Two plead guilty to insider trading in Kodak before Trump loan announcement

Eastman Kodak

03/04/2024 18:17

By Jonathan Stempel
       NEW YORK, April 3 (Reuters) - A former pharmaceutical
executive and his cousin pleaded guilty on Wednesday to insider
trading in Eastman Kodak  KODK.N , based on tips that the
company was arranging a surprise $765 million loan from the
Trump administration to make drug ingredients.
    Andrew Stiles and Gray Stiles each admitted to one count of
securities fraud at a hearing before U.S. District Judge Ronnie
Abrams in Manhattan.
    Both defendants were accused of buying Kodak shares in
anticipation of the U.S. International Development Finance Corp
loan to the former photography giant, and selling them after the
loan was announced on July 28, 2020.
    Prosecutors said this led to more than $500,000 of illegal
profit for Andrew Stiles and more than $700,000 for Gray Stiles.
    Lawyers for the defendants did not immediately respond to
requests for comment.
    Andrew Stiles was a vice president at Phlow, a Richmond,
Virginia-based medicine supply chain company working with Kodak,
when he allegedly learned about the loan and tipped his cousin.
    An indictment included coded text messages between the pair,
including where Gray Stiles referred to the loan as "film we
sent off a few weeks ago to get developed."
    Sentencing is scheduled for July 24.
    Andrew Stiles, of Charleston, South Carolina, could face 21
to 27 months in prison under his plea agreement. Gray Stiles, of
Richmond, could face 10 to 16 months. Fines are also possible.
    Shares of Rochester, New York-based Kodak soared to $60 from
$2.62 within two days of the loan's announcement, as the company
sought to remake itself.
    At a press briefing, Trump called Kodak a "great American
company" with "one of the great brands in the world," and said
the loan would give it the capacity to produce up to 25% of the
active ingredients needed to produce generic drugs domestically.
    "We must never be reliant on a foreign nation for America's
medical or other needs," Trump said.
    The loan was never issued.
    Both defendants also faced related civil charges by the U.S.
Securities and Exchange Commission. That case has been on hold
pending a resolution of the criminal case.
    Kodak and Phlow were not charged.
    The case is U.S. v. Stiles et al, U.S. District Court,
Southern District of New York, No. 23-cr-00098.

 (Reporting by Jonathan Stempel in New York; Editing by Richard
Chang)
 ((jon.stempel@thomsonreuters.com; +1 646 223 6317; Reuters
Messaging: jon.stempel.thomsonreuters.com@reuters.net))