House Accuses POTUS and Kodak of Insider Trading

The House Financial Services Committee is looking into the President and a long standing publicly trading company for insider trading.

The House Financial Services Committee recently put out a statement questioning a deal with Kodak and the President.

“Today, Congresswoman Maxine Waters (D-CA), Chairwoman of the House Committee on Financial Services, Congressman Josh Gottheimer (D-NJ)Congressman Brad Sherman (D-CA), Chairman of the Subcommittee on Investor Protection, Entrepreneurship and Capital Markets, Congressman Bill Foster (D-IL), Chairman of the Task Force on Artificial Intelligence, and Congressman Stephen F. Lynch (D-MA), Chairman of the Task Force on Financial Technology, led a letter to Jay Clayton, Chairman of the Securities and Exchange Commission (SEC) urging the SEC to investigate the transactions surrounding the $765 million proposed deal under the Defense Production Act of 1950 (DPA) between the Trump administration and Eastman Kodak Company (Kodak) amid reports that Kodak’s compensation board issued $1.75 million in stock options to Jim Continenza, the company’s Executive Chairman and Chief Executive Officer. Fueling the Members’ concern about insider training during the COVID-19 pandemic are SEC filings that indicate Continenza and Philippe Katz, a Kodak board member, bought Kodak shares on July 23, 2020 – just days before the DPA loan became public information,” the committee said in the release.

The DPA is a law which allows the President in the US to direct companies to manufacture certain good during time of crisis.

“Passed in September 1950 at the start of the Korean War, the DPA was modelled on the War Powers Acts of 1941 and 1942, which gave President Franklin Delano Roosevelt sweeping authority [PDF] to control the domestic economy during World War II.” The Council on Foreign Relations noted about the DPA. “The original DPA gave the president a broad set of powers including the ability to set wages and prices as well as ration consumer goods, though not all of these powers have been renewed. The law has been continually reauthorized by Congress, most recently in the John S. McCain National Defense Authorization Act of 2019. It is set to expire in 2025.”

On July 28, 2020, President Trump issued an executive order which stated in part, “The Trump Administration is signing a Letter of Interest supporting a deal to transform Kodak into a pharmaceutical company that can help produce essential medicines in the United States.

“When the deal is final, the CEO of the U.S. International Development Finance Corporation (DFC) will use his delegated Defense Production Act (DPA) loan authority to provide a $765 million loan to launch Kodak Pharmaceuticals, which will create at least 360 jobs.”

President Trump has been using the DPA in a limited capacity to direct companies for production in response to COVID.

As the letter notes, Kodak is a curious choice for pharmaceutical work, given the company failed in that foray in 2012.

“According to DFC, the loan would be DFC’s first use of DPA authority and would support Kodak, an organization that was on the brink of failure in 2012 and was unsuccessful in its previous foray into pharmaceutical manufacturing, in its efforts to develop the capacity to produce up to 25 percent of domestic pharmaceutical components,” the letter states.

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