District court: Kodak execs did not mislead investors pre-bankruptcy

By Caroline Salls

Pittsburgh, Nov. 9 - A shareholder lawsuit alleging that Eastman Kodak Co.'s executives made false and misleading statements about the company's financial condition in the year leading up to its bankruptcy filing was dismissed Thursday by the U.S. District Court for the Southern District of New York.

Kodak executives Antonio M. Perez, Philip J. Faraci, Antoinette McCorvey and Pradeep Jotwani filed the dismissal motion. The lawsuit was filed on behalf of "all persons" who bought Kodak stock between Jan. 26, 2011 and Jan. 19, 2012.

Lead plaintiff Bret S. Jones alleged in the lawsuit that Kodak, in response to an unfavorable ruling in a patent case, "immediately embarked on a campaign to convince investors of the imminence of Kodak's transformation to a digital, profitable, sustainable company."

Jones alleged that the Kodak executives failed to disclose that the company did not have enough financial resources and that a significant portion of its cash balance was not available to fund Kodak's U.S. operations.

The plaintiff said Kodak's July 2011 announcement that it hired Lazard Freres & Co. LLC to explore a sale of its digital patent portfolio was also misleading because Kodak did not disclose that the new strategy was a result of its desperation for cash.

According to the lawsuit, Lazard had also been hired "for bankruptcy and restructuring counseling."

In addition, the shareholder alleged that the Kodak executives issued false and misleading statements about the company's intention to file for bankruptcy because, "[u]nbeknownst to investors, Kodak's liquidity had suffered a significant and critical decline."

District court order

In Thursday's ruling, judge Harold Baer Jr. said the statements questioned by the plaintiff at best show that Kodak began to consider bankruptcy as an option while exploring other alternatives to avoid it.

The judge said this does not contradict the executives' statement that Kodak had "no intention" of filing for bankruptcy or Perez's optimism about the company's ability to sell its digital imaging patent portfolio.

Baer said the bankruptcy declarations also do not support the shareholder's claim that the Kodak executives knew or had access to information that would make their optimistic statements about the company's patent licensing and sale, digital transformation and cash position reckless at the time they were made.

Kodak is a Rochester, N.Y.-based imaging technology products and services provider to the photographic and graphic communications markets. The company filed for bankruptcy on Jan. 19, 2012 in the U.S. Bankruptcy Court for the Southern District of New York under Chapter 11 case number 12-10202.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.