Mark Gedek, an Eastman Kodak employee, has filed a civil lawsuit against Kodak’s board members and other fiduciaries of the company’s retirement plans. It’s alleged that they breached their duties as the company was spiraling toward bankruptcy. Gedek, who continues to work at Kodak, is a participant in the Kodak Employees Savings and Investment Plan, as well as in the Kodak Employee Stock Ownership Plan. The board members and directors of those plans continued to sell shares to employees and invest in them ahead of the bankruptcy, according to allegations in the complaint.
Kodak filed for bankruptcy in mid-January, saying it would use the bankruptcy court process to try to sell patents and shed other assets to bring costs and revenue in line. Typically in bankruptcy, shareholders’ equity is worth nothing. Kodak shares, which trade for 34 cents on the pink sheets, were trading at 55 cents on Jan. 18 before the company filed for bankruptcy.
The lawsuit, filed in U.S. District Court for the Western District of New York, seeks class-action status. It’s alleged in the suit that:
• the directors and officials did not disclose to stock-plan participants complete information about Kodak’s dire financial condition;
• they kept its investments in the company’s equity when it was no longer prudent;
• the company should have known it was suffering from a dying technology;
• the company was unable to bring new, profitable products to the market quickly enough;
• the agency could not generate enough cash from patent lawsuits and was suffering from a liquidity crisis; and
• those factors caused the stock price to collapse and caused significant losses to the plans and the plans’ participants.
Among those named in the lawsuit as Defendants are Kodak Chief Executive Officer Antonio Perez, members of the company’s board of directors, the chairpersons for the savings and investment plan, and the plan administrator. Separately, a group of Kodak debtholders disclosed their stakes in the company in a court filing. Among the three biggest investors that make up the group – which had been pushing Kodak for change in the months before the bankruptcy – are the Blackstone Group’s GSO Capital Partners, D.E. Shaw and JPMorgan Chase.
It should be noted that there are two separate lawsuits. One is Mark Gedek v Antonio Perez et al, U.S. District Court for the Western District of New York in Rochester. The other, the bankruptcy case, is in re: Eastman Kodak Co et al, U.S. Bankruptcy Court, Southern District of New York, No. 12-10202.
Source: Insurance Journal
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