Kodak did not mislead investors before bankruptcy-court

NEW YORK Sat Nov 10, 2012 1:50am IST

Kodak World Headquarters is pictured in Rochester, New York January 19, 2012. REUTERS/Adam Fenster/Files

Kodak World Headquarters is pictured in Rochester, New York January 19, 2012.

Credit: Reuters/Adam Fenster/Files

Related Topics

NEW YORK (Reuters) - Eastman Kodak Co EKDKQ.PK executives did not mislead investors about the photography pioneer's deteriorating financial health in the year prior to its bankruptcy, a Manhattan federal judge ruled.

U.S. District Judge Harold Baer on Thursday dismissed a shareholder lawsuit against Chief Executive Antonio Perez and three former Kodak executives. The Rochester, New York-based company was not a defendant because it is in Chapter 11.

Shareholders led by Bret Jones, who claimed to have lost $720,384 by investing in Kodak stock, accused the company of making false and misleading statements that suggested optimism it would become profitable, maintain sufficient liquidity, and sell a digital patent portfolio once thought to be worth as much as $3 billion.

The shareholders also said that in the four months leading up to Kodak's January 19, 2012 bankruptcy filing, the company misled investors about its intention to seek protection from creditors.

Baer concluded, however, that there was no showing that the executives intended to defraud anyone, and indeed they had used their "best efforts" to successfully transform the company.

The judge said there are "serious policy reasons" not to force nearly-insolvent companies to disclose their plans too soon. "No multi-billion dollar company would file for bankruptcy without first engaging in internal deliberations," he said.

Baer added that many of the alleged fraudulent statements, including Perez's expression of confidence on February 3, 2011 that Kodak would transform into a "sustainable, profitable company," were too general for reasonable investors to rely on.

Other defendants included former chief operating officer Philip Faraci; former chief financial officer Antoinette McCorvey; and Pradeep Jotwani, a former president of Kodak's consumer businesses.

The class period ran from January 26, 2011 to January 19, 2012, during which Kodak's share price fell to 30 cents from nearly $4. Kodak shares once traded above $94.

Aelish Baig, a partner at Robbins Geller Rudman & Dowd representing the investors, did not immediately respond to requests for comment.

Jonathan Dickey, a partner at Gibson, Dunn & Crutcher representing the defendants, did not immediately respond to similar requests.

Kodak filed for bankruptcy after failing to keep up as consumers and rivals shifted to digital photography from film photography.

The company has shuttered its digital camera business, set plans to stop selling inkjet printers, and been exploring options to sell the digital patents after failing to win acceptable bids in an August auction. Kodak has said it hopes to emerge from Chapter 11 next year.

The case, whose named plaintiff is not the lead plaintiff, is Hutchinson et al v. Perez et al, U.S. District Court, Southern District of New York, No. 12-01073. (Reporting By Jonathan Stempel in New York; Editing by Nick Zieminski)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

FRESH RULES

A man speaks on his mobile phone in front of the Reserve Bank of India (RBI) seal at the RBI headquarters in Mumbai July 30, 2013. REUTERS/Vivek Prakash/Files

RBI says all companies must apply 2-step payments for credit cards

The Reserve Bank of India said that all transactions involving domestic credit cards must follow rules requiring additional verification, a stance that could impact companies such as Uber Technologies Inc that provide more simple app-based purchases.  Full Article 

REUTERS SHOWCASE

Record Highs

Record Highs

Nifty touches record high; software stocks gain.  Full Article 

New Adviser

New Adviser

Arvind Subramanian likely to be chief econ adviser.  Full Article 

Pricing Mechanism

Pricing Mechanism

Govt sets up a four-member panel to re-examine gas pricing.  Full Article 

Royalty Rates

Royalty Rates

India to hike iron ore royalty, miners may struggle to pass on extra cost.  Full Article 

Diesel Deregulation

Diesel Deregulation

Oil ministry to seek Cabinet nod on diesel deregulation - sources  Full Article 

Commodities

Commodities

Gold near two-month low; set for weekly drop on interest rate fears  Full Article 

Reuters Exclusive

Reuters Exclusive

Apple iPhone 6 screen snag leaves supply chain scrambling   Full Article 

Helping Regional Mills

Helping Regional Mills

Govt raises sugar import duty to 25 pct from 15 pct.  Full Article 

Curbing Risks

Curbing Risks

RBI to lower ceiling on bank loans to a single corporate group.  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage