By Jonathan Stempel
NEW YORK (Reuters) – A former pharmaceutical executive and his cousin pleaded guilty on Wednesday to insider trading in Eastman Kodak, 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)
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