Eastman Kodak said a series of internal errors allowed five former executives to sell about $5.1 million in stock options they didn’t own.
In an earnings call on Tuesday, chief financial officer David Bullwinkle said inadequate controls had failed to prevent the “unauthorized issuance” of the company’s stock.
The previously forfeited stock options were exercised by the former executives in July when the company’s stock jumped on news of a government loan.
In remarks from the White House, U.S. President Donald Trump announced his administration was using the Defense Production Act to provide a $765 million loan to Kodak to produce pharmaceutical ingredients, calling the deal, “one of the most important deals in the history of U.S. pharmaceutical industries.”
The announcement sent Kodak’s shares up as much as 1900%. Within days, the Securities and Exchange Commission announced it was investigating trading before the public announcement of the loan.
Kodak said it would try to recover about $3.9 million from the former executives for the fair value of the shares at the time of their sale. It could recover another $3 million from taxes withheld on behalf of the five former executives.
Bullwinkle said the controls error did not result in any misstatement of financial performance and the company planned to have the issues solved by the end of the year.
In September, the company said an outside review by the law firm Akin Gump found transactions made by chief executive officer Jim Continenza did not violate internal policies but there were gaps in its insider trading processes.
The U.S. International Development Finance Corp. on August 7 said it was putting the loan on hold, citing “recent allegations of wrongdoing” that raised “serious concerns.”