A former Phlow Corp. executive and his cousin were charged in New York with insider trading for allegedly trading on nonpublic information about a pandemic-related government loan to Eastman Kodak Co.
(Bloomberg) — A former Phlow Corp. executive and his cousin were charged in New York with insider trading for allegedly trading on nonpublic information about a pandemic-related government loan to Eastman Kodak Co.
Through his job, Andrew Stiles learned of Kodak’s application for loans to make chemicals for drugs tied to the fight against Covid-19, federal prosecutors said Thursday in a statement. He traded on the information and passed it to his cousin, Gray Stiles, who also bought shares based on the tip, officials said.Â
Between June and July 2020, Andrew Stiles was an executive at a company working with Kodak when he learned of the loan application, prosecutors said. He bought more than 100,000 shares, authorities allege. The stock surged after an announcement by Donald Trump’s White House of a deal to lend Kodak $765 million, but it was later put on hold.
The executive allegedly made more than $500,000 in profits trading on Kodak stock and also told his cousin of the application. Gray Stiles purchased more than 40,000 shares before the loan was announced, allowing him to make more than $700,000, prosecutors said.
The loan was also the subject of an insider-trading probe by New York Attorney General Letitia James, who alleges that Kodak Chief Executive Officer James Continenza violated state securities law by buying shares ahead of the announcement. Kodak has said that Continenza was pre-cleared to trade by the company’s general counsel. That investigation is still ongoing.
The loan, announced in July 2020, would have helped Kodak repurpose its manufacturing facilities to produce drug ingredients that had fallen into short supply in the pandemic’s early months, including those used in Covid-19 medications.Â
SEC Lawsuit
While the company that Andrew Stiles was working for isn’t identified in the indictment, a parallel suit filed by the US Securities and Exchange Commission identified it as Richmond, Virginia-based Phlow, a generic drugmaker. Stiles’ LinkedIn profile indicates he was an executive vice president for government initiatives at the company during the time of the alleged activity. A representative of Phlow didn’t respond to a request for comment.
In May 2020, Phlow said it was awarded a $354 million government contract to make medicines for the pandemic response.
According to the SEC, Andrew Stiles also made more than $45,000 in May 2020 trading shares of Novavax Inc. after learning of its efforts to secure more than $300 million in funding to develop a coronavirus vaccine. At the time, he was working for BDO USA LLC, which had a consulting contract with Novavax, the SEC said. Stiles briefly worked for both BDO and Phlow at the same time.
Andrew Stiles, 37, of South Carolina, and Gray Stiles, 37, of Virginia, are each charged with three counts of securities fraud and one count of conspiracy to commit wire fraud and securities fraud, prosecutors said. They face as much as 20 years in prison if convicted of the most serious counts against them. Lawyers for the two men didn’t respond to telephone and email messages seeking comment
The criminal case is US v Stiles, 23-cr-98, US District Court, Southern District of New York. The civil case is Securities and Exchange Commission v Stiles, 23-cv-1523, US District Court, Southern District of New York.
–With assistance from Erik Larson.
(Updates with details of SEC suit.)
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