After news of a massive federal loan caused Eastman Kodak’s stock to skyrocket, a company insider donated millions of shares to a religious nonprofit for which he has served as president.
On July 29, the peak of Kodak’s recent 2,757% stock surge, a member of the company’s board of directors, George Karfunkel, and his wife donated 3 million shares of Kodak stock — valued at more than $100 million at the time — to a synagogue called Congregation Chemdas Yisroel Inc., according to a securities filing. The synagogue is registered as a charity in New York state.
The donation, which could potentially be claimed as a tax deduction, came in the midst of heavy trading of Kodak’s stock that was sparked by the news that the company would receive a $765 million loan from the US government to help make drug ingredients.
The timing of the announcement and the issuance of certain executives’ stock options have prompted federal scrutiny. House Democrats requested documents and information on the matter from Kodak, according to a letter sent last week.
The Securities and Exchange Commission is reportedly investigating the circumstances around Kodak’s announcement of the loan, according to the Wall Street Journal.
Kodak said in a securities filing Friday that an internal review conducted by an external law firm will examine activity connected to the potential loan. The company said a special committee of independent directors would oversee the internal review.
A spokesperson for Kodak told CNN that donation by the Karfunkels is “within the scope” of that review. The Karfunkels could not be reached for comment.
Kodak’s website describes George Karfunkel as an expert in financial planning and investment strategy who has served on the company’s board of directors since 2013.
The day of his and his wife’s donation, Kodak’s stock hit a low of $17.50 a share and a high of $60, meaning the donation could be worth more than $100 million.
On Friday, the agency behind the loan said that the deal would be put on hold. “Recent allegations of wrongdoing raise serious concerns,” the US International Development Finance Corporation tweeted. “We will not proceed any further unless these allegations are cleared.”
On Monday, Kodak’s stock was temporarily halted after plunging as much as 43% earlier in the day.
Laurie Styron, the executive director of the nonprofit CharityWatch, described the situation involving Karfunkel’s donation as concerning. His position on Kodak’s board may have given him “special knowledge that allowed him to predict likely fluctuations in Kodak’s stock price,” she said.
She also said many charities and religious organizations that offer tax deductions have controls in place to prevent the appearance of impropriety.
“With Karfunkel having one foot firmly planted in both Kodak and in the religious organization receiving the stock donation, it’s unclear if enough board independence existed for this donation to be properly vetted and approved at arm’s length prior to being accepted,” Styron said.
New York charity filings from 2019 describe Congregation Chemdas Yisroel as an Orthodox Jewish synagogue that uses funds exclusively for religious, charitable and educational purposes. The documents list George Karfunkel as the congregation’s president.
Representatives for Congregation Chemdas Yisroel could not be reached for comment.