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Kodak Proves Hydroxychloroquine Can Resurrect the Dead

Kodak Proves Hydroxychloroquine Can Resurrect the Dead

Hydroxychloroquine, Trump’s favorite miracle elixir, is not only the secret cure for Covid-19, we learned this week that it can also resurrect the dead.

Kodak retained little presence in the public imagination other than as the sad answer to a barroom trivia question. That all changed Tuesday when the Trump Administration dropped more than $700m on the undead company, an investment meant to help Kodak produce chemical components for hydroxychloroquine. That loan was roughly 7x Kodak’s total market cap at the time. Overnight the moribund stock shot up roughly 1300%.

Typical of Trump scams, it’s hard to know where to even begin unwinding the threads. Every detail of this deal reeks.

First, a bit of background. Kodak collapsed when smartphones destroyed its core photography and imaging business. It emerged from its 2013 bankruptcy a staggering zombie, feeding off its remaining patents and a handful of ongoing operations. Kodak was, and still is, little more than a brand, a former multi-billion-dollar giant drifting toward oblivion with a market capitalization reaching as low as $70 million at one point this year.

Abandoned Kodak building in Toronto

The malaria drug, Hydroxychloroquine, emerged this spring as Trump’s favorite magic cure for Covid-19, for reasons that remain baffling. It was among dozens of drugs tried early in the pandemic as doctors scrambled to find an effective treatment. After a tiny, flawed early French study suggested it might offer some relief, later studies failed to find any use for hydroxychloroquine and doctors moved on to use more effective drugs like remdesivir. Use of hydroxychloroquine for Covid-19 has been banned across the civilized world, including the US, due to its ineffectiveness and serious side-effects. Despite the drug’s failure, Trump kept flogging that donkey, turning hydroxychloroquine into the right-wing fever swamp’s secret, suppressed cure for the pandemic.

In an average year, about 5 million doses of hydroxychloroquine are prescribed globally for autoimmune disorders like lupus and to fight malaria. At Trump’s insistence, the federal government has already built up a stockpile of 63 million doses, which will come in handy if we face a massive malaria pandemic, but will otherwise go to waste. While Trump hoards a drug we don’t need, hospitals are struggling to obtain enough remdesivir to treat Covid-19 patients.

Trump signed the executive order that made the Kodak deal possible on May 14. The deal was announced on July 28. In a CNBC interview on July 29, Kodak CEO Jim Continenza explained that he’d been working on the deal for months.

Normal trading volume for Kodak is very low. An average trading day this summer for Kodak varies between about 70k and 150k shares, with a steadily declining stock price. Share volume in Kodak surged roughly 6x on July 27th, the last trading day before the announcement.

Everyone who traded that stock in the days before the announcement is a potential suspect in an SEC investigation. Several of those suspects are on the company’s board of directors. One is the CEO.

On July 23rd, Kodak CEO Jim Continenza bought 46,000 shares at $2.20/share, bringing his total ownership to 650,000 shares. On July 27th, the day before the big announcement, Continenza was granted another 1.7m options to purchase Kodak stock at prices as low as $3.03. 

Why would Continenza risk a prosecution with such blatant insider trading? For starters, securities prosecutions under the Trump Administration have become a running joke. Having declined since the early Bush II era, they have practically disappeared under Trump, dropping more than 70% from already-low levels. It’s open season for corporate fraud.

And the potential windfalls are well-worth the risk. In the days following the announcement, Kodak’s stock traded as high as $46, more than 2000% of the value when Continenza made his purchase the previous week. It has leveled off for the moment, around $20. Continenza’s stake had been worth barely over a million. With miniscule trading volume, it would have been hard to sell that off without crashing the stock. Now those holdings are worth about $13 million, with lots of new buyers. Combined with nearly 4 million shares he holds in previously worthless stock options, he stands to take home north of $200 million. You can bet that board members will be dumping stock as quickly as possible since they know this bonanza can’t last.

Out in the real world, Kodak will deliver its first dose of hydroxychloroquine the day after Foxconn builds its first TV at their bogus Wisconsin factory, or that Russian aluminum mill in McConnell’s backyard hires an actual worker. In a few months this scam will be forgotten like the others. The grifters will walk away with their money. Kodak, which had been drifting among the flotsam in the blackish backwaters of junk capital will slowly sink toward its final resting place, completing its life cycle as the Trump Steaks of the pharmaceutical business.

But, there’s more.

Why did this even happen? There is only a very small market for hydroxychloroquine. It’s illegal to use it as a Covid-19 treatment because it doesn’t work. Kodak is not a pharma company. It possesses no capabilities in this arena. If we needed the drug, there are hundreds of companies more competent to produce it. So why did anyone imagine this absurd deal? And how did Kodak’s small group of stockholders land this boondoggle?

Kodak sports a pair of Blackstone figures on its board of directors, an asset which may have granted helpful access to the dark core of Trump’s Griftopia, but there’s another figure who should perhaps be the focus of an investigation. A recent Kodak board member, Matt Doheny, is now chairman of the board of another company that received a nearly identical windfall. He might be the key to understanding how Kodak pulled off this scam.

Matt Doheny has run for the Republican nomination for Congress in Upstate New York’s 21st District multiple times. He was a member of Kodak’s board of directors from 2013-19, and as of his last public filing in 2019 he still owned over 52,000 shares in the company. He still shows up in some sources as a director for Kodak India.

Doheny has also served on the boards of other struggling companies like Affinity Gaming and Elk Petroleum. But it’s his work for a dying trucking company, YRC Worldwide, that draws comparisons to the Kodak deal. Doheny is a long-time board member at YRC, promoted to Chairman late last year.

Like Kodak, YRC is a dying former behemoth. During boom times for the trucking industry in 2018, YRC’s profits declined by a quarter and its market capitalization steadily shrunk. At times last year YRC was worth only $70 million. After the crash this year it dropped as low as $50 million. Then a rescue arrived.

On July 1, just four weeks before Kodak’s rescue was announced, it was revealed that the Treasury Department had lent YRC $700 million, roughly ten times its market value, and bought a 30% stake in the company. For justification Treasury mumbled something incoherent about YRC’s critical military value. Apparently, their trucks sometimes carry loads for the military, a role which had never been critical to national security during YRC’s previous brush with bankruptcy or its other financial struggles. What was going on here and how might it relate to Kodak? As Chairman at YRC, Doheny would almost certainly involved in the bailout planning for some months and he may have found a way to prop up his possible Kodak shares in the package.

Doheny hadn’t made a single reported federal campaign contribution since 2012. Then he suddenly made the maximum family contribution to the Trump campaign on March 10, 2020. The same day he contributed the maximum to WinRed, the Republican donor platform partly owned by Jared Kushner’s brother. On April 14, the administration announced the formation of its Great American Industry Groups aimed at shaping the country’s post-pandemic economic plans. Included in the groups were industry powerhouses like Raytheon, Apple, 3M, Amazon, and of course a little dying trucking company called YRC Worldwide.

YRC’s share volume quadrupled on June 26, the Friday before the July 1 announcement of the government gift, when the stock closed at $1.61. Volumes bubbled along at about double normal levels on Monday and Tuesday, closing at $1.74 and $1.85. Stock values soared with announcement of the deal on Wednesday July 1, rising to 3.23, delivering 100% returns to the lucky folks who managed to guess on the 26th that something big was coming the following week. The deal engineered by Doheny’s YRC Worldwide was a Kodak copy of the deal that followed four weeks later.

Don’t imagine for a minute that a five-digit campaign contribution would be enough to secure millions in corporate welfare or access to a valuable White House planning group. Those contributions, outsized, unprecedented, and entirely out of character with all of Doheny’s past donor activity are likely the visible tip of lobbying iceberg, a demand made to seal a degree of loyalty as part of a wider negotiation.

Was Doheny able to leverage his access to the YRC bailout process to promote a nearly identical bailout for another of his holdings? This would be an interesting angle of inquiry. Is Doheny still holding Kodak stock and did he engage in any transactions this spring? Doheny left the board of Kodak in May 2019. Section 16 of the Exchange Act requires him to report transactions in the company’s stock for six months after leaving, so we can’t know for sure what he did with Kodak this spring.

What other trades have insiders in companies included in the Great American Industry Groups made in companies impacted by related bailouts? How many Continenzas and Dohenys are out there, flying under the radar?

One might argue that the connections between Doheny, the Trump Administration, and Kodak are attenuated and unlikely. That is true. However, when you’re living in a Coen Brothers movie where none of the players’ stated motivations make sense, the only truth will be absurd.

Why did YRC and Kodak receive massive, utterly pointless federal windfalls enriching no one but their small collection of stockholders on the way to those companies’ still-inevitable oblivion? The only explanations that make sense are random chance or fraud. Between random chance and fraud, which best holds up to the blade of Occam’s Razor?

Back in April, the President touted hydroxychloroquine as a “miracle” cure for Covid-19. With Kodak, we now have proof that the drug can deliver a brief reprieve from a terminal condition, earning the President a few more wealthy friends along the way. How much sepsis it spreads in the wider body politic remains to be determined.


  1. Just wanted to swing by one last time to talk about how Senator Chris Murphy revealed that the U.S. attempted a coup in Venezuela. I remember last year on the “Little Marco Finds Someone His Own Size” article that Chris reassured that “We aren’t going to do anything about Venezuela.” Turns out he was wrong. The U.S. has become so incompetent that it can’t even engage in imperialism and regime change so that the rich can benefit.

    That’s at least one up-side to America slowly falling apart like soggy cardboard in the rain; maybe it should fall apart all the way and new governments across the continent can take its place. Y’know, ones that can’t stage coups in Central and South America, or don’t want to because *they know that’s evil.*

    1. If you are talking about regional governments like a North-East Bloc and Pacifica rising from the ashes, well, even I can’t fathom that.

      Plus, I imagine that both Canada and Mexico are terrified about the civil war, and have no interest in picking up the pieces. Both are economies intrinsically tied to the U.S. economy. As the U.S. rips itself apart in the coming months, both those economies, which like the rest of the world’s economies are hanging by a thread thanks to Covid, will be battered, perhaps to the point of collapse.

      The worldwide effects of the 2nd american civil war obviously could not come at a worse time for the global economy. From a purely economic point of view, it is better that the loser party simply roll over when the tyrant announces he has “won the election”, or he does cancel it, via cronies on the state level. Given the makeup of the loser party, there is a high probability of them indeed just rolling over.

    1. There are enough decent, honorable people in this country to have a governing coalition with to build the future – but you won’t reach them if you insist on being a hop, skip, and a jump away from thinking just like Trump’s cultists.

      Hope and optimism are what win people’s hearts, not endless fear and barely veiled threats of violence.

      1. Yup…you keep on believing in your fantasy.
        Hope and optimism…..yup.
        That will certainly work with this guy with the AK-47.

        And quoting a paragraph from that article:
        “In recent weeks, police say that arguments over masks have led to the vicious beating of Trader Joe’s employees in New York, the fatal shooting of a Family Dollar store security guard in Michigan, and the shooting of a McDonald’s worker in Oklahoma. That violence adds more challenges for retail stores and restaurants where workers are left to dictate mask rules that authorities often haven’t given police the option to enforce.”

        If the members of the death cult are willing to kill over masks, just exactly will they do when their leader says “help me, it is a coup”. Oh yeah, he used those words in a Tweet today.

    1. I don’t think so.

      I haven’t seen in person my R friends. I use to meet with them about once a week. But now I’m grateful I can’t because the male of this long-married couple is wearing out his wife’s patience with his praise of 45 .

      Theoretically, my friend is a rational guy. Used to run a small industrial company; pilot; keeps a small community organization in operation. But when it comes to 45, he’s an idiot.

      We have to outvote the idiots.

      1. A million years ago, I was on the Kodak campus. Two things:

        They did clean room manufacturing because creating photographic film requires it. Does that make them ready for pharmaceuticals? Don’t know. But it’s possible no one cares.

        And the voice and data system we installed there was way too big for their current situation. I wonder what they did with it.

        Third thing: one multi-shift job was mopping a clean room for any dust.

        Fourth thing: everyone, from security guard to average person on the street, was well spoken and seemed very well educated.

        Fourth thing: multi-story red brick buildings reminded me of a Dickens story, that’s how old the place seemed.

      2. A million years ago, Kodak was a business, not a financial instrument.

        Of course that is true of nearly everything we currently call “businesses,” and not a million years ago but living memory.

        Maybe we’ll go back to having real businesses that create actual value to people of all means, but it ain’t happening anytime soon.

  2. Chris this is clearly a grift as I have seen elsewhere, but I’m wondering if the HCQ angle you’ve mentioned here is based on info you’ve seen or is it storyteller’s license? (Serious question – just haven’t seen others tie it to HCQ specifically, but to your larger point that Kodak won’t produce any “chemicals” at all.) Thanks.

    1. From several sources:

      “Part of the enthusiasm may stem from the fact that Kodak reportedly aims to make drug ingredients used in the fight against Covid-19, including hydroxychloroquine, a medicine that President Donald Trump continues to tout as a possible treatment even though it has repeatedly failed to show a benefit in clinical trials.”

      1. Thanks, Chris! That’s really wild. Appreciate this site and your writing, particularly in this terrible year.

        Aaron, I think it may have been you who shared an earlier ET post here. For that, I thank you. I have really been enjoying that site and it’s led me to some other great content in addition.

  3. Off-topic. @WX Wall, if you see this. A couple weeks ago you were talking about real estate prices in America being unique, and that this uniqueness is rooted in the reforms (or “reforms”, depending) of the FDR administration. I was wondering if you could post links to long-form pieces for further reading.

    1. Hi Jon-
      Here are a few links. The first is from Tanta at the Calculated Risk blog. Tanta was a loan officer, and if you’ve never read her pieces (sadly, she passed away years ago), I highly encourage them. They will tell you everything you ever wanted to know about mortgages in America, in easy to read, even fun prose. The one that talks about the development of fixed-rate fully amortized loans in the post-Great Depression world is here:

      A more academic piece that goes over the pieces put into place in more detail, and ties them to Federal Reserve and overall economic policy, is from Matt Stoller:

      Here’s my tl;dr summary of both pieces:
      Before the New Deal, most mortgages were balloon loans, that is, they matured before the principle was fully paid off. Loan terms were typically for a few years, after which, the borrower would have to roll over the remaining balance into a new loan. This worked fine, as long as there was a lender available to do the rollover. If there wasn’t, even if you still had the ability to pay the monthly payment, you’d still lose your house. Which is what happened in the Great Depression. Lots of people had their homes foreclosed on because, due to the general balance sheet crisis affecting banks, no one would lend, even to creditworthy borrowers.

      Why were loans structured this way? Because the fundamental question when lending long-term, is who do you want to shoulder the interest rate risk and liquidity risk? Banks fund their lending by deposits, which are short-term and can be withdrawn at any time. If banks lend you for 30 years at 5%, and fund it with short-term deposits, then they’re taking on the risk that a) they won’t have a bank run where they need liquidity to fund withdrawals, and b) the interest rate they pay on those deposits won’t exceed 5% for the duration of those 30 years. If either of those happens, the bank will fail.

      Because of this, prior to the New Deal, no bank was insane enough to lend you a fixed rate loan for 30 years. At best, they would give you a few years, and force you to re-apply for a new loan. In this way, the actual borrower would have to shoulder both the liquidity risk (there might not be a lender to rollover at the end of the term if all the banks need their money back) and the interest rate risk (they might have to rollover at higher prevailing rates).

      If you’re a strict capitalist, this is as it should be: no one has outlawed 30 year fixed loans. It’s just that the banks and borrowers have negotiated freely who takes what risk for what profit, etc. and the market has decided that homeowners will shoulder most of the risk of both liquidity and interest rate changes. But this meant that only wealthy people, who could put up a significant chunk of the purchase price themselves and finance only a small portion, and who had enough reserves to weather the inevitable ups and downs of the economy, could afford to own property without getting blown out. And the rest of us would rent (whether that was a house, farmland, whatever).

      After seeing millions of people thrown out of their homes in the Great Depression due to widespread bank failures, Roosevelt decided this wasn’t great policy. It was obvious that individual homeowners couldn’t shoulder the inherent risks of borrowing long-term themselves. Why did he care? Why not let them all rent and design policies around subsidizing renters instead? Because you have to remember that the New Deal was designed to throw enough benefits to people to keep them from turning communist. And it was felt that people who owned homes were less likely to become communist, were more likely to be socially stable (i.e. less likely to becoming bomb-throwing revolutionaries), and more likely to be invested in their communities (because they now had “skin in the game” i.e. the value of their house, in making sure their neighborhood didn’t go to hell).

      So individuals couldn’t shoulder the inherent risks of borrowing for long-term assets like a house. And it was obvious banks couldn’t do it either. Who was left? The govt. of course. So the government created entities like the FHA, Fannie Mae, VA loans, etc. Now, as long as banks met the lending criteria established by the GSEs, they could originate a 30-year loan, then sell it to a GSE, which would provide a federal guarantee on the loan, and then sell it on to bond investors. Without that government guarantee, banks wouldn’t be able to lend 30-year fixed loans, and potential homeowners wouldn’t be able to buy without spending 20 years of their life saving up their own money. But once this government intervention was in place, homeownership exploded.

      Stoller’s article goes into even more detail about how once this was in place, the Federal Govt. wielded tremendous power in the housing market. Thanks to setting the standards for a “conforming loan” (i.e. one that was eligible to be sold to the GSEs), they could do things like require that neighborhoods remain racially segregated, that lending be structured to favor sparse suburban developments over dense urban structures, etc. Not only that, but once housing became the primary means in which people accumulated capital over their working lives, housing became an instrument for wealth distribution, economic policy, etc.

      When liberals and conservatives clashed in the 90s over how to distribute wealth to minorities who had been excluded for decades, they couldn’t agree on much, but they could agree on promoting home ownership as one mechanism, since conservatives favored homeowners over renters (more likely to become Republicans) and liberals were happy giving them a piece of the “American Dream”. (IOW, there is some truth to the conservatives view that the 2007 crisis was brought about by loose lending standards to poor and minority borrowers that Democrats implemented. But it’s only a sliver, mainly because a) that was just a tiny part of the reason for the crisis and b) conservatives were just as happy to do it. It was one of the few methods of wealth distribution they could get on board with.)

      When the financial crisis hit in 2007/8, rather than letting market forces reset the housing market, through foreclosures and other normal means, which would have lowered prices to where buyers could be found, at the expense of wiping out the net worth of a large number of households, the Fed govt. committed themselves to injecting >$200 Billion into the GSEs to ensure the housing market wouldn’t break. That doesn’t include the $1.7 Trillion in GSE mortgage bonds that the Federal Reserve outright bought to prop up the mortgage markets. We are now at the point where nearly 90% of new mortgages are backed by a government entity:

      IOW, if you have a mortgage, odds are 90% that the govt owns (at least part of) your house, and your monthly check goes to them. When I say that housing policy in America is as socialized as it was in the USSR, I’m only half joking. Housing is *the* cornerstone of America’s economic policy, and as such, for at least the past 80 years, it’s been deemed way too important to be left in the hands of the private market.

  4. If you haven’t already, you might want to look at the irreverent finance writer Matt Levine’s column on Thursday 7/30. (His posts are collected at Bloomberg.) This isn’t about competing theses per se, but a different angle. To summarize:
    The explosion in Kodak’s stock was not driven by smart money; it was driven by day traders and users of the app Robinhood. Maybe some of them were stupid and some were just bored: day trading is a form of gambling which is 1. legal and 2. can be done even when world events shut down most athletics. And maybe others were speculating on the bubble arising from the first two groups, who knows.
    Kodak’s stock experienced a similar spike in 2018, when they announced the launch of a cryptocurrency. Presumably they (and Long Island Iced Tea, which got a similar result simply changing its name to refer to blockchain) were exploiting the forces mentioned in the paragraph above, because naturally that development meant nothing and went nowhere.
    There was some movement before the announcement because they allegedly forgot to include an embargo with the story they sent to the press. That said, Levine didn’t mention or didn’t know that board members bought shares, so in light of this new revelation the forgotten embargo looks like the smokescreen for a crime.

    Aannyways, rest easy. The biggest victims here aren’t taxpayers; they’re day traders.

      1. The insiders, obviously. Doesn’t mean this is purely or even mostly a Wall St. vs. Main St. dynamic, except insofar as some from Main St. use the market to substitute for the horse tracks.

      1. A billion here and a billion there, and pretty soon you’re talking real money…

        In all seriousness I get it. They should be sent to prison for corruption and insider trading. I thought about it, and I think the feeling I’m trying to convey is that especially when you look at Kodak’s cryptocurrency maneuver two years ago, this story is as amusing as it is horrifying. I realize (and my tongue is only half in cheek here) that high capacity to be horrified can be a virtue, but I think my ability to be horrified by corruption was pretty well depleted when certain Republicans committed the ultimate insider trading of pulling out of stocks while allowing the novel coronavirus to crash the economy.

        (Thanks for the links WX. Read your post; haven’t read the links yet. Will probably respond with more questions in a day or two,)

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