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Signage is displayed outside Kodak Tower at the Eastman Kodak Co. headquarters complex in Rochester, New York, U.S., on Saturday, Aug.1, 2020.Mike Bradley | Bloomberg | Getty Images

Securities transactions made by Eastman Kodak Chief Executive Officer Jim Continenza around the time the photography equipment maker learned it could receive a $765 million government loan did not violate internal policies, a law firm hired by the company's board said on Tuesday.

However, an investigation found "gaps" in Kodak's insider trading processes where certain individuals were not included on insider lists, Akin Gump Strauss Hauer & Feld said in a report to a special committee of independent directors at Kodak's board.

Shares of Kodak surged more than 38% in premarket trading following the report.

Kodak's General Counsel was found to be overwhelmed and running on outdated policies, resulting in board members not being fully advised on relevant internal policies regarding options grants, the law firm said.

Last month, the U.S. government put on hold its loan to Kodak to produce pharmaceutical ingredients at its U.S. factories, over concerns about the company granting of options for 1.75 million shares to Continenza and other securities transactions made by executives.

Initial news of the loan had driven shares 1000% higher, generating a windfall for executives, some of whom had received options one day earlier.

U.S. lawmakers have cited "serious concerns" about the transactions and asked the Securities and Exchange Commission to investigate the circumstances surrounding the matter.

"It is clear from the review's findings that we need to take action to strengthen our practices, policies, and procedures," Continenza said on Tuesday.

Akin said Continenza and board member Philippe Katz obtained preclearance to trade from Kodak's General Counsel, who had concluded it was appropriate as the company's loan application process was at a "highly uncertain" stage.

—CNBC contributed to this report.

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Watchdog: State Dept Lied About Rescinding Woman's Award

By MATTHEW LEE, AP Diplomatic Writer

WASHINGTON (AP) — The State Department’s internal watchdog has determined that the agency lied to the public and Congress about the reasons it rescinded a prestigious award to a Finnish journalist who had been critical of the Trump administration.

The department’s inspector general said in a report issued Friday that explanations for the decision not to honor Finnish journalist Jessikka Aro with an International Woman of Courage award in 2019 were inaccurate and misleading. Although the report said the department had the right to rescind the award, it said officials were not honest about their reasons for doing so.

The report cited internal emails and interviews with those in the selection process that indicated the award was revoked because of fears based on her social media posts that Aro might make “political statements” critical of President Donald Trump and the administration at a gala ceremony that was attended by first lady Melania Trump.

“Because decisions as to IWOC awardees are solely within the department’s discretion, the decision to rescind Ms. Aro’s award appears to have been an authorized exercise of the Department’s broad discretion to select awardees," it said.

“OIG found, however, that department officials made subsequent statements to the public and to congressional staff that inaccurately asserted that Ms. Aro was erroneously notified that she had been selected for the award and that factors other than Ms. Aro’s social media posts formed the basis of the decision not to give her the IWOC Award.”

Aro had been told she had won one of the awards for her work in exposing Russian propaganda and misinformation, but was later told the notification had been a mistake.

The department told reporters and congressional aides at the time that the notification had been the result of an unfortunate error and poor coordination between the embassy in Helsinki and Washington. The inspector general, however, determined that Aro’s social media posts critical of Trump were the primary reason the award was rescinded.

In response to questions from some reporters, department officials offered several explanations, including a convoluted answer that claimed there were too many awardees from Europe and that one of them had to be dropped in the interest of geographic fairness.

At a department press briefing, a spokesman characterized assertions that the decision was based on Aro's social media statements as “speculation” and refused to discuss the selection process further.

“The department’s statements during this briefing do not align with the internal discussions that occurred at the time the decision was made to rescind Ms. Aro’s selection," the report found.

In response to questions from congressional aides, the department said that confusion due to the government shutdown had caused the error. It made no mention of Aro's social media posts and said the honor was rescinded because Aro “was not sufficiently aligned with the broader goals of the award.”

But the report cited internal documents as saying that Aro had not been “fully vetted” for the award and had a “history of inflammatory tweets, targeting US leadership and the administration in a specific way.” One document noted that the “identified disconcerting social media content could lead to potentially embarrassing media coverage for the department and the first lady along with the other awardees.”

Copyright 2020 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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