The Grifters, chapter 1 – Kodak

Epsilon Theory PDF Download (paid subscribers only): The Grifters, chapter 1 – Kodak

The Grifters (1990)
Pat Hingle as Bobo and Angelica Huston as Lilly

Bobo Justus: Tell me about the oranges, Lilly…

[kicks over a bag of oranges]

Bobo Justus: While you put those in the towel.

Lilly Dillon: [kneels on the floor and starts picking them up] You hit a person with the oranges wrapped in a towel… they get big, ugly looking bruises. But they don’t really get hurt, not if you do it right. It’s for working scams against insurance companies.

Bobo Justus: And if you do it wrong?

Lilly Dillon: [terrified] It can louse up your insides. You can get p… p… p-p-p-p-p

Bobo Justus: What?

Lilly Dillon: P-permanent damage.

The best movie about con games is The Grifters, and the best scene in that movie is “Bobo and the oranges”, where mob boss Bobo terrorizes and punishes Lilly for screwing up one of his money laundering schemes. It’s one of the top-ten brutally compelling scenes in any movie I’ve seen, not so much for the physical violence as for the psychological violence.

We’re all Lilly Dillon today.

Our political and market worlds have become an unending sea of grift … small cons, big cons, short cons, long cons … and every day the distinction between grifters and squares becomes more and more blurred.

Day after day, we’re all getting smacked by Bobo and his bag of oranges, hoping to god that we only get badly bruised in the process.

But we all know that we’re past the point of permanent damage.

We’ve been assaulted by three grifts in just the past week … three smacks from Bobo and his bag of oranges … each deserving of an Epsilon Theory note.

Here’s chapter 1.

On Tuesday afternoon, the White House announced that Kodak – a public company with less than $100 million in market cap, basically a pension fund with a famous brand name attached – would receive $765 million in “loans” from the US government to create a “pharmaceutical start-up” that over a period of 8 YEARS will start making pharmaceutical “supplies”. Whatever the hell that means.

This $765 million in non-recourse, non-secured loans for pharmaceutical supply production, given to this micro-cap company with zero experience or expertise in pharmaceutical supply production, comes from the International Development Finance Corporation (DFC), a $60 billion piggy bank established by the Trump administration in 2019 to replace the Overseas Private Investment Corporation (OPIC).

Yes, “international development” and “overseas investment”.

The DFC is an institution that, per its mission statement and Congressional charter via the 2018 Better Utilization of Investments Leading to Development (BUILD) Act, is “focused on promoting inclusive economic growth in the world’s least developed countries.”

I mean … I knew things were bad in Rochester, but I didn’t know they were that bad.

To dust off an old Epsilon Theory catchphrase:

They’re. Not. Even. Pretending. Anymore.

Who is “they”?

On the corporate-grift side, it’s Kodak Chairman and CEO Jim Continenza (SEC CIK 0001197594), who picked up about 3 million shares and cheap options over the past year. It’s Kodak board member George Karfunkel (SEC CIK 0001085765), of the private equity and banking Zyskind-Karfunkel family, with his 6.4 million shares. It’s Kodak board member Philippe Katz (SEC CIK 0001579836), who owns about 4.3 million shares through at least five shell companies.

Here’s a pic of Jim Continenza, shown here on a magazine cover touting Vivial, the other company where he’s also Chairman and CEO. Vivial is a digital marketing company, which is Jim’s particular forte.

Oh, wait, you thought Jim had a background in manufacturing or pharmaceuticals? Hahahahahahaha. Hooo, boy, that’s rich. No, no … Jim is a marketing guy. Shocking, I know.

Based on yesterday’s closing price of $33.20 for the stock, I figure Jim and George and Philippe have made about $400 million over the past 48 hours.

The numbers looked even better when Kodak hit $53 earlier earlier in the day, but easy come, easy go.

I’m focused on Jim and George and Philippe, each of whom were granted tens of thousands of shares in Kodak just over the past 60 days, because this is where the real money from crony capitalism grift is made. But I’d be remiss if I didn’t acknowledge the effort of the small-fry Kodak grifters who covered their tracks and tipped their buddies about the deal, sparking 1.65 million Kodak shares trading for $2 and change on Monday, about 25 times the average trading volume of the prior week, in advance of the Tuesday announcement.

I would hope that lots of people in the Rochester area are about to get a crash course in what constitutes material non-public information and what their responsibilities are in this regard, whether they are the tipper OR the tippee.

But with the current priorities of the SEC and the Justice Department, I’m not holding my breath.

Who is “they”?

On the government-grift side, it’s Donald Trump, who gets a press conference and a talking point.

It’s Commerce Secretary Wilbur Ross and Secretary of State Mike Pompeo, who sit on the DFC board of directors and approved this deal, each pocketing a favor.

It’s Larry Kudlow, University of Rochester alum and friend of Kodak, who pockets a BIG favor.

It’s Adam Boehler, 41 year-old CEO of the DFC, who cements a lucrative career once his government “service” is complete.

Here’s the official government pic of Adam Boehler, sporting the same well-coiffed stubble as Homeland Security Acting Secretary Chad Wolf. Must be a thing with 40-something White House appointees these days.

In prior work, Adam was an “operating partner” at Francisco Partners, a $14 billion private equity firm, which means that he wasn’t a deal guy, but was one of the consultants they’d install to help manage a portfolio company.

Don’t worry, Adam, I’m sure you’ll be a real partner at whatever private equity firm you go work for next year.

Here’s Adam’s rationale for all of us getting smacked with this bag of oranges.

I learned that the company was interested in creating a start-up that could supply ingredients for pharmaceuticals.

What is crony capitalism? THIS.

Crony capitalism is when the 41 year-old head of a government slush fund “learns” – his words – that a failed company with ZERO experience or expertise in medicine or pharmaceuticals “was interested in creating a start-up that could supply ingredients for pharmaceuticals”, and so – within a matter of days – advances a proposal to give that failed company 765 million American dollars.

Now, Adam … purely out of curiosity … how exactly did you “learn” of Kodak’s keen interest in creating a pharmaceutical start-up?

Did they send an email to [email protected]?

Or maybe, just maybe you “learned” about Kodak’s … oh my god, I can’t type this without bursting out laughing … pharmaceutical start-up plans from Uncle Wilbur or Uncle Larry after they had a really interesting conversation with their good friends in Rochester.

And, Adam … again, purely out of curiosity … what evidence was proffered to you and the board showing Kodak’s pharmaceutical start-up expertise?

Because, Adam, I’m looking at Kodak’s 10-k and 10-q, where they talk about the business lines that Kodak has – Traditional Printing, Digital Printing, Advanced Film Materials & Chemicals, and a fourth category they just call “Brand” – and I’m wondering where pharmaceuticals fits into this picture.

Because, Adam, I’m looking at management discussion of new business and licensing opportunities, which took place at the annual shareholders meeting on May 27th – you know, Adam, all of 8 weeks ago – and where they talk about opportunities in “3D printing, smart material applications and printed electronics”, but I can’t find a single mention of pharmaceuticals.

Because, Adam, as the kids would say, I’m old enough to remember the last time Kodak stock tripled in a week, back when the company decided to reinvent itself as a crypto play, complete with a failed ICO and a Bitcoin-mining machine. You know, way back in 2018.

Ladies and gentlemen, I give you the Kodak KashMiner.

AYFKM, Adam?

Crony capitalism. In its purest form.

Just one big smack in the face by Bobo and his bag of oranges.

So I’m going to conclude chapter 1 of The Grifters with this.

Remember how I said that the DFC – this $60 billion piggy bank that is one (of many) White House conduits for crony capitalism – was established by law, specifically the 2018 BUILD Act, to support projects in developing countries?

What that means is that Congress could stop this bullshit transfer of $765 million in taxpayer money to the politically-connected managers and investors of this Rochester, NY-based company.

If they wanted to.

They don’t.


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  1. How could they Ben , my guess is that several members were the ones buying on Monday.

  2. When the Kodak news hit the tape on Tuesday I took notice. Though it portends no insight to the deal, I noticed bc I was born in upstate NY and graduated from the University of Rochester ('79) which was a huge beneficiary of Kodak’s success. I’ve had a front row seat to the decline that has occurred in upstate NY, as well as to the decline of what was an american corporate giant. Knowing full well what has become of Kodak, my reactions was … “WTF!”, and … “HTF does this happen.” Well, now I know.

    Contrast that to Boston, where I schooled as well. Boston is a biotechnology and pharmaceutical hub, where companies start and fail on a continuous basis. On their own for the most part.

    Very dispiriting to say the least.

  3. I cut my teeth as a young banker at OPIC doing structured finance in Russia with large multi-nationals - most oil & gas stuff in the 1990s. We learned how to be underwriters, professionals who create financial projects, perfect security and work with local counsel to bring much-need long-term finance to places that didn’t have it. Since then, China’s various development finance arms are now 5x what the World Bank, IMF, IFC do globally. And now this. We are Back In The USSR.

  4. Ben, Thank you for this article. Those of us who do advisory/planning work as an avocation/living often have to pull clients out of the hype muck and reground them into reality about what makes a good investment. Your article put real meat on to the issues that goes beyond Kodak or stock X.

    It seems to me that the public has been so overwhelmed with the hype (your bag of oranges) and everyday “real issues” (income, family, health, etc.) that they’ve forgotten how, or lost the ability, to critically think beyond the next hour, day, week or year. Oh, and some never where taught that skill to begin with. Hopefully, we can help those we come in contact with.

  5. Eureka! Disinfection agent Argyrol Anti-Infective was given a monopoly under law by FDA in 1999 and remained WHO Essentials Medicine Listed until @ 2011. Kodak would have been familiar with the chemical which is the drug used in sterile photographic film developing processes. Argyrol is the missing disinfectant for mucous membranes that was mandated by the Surgeon General for the 1918 pandemic. There has been no response from pitching Argyrol into Homeland Security as a Medical Intervention. Now I understand the fetid stench.

  6. Keep outing the criminals, Ben. It makes a huge difference. This side of the story is going viral now because you have written about it.

  7. In an atmosphere of chaos the looters are no longer relegated to taking the valuables out the back door but smash in the storefront and run off with the goods.

    Its a “get yours while the getting’s good before the goods are gone” fire sale of our economic future.

    In this fight for our economic lives these are the war criminals.

  8. So thankful to be in Elkhart County, IN. The land of RVs. Driving around, I see factories humming at full capacity, with job signs in the yard offering signing bonuses. Semis everywhere. And I can pretend for just a minute that the world isn’t on fire (if ignoring our Covid rates). Maybe the universe is just making up for 2008 that was harder on our community than most. Wish you were all here with masks on!

    If you are waiting for an RV, it’s likely one of thousands finished and parked at the transport company. Delivery is the main bottleneck right now. Ask your dealer if you can come get it yourself.

    Recessions have always hurt us badly, for reasons that should be obvious to this wise pack. Local leaders ALWAYS respond by announcing plans to diversify our industry. Their continual failure is actually paying off now. Unbelievable. Could never have imagined this scenario.

    Now if our companies can avoid playing too many of these games like Kodak, Boeing, etc. I fear that the drastic economic contrast will lead to us becoming a political prop very soon, that could lead to even worse games. I never understood Obama’s attention on Elkhart, but political attention by many will make sense in coming months. I expect many to take credit for all of you buying RVs for the first time.

    We bought one. Said I never would. Made a trip to CO far less stressful–having our own bathroom and kitchen available on the drives, and our own living area. Safest way to travel right now.

  9. Option volume was up quite a bit for the five previous trading days before this scam very cool, very normal loan was announced. Weird how that always seems to happen, no? Prior to this I had ‘Sketchy Biotech Writer Puts Out Amazing Scoop on Gilead Within Hours of Huge, Otherwise-Irrational Call Volume’ as my winning grift of 2020, but this one beats it by a country mile.

  10. Avatar for O.P.A O.P.A says:

    It keeps getting better. DFC has an eligibility checklist for projects, including a page listing every country they do business in.

    America is not on that list. Not sure what loopholes their own policies have, but their own web page seems to pretty plainly exclude US investments. They could have at least updated it.

  11. Anybody remember Cleo the dialup psychic from the 1980s? “Call meh Nao” (call me now in a West Indian accent). That’s where we’ve arrived. Call them up and they’ll tell you the future. For a fee.

  12. I’ve lost my capacity for getting worked up about this kind of grift, but at least I can still feel outrage over a magazine tagline where ‘industry’ is a verb. Good to know I’m not completely dead inside.

    I think maybe you miss the point on TNEPA. Once upon a time I thought Betrayal was their kink. Now, though, I’m pretty sure that Contempt is the only thing that gets them off. And if that’s the case, well, pretending isn’t really going to cut it now, is it?

  13. Honest observation requires a numerator and a denominator. Clearly, events in the numerator like Kodak loans (and associated suspect activities which are just more obvious when so egregious) must be normalized by an accurate denominator. But just like total Covid cases, we don’t or can’t know the denominator (or most likely do not want to know for cases like Kodak, Boeing, IBM, etc and the like). How do you find entities not in the denominator?

  14. But Kodak was a pharmaceutical company!

    They bought Sterling Drug back in the 80s as part of their diworsification efforts and later sold it in the 90s due to their inability to manage it competitively. I remember writing a paper during my MBA at Rochester Institute of Technology that it was not a core competency and should be sold.

    Second time’s the charm?..

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