Federal government pauses Kodak loan pending probes

Shares of Eastman Kodak Co. plummeted Monday after a federal agency blocked a $765 million government loan to the company following the deal, which was touted by President Trump, coming under congressional scrutiny.

The U.S. International Development Finance Corporation (DFC) said in a Friday tweet that “recent allegations of wrongdoing raise serious concerns. We will not proceed any further unless these allegations are cleared.”

The Securities and Exchange Commission is investigating the deal after being pressed by lawmakers, led by Sen. Elizabeth Warren (D-Mass.).

Kodak’s board said Friday it’s also opening a review.

Warren specifically asked Securities and Exchange Commission Chairman Jay Clayton to investigate “several instances of unusual trading activity” involving Kodak stock one day before the federal government announced it would lend $765 million to the company to produce pharmaceuticals in the U.S.

The loan announcement drastically increased the price of Kodak stock from roughly $2 per share to as high as $33. But the surge of Kodak’s stock price and the volume of shares traded the day before the announcement has prompted scrutiny.

On Monday, stocks fell more than 40 percent before trading was briefly halted. 

The DFC was set to give the loan to Kodak last month, in a deal cheered by Trump to help the company shift into manufacturing components for COVID-19 drugs.

Trump called the loan “one of the most important deals in the history of U.S. pharmaceutical industries” and “a historic agreement.”

Questioned about it last week, the president distanced himself from the deal and said the government would investigate.

In a statement, House Majority Whip James Clyburn (D-S.C.), chairman of the Select Subcommittee on the Coronavirus Crisis, praised the decision to halt the loan. 

He said the committee is still seeking answers about why the administration decided to loan hundreds of millions of dollars for drug manufacturing to a company without pharmaceutical experience, and how Kodak executives acquired millions of dollars worth of stock and options at the same time they were negotiating the loan.

Clyburn and other House Democrats are seeking all communications about the loan from the DFC, an agency that was formed last year and is run by White House senior adviser and Trump son-in-law Jared Kushner’s former roommate Adam Boehler.

“Given that the Administration admitted there are ‘serious concerns’ with the loan and said they ‘will not proceed any further unless these allegations are cleared,’ I expect both the Administration and the company will fully comply with the Committees’ document requests without delay,” Clyburn said