Kodak’s $765 Million U.S. Loan Prompts Probe by House Democrats

(Bloomberg) -- House Democrats have launched an investigation into Eastman Kodak Co.'s $765 million government loan and are seeking documents from a U.S. agency involved in granting the proposed funding.

House Financial Services Committee Chairwoman Maxine Waters is among Democrats who said they've sought all communications about the loan from the U.S. International Development Finance Corp. The agency handles financing provided through the Defense Production Act, which is how Kodak would secure funding to make ingredients for generic drugs.

In a Wednesday letter to the DFC, the Democrats questioned why the agency would “support Kodak, an organization that was on the brink of failure in 2012 and was unsuccessful in its previous foray into pharmaceutical manufacturing.”

The Kodak loan, announced July 28, has triggered no shortage of controversy. The former film company would be the first beneficiary of a Trump administration program aimed at bolstering U.S. drug-making capabilities amid the coronavirus outbreak, despite its lack of a track record in pharmaceuticals.

Democratic Senator Elizabeth Warren also called for the Securities and Exchange Commission to investigate possible insider trading and disclosure violations tied to Kodak's announcement. Volume in the company's shares soared July 27 and the stock rose about 20%.

In a Tuesday letter to the SEC, Warren said the rise could have been triggered by news sources in Rochester, New York -- where Kodak is based -- sharing information about the loan on Twitter. She questioned whether such news reports could have been prompted by a violation of what's known as Regulation Full Disclosure, a rule that requires public companies to release material information to all investors at the same time.

The Wall Street Journal reported Tuesday that the SEC is investigating the circumstances around Kodak's announcement.

Kodak has said that it didn't intend for news about the loan to be published ahead of the July 28 announcement and that it fully intends to cooperate with any government inquiries. The SEC declined to comment.

©2020 Bloomberg L.P.