Eastman Kodak Company was supposed to be receiving a $765 million (£587 million) loan from the US government to enable it to ramp up pharmaceutical production as part of the fight against Covid-19. This loan has now been put on hold for the time being, owing to “recent allegations of wrongdoing,” said the U.S. International Development Finance Corp (DFC).
The allegations concern securities transactions made by Kodak and various executives when it learned it was getting the loan – insider trading, basically. According to the FT, “the $765m loan, the first under the Defense Production Act since the start of the coronavirus pandemic, drew scrutiny from members of Congress because shares of the company rose in advance of its announcement. Share purchases in June by Jim Continenza, executive chairman of Kodak, and Philippe Katz, a board member at the Rochester, New York-based company, also drew scrutiny.”
“Recent allegations of wrongdoing raise serious concerns,” the DFC tweeted. “We will not proceed any further unless these allegations are cleared,” the DFC said. It was referring to a letter of interest it signed on July 28 with Kodak.
Kodak shares rose more than 1,000% last week after news of the loan agreement broke, with many executives owning share options looking forward to a bumper payout, Now, however, the share price has fallen back over 30%. Kodak announced it has appointed a committee of independent directors of its board to carry out an internal review.