House Democrats are investigating a $765 million federal loan awarded to Eastman Kodak for the photography company to start producing drug ingredients — a surprising deal that has drawn scrutiny because of stock transactions by company insiders around the announcement.
House Coronavirus Crisis Subcommittee Chair Jim Clyburn (D-S.C.), Financial Services Chair Maxine Waters (D-Calif.) and other committee leaders sent letters seeking information to Eastman Kodak Executive Chair James Continenza and to U.S. International Development Finance Corp. CEO Adam Boehler, whose agency issued the loan.
The lawmakers are seeking details on how Kodak obtained the government support, which the Trump administration said would allow the company to begin producing critical pharmaceutical components. They’re also requesting documents related to stock transactions by company executives.
“Companies and individuals that receive federal funds in response to the coronavirus crisis must follow the law and not engage in abusive practices,” they said in the letter to Continenza. “DFC’s decision to award this loan to Kodak despite your company’s lack of pharmaceutical experience and the windfall gained by you and other company executives as a result of this loan raise questions that must be thoroughly examined.”
The Democrats’ inquiry will fuel growing questions about the deal, which the Trump administration approved under the Defense Production Act. The loan to Kodak surprised many in the pharmaceutical industry, given the company’s historic focus on photography. Kodak has some experience manufacturing chemicals but needs to retool plants in Rochester, N.Y., and St. Paul, Minn., before it can begin pumping out drug ingredients.
“Although Kodak has experience manufacturing chemicals used in photography, it has not traditionally manufactured chemicals for use in pharmaceutical products,” House members wrote to Continenza. The senior lawmakers probing the deal also include House Oversight Chair Carolyn Maloney and Foreign Affairs Chair Eliot Engel, both New York Democrats.
A spokesperson for Kodak said the company “intends to fully cooperate with the subcommittee.” A spokesperson for the U.S. International Development Finance Corp. said the agency received the letter and was reviewing it.
The scrutiny by House Democrats follows a Wall Street Journal report that the Securities and Exchange Commission is also investigating the issuance of the loan.
The plan underlying the deal is for Kodak to make essential drug ingredients that are in short supply, as determined by the Food and Drug Administration. White House trade adviser Peter Navarro has said these will include components of hydroxychloroquine, even though several major clinical trials have shown the malaria drug does not benefit Covid-19 patients.
The White House has pushed to bring drug manufacturing back to the U.S. to ensure supplies of critical medicines. More than 70 percent of the world’s drug ingredients are made overseas, with the bulk coming from China and India. In May, the Trump administration signed a $354 million deal with a Richmond, Va., startup called Phlow to produce drug ingredients and generic medicines.
Beyond Kodak’s competency for pharmaceutical production, Democrats are also probing stock transactions by company leaders before the loan’s July 28 announcement. The deal was accompanied by a spike in the company’s share price, possibly enriching executives such as Continenza, who was awarded 1.75 million stock options the day before the loan was announced.
Democrats are seeking documents and communications related to the issuance of Kodak stock and options to company insiders including to Kodak board members on May 20 and to Continenza on July 27. They also want documentation of stock trades by Kodak’s leadership, such as share purchases by Continenza and board member Philippe Katz on June 23.
Lauren Morello contributed to this report.