A worker cleans a Kodak booth at the Las Vegas Convention Center in Las Vegas, Nevada, the US. Picture: REUTERS/STEVE MARCUS
A worker cleans a Kodak booth at the Las Vegas Convention Center in Las Vegas, Nevada, the US. Picture: REUTERS/STEVE MARCUS

Washington —  House Democrats have launched an investigation into Eastman Kodak’s $765m government loan and are seeking documents from a US agency involved in granting the proposed funding.

House financial services committee chair Maxine Waters is among Democrats who said they have  sought all communications about the loan from the US International Development Finance Corporation (DFC). 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  letter to the DFC on Wednesday, the Democrats questioned why the agency would “support Kodak, an organisation 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 programme aimed at bolstering US drugmaking 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 (SEC) 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 on Tuesday that the SEC is investigating the circumstances around Kodak’s announcement.

Kodak has said that it did not intend for news about the loan to be published ahead of the July 28 announcement and that it fully intends to co-operate with any government inquiries. The SEC declined to comment.

Bloomberg

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