Kodak $765M Federal Loan Process Involved No Wrongdoing, DFC Concludes

There was no wrongdoing involved in the process of Eastman Kodak Company KODK receiving a $765 million federal loan for its pharmaceuticals foray, the U.S. International Development Finance Corp. has reportedly concluded. 

What Happened: The DFC is the federal agency that originally granted the loan. As per the Wall Street Journal, the DFC Inspector General Anthony Zakel reported his findings to Senator Elizabeth Warren (D-Mass.) last week.

Zakel told Warren — who has been among the most vocal critic of what she earlier referred to as a “massive fiasco of a deal” — that the DFC in its review found no conflict of interest for the employees of the federal agency in the deal and that there is no “evidence of misconduct on the part of DFC officials.”

The loan was sanctioned at the behest of President Donald Trump in July this year.

The U.S. Securities and Exchange Commission has also been reportedly probing the events surrounding around the loan, including allegations of potential insider trading violations.

A DFC spokesperson told the Journal, “the record is abundantly clear and the independent IG review confirms that DFC followed its standard process, under its standard timeline, driven by career finance professionals.”

Why Does It Matter: It isn't immediately clear if DFC will go forward with the loan.

One of Warren's aide claimed that Zakel's assessment didn't look into potential ties between the White House and other related parties with a political background. The associate also raised certain questions about the DFC’s procedures.

Zakel said the DFC limited the probe internally and “did not review conduct by Kodak or non-DFC personnel.“

Kodak shares have seen immense volatility since the announcement of the loan in July. Grant of stock options to Kodak Chairman and CEO Jim Continenza a day before the loan was announced, along with his purchase of a significant amount of shares in the company ahead of the loan raised eyebrows. 

An independent committee appointed by the Kodak board in September concluded there was no violation of the law on part of the Rochester-based photography company but it flagged concerns related to corporate governance.

Continenza said in October that Kodak will move forward with the generic drug ingredients manufacturing venture even if the federal loan is not granted.

Price Action: KODK closed Friday 4.5% higher at $7.53.

Photo by El Grafo on Wikimedia