Back in September, a board-appointed committee cleared Eastman Kodak's executives of wrongdoing after insider trading accusations scuppered the company's plans to enter drug manufacturing. Now, a government watchdog has absolved the agency that brokered the camera maker's ill-fated federal loan.
In an assessment for Sen. Elizabeth Warren, D-Massachusetts, the Office of the Inspector General of the U.S. International Development Finance Corporation (DFC), said agency officials had acted aboveboard in planning to award Kodak $765 million to set up drug manufacturing.
The inspector general, Anthony Zakel, found no proof that agency employees had any conflicts of interest in the deal and said he did not turn up "any evidence of misconduct on the part of DFC officials," according to a copy of the report obtained by The Wall Street Journal.
The plan to fit out Kodak for active pharmaceutical ingredient (API) manufacturing was itself sound, Zakel said, citing other companies' recent efforts to shore up drug manufacturing stateside. The DFC had intended to establish capacity for the APIs in key generic drugs before its plan buckled under the weight of multiple investigations.
The Trump administration has hustled to establish a network of "onshore" API and finished drug manufacturing amid COVID-19 supply concerns. One noteworthy deal came in May when fledgling pharma Phlow scored a $354 million loan from the Biomedical Advanced Research and Development Authority to crank out meds at risk of shortage.
Zakel noted that Kodak is no stranger to the industry, either. For years, the company has produced key materials for API production, and it even briefly operated a pharma unit, Sterling Drug—sold off in 1992.
What could have done with some fine-tuning, however, was the timing of the deal's announcement, Zakel said.
Kodak was still in the thick of its loan process with the DFC when the plan went public in late July; plus, the agency had yet to decide whether the loan even met its minimum eligibility requirements, the inspector general said.
Facing alleged DFC pressure, Kodak let news of the deal slip to local media a day early, sending its stock skyward. The Securities and Exchange Commission and congressional committees quickly launched investigations.
The inspector general's office plans to audit other DFC projects under the Defense Production Act, the legal underpinning for Kodak's payout. The agency needs to reassess how it announces "market-sensitive" transactions with public companies, Zakel said.
But the DFC may not be off the hook just yet. The assessment failed to suss out potential contacts between the White House and political appointees about the deal, an aide for Warren told the WSJ. The inspector general didn't review whether the agency's process avoided waste or abuse of taxpayer money, either, the aide said.
The assessment was limited in scope to the DFC alone and did not review the conduct of Kodak or non-agency personnel, Zakel said.
Meanwhile, Kodak in September carried out its own review through a board-appointed committee, clearing its top brass of insider trading accusations. Precleared stock trades for CEO Jim Continenza and board member Philippe Katz were legal and in keeping with company rules, while two investors who dumped millions of shares soon after the loan announcement weren't tipped off ahead of time, the review found.
The committee did suggest Kodak bolster its legal department and insider trading rules to avoid future imbroglios—suggestions Kodak said it would "expeditiously" pursue.
Plus, Kodak hasn't given up the pharma ghost just yet. Continenza in October defended Kodak's handling of the loan plans and said his company would enter the API business with or without government support, WSJ wrote.
And the DFC, for its part, isn't letting its poorly-developed Kodak plan ruin the bigger picture: The agency late last month approved a whopping $590 million loan to ApiJect Systems, maker of a plastic, prefilled injector, to boost its output by up to 3 billion devices per year—a bid to secure supplies ahead of a fast-approaching vaccine rollout.
Editor's Note: This article was updated to clarify that DFC approved a loan to ApiJect and did not grant the company money outright.