On July 28, President Donald Trump crowed that his administration reached "a historic" and "groundbreaking" deal to provide a $765 million loan for Kodak in Rochester, New York, to expand its pharmaceutical chemicals line.
"I want to thank Gov. Andrew Cuomo and his representatives," Trump said in a rare gesture. "We’ve worked really well together on this deal. It’s a big deal. It’s going to be a great deal and a great deal for New York and a great deal for Kodak."
The stock value quickly tripled.
But in a flash, this "great deal" seemed to be in a great deal of trouble. Five days after the announcement, Trump responded to reports that the Securities and Exchange Commission and other agencies were probing possible improprieties.
"We’ll do a little study on that. We’ll find out. If there is any problem, we’ll let you know about it very quickly,” Trump said, before adding: “I wasn’t involved in it."
Now the deal is delayed indefinitely. Company stock prices plunged when federal officials last week announced the holdup, citing "recent allegations of wrongdoing" that "raise serious concerns."
Sen. Elizabeth Warren (D-Mass.) asked the SEC to investigate any connection between the granting of the loan and several trades and executive purchases of Eastman Kodak stock.
A dramatically high volume of trading just a day before the public announcement marks one of what appear to be several irregular features of the deal.
Some Wall Street analysts wondered why officials turned to Kodak, which had declined since the rise of digital photography destroyed its film-based business. The company has no presence in the pharma trade.
“We find it puzzling why generic pharmaceutical companies who have the capabilities and know-how for this have not yet been awarded such contracts,” Ami Fadia of the investment bank SVB Leerink was quoted by the MarketWatch website as saying.
“Bringing pharma manufacturing back to the U.S. is no easy feat and [we] continue to believe that leading generic manufacturers will eventually be part of the solution.”
Perhaps some of the answer will turn out to involve the fact that Kodak spent $870,000 lobbying Congress and federal agencies from April through June, as reported by Bloomberg News. The company reported having spent no money on lobbying since an expense of less than $5,000 in the first quarter of 2019.
Another oddity is the source of the public financing: the U.S. International Development Finance Corporation (DFC), which on an official website describes itself as "prioritizing investments in lower- and middle-income countries."
Meanwhile, the company is reviewing a very out-of-the-ordinary transaction related to the loan announcement. In a securities filing, Kodak board member George Karfunkel and his wife reported donating 3 million of their 6.3 million company shares to the nonprofit Congregation Chemdas Yisroel in Brooklyn on July 29, after the stock reached its highest share price since 2014.
That would be a donation worth $116.3 million — possibly the biggest contribution on record to a religious nonprofit, according to The Wall Street Journal. Karfunkel is listed as its president.
Trump authorized the unique U.S. loan to Kodak under the Defense Production Act enacted in the 1950s.
For weeks after the coronavirus outbreak began in the U.S., state officials and members of Congress repeatedly urged an apparently reluctant Trump to use that law's emergency provisions to force the production of needed medical supplies. He did so in a few places, such as to get General Motors to make ventilators.
But supply problems persist in the fight against coronavirus, especially now that the pandemic is spreading to the nation's South and West. One month ago, Kelly Magsamen, the National Security Council's former senior director for strategic planning, told CNN that "a much more aggressive and early use of the Defense Production Act [in February] would have saved a lot of the heartaches we are seeing right now."