The U.S. government will not proceed with a $765 million loan to Eastman Kodak Co (KODK.N) to make drugs at its U.S. factories unless the company is cleared of alleged wrongdoing in circumstances surrounding the announcement of the loan, the White House said on Monday.
White House Press Secretary Kayleigh McEnany made the remarks to reporters after U.S. President Trump said last week the federal government would quickly investigate the issue.
The U.S. International Development Finance Corp on Friday said the loan, aimed at helping the photographic equipment maker shift to making ingredients for pharmaceuticals, was on hold due to “recent allegations of wrongdoing.”
McEnany said the president took the allegations seriously but declined to say if the loan could be canceled outright.
“We will not proceed any further unless these allegations are cleared,” she said at a regular briefing, adding that the investigation was still underway.
She said the case had not shaken the president’s faith in using the Defense Production Act to increase U.S. stockpiles of ventilators and other equipment to respond to the pandemic.
News of the investigation and a halt in the loan weighed heavily on Kodak shares, which were trading down 28% at $10.70 on the New York Stock Exchange on Monday afternoon.
Initial news of the loan had driven the shares 1,000% higher, generating a windfall for executives, some of whom had received options one day earlier.
Senior Democratic lawmakers last week asked federal regulators to investigate securities transactions made by the company and its executives around the time it learned it could receive the government loan.
Lawmakers said they had “serious concerns” about the transactions and asked the Securities and Exchange Commission to investigate the circumstances surrounding the matter. They cited growing concerns about insider trading.
The company said it had appointed a special committee of independent directors of its board to conduct an internal review.