Sen. Elizabeth Warren calls Kodak loan decision a 'fiasco,' urges new investigation
- In a letter viewed by CNBC, Warren blasted the Trump administration's decision to offer, and then revoke, a loan made to Kodak as a "fiasco."
- The decisions to offer and revoke "the Kodak loan also raises larger questions about corruption, nepotism, and mismanagement," the Massachusetts Democrat wrote.
- The letter comes weeks after the Trump administration announced plans to award Kodak a $765 million loan so that the company could produce drug ingredients.
U.S. Sen. Elizabeth Warren on Thursday blasted the Trump administration's decision to offer, and then back away from, a multimillion-dollar loan to Eastman Kodak as a "fiasco."
In a letter viewed by CNBC, the Massachusetts Democrat urged the federal oversight board tasked with monitoring how Covid-19 relief funding is spent to examine the decision-making behind what was expected to be a $765 million loan to the Rochester, N.Y.-based Kodak.
Warren first questioned the motives of the U.S. International Development Finance Corp., a new federal foreign investment agency that has been tasked by President Donald Trump to help find ways to rebuild the national stockpile of medical supplies.
"The fiasco surrounding the decision to offer, then revoke, the Kodak loan also raises larger questions about corruption, nepotism, and mismanagement in the Trump Administration's response to COVID-19," Warren wrote to Michael Horowitz, acting chair of the Pandemic Response Accountability Committee.
"It is not at all clear why President Trump, in his Executive Order, chose to give the DFC ... this new loan authority — but the mismanagement of the Kodak loan raises new concerns that it may be fundamentally unsuited to the task."
The letter from Warren came just weeks after the Trump administration announced that it planned to award Kodak a $765 million loan through the DFC so that the company could produce ingredients used in drugs.
A spokesperson for Kodak reiterated that the company has yet to receive the loan and, therefore, that it could not be revoked. The White House did not respond to CNBC's request for comment.
But Kodak, which has struggled as digital cameras overtook its once-dominant film business, may not be the best company equipped to manufacture pharmaceuticals. It's for that reason, and in light of unprecedented lobbying by the company, that the decision to make the loan ought to be investigated, Warren argued.
"DFC provided this taxpayer-funded loan to produce an unproven drug to Kodak, a company that had no pharmaceutical manufacturing experience, through an opaque process and after an extensive and unprecedented lobbying effort by the company," Warren, a member of the Senate Banking Committee, wrote.
Kodak's representative noted that the loan was never intended to produce an unproven drug and that the company does have experience in chemicals and advanced materials.
But Warren continued: "Then, it got worse," referring to questionable stock purchases made in the days leading up to the loan's public announcement.
On July 27, a day before Kodak and Trump announced the loan, shares of the film pioneer soared nearly 25% with trading volumes far exceeding those in previous sessions. The stock had plateaued around $2 per share for months but spiked as high as $60 the day after the deal.
The Securities and Exchange Commission has since opened an investigation that is expected to examine stock options granted to executives on July 27, according to The Wall Street Journal.
"The net result has been a waste of time, money, and resources, no progress whatsoever in the effort to mitigate the coronavirus disease 2019 (COVID-19) pandemic, and a host of questions about how and why the Trump Administration is handing out taxpayer funds and who is benefitting from these expenditures," Warren wrote.
Condemnation of the dubious trading and executive purchases isn't confined to Democrats. White House trade advisor Peter Navarro blasted Kodak executives on Monday for their handling of the loan announcement.
"Based on what I'm seeing, what happened at Kodak was probably the dumbest decisions made by executives in corporate history," Navarro told CNBC earlier this week.
"You can't fix 'stupid,'" he added. "You can't even anticipate that degree of stupidity."
But Warren went a step further and implored the Pandemic Response Accountability Committee to investigate the circumstances of the "botched" Kodak loan.
She advised the committee, comprised of inspectors general, to probe the rationale for making Kodak the first recipient of a Defense Production Act loan, whether the company's lobbying inappropriately influenced Trump administration officials and whether White House representatives may have aided insider trading.
Subscribe to CNBC PRO for exclusive insights and analysis, and live business day programming from around the world.