By Daniel Wilson

Law360 (September 18, 2020, 6:08 PM EDT) -- Senior House Democrats will continue to probe a contentious pending $765 million government loan to Kodak, saying a recent report by Akin Gump backing the legality of certain stock trading around the loan announcement "raises more questions than it answers."

The Sept. 15 report to a special committee of Eastman Kodak Co.'s board of directors, authored by Akin Gump Strauss Hauer & Feld LLP attorneys, found that the company's leadership did not violate securities regulations or laws, breach their fiduciary duty, or violate any internal policies as part of events leading up to and following the U.S. International Development Finance Corp.'s July 28 loan announcement. There was unusually high trading activity the day before the announcement, with the company's stock price soaring afterward.

But the report still leaves questions open around why the Trump administration would give a loan to the onetime photography giant to set up a pharmaceutical manufacturing arm despite no prior experience in that industry and related "windfalls" by company executives and board members stemming from stock trades executed before details of the loan were made public, Reps. Jim Clyburn, D-S.C., Maxine Waters, D-Calif., and Carolyn Maloney, D-N.Y., said Thursday.

Clyburn chairs the House Select Subcommittee on the Coronavirus Crisis, Waters leads the House Financial Services Committee and Maloney is in charge of the House Oversight Committee.

"Let's be clear: this report does not represent the findings of any regulator; it is a report generated by a law firm hired by Kodak," the lawmakers said. "Kodak's lawyers deny the company violated securities law, but the Securities and Exchange Commission must independently and carefully scrutinize this matter."

The committee chairs noted that they will also continue to "vigorously pursue" their own ongoing investigation of the loan, launched in early August, making note of several issues raised in the Akin Gump report.

These include "significant concerns from a corporate governance perspective" — the law firm suggested substantive changes to Kodak's practices and policies around executive compensation, insider trading and public disclosures — and the role of senior White House officials in arranging the loan, the lawmakers said.

A representative for Akin Gump declined to comment. Representatives for Kodak and the White House did not immediately respond to requests for comment Friday.

The loan is intended to allow Kodak to produce critical pharmaceutical components for generic medicines, which the U.S. consumes more of than it produces, as part of a broader push by the Trump administration to "onshore" pharmaceutical manufacturing capacity and reduce reliance on overseas suppliers.

It was the first use of an authority newly granted to the U.S. International Development Finance Corp., better known as the DFC, by President Donald Trump, enabling it to use the Defense Production Act to make loans to shore up the domestic industrial base so it can respond to the COVID-19 pandemic.

Kodak's soaring stock price and the high volume of trading activity led to a reported SEC probe, and Kodak's directors called for Akin Gump to review the controversy on Aug. 6.

The DFC then announced on Aug. 7 that it would halt the loan until "recent allegations of wrongdoing" related to the stock trading had been cleared up, and its Office of Inspector General is also investigating the deal, Sen. Elizabeth Warren, D-Mass., announced on Sept. 14, examining issues such as how and why Kodak was chosen for the loan and whether administration officials involved had conflicts of interest.

--Additional reporting by Dean Seal. Editing by Daniel King.

For a reprint of this article, please contact reprints@law360.com.