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There will be no need for mugshots in the Kodak saga.

A government watchdog announced it found no wrongdoing in Eastman Kodak's planned loan to produce pharmaceutical ingredients for the U.S. government. And shareholders applauded.

The Camera Doesn't Lie

Kodak drew much attention and ire this summer after the company was awarded a first-of-its-kind Defense Production Act loan from the U.S. government to manufacture drug ingredients.

While a century-old camera company snapping up a $765 million loan to make medicine raised some eyebrows, the real controversy was the timing:

  • Kodak execs received stock options just prior to the loan announcement, which promptly sent the company's then-ailing shares up nearly 3000%.
  • CEO (and shareholder) Jim Continenza reportedly netted a $200 million profit – unrealized, of course-in the 2-day period following the loan announcement.

Kodak claimed the timing of executive stock compensation was coincidental, but lawmakers didn't buy it. In August the deal-broker, the Development Finance Corporation, put the loan on hold pending an internal review and the SEC opened its own probe. That sent shares tumbling from their $60 summer high to below $10.

But DFC inspector general Anthony Zakel reported Sunday he found no wrongdoing in how the loan was brokered. The positive turn once again sent Kodak shares skyrocketing nearly 100% Monday morning.

Hold On A SEC

Despite the flash of good news, it might be a while before Kodak can say "cheese." The SEC and members of Congress are still doing their own due diligence and the DFC tweeted that the loan will remain on hold until Kodak is cleared of all "recent allegations of wrongdoing."

A September report from law firm Akin Gump concluded Kodak did not violate insider-trading laws, but said the loan application was still "at a highly uncertain stage."

The Takeaway: Kodak has maintained its innocence, but conceded "we need to take action to strengthen our practices, policies, and procedures." With members of Congress and multiple government bodies whipping out their microscopes, we'd have to agree.