Northwest Arkansas Democrat-Gazette
$700M covid-relief loan faulted in panel’s report
WASHINGTON — Democratic lawmakers on Wednesday released a report alleging that top Trump administration officials awarded a $700 million pandemic relief loan to a struggling trucking company in 2020 over the objections of career officials at the Defense Department.
The report, released by the Democratic staff of the House Select Subcommittee on the Coronavirus Crisis, describes the role of corporate lobbyists during the early months of the pandemic in helping to secure government funds as trillions of dollars of relief money were being pumped into the economy. It also suggests that senior officials such as Steven Mnuchin, the former Treasury secretary, and Mark Esper, the former defense secretary, intervened to ensure that the trucking company, Yellow Corp., received special treatment despite concerns about its eligibility to receive relief funds.
“Today’s select subcommittee staff report reveals yet another example of the Trump administration disregarding their obligation to be responsible stewards of taxpayer dollars,” Rep. James Clyburn, D-S.C., the chairman of the subcommittee, said in a statement. “Political appointees risked hundreds of millions of dollars in public funds against the recommendations of career DOD officials and in clear disregard of provisions of the CARES Act intended to protect national security and American taxpayers.”
The $2.2 trillion pandemic relief package Congress passed in 2020 included a $17 billion pot of money set up by Congress and controlled by the Treasury Department to assist companies that were considered critical to national security. In July 2020, the Treasury Department announced it was giving a $700 million loan to the trucking company YRC Worldwide, which has since changed its name to Yellow.
Lobbyists for Yellow had been in close touch with White House officials throughout the loan process and had discussed how the company employs Teamsters as its drivers, according to the report.
Mark Meadows, the White House chief of staff, was a “key actor” coordinating with Yellow’s lobbyists, according to correspondences that the committee obtained.
The loan raised immediate questions from watchdog groups because of the company’s close ties to the Trump administration and because it had faced years of financial and legal turmoil. The firm had lost more than $100 million in 2019 and was being sued by the Justice Department over claims that it had defrauded the federal government for a seven-year period. It recently agreed to pay $6.85 million to resolve allegations “that they knowingly presented false claims to the U.S. Department of Defense by systematically overcharging for freight carrier services and making false statements to hide their misconduct.”
To qualify for a national security loan, a company needed certification by the Defense Department.
The day after a defense official notified a Treasury official that the company would not be certified, one of Mnuchin’s aides set up a telephone call between him and Esper.
The report indicated that Esper was not initially familiar with the status of Yellow’s certification. Before the call, aides prepared a summary of the analysis and recommendations of the department’s career officials that concluded that the certification should be rejected.
Before those reached Esper, Ellen M. Lord, the department’s undersecretary for acquisition and sustainment who was appointed by Trump, requested a new set of talking points that argued that the company should receive the financial support “to both support force readiness and national economic security.”
After the call with Mnuchin, Esper certified that the company was critical to national security and a week later the approval of the loan was announced.
Esper and Mnuchin declined to comment.
In December, 2020, U.S. Rep. French Hill, R-Ark., raised questions about why Yellow Corp., then known as YRC Worldwide, was deemed vital to national security and given a $700 million covid-19 relief loan. Hill, at the time, also criticized the Department of Defense for failing to provide satisfactory explanations.
Hill was appointed to a congressional commission charged with monitoring U.S. Treasury-backed lending authorized by the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which provided the U.S. Treasury Department with $500 billion for loans and other investments “to provide liquidity to eligible businesses, States, and municipalities related to losses incurred as a result of coronavirus.”
Up to $ 17 billion of the overall amount was targeted for businesses that were considered “critical to maintaining national security.”
In a report released in May 2021, the commission criticized the Yellow Corp. loan, with Hill at the time calling it a “mistake” because the company didn’t appear to qualify because there “was no evidence to support Yellow being critical to national security.”
The report accuses Yellow of misrepresenting its business to help secure the loan. It claimed to provide a larger share of trucking services to the Defense Department than the department assessed.
Communications included in the report also showed a company executive discussing using funds to catch up on capital investments when the relief money was supposed to be used for offsetting losses from the pandemic.
Along with the release of the report, Clyburn sent a letter to the Treasury Department’s inspector general asking for an investigation into whether Yellow had violated the False Claims Act.
A law firm representing Yellow sent a letter to Clyburn before the release of the report defending the company’s actions and describing many of the allegations as “baseless.”
The company stood by the trucking services data that it provided when applying for the loan and said that Yellow has paid more than $25 million in interest on the loan.