The Trump administration approved a $700 million CARES Act loan for trucking company, YRC Worldwide Inc.
The loan, which violated stipulations in the CARES Act, was approved despite objectives from the Defense Department.
Company executives “sought to use government funds for long-term capital investments,” a House Select Subcommittee said.
The Trump administration approved $700 million in pandemic loans for a trucking company tied to the former president, despite the objects of the Department of Defense officials, Democratic lawmakers said on Wednesday.
The loans to YRC Worldwide Inc., now called Yellow Corporation, violated stipulations in the CARES Act. Senior Trump officials – “potentially including the president” – were involved in getting the loan approved, Democrats on the Select Subcommittee on the Coronavirus Crisis said in a press release.
“Today’s Select Subcommittee staff report reveals yet another example of the Trump Administration disregarding their obligations to be responsible stewards of taxpayer dollars,” Chairman James Clyburn said in the press release.
“Political appointmentees 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 release went on to say.
The $2.2 trillion CARES Act enacted in March 2020 allocated $17 billion for companies that were considered critical to national security, the New York Times reported. The loan to Yellow “represented 95% of the total funds disbursed under the CARES Act national security loan program,” the Select Subcommittee found.
The report by the Select Subcommittee found that “career DOD officials recommended against certifying the company as ‘critical to maintaining “national security,'” finding that other companies could replace the trucking services Yellow provided to DOD, which were less than half of what the company claim.”
The Defense Department officials also noted, per the report, an ongoing Department of Justice lawsuit against Yellow for “fraudulently overcharging DOD, which Yellow misleadingly described to Treasury merely a ‘contractual dispute.”‘ The Justice Department announced in March that Yellow agreed to pay $6.85 million to resolve claims of presenting false to the DOD and “systematically overcharging for freight carrier services and making false statements to hide their misconduct.”
According to the Select Subcommittee’s report, Treasury Secretary Steven Mnuchin requested a phone call with Defense Secretary Mark Esper in June 2020, after Mnuchin was informed that the DOD was not planning to classify Yellow as “critical” to national security. Following the phone call, the DOD certified the company as “critical,” making it eligible for the $700 million loan.
“Immediately after Treasury decided to award Yellow the loan, Treasury Secretary Steven Mnuchin emailed the announcement to Chief of Staff Meadows and other close aides to Trump and highlighted praise for President Trump in news reports about the loan,” the report said.
Insider was not immediately able to get in touch with Mnuchin for comment on Wednesday. Jonathan Hoffman, a spokesperson for Esper, said that “the DOD staff determined that the firm met the explicit criteria for CARES Act loan eligibility, and was considered critical to national security.”
“Few reasonable people can argue that, in the middle of a global pandemic that was destroying businesses, the Department of Defense potentially losing between 1/3 and 2/3 of domestic shipping of equipment and supplies would be detrimental to national security over some period of time,” Hoffman said.
According to the subcommittee, “Yellow executives sought to use government funds for long-term capital investments to update the company’s aging truck fleet.” Despite the stipulations that CARES Act loans were supposed to offset company losses as a result of the pandemic, the Trump administration “agreed to allow Yellow to use $400 million of its $700 million loan for long-term capital investments,” the report said.
Yellow’s Chief Financial Officer wrote to a private creditor saying, ‘while we had our hand in the cookie jar we thought we would try to get a little ‘catch up’ capex [capital expenditures] While we were at it,'” the report said.
Yellow spokesperson Heather Nauert told Insider that the loan had bipartisan support and helped preserve 30,000 jobs during the pandemic.
“Yellow’s intended use of the loan funds, including for capital expenditures, was the subject of extensive negotiations with Treasury,” Nauert said. “Yellow CEO Darren Hawkins has repeatedly said that the loan would be paid back.”
A letter sent to the Select Subcommittee from Kasowitz Benson Torres LLP, who is representing Yellow, said claimed made against the company in the report were “demonstrably false.”
“Yellow’s eligibility for and use of its CARES Act funds is, was, and continues to be appropriate in every respect,” the letter said.
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