POLITICS

Trump administration overruled Pentagon officials to approve $700M COVID loan: House report

Yellow Corporation's loan was approved on terms that violated the CARES Act, the House oversight panel determined.

Ella Lee
USA TODAY
  • House investigators found that the Trump administration dismissed objections by Pentagon officials to loan $700 million in pandemic aid to a trucking company.
  • The Trump administration approved the loan on terms that violated the CARES Act, the report says.

WASHINGTON – Trump administration appointees dismissed the objections of Pentagon officials to loan $700 million in pandemic aid to a trucking company that was deemed ineligible for the funds, a House oversight panel determined.

The loan given to Yellow Corp., a trucking firm previously called YRC Worldwide Inc., was approved on terms that violated the CARES Act, the multitrillion-dollar financial package approved by Congress in March 2020 to help businesses survive the COVID-19 pandemic, according to a report released Wednesday by the Democratic-led House subcommittee on the COVID-19 crisis.

The trucking company’s loan represented 95% of the total funds disbursed under the CARES Act national security loan program, despite the fact that a Defense Department assessment deemed the company not “critical” to national security, which was a requirement under the act, according to the House panel's report.

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South Carolina Rep. James E. Clyburn, chairman of the subcommittee and a Democrat, called on the Treasury Department to investigate whether Yellow broke any federal laws, such as making false claims or statements when applying for the loan. 

“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," Clyburn said in a statement.

In response to USA TODAY's request for comment, Yellow spokesperson Heather Nauert provided a letter sent by Yellow lawyer Marc Kasowitz, which describes the committee's findings as "unsubstantiated, and indeed demonstrably false."

According to the report, a "career DOD official" in June 2020 told the Treasury Department and political appointees that the Pentagon would not certify Yellow as critical to national security. They noted that “plenty of other trucking companies” could provide Yellow's same services and cited concerns over a now-settled lawsuit that was pending between the Department of Justice and the company for fraudulently overcharging the government.

Treasury Secretary Steve Mnuchin requested a call with Defense Secretary Mark Esper after that briefing, the report says. Shortly after, Esper signed a letter to the Treasury confirming he certified Yellow as “critical to maintaining national security” in regards to the CARES Act national security loan program.

The Treasury announced its approval of the loan on July 1, 2020, writing that Yellow provided 68% of the Defense Department’s less-than-truckload shipments — a figure twice the percentage of the Pentagon's assessment of the company's help. 

In its letter to the committee, Yellow's legal representative said the company "stands firmly" behind that figure.

Trump administration officials overrode objections by the Pentagon to give Yellow Corporation a $700 million COVID relief loan, a new House report says. Government source/special to USAT

The report indicates Trump administration officials were working behind the scenes to seal the deal, as well.

In May 2020, then-White House Chief of Staff Mark Meadows told lobbyists for Yellow that he would call Mnuchin regarding the company's loan application, according to the report. Meadows and other Trump staffers remained in regular contact with the company, and the Treasury official negotiating Yellow's loan said work on the company's application became "intensive" around this time, the subcommittee said. 

In June, former President Donald Trump also spoke to a union leader coordinating with Yellow regarding the trucking firm's loan application; that call was communicated to Mnuchin and Esper, the report says. 

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House investigators found that the Trump administration allowed Yellow to spend $400 million of its $700 million loan on replacements for its tractors and trailers, despite the CARES Act rule that loans could only be used to cover pandemic-related losses, and gave the trucking company an interest rate 4 points lower than the company paid its private lenders.

Yellow's chief financial officer wrote to a private creditor in an email released as part of the report that "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.” 

Kasowitz, Yellow's legal representative, wrote in his letter to the committee that the "off hand" and "flippant" quoted comment was made by a former employee.

"It is highly unfortunate, indeed, that the Committee, which had the opportunity to quote from literally tens of thousands of pages of substantive material in the documents voluntarily produced by Yellow to the Committee, has chosen instead to elevate rhetoric over substance for cheap political gain," Kasowitz wrote in the letter. 

Kasowitz added that Yellow’s CEO was invited to discuss supply chain challenges with President Joe Biden and his transportation team, writing that "employees at Yellow remain truckers not politicians which is why the Company is pleased to work with whichever party is in the White House." 

The House oversight panel began investigating the Trump administration's multimillion-dollar loan to Yellow in June 2021. At the time, Clyburn wrote tin a statement that the COVID-19 subcommittee feared the administration mismanaged the national security loan program "in a manner not authorized by law."