Emails obtained by congressional watchdogs suggest that former President Donald Trump and his aides may have pushed for a $700 million federal loan to LTL carrier YRC Worldwide Inc. to gain support from the Teamsters in the run-up to the 2020 election.
The new details are included in a report issued on Wednesday by Democrats on the House Select Subcommittee on the Coronavirus Crisis. It is part of the panel’s investigation into the legality of a national security loan issued by the Trump administration to YRC – now Yellow Corp. (NASDAQ: YELL) – under a Coronavirus Aid, Relief and Economic Security (CARES) Act program.
The investigation was launched last June following reports that Yellow may not have been eligible for the loan and may have misused the funds.
The report also asserts that new evidence shows the company was certified as eligible for the loan despite the assessment of career Department of Defense officials that the company was not “critical” to national security, a requirement under the CARES Act.
“The loan’s approval involved the intervention of top Trump Administration officials – potentially including the president – and its generous terms also violated CARES Act risk and interest rate requirements,” the report states.
Praise from Teamsters’ Hoffa
As early as April 3, 2020, according to the report, White House officials sent Yellow’s CARES Act application to Brian Morgenstern, deputy assistant secretary of the treasury, and requested that he call Yellow’s CEO.
“A few days later, Yellow’s lobbyists wrote that the White House Political Director [Brian Jack] was ‘almost giddy’ on a phone call with them about the prospect of working on Yellow’s application for a loan ‘considering the Teamsters angle,’ referring to the fact that Yellow employed Teamsters members as its drivers,” the report states.
It reveals evidence showing that on June 19, 2020, Yellow’s lobbyists told Defense Secretary Mark Esper’s deputy chief of staff that former Teamsters President James Hoffa (who lost his reelection bid in November to Sean O’Brien) spoke to Trump about YRC that week and that that call also prompted a call from Treasury Secretary Steven Mnuchin to Hoffa.
“President Trump’s reported call concerning Yellow’s loan application, and the resulting call from Secretary Mnuchin to Mr. Hoffa, were highlighted for Secretary Esper in background materials he received the same day he certified Yellow as ‘critical’ to national security,” the report notes.
On the morning that the Treasury Department announced the loan to Yellow, Mnuchin sent the company’s press release to Molly Michael, Trump’s executive assistant, according to the report.
“A few hours later, he sent Ms. Michael and Chief of Staff [Mark] Meadows a CNN article reporting on the loan and highlighted that Mr. Hoffa had thanked President Trump, writing ‘SEE COMMENT FROM JAMES HOFFA.’ These records suggest that President Trump may have intervened to press for Yellow’s receipt of the $700 million national security loan based on the calculation that it could result in praise from a union leader months before the presidential election.”
Illegal capex?
The report also underscored prior assertions that the Trump administration had approved Yellow’s loan on terms that violated CARES Act use-of-funds requirements, which require that loans be made to offset losses incurred as a result of the coronavirus.
Despite that requirement, however, the administration agreed to allow Yellow to use $400 million of the $700 million loan for long-term capital investments to upgrade the company’s aging truck fleet — an amount that “far exceeded” what Yellow had been spending annually on capital investments before the pandemic, the report states.
New documents obtained by the subcommittee show that Yellow’s former CFO, Jamie Pierson, sent the company’s creditors a summary of its loan request, with hundreds of millions designated for capital investments in new tractors, trailers and technology.
“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,” Pierson wrote, according to committee documents.
Yellow: Allegations ‘false,’ ‘unsubstantiated’
Yellow from the outset has repeatedly denied wrongdoing concerning the Treasury loan. In a letter to subcommittee Chairman Rep. James Clyburn, D-S.C., Yellow attorney Marc Kasowitz called the latest allegations “unsubstantiated” and “demonstrably false.”
“Despite Yellow’s voluntary and good faith efforts throughout to provide the committee with the documentary evidence necessary for it to make a full and fair assessment, the committee continues to call into question, without substantiation, Yellow’s eligibility for and use of its CARES Act loan funds,” Kasowitz stated. “In truth and fact, and as this committee now indisputably knows, Yellow’s eligibility for and use of its CARES Act funds is, was, and continues to be appropriate in every respect.”
He noted that Yellow has never denied its efforts to secure the loan and “strove hand-in-hand with senior union leadership” in efforts to “save approximately 30,000 (predominantly American) jobs, including those of 24,000 hard-working International Brotherhood of Teamsters employees.” The company received support from both sides of the political aisle for the loan “contrary to the insinuations by the committee of undue political pressure.”
Regarding assertions that using loan money for long-term investments was improper, Kasowitz wrote that Yellow had provided the committee with evidence last year showing that such use of funds “was the subject of extensive negotiations with Treasury.”
Kasowitz also chided the committee for using the “cookie jar” quote from the former CFO as part of the title for the latest report.
“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,” he stated.
“Indeed, employees at Yellow remain truckers not politicians, which is why the company is pleased to work with whichever party is in the White House,” he said, pointing out that Yellow’s CEO has participated in discussions with President Joe Biden on current supply chain issues.
Investigating false claims
Clyburn, meanwhile, wrote to the Treasury’s Office of Inspector General on Wednesday requesting that the office investigate whether any of the allegedly misleading representations made by Yellow in applying for the loan “constitute knowing false claims and false statements within the meaning of the False Claims Act, or otherwise violate federal law.”
