Select Subcommittee Launches Investigation into $700 Million Loan Issued by Trump Administration to Troubled Trucking Company
Washington, D.C. (June 3, 2021) —Today, Rep. James E. Clyburn, Chairman of the Select Subcommittee on the Coronavirus Crisis, launched an investigation into a $700 million loan awarded by the Department of the Treasury (Treasury) with the involvement of the Department of Defense (DOD) under the Trump Administration as part of a program intended to support companies that were critical to maintaining U.S. national security during the coronavirus pandemic. In letters to Treasury Secretary Janet Yellen, Defense Secretary Lloyd J. Austin, III, DOD subcontractor YRC Worldwide—now named Yellow Corporation (Yellow) —and DOD contractor Crowley Logistics (Crowley), Chairman Clyburn requested documents and information regarding whether the loan to Yellow was issued appropriately and used properly.
"In light of troubling reports regarding Yellow’s questionable eligibility for and use of the funds, I write to seek documents and information to determine whether funds were diverted to waste, fraud, or abuse through the previous Administration’s process for approving this substantial loan," Chairman Clyburn wrote. "The Select Subcommittee is concerned that the previous Administration may have mismanaged the national security loan program and squandered taxpayer funds in a manner not authorized by law."
The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) authorized Treasury to make loans, loan guarantees, and other investments to provide liquidity to businesses critical to maintaining national security that suffered losses incurred as a result of the coronavirus pandemic. DOD certified and recommended loan recipients eligible for this program.
In June 2020, DOD certified that Yellow was critical to national security and thus eligible for the $700 million loan, despite indications that the company’s trucking services could be replaced by other firms and Yellow’s history of allegedly overcharging DOD for trucking services. An April 2021 report from the bipartisan Congressional Oversight Commission (the Commission) indicated that DOD received information suggesting that Yellow was not “critical to maintaining national security” because of the limited services the company provides and because those services could be readily replaced by other companies. Furthermore, at the time the loan was approved, Yellow was subject to an active lawsuit brought by the Department of Justice for knowingly overcharging DOD and allegedly making false statements to cover up that overcharging scheme. The case is still pending.
In July 2020, Treasury approved the loan—which accounts for nearly 95 percent of the total $735.9 million disbursed to businesses as part of this program—despite Yellow’s precarious financial condition before the pandemic. Yellow had accrued nearly $825 million in existing debt and was at high risk for entering bankruptcy. Given this financial position, it is questionable whether the loan was “prudently incurred,” as required by the CARES Act. Additionally, Treasury agreed to charge an interest rate four percentage points lower than the company had received through private financing shortly before the pandemic. These loan terms appear to run counter to the CARES Act’s requirement that any loans that were not “sufficiently secured” be “made at a rate that reflects the risk of the loan.” Yellow subsequently used a large portion of the loan to make long-term capital investments, despite the CARES Act’s directive that the loans be used for losses incurred as a result of the pandemic.
The nonpartisan Government Accountability Office (GAO) also found significant abnormalities in Treasury’s implementation of the national security loan program in December 2020, identifying as potentially problematic the accelerated evaluation of Yellow’s application purportedly “due to the urgency of the business’s financial circumstances, including the possibility of YRC filing for bankruptcy if it did not receive aid,” even as other companies in similar circumstances did not receive such fast track consideration.
Today’s letters request documents and information by June 17, 2021.
Click here to read today’s letter to Treasury Secretary Yellen.
Click here to read today’s letter to Yellow.
Click here to read today’s letter to Crowley.