According to emails uncovered by congressional watchdogs, former President Donald Trump and his advisors may have lobbied for a $700 million federal loan to LTL carrier YRC Worldwide Inc. in order to garner Teamsters support in the run-up to the 2020 election.
Democrats on the House Select Subcommittee on the Coronavirus Crisis issued a report on Wednesday that included the new information. It is part of the panel’s probe into the legality of a national security loan made by the Trump administration to YRC – now Yellow Corp. (NASDAQ: YELL) – under the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
The investigation was begun in June of last year in response to reports that Yellow may not have been eligible for the loan and may have misappropriated the funds.
According to the article, fresh evidence demonstrates that the company was recognized as eligible for the loan despite career Department of Defense officers’ judgment that the company was not “vital” to national security, as required by the CARES Act.
“The loan’s approval required the intervention of top Trump Administration officials – possibly even the president – and its generous conditions also breached CARES Act risk and interest rate restrictions,” according to the study.
Hoffa’s praise for the Teamsters
According to the article, White House officials forwarded Yellow’s CARES Act application to Brian Morgenstern, deputy assistant secretary of the Treasury, on April 3, 2020, and requested that he phone Yellow’s CEO.
“A few days later, Yellow’s lobbyists wrote that the White House Political Director [Brian Jack] was ‘almost giddy’ on the prospect of working on Yellow’s loan application ‘considering the Teamsters angle,’ referring to the fact that Yellow employed Teamsters members as its drivers,” the report states.
It reveals evidence 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, prompting a call to Hoffa from Treasury Secretary Steven Mnuchin.
“President Trump’s reported conversation regarding Yellow’s loan application, and the consequent contact from Secretary Mnuchin to Mr. Hoffa, were highlighted for Secretary Esper in background materials he received the same day he certified Yellow as ‘important’ to national security,” according to the report.
According to the article, Mnuchin forwarded the company’s news statement to Molly Michael, Trump’s executive assistant, on the morning the Treasury Department announced the loan to Yellow.
“A few hours later, he texted Ms. Michael and Chief of Staff [Mark] Meadows a CNN item on the loan that highlighted Mr. Hoffa’s thanks to President Trump, adding ‘SEE COMMENT FROM JAMES HOFFA.'” These records imply that President Trump may have interfered to pressure Yellow to accept the $700 million national security loan, calculating that it would result in praise from a union leader months before the presidential election.”
Capex that is illegal?
The investigation also backed up previous claims that the Trump administration approved Yellow’s loan on terms that violated CARES Act use-of-funds standards, which require loans to be made to offset losses caused by the coronavirus.
Despite this requirement, the administration agreed to let Yellow 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 was spending annually on capital investments prior to the pandemic, according to the report.
According to fresh documents received by the subcommittee, Yellow’s former CFO, Jamie Pierson, gave a summary of the company’s loan request to creditors, with hundreds of millions slated for capital investments in new tractors, trailers, and technology.
“While we had our hands in the cookie jar, we thought we’d try to get a little ‘catch up’ capex [capital expenditures] while we were at it,” Pierson wrote in committee records.
Yellow: ‘false,’ ‘unsubstantiated’ allegations
Yellow has always denied any misconduct in connection with the Treasury loan. Yellow attorney Marc Kasowitz said the latest charges were “unsubstantiated” and “demonstrably false” in a letter to panel Chairman Rep. James Clyburn, D-S.C.
“Despite Yellow’s voluntary and good faith efforts throughout to provide the committee with the documentary evidence required for it to make a full and fair assessment,” Kasowitz stated, “the committee continues to call into question, without substantiation, Yellow’s eligibility for and use of its CARES Act loan funds.” “In truth and fact, as this committee now unequivocally knows, Yellow’s eligibility for and use of CARES Act monies is, was, and continues to be appropriate in every way.”
He stated that Yellow has never denied its efforts to obtain the loan and has “strove hand-in-hand with top union leadership” to “save roughly 30,000 (predominantly American) jobs, including those of 24,000 hardworking International Brotherhood of Teamsters employees.” The loan attracted support from all sides of the political aisle, “contrary to the committee’s insinuations of undue political pressure.”
In response to claims that using loan funds for long-term investments was inappropriate, Kasowitz said that Yellow had presented the committee with documents last year demonstrating that such use of funds “was the subject of significant negotiations with Treasury.”
Kasowitz also chastised the committee for citing the former CFO’s “cookie jar” comment as part of the title of the newest report.
“It is truly unfortunate 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 instead chosen to elevate rhetoric over substance for cheap political gain,” he said.
“True, Yellow employees are truckers, not politicians, which is why the company is glad to engage with whichever party is in the White House,” he said, noting that Yellow’s CEO has participated in meetings with President Joe Biden on current supply chain challenges.
Examining bogus claims
Meanwhile, Clyburn wrote to the Treasury Department’s Office of Inspector General on Wednesday, requesting that the office investigate whether any of Yellow’s allegedly misleading representations 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.”
