Trump officials OVERRULED Pentagon to approve pandemic loan, report finds

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, who are a trucking firm previously known as YRC Worldwide Inc., was approved on terms that violated the CARES Act, which was a 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.

A phone call between Treasury Secretary Steven Mnuchin and Defense Secretary Mark T. Esper on June 26, 2020 recently surfaced. That call was set up to discuss “YRC and DOD certification,” according to the Democrats’ report. Esper then certified the company as “critical to maintaining national security” for the purposes of the loan.

“As we’ve previously stated, one of the ways companies could be considered for Treasury loans was a certification from DOD that the applicant business was critical to maintaining national security,” said Defense Department spokesperson Jessica Maxwell.

“DOD used the same criteria used for other CARES Act funding opportunities to assess companies for DOD certification for Treasury loans. However, DOD did not make any final decisions regarding granting these loans. Department of Treasury made final determinations and decisions.”

Jonathan Hoffman, who is a spokesman for Esper, said the former defense secretary followed the recommendations of career staffers who recommended certifying the loan and the Treasury Department made the final decision to issue it.

“As the committee report makes clear, the DOD staff determined that the firm met the explicit criteria for CARES Act loan eligibility, and that doing so was considered critical to national security,” Hoffman said. “As the committee report also notes, senior DOD staff conveyed that decision to Secretary Esper – he did not direct it, and recommended he certify it.”

Rep. James E. Clyburn (D-SC), who is chairman of the subcommittee, 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.

“I don’t believe this company was eligible for this financing,” Rep. French Hill (R-AR), a member of the commission, said in a recent interview, noting that Yellow received the vast majority of the $735.9 million total lent under the national security program. “Ninety-five percent of the money in this pot went to one company that I don’t believe is fundamentally eligible for it.”