U.S. Rep. French Hill, R-Ark., wants to know why a financially struggling Kansas trucking business was deemed vital to national security and given a $700 million covid-19 relief loan. He criticized the Department of Defense on Friday for failing to provide satisfactory explanations.
Thus far, the Congressional Oversight Commission has received no credible evidence suggesting that the company, YRC Worldwide, was crucial to the military's success, Hill said.
A closed-to-the-public briefing Friday by Ellen Lord, the undersecretary of defense for acquisition and sustainment, did little to resolve the matter, he added.
Commissioners had asked Lord to appear in a public setting. She declined.
The commission is seeking additional records pertaining to the loan approval process for YRC Worldwide. Hill expressed doubt that all the records would be released.
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The company, which lost more than $100 million in 2019, is a Pentagon subcontractor responsible for handling many of its "less-than-truckload" shipments.
A company spokesman did not respond to phone calls and emails seeking comment.
Hill has already said he wouldn't have approved the loan if it had crossed his desk when he was chairman and chief executive officer of Delta Trust and Banking Corp. in Little Rock.
The Treasury Department announced on July 1 that it had approved the loan.
The four-member commission, which is in charge of monitoring U.S. Treasury-backed lending authorized by the Coronavirus Aid, Relief, and Economic Security (CARES) Act, has been asking questions about the loan almost ever since.
"I found the pace of the responses disappointing. I've found the substance of some of the responses disappointing and not responsive," Hill said Friday.
"To say that this process is hidden behind the wall of intense interagency bureaucracy would be, you know, an understatement," Hill said in a by-telephone news conference. "I don't find a rationale for YRC to be essential to national security. I have heard nothing that changes my view on that."
It's "an open question" whether smaller companies receiving similar loans were "essential to national security," he added.
The CARES Act provided the U.S. Treasury Department with $500 billion for loans and other investments "to provide liquidity to eligible businesses, States, and municipalities related to losses incurred as a result of coronavirus."
It also created the oversight commission on which Hill serves to monitor the use of taxpayer funds.
Up to $17 billion of the overall amount was targeted for businesses that are "critical to maintaining national security."
"At the height of the crisis, it was anticipated by [Treasury] Secretary [Steven] Mnuchin and some on Capitol Hill that Boeing or other very substantial national security lead contractors might need covid-19 relief as a result of the pandemic," Hill said.
Ultimately, only about $736 million of the $17 billion was lent. Of that $700 million went to YRC Worldwide.
A U.S. Government Accountability Office report earlier this month found that the Treasury Department, in approving the YRC Worldwide loan,"did not follow the standard process established for evaluating applications."
The Treasury Department executed the loan "almost 3 months before it executed any other loans," the report stated.
"According to Treasury, it accelerated evaluating YRC's application due to the urgency of the business's financial circumstances, including the possibility of YRC filing for bankruptcy if it did not receive aid. Treasury did not fast track any other applications from specific businesses based on financial need, though other businesses faced similar circumstances," the report stated.
Mnuchin, who appeared at a Congressional Oversight Commission hearing last week, portrayed the bailout of YRC Worldwide as "risky," acknowledging that he would not have approved it in his previous role as an investment banker.
But the loan met the government's established criteria and saved jobs, Mnuchin added.
The Treasury secretary said he was aware that YRC Worldwide would likely have declared bankruptcy if it had not received the federal help.
The Treasury Department did not independently determine whether YRC Worldwide was a business "critical to maintaining national security," Mnuchin said, indicating that it relied on the Pentagon to make that classification.
Hill said Friday that he believes Treasury should have done its own assessment.
Mnuchin portrayed the loan as a success, arguing that the federal government stood to make money on the transaction. Taxpayers now own a nearly 30% stake in the company.
Hill has questioned whether taxpayers would recoup their investment if the company were unable to meet its financial obligations.
Democrats have noted that YRC Worldwide had received $600 million in loans from Apollo Global Management before the covid-19 downturn. Apollo also loaned $184 million, in 2017, to Jared Kushner's family real estate firm, The New York Times has reported. Kushner is President Donald Trump's son-in-law.
The loan, they say, helped shield Apollo from potential losses.
Because of concerns raised by the YRC Worldwide loan, Hill said he and fellow commissioner U.S. Rep. Donna Shalala, D-Fla., are recommending that the House Armed Services Committee "follow up on the bigger picture issue of how contracting is done."
They want to know whether "financial stability [and] financial viability [are] part of the characteristics in doing contracting at the Pentagon with taxpayer resources," he said.
In written answers to questions from the Arkansas Democrat-Gazette, Defense Department spokeswoman Jessica Maxwell maintained that the Kansas trucking company is critical to national security.
"YRC is the largest provider of less than truckload (LTL) services to DoD, through prime contracts the Department has with other carriers. YRC delivers both general cargo items like food, electronics, and other necessary supplies, as well as hazardous materials to military locations around the country. It is important for the U.S. Transportation Command (TRANSCOM) mission to move these goods to the locations where they are needed by our warfighters. Because of the volume of activity performed by YRC in support of critical logistic shipments, DoD identified YRC as critical to maintaining national security," she wrote.
Asked about Hill's claims that YRC Worldwide's services are widely available from other American companies, Maxwell wrote: "YRC's status as 'critical to national security' is a function of its providing these services to DoD; it is not necessary that it be a unique provider of such services."
Asked why the federal government is relying on a company that had lost money and was reportedly on the edge of bankruptcy earlier this year, Maxwell wrote that the Defense Department's reasoning had been stated in her previous answer.
"Note, YRC is a subcontractor and it is typically the prime contractors who select their subs. With that said, DOD did not make any final decisions regarding granting these loans. Department of the Treasury made final determinations and decisions," she said.
Asked about Hill's claims that the Defense Department had been slow to respond to the commission's questions and that its answers had been insufficient, Maxwell replied: "Ms. Lord responded to the Commission's questions in writing and welcomed a telephone call to answer any outstanding questions."
Asked why Lord had not wanted to answer questions in a public setting and why the department would not allow a transcript of Lord's answers to be released, Maxwell said: "Ms. Lord initially responded to the Commission that she was unavailable for a public hearing. Ms. Lord has responded to the Commission's questions in writing and had a telephone call today to answer any outstanding questions from the Commission. Given that the loan is handled by the Department of Treasury, Secretary Mnuchin is the best representative to discuss the loan program, and any specific loan. DOD remains committed to answering COC's [the Congressional Oversight Commission's] outstanding questions."