Select Subcommittee Staff Report Shows Trump Political Appointees Overruled Career DOD Officials to Approve $700 Million National Security Loan That Violated CARES Act Terms

Washington, D.C. (April 27, 2022) – Today, the Select Subcommittee on the Coronavirus Crisis, chaired by Rep. James E. Clyburn, released a staff report that lays out troubling new evidence regarding the Trump Administration’s approval of a $700 million loan under the Coronavirus Aid, Relief and Economic Security (CARES) Act program for companies “critical to maintaining national security.”  This loan to trucking company YRC Worldwide Inc. (now named Yellow Corporation) represented 95% of the total funds disbursed under the CARES Act national security loan program.  Chairman Clyburn also wrote to the Department of the Treasury (Treasury) Deputy Inspector General Richard K. Delmar to request that the Office of Inspector General investigate whether any of the misleading representations Yellow made in applying for its loan constitute knowing false claims and false statements within the meaning of the False Claims Act, or otherwise violate federal law. 

Evidence newly uncovered by the Select Subcommittee shows the company was certified as eligible for the loan despite the assessment of career Department of Defense (DOD) 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.  

Documents obtained by the Select Subcommittee indicate that, contrary to CARES Act requirements that loans be used to cover pandemic-related losses, Yellow executives sought to use government funds for long-term capital investments to update the company’s aging truck fleet.  For example, Yellow’s Chief Financial Officer wrote to a private creditor saying, “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.”  

Chairman Clyburn released the following statement about the report: 

“Today’s Select Subcommittee staff report reveals yet another example of the Trump Administration disregarding their obligation to be responsible stewards of taxpayer dollars.  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.  The Select Subcommittee is committed to accountability for government officials and other unscrupulous actors who sought to use a public health crisis as an opportunity for political gain and personal profit.”   

The Select Subcommittee investigation of Yellow Corporation began in June 2021 following reports that questioned the company’s eligibility for the loan and use of the funds.  

Today’s staff report, entitled “‘We Had Our Hand in the Cookie Jar’: The Trump Administration’s $700 Million ‘National Security’ Loan to Yellow Corporation,” is available in full here and reveals the following key findings: 

White House Officials—Likely with President Trump’s Involvement—Intervened as Yellow’s Application for a National Security Loan Was Being Evaluated. 

• Documents newly uncovered by the Select Subcommittee show that White House Chief of Staff Mark Meadows planned to call Treasury Secretary Mnuchin regarding Yellow’s application in late May 2020, and that other White House officials regularly communicated with Yellow and its representatives concerning Yellow’s loan application and sought to reach out to Treasury on Yellow’s behalf. 

• Briefing materials provided to Secretary Esper shortly before he certified Yellow as critical to national security noted that President Trump had received a call lobbying for a loan on Yellow’s behalf.  An earlier report from Yellow’s lobbyists noted that the White House political director was “almost giddy” to work on Yellow’s application.   

• Secretary Mnuchin’s communications confirm President Trump’s interest in the loan approval.  The morning that Treasury announced the loan to Yellow, Secretary Mnuchin sent Chief of Staff Meadows and the president’s executive assistant a CNN article reporting on the loan and highlighted that a union leader thanked President Trump for the loan—just months before the 2020 presidential election. 

Trump Administration Political Appointees Overrode the Recommendation of DOD Career Officials to Certify That Yellow Was Critical to National Security and Thus Eligible for the Loan. 

• Trump appointees awarded Yellow $700 million even though career officials recommended that Yellow not be certified as “critical to maintaining national security” and thus ineligible for a CARES Act national security loan, according to documents newly uncovered by the Select Subcommittee.   Career officials found that Yellow’s services could be replaced by other companies and expressed concern about an ongoing Department of Justice lawsuit against Yellow for fraudulently overcharging DOD, which Yellow misleadingly described as merely a “contractual dispute.”   

• Documents obtained by the Select Subcommittee show that Treasury Secretary Steven Mnuchin requested a phone call with Defense Secretary Mark Esper shortly after DOD career staff informed Treasury that DOD would likely not certify Yellow as “critical.”  On June 24, 2020, DOD staff informed a Treasury official that DOD would not be certifying Yellow to be eligible for a national security loan.  The Treasury official replied that she had briefed this information “up my chain.”  The next day, Secretary Mnuchin’s office requested an urgent call “re: YRC and DOD certification” between the two Secretaries.  The call was held the next morning. 

• After the call with Secretary Mnuchin regarding the Yellow certification process, Defense Secretary Esper certified that Yellow was “critical” to national security and eligible for a national security loan.  New evidence of this phone call obtained by the Select Subcommittee calls into question the veracity of Secretary Mnuchin’s testimony to the Congressional Oversight Commission on December 10, 2020, during which he said that Treasury merely “relied” on the DOD certification. He also testified that “it’s not my position to comment on the DOD certification,” leaving out that he was actively involved in and may have influenced DOD’s decision. 

The Trump Administration Approved the Loan to Yellow on Terms That Violated CARES Act Risk and Use of Funds Requirements. 

• The Trump Administration agreed to allow Yellow to use $400 million of its $700 million loan for long-term capital investments, despite the CARES Act requirement that loans be made to offset “losses incurred as a result of the coronavirus.”  This amount far exceeded what Yellow had been spending annually on capital investments before the pandemic and was much larger than Treasury’s initial loan offer.   

• Documents now obtained by the Select Subcommittee show that Yellow’s Chief Financial Officer wrote to a creditor to say, “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,” making clear that Yellow’s executives intended that the capital expenditure request go beyond covering losses caused by the pandemic.   

• The Trump Administration’s loan to Yellow provided an interest rate four points lower than the rate Yellow paid to private creditors, even though the government took on more risk than those creditors and received less collateral.  These terms violated the CARES Act requirement that loans be made at a “rate that reflects the risk” and which is not less than the rate the company would have received “prior to the outbreak of the coronavirus.”  The loan terms agreed to by the Trump Administration were impermissibly generous even under Yellow’s own legal counsel’s interpretation of the applicable CARES Act requirements, according to documents obtained by the Select Subcommittee.   

Today’s report includes recommendations to prevent future abuse of crisis relief legislation provisions regarding national security, including:  

1. requiring agencies to provide justifications for determinations that companies are eligible for aid designating for companies critical to national security; 

2. preventing companies facing credible allegations of fraud against the government from receiving relief funds; and 

3. requesting an investigation by the Treasury Office of Inspector General of Yellow’s misleading statements. 

Click here to read today’s report. 

Click here to read Chairman Clyburn’s letter to Treasury Deputy Inspector General Richard K. Delmar.