Pentagon Offers Little Rationale for Trucking Firm Bailout

WASHINGTON — The Department of Defense offered few details to a congressional oversight committee about why a struggling trucking company, YRC Worldwide, was determined to be critical to national security, a designation that allowed it to receive a $700 million stimulus loan.

The loan, which was approved in July by the Treasury Department, has been the subject of a congressional inquiry into whether the money was properly awarded and why YRC, which ships military supplies, was designated as critical to national security. The Congressional Oversight Commission, which was set up to police stimulus funds, has also been examining whether YRC’s ties to the White House were a factor in a loan.

In a letter to members of the commission the Defense Department provided limited explanation for why YRC deserved so much government assistance.

The letter, which was reviewed by The New York Times, said that YRC qualified for the loan because it was the Department of Defense’s largest domestic shipping provider, moving food, electronics and other supplies to military bases around the country. The explanation echoed the justification that the Treasury Department shared when it approved the loan in July, but provided no additional reason why the firm, which was on shaky financial ground and had been sued by the government, should receive a bailout when other shipping providers were available.

YRC lost more than $100 million in 2019 and was being sued by the Justice Department over claims it defrauded the federal government for a seven-year period. The case is unresolved.

The Defense Department noted in the letter that it had access to other shipping companies such as FedEx and UPS. YRC is the fourth largest small-freight shipping company in the United States.

Asked why the firm was deemed critical to national security, Ellen M. Lord, the under secretary of defense for acquisition and sustainment, wrote: “It is important that our troops have the supplies they need in order to be able to perform their duties and defend the country.”

The Defense Department confirmed that it sent the letter to members of the commission last week. Amber Venzon, the chief clerk of the Congressional Oversight Commission, did not immediately respond to a request for comment.

In a Congressional Oversight Commission report earlier this month, the Treasury Department said YRC provided 68 percent of the Defense Department’s small-freight shipping and provided services to the Department of Homeland Security and the U.S. Customs and Border Protection agency. As to why that made it critical for national security, the Treasury deferred to the secretary of defense, Mark Esper, who is responsible for making that certification.

A new report from the commission released Friday did not include the Pentagon letter but noted that it was received and expressed frustration with the Pentagon.

“The commission finds the Department of Defense’s delay inexcusable and its answers incomplete,” the report said. “The commission looks forward to further discussion of this matter in its November report.”

In the letter, Ms. Lord said that the Defense Department did not communicate with other trucking companies about whether they could meet its needs if YRC reduced or ceased operations and said that the agency had not developed contingency plans in the event YRC shut down.

Commission members had raised concerns that the company might have received a loan because of ties to the White House. YRC has financial backing from Apollo Global Management, a private equity firm with close ties to Trump administration officials.

Lawmakers from both parties wrote letters to the Treasury Department earlier this year urging the Trump administration to support YRC, which employs 30,000 workers.

The $17 billion fund to help companies that are deemed critical to national security was created out of the $2.2 trillion economic relief legislation that Congress passed in March. Companies can apply for the loans to the Treasury Department, which must get the Defense Department to affirm that they meet the national security requirements.

The Pentagon said in the letter that 19 other companies had been certified as critical to national security through the program. YRC is the only company to have received a loan so far.

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