The bipartisan Congressional Oversight Commission charged with reviewing pandemic stimulus spending is pressing Pentagon acquisition chief Ellen Lord to provide more public information about the Defense Department's support for a controversial $700 million loan to a financially troubled trucking company.
Lord was not able to appear at a commission hearing today alongside Treasury Secretary Steve Mnuchin, but has agreed to speak to the commission at a later date via teleconference, according to Sen. Pat Toomey (R-PA), who co-chairs the COC.
Toomey said DOD is “currently resisting making public the official transcript record of that teleconference.”
Toomey said the commission “strongly urges DOD to reconsider that position.”
DOD spokeswoman Jessica Maxwell said Lord has responded to the commission’s questions in writing and “welcomes a telephone call to answer any outstanding questions.” It remains unclear if DOD will agree to allow a transcript of the call to be publicly released.
Over the summer, DOD recommended Overland Park, KS-based trucking company YRC Worldwide receive a loan from a $17 billion Treasury Department fund created by the Coronavirus Aid, Relief and Economic Security Act to help companies critical to national security that have been hurt by the pandemic. In exchange, the federal government received a 30% stake in the company.
The loan has drawn scrutiny, however, because YRC and its key creditor, private equity firm Apollo Global Management, have ties to the Trump administration. Additionally, YRC was near bankruptcy before the pandemic and the Pentagon has had difficulty convincing the commission the company, a mid-sized trucking firm, is critical to national security.
Apollo spokeswoman Joanna Rose said Apollo was "not involved at all in the company’s decision to seek the Treasury funds."
"We are a capital provider for thousands of companies," she said. "We are one of many lenders to YRC."
YRC did not respond to a request for comment.
Toomey said, “the commission and DOD have a responsibility to inform the public about how taxpayer funds are being used, especially given the concerns that have been raised about the YRC loan.”
Maxwell said DOD used “objective criteria” to review YRC’s suitability for the special Treasury Department loan.
Today, Mnuchin defended the loan to YRC, despite saying if he were running a private bank, he would never have approved the loan for such a troubled company.
“It's not my position to comment on the DOD certification,” he said. “If you have questions about that, you should ask DOD.”
But Mnuchin also said many members of Congress urged the Treasury Department to give YRC the loan, including lawmakers who wanted to protect union jobs. Lawmakers, he said, also urged the government to “take losses” to protect vulnerable companies.
“I do believe that, ultimately, Treasury and the taxpayers will be very well compensated because the economy came back quicker than people thought and the businesses came back quicker,” he said of the loan.
Mnuchin said he is going to recommend the incoming Treasury secretary look to sell the loan and recover “what I think will be a profit to taxpayers. We do not want to be in the long-term business of lending to this type of company.”
While Mnuchin acknowledged it was a “risky loan,” he also said he is “quite proud” of it.
“It saved lots and lots and lots of jobs,” he said.
The Treasury Department said in July the loan helped YRC maintain more than 30,000 trucking jobs.
Mnuchin sad the $17 billion loan program, however, has been terminated after having only lent $736 million to 11 companies, the majority of which went to YRC. Mnuchin said 74 companies applied for the loans, 20 of which were recommended by DOD.
“The program is over; it's done,” he said. “There's no other loans and I encourage Congress to reallocate the money.”
Mnuchin said other companies recommended by DOD were rejected because they did not make it through the Treasury Department’s internal underwriting process.
Toomey said Congress established the program to protect major defense companies like Boeing and General Electric, but those contractors have had no difficulty finding money on the private market.
“Since credit-worthy firms have generally been able to access private markets only those with lower grade credit or limited access to credit in the first place appear to have applied for national security loans,” he said. “Of the 11 businesses that have used the national security loan program, five had negative profits in 2019 before the coronavirus struck.”
At least one of the companies is also a “pre-revenue” start-up, Toomey said.
“The question in my mind is whether or not these loans . . . were a prudent use of taxpayer funds,” he said.
Mnuchin said the remaining funds should go to provide relief for aviation industry workers and small businesses.
Bharat Ramamurti, a COC commissioner, pointed out that Apollo Global, which loaned $184 million to the real estate company of White House adviser Jared Kushner, President Trump’s son-in-law, was a major creditor of YRC and “got lucky” because the government bailed out the company.
Ramamurti also pointed to a recent Government Accountability Office report that said the Treasury Department accelerated distribution of the YRC loan, but not others involved in the national security program.
“I think at best this is a loan . . . that puts nearly $1 billion of public money at risk with minimal protections, and that helps a private equity giant that was sitting on billions of dollars of its own money,” Ramamurti said. “And at worst I think this generous loan was rushed into place to benefit a firm with close personal ties to the president’s family and I think that this warrants further investigation by this commission.”
Mnuchin said neither Kushner nor anyone from his staff influenced the loan to YRC.