Congress Steps Up Investigation Of $ 700M Yellow COVID Credit



Congress tightens control over Yellow Corp. (NASDAQ: YELL) and his $ 700 million CARES Act loan after reports that the company may not have been eligible and then misused the funds.

In letters sent Thursday to Treasury Secretary Janet Yellen, Secretary of Defense (DOD) Lloyd Austin, Yellow CEO Darren Hawkins and Crowley Logistics, Rep. James Clyburn, chair of the Coronavirus Crisis Subcommittee, requested documents as to whether Yellow’s loan was properly disbursed and used appropriately.

As a subcontractor of Crowley – DOD’s general contractor – Yellow got money in 2020 as part of a loan program run by the US Treasury Department to support companies critical to US national security during the pandemic.

“In light of the alarming reports of Yellow’s questionable right to receive and use funds, I am writing to request documents and information to determine if funds were diverted to waste, fraud, or abuse through the previous administration’s process to approve this substantial loan.” said Cliburn. wrote. “The Special Subcommittee is concerned that the previous administration may have mismanaged the homeland security loan program and wasted taxpayer funds in ways not permitted by law.”

The bipartisan Congressional Oversight Commission began investigating the circumstances surrounding the loan shortly after it was announced. Commission report released in April showed that yellow was probably not “critical to maintaining national security,” as the Department of Defense and Treasury had suggested.

The report notes that the carrier likely provided only 20% to 40% of the US Department of Defense’s cargo transportation services, rather than the 68% claimed by the Department of Defense and Treasury in justifying the loan.

However, Yellow claims that she has a longstanding relationship with the Department of Defense and that the contract she has through Crowley is only part of Yellow’s contract business with the government agency.

In response to Clyburn’s investigation, Yellow confirmed that it applied for and received a Cares Act loan “following the significant adverse impact of the pandemic,” for which the company will pay in full, the company said in a statement.

“As part of the loan requirements under the CARES Act set by Congress, the Secretary of Defense has identified yellow as critical to maintaining national security. Both then and today, we handle a significant portion of the US Department of Defense’s LTL shipments, and we support this national security designation, ”said Yellow.

“In addition, we are proud to have reached a mutually beneficial loan agreement with the US Treasury that protected US jobs and ensured the delivery of essential goods during the national crisis, and benefited US taxpayers.”

The Cliburn Subcommittee is also looking into whether Yellow is spending money for purposes other than the losses caused by the coronavirus crisis, noting in a letter to Hawkins that a significant portion of the funds were used to replace tractors and trailers in its fleet, “which appears to be contrary to the CARES Act. “.

Reporting First Quarter Loss Of $ 63.3 Million In MayThe company said it used a $ 251 million loan to ship new equipment during the fourth and first quarters. Management said it received the next $ 130 million from the Treasury, allowing it to continue purchasing equipment in the second quarter.

“Other circumstances heighten concerns about how Yellow obtained such a sizable national security loan,” Cliburn wrote, citing FreightWaves September 2019 Article reporting that the company received a $ 600 million loan from a group led by Apollo Global Management LLC.

“In April 2020, Apollo reportedly lobbied senior White House adviser Jared Kushner and other Trump administration officials to ease risk requirements for other lending programs under the CARES Act, suggesting that the company could have exerted similar pressure in this case. “.

Cliburn and his committee required Yellow to submit a list of document types by June 17, including a CARES loan application and “all communications with Apollo Global Management LLC or the White House related to Yellow’s efforts to obtain any loan or other financial resources. support from the federal government ”.

Yellow replied, “We understand and respect the fact that the Select Subcommittee has important work to do, and we intend to work fully with its members as we continue to move the economy forward.”

Click here to see more articles by John Gallagher on FreightWaves.


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