Pentagon Erred in Relief Loan to Firm, Oversight Member Says

Congress may have given too much leeway to the Treasury Department and Pentagon to make loans during the pandemic, putting taxpayer dollars at risk, a member of a congressional oversight panel said.

Representative French Hill of Arkansas, a Republican member of the Congressional Oversight Commission, said he’s concerned that the Department of Defense didn’t give YRC Worldwide Inc. enough scrutiny when it classified the company as critical to national security, making it eligible to get a $700 million loan at favorable rates as part of the Cares Act passed in March.

“To say that this process was hidden behind the wall of intense interagency bureaucracy would be an understatement,” Hill said Friday on a call with reporters. “I don’t find a rationale for YRC to be essential to national security. I have heard nothing that changes my view on that.”

Treasury approved a $700 million loan to YRC, an Overland Park, Kansas-based shipping firm, with funds from the Cares Act intended for companies critical to national security. The oversight panel has raised concerns that YRC, which ships supplies between military bases, doesn’t meet that criteria.

YRC did not immediately respond to a request for comment on Friday evening.

Hill made the comments after he and other member of the oversight panel spoke with Ellen Lord, under secretary of Defense for Acquisition and Sustainment. Hill said that the Pentagon appeared to go against its own internal guidelines for approving which companies might be eligible for the loans, including looking at whether there were viable alternative companies to carry out the work.

“The answer is overwhelmingly yes,” Hill said. “There are more stable, more available union and non-union carriers.”

Hill said Treasury Secretary Steven Mnuchin should have also been responsible for ascertaining whether YRC was a good candidate for a taxpayer-backed loan.

Mnuchin told the panel earlier this month that it was his belief that the Pentagon was responsible for that vetting. He also told lawmakers, though, that Treasury “made a significant profit” on the YRC deal.

Mnuchin said he would recommend that his successor — most likely, Janet Yellen — should “seriously look at selling this loan and recovering what I think will be a profit to taxpayers.”

Hill said Friday that he and Representative Donna Shalala of Florida, a Democratic-appointee to the oversight panel, have talked with the House Armed Services Committee about creating more oversight of the financial stability of Pentagon contractors and subcontractors.

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