In June, the Senate confirmed Bill Zollars, the former head of a trucking company called YRC Worldwide, to the board of the United States Postal Service. Salon learned that YRC is being sued by the federal government for allegedly defrauding the Pentagon while Zollars was CEO.
In addition, the government on Wednesday extended a taxpayer-backed loan of $ 700 million to YRC Worldwide, which was valued at just $ 70 million in total the previous day, and warned shareholders in May that it was at risk of closing the business. .
In exchange for the loan, taxpayers will take a 29.6% stake in the company.
When the Senate confirmed the Zollars to the USPS board, along with former President of the Airline Pilots Association, Donald Moak, he restored the quorum that had been lost after Deputy General Postmaster Ron Stroman resigned.
Stroman was reportedly ejected as part of a USPS housecleaning led by President Donald Trump, who wants to completely privatize the government-run service and has repeatedly made unsubstantiated allegations that mail ballots are subject to rampant fraud.
USPS has warned that without emergency funds, the expansion of postal voting represents an existential threat to its financial viability.
In a statement announcing the emergency loan to YRC, Treasury Secretary Steve Mnuchin said the funds will go to support around 30,000 jobs, as well as “essential military supply chain operations” on which 200,000 depend North American companies. The Treasury Department has not disclosed the terms of dividend payments to shareholders.
Although the government does not usually appropriate holdings in companies, Congress passed such measures amid the pandemic to ensure that taxpayers’ money was not wasted badly.
The current $ 700 million loan, maturing in 2024, does not come from funds that the CARES Act reserves for small businesses, but from a $ 17 billion section intended to support companies considered crucial to national security.
The CARES Act says that companies that take money from the $ 17 billion fund must give the government a capital stake.
The Treasury reportedly did not deliver any of that portion for more than three months, largely because defense contractors “considered those terms too burdensome,” industry executives and lobbyists told The Washington Post.
“There are too many bells and whistles in the wrong direction, and the major aerospace companies are simply not interested,” said Arnold Punaro, a retired Marine Corps general who currently works as a consultant for the defense industry. “If this were good business for our aerospace companies, they would be using it.”
YRC Worldwide, which according to the Treasury Department represents 68% of the military’s “less than a truck” shipping service, or LTL, has suffered losses amid the economic closings necessary for the coronavirus pandemic. The company recorded a loss of revenue in the first quarter and has laid off several workers.
More troubling, YRC also owes a total of $ 825 million to multiple creditors, the Washington Post reported Wednesday.
In 2018, the Justice Department filed a lawsuit against YRC, along with subsidiaries Roadway Express Inc. and Yellow Transportation Inc., alleging that the truck units had charged the Pentagon millions of dollars for at least seven years. The lawsuit claims that the companies made false statements to the government and inflated weight measurements on the bills it charged the Defense Department from 2005 through at least 2013.
YRC did not immediately respond to Salon’s request for comment, but said in a statement Wednesday that the government’s lawsuit is “a contractual dispute that originated in 2009 and pre-dates the current board of directors and CEO by more than a decade. “
However, Zollars was CEO for most of the years covered by the allegations.
Zollars resigned from YRC in 2011. He had been with the company and its predecessors since 1996, and oversaw the acquisition of Roadway in 2003 and Yellow’s formal merger with Roadway in 2009.
According to federal prosecutors, around that time, company workers reweighed thousands of shipments, but did not notice the changes when the units entered below the original estimated weight.
The truckers “re-weighed thousands of shipments and suppressed the results each time they indicated that one shipment was actually lighter than its original estimated weight,” the lawsuit said.
“This case should serve as a warning to any organization entering into a contract with the federal government: If you try to scam us, prepare to pay a high price,” US Attorney James Kennedy said in a statement at the time. The lawsuit was filed.
A YRC spokesperson told the Wall Street Journal in 2018 that the investigation had been ongoing for about a decade, and that the Pentagon had held her as a client during that time. YRC, the spokesperson said, has since changed its behavior.
The original complaint was filed in 2008 by a complainant who had worked for the company for over 30 years, prompting the government investigation that culminated in the lawsuit.
Around that time, YRC companies posted billions in the billions, peaking at $ 9.9 billion in 2006. Profits increased simultaneously, and the companies expanded their interests in China, acquiring significant stakes in two large cargo companies. Chinese.
In 2008, YRC recorded a loss of nearly $ 1 billion during the Great Recession, and then in 2009 barely escaped bankruptcy when it convinced the company’s bondholders to trade $ 470 million for a 94% stake in the company.
In September 2011, the year Zollars resigned, YRC underwent a restructuring that precipitated massive pay cuts, including Teamster union jobs, and “essentially eliminated any equity capital.”
Wednesday’s Treasury statement said the YRC loan was blessed by Defense Secretary Mark Esper.
“The Treasury’s determination was based on a certification by the Secretary of Defense that the YRC is essential to maintain national security,” the statement said.
The Treasury Department, the Justice Department, the United States Postal Service and the White House did not immediately respond to Salon’s request for comment. Bill Zollars did not respond when asked for comment.
