Oversight panel slams Pentagon for $700M loan

Oversight panel slams Pentagon for $700M loan
© Greg Nash

The Congressional Oversight Commission overseeing COVID-19 relief funds excoriated the Defense and Treasury departments Tuesday over a $700 million loan to a troubled shipping company.

The Treasury Department and the Defense Dpeartment offered the loan in July when the company, YRC Worldwide, was reportedly worth just $70 million and had been sued by the Pentagon for overpriced shipping costs.

The bipartisan commission overseeing funds from the $2.2 trillion CARES Act said both agencies had failed to provide adequate answers on the matter, and in some cases had raised further concerns with their responses to earlier inquiries.

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“The Department of Defense has yet to provide the Commission a satisfactory explanation for how YRC is critical to national security,” the committee said in its most recent oversight report, noting that there were three larger shipping providers offering similar services.

“The Department of Defense did not even consider whether the services it obtains from YRC could be obtained elsewhere,” the report continued, raising further concerns about the favorable terms of the loan and the likelihood that the stake Treasury took in the company would be compromised in the event of a default.

“The Commission is concerned that the Treasury may have put taxpayers in a precarious position,” the report said.

The report also hit the Defense Department’s responses to previous inquiries, noting that the response was delayed and at times contradictory. The Pentagon said it did not seek an alternate provider, but also that the lack of an alternate provider justified its national security designation of the company.

“The Commission finds the Department of Defense’s delay inexcusable and its answers incomplete,” the Oversight report said.

The issue is likely to come up at a hearing with Treasury Secretary Steve Mnuchin next Thursday.