Yellow Corporation responds to Rep. Clyburn's staff report on controversial $700 million loan

The following statement was sent to CCJ in response to a Select Subcommittee Staff Report, which alleges Trump political appointees overruled career DoD officials to approve a $700 million National Security Loan that violated CARES Act terms.

Chairman James E. Clyburn
House of Representatives
Select Subcommittee on the Coronavirus Crisis
2157 Rayburn House Office Building
Washington, DC 20515

Re: Investigation of YRC Worldwide Inc. CARES Act Loan

Dear Chairman Clyburn:

We represent Yellow Corporation f/k/a YRC Worldwide Inc. (“Yellow”) in connection with the Select Subcommittee on the Coronavirus Crisis’ (“Committee”) investigation into Yellow’s CARES Act loan. We have been informed that the Committee will issue a report tomorrow morning. While Yellow has not had the opportunity to review and digest the Committee’s report, we are writing to address the unsubstantiated, and indeed demonstrably false, allegations that we understand the Committee to be asserting against Yellow in that report.

As a threshold matter, since the inception of the Committee’s investigation, Yellow has diligently and voluntarily cooperated, including by producing thousands of pages of materials in response to the Committee’s requests. The documents Yellow has provided conclusively establish Yellow’s transparency, eligibility for, and proper use of its CARES Act loan proceeds. Nonetheless, the Committee continues to peddle baseless speculation and innuendo regarding Yellow’s receipt and use of its CARES Act loan. Yellow is compelled to respond to set the record straight.

On April 24, 2020, facing potentially crippling economic dislocations caused by the Coronavirus pandemic, Yellow applied for a CARES Act loan under Section 4003(b)(3) thereof in an amount that was only approximately 4% of the $17 billion in funds that Congress had earmarked for this program. In connection with its efforts to save approximately 30,000 (predominately American) jobs, including those of 24,000 hard-working International Brotherhood of Teamsters employees, Yellow strove hand-in-hand with senior union leadership to garner support for its loan application, and in fact received broad support from numerous Members of Congress on both sides of the aisle who recognized Yellow’s criticality and urged Treasury to approve Yellow’s application. Yellow has never denied its many efforts to secure the CARES Act loan. Ultimately, on July 1, 2020, after extensive diligence and intense negotiations, and after the Department of Defense had provided Yellow the requisite national security certification, Treasury approved Yellow’s loan application.

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Despite Yellow’s voluntary and good faith efforts throughout to provide the Committee with the documentary evidence necessary for it to make a make a full and fair assessment, the Committee continues to call into question, without substantiation, Yellow’s eligibility for and use of its CARES Act loan funds. In truth and fact, and as this Committee now indisputably knows, Yellow’s eligibility for and use of its CARES Act funds is, was, and continues to be appropriate in every respect.

For example, the Committee continues to suggest that there is reason to doubt Yellow’s criticality to maintaining national security. Yellow’s CEO, however, in his June 10, 2021 letter to the Committee, explained that Yellow is one of the nation’s largest less-than-truckload (“LTL”) carriers and a major LTL service provider for the Department of Defense with expertise in critical military supply chain operations, and that Yellow is also a leading carrier for the Department of Homeland Security and the Department of Energy. Documentary evidence Yellow has since provided the Committee confirms as much, and further confirms that, when Yellow sought and obtained its 4003(b)(3) certification from the Department of Defense, it did so in a completely transparent manner.

Similarly baseless is the Committee’s continued false assertion that Yellow’s use of some of the loan funds “to make long term capital investment” was somehow improper. As Yellow’s

CEO explained in his June 10 letter, and as documentary evidence provided to the Committee by Yellow conclusively establishes, Yellow’s intended use of the loan funds, including for capital expenditures, was the subject of extensive negotiations with Treasury. Documents in the Committee’s possession, including the loan agreements themselves, thus establish the manner in which Yellow could use the loan proceeds. The documents that Yellow provided to the Committee also establish that Yellow was required to seek approval from Treasury through explicit disbursement requests to obtain any funding thereunder. As a practical matter, this means that Treasury reviewed and approved the use of all funds in advance of their disbursement to Yellow under both the prior Presidential administration as well as the current. Further, documents in the Committee’s possession Yellow voluntarily produced conclusively demonstrate that Yellow can account for, and has accounted for, each and every dollar of Cares Act loan funding it received.

Further, although the Committee contends that Yellow’s loan was obtained at an interest rate lower than the rate Yellow paid to private creditors, the Committee fails to acknowledge that, as additional security for the loan, Yellow posted collateral in the form of a first-priority lien on all equipment purchased with the loan proceeds, as well as a junior lien on all other assets. Over and above that, Treasury received 29.8% of Yellow’s stock, totaling 15.9 million shares. That equity stake is worth approximately $69.67 million, and has increased approximately 50% in value since the inception of the loan. Moreover, Yellow has paid more than $25 million in interest on the loan.

The Committee also contends that, at the time the loan was procured, “career officials” were also purportedly concerned about a then-ongoing lawsuit between Yellow and the Department of Defense concerning the reweighing of shipments dating back more than a decade. That lawsuit was resolved in March 2022, for a fraction of the amount initially demanded, and Yellow admitted no liability in connection with that settlement.

In stark contrast to the Committee’s partisan approach stands the uncontroverted evidence that Yellow has provided the Committee for its review. That evidence speaks to the transparency of the loan application process; the rigor of the negotiations between Treasury and Yellow; the efficacy of the

Department of Defense’s conclusion that Yellow was vital to supporting numerous military supply chains; and, contrary to the insinuations by the Committee of undue political pressure, the broad, bipartisan support that Yellow had from both Democrats and Republicans in its pursuit of this critical, job-saving loan. In completing its review of the loan, rather than continue to leak information about its investigation to the press, Yellow implores the Committee to start focusing on the objective evidence rather than its pursuit of political vendettas.

We also understand that the Committee is recommending that the Treasury Department investigate whether Yellow made false representations in its loan application concerning the FCA lawsuit, its planned uses of the loan funds and its share of DoD trucking services. The Committee’s unsubstantiated assertions about Yellow, including its ludicrous suggestion that the DoD (or Treasury for that matter) was somehow duped about a public lawsuit the Department of Justice was then litigating on its behalf, are baseless. Further, the Committee’s claim that Yellow overstated the percentage of business that the Company handles for DoD is likewise patently meritless. The Company stands firmly behind its assertion that it was then responsible for handling 68% of DoD’s LTL freight. As Yellow has repeatedly pointed out, and the documentary evidence establishes, Yellow was completely transparent and forthright with Treasury throughout the loan procurement process.

We note the Committee’s prominent quotation of an off hand and flippant remark made by a former employee. It is highly unfortunate, indeed, that the Committee, which had the opportunity to quote from literally tens of thousands of pages of substantive material in the documents voluntarily produced by Yellow to the Committee, has chosen instead to elevate rhetoric over substance for cheap political gain.

Indeed, employees at Yellow remain truckers not politicians which is why the Company is pleased to work with whichever party is in the White House. Recently, Yellow’s CEO has been invited to and has had the privilege of participating in high-level discussions with President Biden and his transportation team to work to come up with solutions for America’s supply chain challenges.

In the meantime, Yellow will remain focused on supporting the currently-fragile U.S. supply chain and working hard every day to pay back the CARES Act loan that it continues to be so proud to have secured. A loan that saved 30,000 jobs, enabled Yellow to help protect the U.S. economy during the height of the Covid crisis, and ensured that our brave men and women in uniform received the supplies they needed to continue defending our great nation.

Marc E. Kasowitz