Treasury Approved $700 Million Loan To Company Being Sued For Overpricing
On July 1, the Treasury Department approved a $700 million loan to YRC Worldwide. This trucking company is experiencing financial struggles, while the Defense Department sues for overpricing shipping costs.
- YRC endured competitive issues in recent years, with its stock dropping nearly 30% this year. According to CNN, the company's worth fell to $70 million by the end of June.
- The DOD sued the company in December 2018, claiming that YRC overcharged the government for the movement of shipments for seven years.
- The complaint said that YRC “reweighed thousands of shipments and suppressed the results whenever they indicated that a shipment was actually lighter than its original estimated weight." This action allegedly cost the agency millions.
- YRC said the suit is “a contractual dispute which originated in 2009 and predates the current board and CEO by more than a decade.” The company moved to dismiss the suit, and their relationship with the DOD has apparently not been affected.
Steven Mnuchin, the Treasury Secretary, said in a statement: “We are pleased for Treasury to make this loan pursuant to the CARES Act. This loan will enable a critical vendor to the Department of Defense to maintain significant employment while providing appropriate compensation to taxpayers.”
- The CARES Act is one of the pieces of legislation providing stimulus in the pandemic that was passed by Congress and signed by President Trump in late March.
- Treasury described YRC as a “leading provider of critical military transportation and other hauling services to the U.S. government and provides 68% of less-than-truckload services to the Department of Defense."
With the new loan, the government will own about 30 percent of YRC’s stock, and the loans will mature September 2024.