Democrats call on watchdog to investigate USPS changes
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Democrats call on watchdog to investigate USPS changes 02:36
(CNN)Postmaster General Louis DeJoy continues to hold a multimillion-dollar stake in his former company XPO Logistics, a United States Postal Service contractor, likely creating a major conflict of interest, according to newly obtained financial disclosures and ethics experts.
Outside experts who spoke to CNN were shocked that ethics officials at the postal service approved this arrangement, which allows DeJoy to keep at least $30 million in XPO holdings. DeJoy and USPS have said he fully complied with the regulations.
Raising further alarms, on the same day in June that DeJoy divested large amounts of Amazon shares, he purchased stock options giving him the right to buy new shares of Amazon at a price much lower than their current market price, according to the disclosures.This could lead to a separate conflict, given President Donald Trump’s disdain for Amazon, and his reported effort in 2018 to pressure DeJoy’s predecessor to raise prices on Amazon and other firms, while complaining about its founder Jeff Bezos. The Treasury Department also recently struck a loan deal with USPS that gives the Trump administration more leverage to push for higher shipping prices — one of his pet projects. Read MoreDeJoy already faces bipartisan criticism for implementing disruptive changes after taking over the USPS on June 15, including eliminating overtime for many workers. Democrats also claim he is intentionally slowing down mail delivery to sabotage absentee voting in the November election — a charge he denies. Before joining the administration, DeJoy, a Trump ally and fundraiser, was on the board of directors at XPO Logistics, a large transportation and logistics company that does business with the USPS and has contracts with other US government agencies, such as the Department of Defense. In 2014, XPO acquired DeJoy’s company, New Breed Logistics, for $615 million. These questions about DeJoy come at a time of incredible strain at USPS. The agency is already strapped for cash and facing funding shortages. And two members of the board of governors quit earlier this year, at least in part to protest efforts by Trump aides to control USPS finances and operations. DeJoy’s supporters say he’s the right person for the job because he can streamline the struggling agency with his business expertise.
‘Doesn’t pass the smell test’
U.S. Postmaster General Louis Dejoy arrives at a meeting at the office of Speaker of the House Rep. Nancy Pelosi (D-CA) at the U.S. Capitol August 5, 2020 in Washington, DC. When announcing DeJoy’s appointment, the USPS board of governors noted that New Breed “was a contractor to the U.S. Postal Service for more than 25 years,” and received awards for high quality in the 1990s. The announcement didn’t mention XPO’s ongoing ties to the USPS. According to federal records, when he became postmaster general, DeJoy still owned a large equity stake in XPO, totaling between $30 million and $75 million. Federal ethics officials recently approved his decision to keep these assets, but outside experts with decades of experience in government are raising red flags. “The idea that you can be a postmaster general and hold tens of millions in stocks in a postal service contractor is pretty shocking,” said Walter Shaub, the former director of the Office of Government Ethics, who resigned in 2017. “It could be that he’s planning on selling it, but I don’t understand the delay. He has managed to divest a lot of other things. And if he wasn’t prepared to sell that off, he shouldn’t have taken the job.”Schaub, who is now a senior adviser at Citizens for Responsibility and Ethics in Washington, suggested that if DeJoy doesn’t divest his holdings soon, it could be construed as an illegal conflict of interest. Schaub also questioned why the ethics officials approved this arrangement. It’s illegal under federal law for federal government employees or their spouses to have a “financial interest” in companies that intersect with their official duties. The ethics experts who spoke to CNN said DeJoy could have mitigated these conflicts by divesting, agreeing upfront to recuse himself from some matters, receiving legal waivers, or even establishing a blind trust. “If you have a $30 million interest in a company, of course it’s going to impact you,” said Stuart Gilman, who spent 12 years at the Office of Government Ethics, where he was the assistant director. “I would assume that there is a problem here. It certainly doesn’t pass the smell test.”
Democrats call for inquiry
A USPS spokesman previously told CNN that DeJoy followed all ethics requirements. Federal ethics officials approved DeJoy’s required financial filings in June, July and earlier this month. “No issues relating to XPO’s Postal Service contracts have been presented to Postmaster General DeJoy, nor would any such issues be expected to rise to that level,” USPS senior ethics counsel Jessica Brewster-Johnson told CNN. “Decisions regarding XPO contracts are made at much lower levels in the organization. If, however, an issue relating to XPO came before Postmaster General DeJoy, he would be obligated to recuse himself or, if recusal were not practicable, the Ethics Office would require divestiture. To date, no such issue has arisen.”The experts who spoke to CNN said this explanation was “sloppy” and “absurd,” particularly because the rules require top officials to avoid even the appearance of a potential conflict. Federal records also show that DeJoy owned between $265,000 and $550,000 in UPS stock, but divested them after becoming postmaster general in June. Experts praised this move, because it eliminated a conflict of interest, as UPS is a direct competitor of the postal service.A group of Senate Democrats, led by Massachusetts Sen. Elizabeth Warren, asked the USPS inspector general to investigate the policy changes DeJoy imposed this summer and to examine whether DeJoy “met all ethics requirements” regarding his personal finances and XPO stake. A spokesperson for the USPS watchdog declined to say if they were launching an investigation. DeJoy made dozens of stock sales and purchases around the time he started at USPS. He divested at least $100,000 in XPO options, but apparently held onto his larger equity stakes. He also owns options to buy an additional 270,000 shares in XPO, at varying prices in the future. Those options all expire in November. Around the time he took over the USPS, DeJoy bought and sold stocks or stock options across a wide array of industries, including health companies like Johnson & Johnson and Abbott Laboratories, which are involved in the pandemic response. He also sold shares in Coca-Cola and Uber, and purchased shares of ExxonMobil. These financial transactions continued after DeJoy joined USPS, according to federal records.
DeJoy’s trades in Amazon shares are also facing scrutiny. According to his financial disclosures, DeJoy owned between $100,000 and $250,000 in Amazon stock when he joined the administration.On June 24, DeJoy divested those shares, but the same day he bought a new financial interest in the company, purchasing between $50,000 and $100,000 in stock options for Amazon. The stock options, which expire on October 16, give DeJoy the right to buy shares of Amazon at a price of $1,960 per share. Shares in Amazon are currently trading at more than $3,100. “It’s another conflict. He’s got the option to buy. That means he’s gambling that Amazon’s value is going to go up,” said Marcus Owens, a former top IRS official with decades of experience dealing with federal ethics rules. “Why is he investing in a competitor to the enterprise that he’s supposed to be managing? This is a classic case for investigation by an inspector general.”Given the President’s repeated criticism of Amazon and its contracts with the Postal Service, those stock trades stuck out to ethics experts. Trump has publicly attacked Amazon and the Washington Post, which is owned by Amazon founder Jeff Bezos. And Trump has privately complained about Washington Post coverage while attacking Amazon, the newspaper reported. “This is pretty outrageous, to come into government and then buy conflicting (interests),” Shaub said. “He partially eliminated a conflict of interest and then bought a new one on the same day.” As recently as last week, Trump invoked Amazon by name while criticizing USPS’ price points.
The USPS maintains that DeJoy’s ownership of the XPO stake, and of these other assets, are not problematic on their own. USPS officials also say their new leader isn’t trying to sabotage the 2020 election with postal delays, and that he is following all appropriate ethics rules. “I take my ethical obligations seriously, and I have done what is necessary to ensure that I am and will remain in compliance with those obligations,” DeJoy said in a statement given to CNN.