The ethical hurricane surrounding Postmaster General Louis DeJoy took another surprising turn last weekend as CBS News reported that his former company XPO Logistics scored a $5 million contract from the United States Postal Service in August to transport mail between Norfolk, VA and Evansville, IN. The contract, disclosed as part of a USPS report in October, was reportedly negotiated and signed in August.
The timing is shocking. As CREW has previously discussed extensively, and as Representatives Porter and Raskin highlighted during and following an August hearing with the postmaster general, DeJoy still retains a significant investment in XPO. And he had not even begun the process of divesting that interest in August, when the contract was awarded. He has still not completed the process as of publication.
“If DeJoy was directly involved in the negotiation and awarding of this contract, he would face significant criminal exposure.”
If DeJoy was directly involved in the negotiation and awarding of this contract, he would face significant criminal exposure. The criminal conflicts of interest law, 18 U.S.C. § 208, is unambiguous in this type of circumstance: personally and substantially participating in awarding a contract from the agency you run to a company in which you still own an interest is a crime. In fact, the law is so clear in this circumstance that it seems unlikely that DeJoy would have been willing to test it–and that the USPS Designated Agency Ethics Official (DAEO) would have allowed it. Even President Trump, who is not covered by the criminal conflicts law, decided to cancel his plan to award a government contract to host the Group of 7 meeting at his Doral resort following immense backlash due to the obvious corruption inherent in the decision.
Another factor pushing against the notion that DeJoy would have been personally involved in this contract was the USPS ethics counsel’s mid-August statement (issued around the time the contract was signed) when CREW and others pressed the agency about DeJoy’s XPO conflict. The USPS ethics counsel noted that “[n]o issues relating to XPO’s Postal Service contracts have been presented to Postmaster General DeJoy.” The ethics counsel also said that should something rise to that level, DeJoy would be required to recuse.
There are serious criminal liabilities if DeJoy were personally involved in the awarding of a contract to XPO, but he did not have to be directly involved in the contract to affect the outcome. His sweeping changes to USPS policies still may have been a factor in helping the company win contracts like the one it was awarded in August from the agency he now runs. Given DeJoy’s deep political ties to President Trump and the Republican party, some have speculated that these moves were designed to delay voting by mail. Given DeJoy’s stake in XPO it may also be fair to question whether his financial interests were a factor. Ultimately, the fact that these questions need to be asked is why installing a financially conflicted Trump ally to lead USPS undermines the agency, and demonstrates why DeJoy should have divested from his XPO assets before taking the job. These open questions are exactly why the ethics laws and regulations exist.
Recently, the USPS Inspector General (OIG) released a comprehensive and devastating chronicle of DeJoy’s misconduct and mishandling of the USPS, which sheds more light on facts potentially related to his conflicts of interest (and on a related question regarding a potential plan to transfer his assets to his adult children). The USPS OIG report squarely places DeJoy in the driving seat of all the changes USPS made during his tenure–a fact that has been in dispute until now. While we have already pointed out that DeJoy’s participation in these matters could be a violation of the criminal conflicts law, we now have more substantial evidence that his conduct was improper. We knew, for example, that the policy changes outlined in a July 10 memorandum could have been violations of his statutory duty to avoid financial conflicts of interest, assuming he was directly involved in their implementation. Now we know that USPS agreed that DeJoy himself was responsible for these critical mail service changes–that his operational changes had the practical impact of delaying the mail.
The USPS OIG report also tries to shed some light on DeJoy’s intent in implementing these changes. It doesn’t get far. Part of the problem that OIG ran into was that DeJoy and USPS may have intentionally blocked the OIG review by, as the report states, adopting “a ‘head-in-the-sand’ approach” to the impacts of the multiple, broad changes. So while OIG’s report does state unambiguously that DeJoy did not undertake any analysis of how these changes would actually impact USPS’s ability to do its jobs, OIG couldn’t determine his intent in implementing these changes in large part because of his unwillingness to conduct the analyses that OIG called for. Uncovering DeJoy’s intent in implementing these changes would be powerful evidence in determining if he violated conflict of interest laws.
Based on the OIG report, it appears these changes could have helped DeJoy’s former company. For example, one of the things the OIG report reveals is that DeJoy conducted an internal reorganization of parts of the USPS. Specifically, the second unit reorganization–logistics and processing operations–could clearly impact XPO, a logistics and processing company. DeJoy’s restructuring of the USPS’s operational logistics could have had the impact of creating or preferencing new types of highway route contracts that more closely suited the operational capacities of larger USPS contractors like XPO. The OIG report specifically notes that a main reason DeJoy made the change was to “capture operating efficiencies by providing clarity and economies of scale.” While this choice–to preference economies of scale and thus reduce the USPS cost base–could have helped XPO directly, the change could also have had the effect of harming smaller regional carriers that might not be able to offer the same economies of scale as their larger competitors like XPO.
DeJoy’s unwillingness to divest his potentially conflicting assets has placed the public in an impossible place: questioning whether DeJoy considered the financial impact of his sweeping changes at USPS on the company in which he still retains a substantial investment. This is exactly the scenario that our ethics laws were written to prevent, and is exactly why DeJoy should have divested his financial interests in the first instance.
DeJoy’s ability to avoid an accounting that the public desperately requires, by, in part, successfully preventing OIG from making a finding of his intent in making these changes, and by refusing to respond to numerous public and even Congressional letters, demands accountability. Sadly, the only option that remains is for Congress to require his appearance, yet again, to answer questions about these issues publicly and under oath.