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Lawmakers grill DeJoy on alleged conflicts of interest with Amazon, XPO

U.S. postmaster general endures five-hour hearing, with some calling for his resignation

U.S. Postmaster General Louis DeJoy insisted during a five-hour grilling from lawmakers on Monday he has no conflicts of interest with either his former company or a major customer of his current agency.

The hearing before the Democrat-run House Committee on Oversight and Reform was considerably longer and more hostile than the one at which DeJoy was called to testify last week by the Republican-controlled Senate Homeland and Governmental Affairs Committee.

Amid calls from several lawmakers for him to resign in the wake of reported drop-offs in service and cutbacks to operations, DeJoy was asked about potential conflicts of interest with XPO Logistics [NYSE: XPO] and Amazon [NASDAQ: AMZN], both of which have contracts with the U.S. Postal Service (USPS).

“I have a significant investment in XPO Logistics which I vetted with the ethics department of the Postal Service, and I was given specific types of guidelines that I needed to adhere to,” DeJoy said in response to Rep. Jamie Raskin, D-Maryland, who asked that he release XPO contract information. DeJoy became a top executive at XPO after the company purchased New Breed Logistics, where DeJoy had been chairman and CEO.

“It’s a very small part of the Postal Service business that I have nothing to do with,” DeJoy said. “We have an [Office of Inspector General] investigation going on, and I guess they’ll get to everything that you’re interested in, and we’ll see what will happen.”

In addition, DeJoy said that while he had “looked at” rates USPS charges one of its largest customers, Amazon, he had not reviewed the contract in detail. But he acknowledged that he had sold stock that he owned in Amazon on June 22, which he replaced with “covered call” options, a type of financial instrument, shortly after. This sparked questions as to whether this meant he continued to be financially tied to Amazon.

“[Morgan Stanley] told me I had to recuse myself from reviewing a number of contracts or sell the stock,” DeJoy testified. “I called our broker to sell the stock. But I did not buy options, I actually bought covered calls back at a loss.”

Rep. Rashida Tlaib, D-Michigan, pressed DeJoy further, citing documents showing he had purchased 50,000 to 100,000 covered calls in Amazon that are set to expire in October. “So you’ll have to make a decision regarding this financial interest,” Tlaib said. “This appears to be a classic example of conflict of interest. Will you commit to divest any and all financial interest in Amazon to avoid illegal insider trading?”

DeJoy asserted, however, that “I don’t own anything with Amazon.”

DeJoy, who has been on the job for 70 days, was also asked about on-time delivery changes he put in place shortly after taking the reins of the Postal Service on June 15. The changes were aimed at sharply reducing extra-mail delivery trips by requiring semi-trailer trucks moving from mail processing plants to delivery units to run on time and on schedule.

However, according to Rep. Jim Cooper, D-Tennessee, the change was forcing trucks in the Nashville area to leave on schedule even if they were empty. “Imagine it: 53-foot trucks forced to travel hundreds of miles completely empty due to your so-called reforms,” Cooper alleged as he displayed truck dispatch records. “That’s not efficiency, that’s insanity.”

DeJoy responded that his on-time initiative did not call for allowing trucks to run empty or partly empty. “We still have thousands of trucks a day that leave late within a certain time frame, and there are still hundreds of extra trips,” he said.

Keeping trucks on schedule, he added, is “a fundamental premise of how the whole mail network is put together. If the trucks don’t run on time, the mail carriers can’t leave on time. I see $7 billion in potential savings in getting the system to connect properly. We are working extremely hard to bring service levels back to where they were, and to exceed that. We will be there shortly.”

DeJoy stressed in his testimony that on-time departures are approaching 98% and wasteful extra trips are down by over 70%.

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John Gallagher, Washington Correspondent

Based in Washington, D.C., John specializes in regulation and legislation affecting all sectors of freight transportation. He has covered rail, trucking and maritime issues since 1993 for a variety of publications based in the U.S. and the U.K. John began business reporting in 1993 at Broadcasting & Cable Magazine. He graduated from Florida State University majoring in English and business.

7 Comments

  1. Paragraph 6 is inaccurate. You cannot have a covered call without owning the stock. He said he sold the stock and bought back call options that he originally sold. This means that he was divesting himself in all interest in Amazon, not replacing anything.

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