DeJoy maintains financial ties to former company as USPS awards it new $120 million contract

·9 min read
United States Postal Service Postmaster General Louis DeJoy speaks during a House Oversight and Reform Committee hearing on "Legislative Proposals to Put the Postal Service on Sustainable Financial Footing" on Capitol Hill, Wednesday, Feb. 24, 2021, in Washington. United States Postal Service Postmaster General Louis DeJoy is left. (Jim Watson/Pool via AP) (ASSOCIATED PRESS)

The U.S. Postal Service will pay $120 million over the next five years to a major logistics contractor that Postmaster General Louis DeJoy previously helped lead and with which his family maintains financial ties, according to DeJoy's financial disclosure statements.

The new contract will deepen the Postal Service's relationship with XPO Logistics, where DeJoy served as supply chain chief executive from 2014 to 2015 after the company purchased New Breed Logistics, the trucking firm he owned for more than 30 years. Since he became postmaster general, DeJoy, DeJoy-controlled companies and his family foundation have divested between $65.4 million and $155.3 million worth of XPO shares, according to financial disclosures, foundation tax documents and securities filings

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But DeJoy's family businesses continue to lease four North Carolina office buildings to XPO, according to his financial disclosures and state property records.

The leases could generate up to $23.7 million in rent payments for the DeJoy businesses over the next decade, according to a person who shared details of the agreements with The Washington Post but spoke anonymously to discuss confidential financial arrangements. In 2018, when DeJoy sat on the company's board, XPO reported similar figures with the Securities and Exchange Commission. The leases run until 2025 and can be extended until 2030, according to those filings.

Postal Service spokesman Jeffery Adams said that DeJoy did not participate in the procurement process for the XPO contract, which was competitively bid. The DeJoy company leases to XPO were cleared by ethics officials before DeJoy took office in June 2020, according to a previously unreported Postal Service inspector general investigation, because the properties were rented to a contractor and not the agency itself. DeJoy is recused from any matters involving XPO, Adams said.

DeJoy's personal spokesman, Mark Corallo, referred most questions to the Postal Service.

DeJoy's leases have alarmed some ethics watchdogs.

"There's no question he's continuing to profit from a Postal Service contractor," said Virginia Canter, chief ethics counsel at watchdog group Citizens for Responsibility and Ethics in Washington. "He can comply with these technical legal requirements . . . but it does create an appearance issue about whether it's in his financial interest to continue to make policy that would benefit contractors like XPO."

The previously unreported agreement will see XPO take over operations at two crucial sorting and distribution facilities in Atlanta and Washington, D.C. The agency awarded the company the contract in April, but XPO is a longtime postal vendor with dozens of other active contracts with the Postal Service for trucking and logistics assistance.

DeJoy's 14-month tenure at the Postal Service has faced controversy throughout. Congressional Democrats and independent postal experts accused him of slowing mail delivery ahead of the November 2020 presidential election - accusations he denied. He is under federal criminal investigation over alleged campaign finance abuses. A DeJoy spokesman in June said DeJoy "has always been scrupulous in his adherence to the campaign contribution laws and has never knowingly violated them."

DeJoy has said repeatedly in congressional testimony that he would abide by all ethics requirements.

"LDJ Global Strategies, of which Mr. DeJoy is a majority shareholder, leases certain commercial buildings to XPO. Such leases were disclosed by Mr. DeJoy in his public financial disclosure report," Adams said in a statement. "In addition, the Office of Government Ethics endorsed Mr. DeJoy's recusal agreement concerning XPO as an appropriate remedy to resolve any issues concerning the possible appearance of a conflict of interest concerning this landlord/tenant relationship."

XPO spokesman Joseph Checkler said the company's contracts with the Postal Service were awarded through regular procurement mechanisms.

DeJoy has deep connections to the logistics industry. He built his family's trucking business into a shipping juggernaut after a breakthrough contract with the Postal Service in the early 1990s. He sold the business to XPO in 2014 for $615 million.

DeJoy generally held commercial properties leased to XPO and shares in the company through individual limited liability companies and his family foundation, according to his financial disclosures, his wife's financial disclosures and SEC filings. (DeJoy's wife, Aldona Wos, was then-President Donald Trump's ambassador-nominee to Canada, and filed separate ethics forms in 2019.)

Three limited liability companies - 4000 Piedmont Parkway Associates, 4035 Piedmont Parkway Associates and LMD Properties - own the leased buildings, according to North Carolina property records. DeJoy lists himself as a "managing member" of all three businesses in his financial disclosures.

Another limited liability company, the Louis DeJoy Family Partnership, held his XPO stock.

The three limited liability companies that lease buildings to XPO did not hold XPO shares. DeJoy's family charitable foundation did hold XPO assets, according to the inspector general report, though the investigation did not include how many shares or their value.

The inspector general report said a Postal Service ethics lawyer recommended DeJoy divest of certain assets to avoid conflicts of interest - including stock in XPO, Amazon and UPS - or that he sign a recusal memorandum reassigning issues involving those companies to other agency leaders.

Within nine days of taking office, DeJoy sold between $565,000 and $1.2 million of stock in UPS and Amazon, two of the Postal Service's top competitors, according to his financial disclosures. (Amazon founder Jeff Bezos owns The Washington Post.)

But the inspector general report stated that DeJoy initially explored alternatives to divesting XPO assets while remaining in compliance with ethics regulations. DeJoy assigned Michael Elston, secretary to the agency's governing board, and Heather Clarke, DeJoy's chief of staff who was previously employed at DeJoy's former companies, to screen issues involving companies with which DeJoy held investments, including XPO, according to the inspector general investigation.

Those issues were to be directed to David E. Williams, the agency's chief operating officer. Williams retired in January. The Postal Service declined to provide The Washington Post with DeJoy's updated screening processes.

On Aug. 13, though, DeJoy notified postal ethics officials that he would begin to divest of 14 companies of which he held assets and officials said could present conflicts of interest, including XPO.

Over the ensuing four months, he sold between $27.7 million and $107.8 million in shares from those companies. The vast majority - between $26 million and $103.6 million - were of XPO assets.

Postal ethics officials initially determined that DeJoy did not need to disclose his family foundation's assets because the organization held nonprofit tax status, according to the inspector general inquiry. But investigators found subsequently that the foundation held a previously unknown account primarily consisting of XPO assets.

The inspector general's office informed postal ethics officials of this account, and those officials instructed DeJoy to hire an independent asset manager for the foundation, the report stated, which Corallo, DeJoy's personal spokesman, said the foundation has since done.

When DeJoy left XPO's board of directors in 2018, according to SEC filings, the foundation owned 484,340 XPO shares. Those shares would have been worth $38 million when DeJoy took office. With the approval of postal ethics officials, the foundation's assets were not included on DeJoy's ethics forms. Adams said the foundation has sold all of its XPO shares, though the Postal Service did not respond to questions of when those sales occurred.

The divestiture process and the Postal Service's growing relationship with XPO raise new concerns for some ethics experts about DeJoy's long history with the logistics industry.

"He could, in fact, divest himself of those but he chooses not to. That's a choice that he's making," said Lisa Graves, executive director of True North Research, a private ethics research firm, and former chief counsel for nominations to Sen. Patrick J. Leahy, D-Vt. "That choice means that even if he himself is not the one making a decision affecting XPO, other people within the Postal Service know that it could benefit him, and that could curry favor with him."

Others question whether DeJoy's ties to the logistics industry make him more apt to seeing advantages in outsourcing.

"He comes from a company that made much of its fortune working as one of the places where the Postal Service had outsourced work," said Steve Hutkins, the founder and editor of the Save The Post Office blog, which has tracked the agency since 2011. "He knows all about outsourcing postal work to private industry. He was one of them."

Under the new Postal Service contract, XPO will take over two "surface transfer centers" that organize mail shipments and load them on trucks.

The Postal Service struck the deal with XPO in April, but did not publicly discuss the agreement until late June. The agency will contract out work in four more facilities in San Francisco, Los Angeles, western Massachusetts and New Jersey in the coming months.

In each case, according to a presentation agency executives made in June before a postal stakeholder group, the Postal Service will relocate operations to buildings that can accommodate more package-sorting machines.

Close to a dozen employees in each facility will move to the new buildings to manage the work of XPO contract workers, union officials involved in the moves said.

The plans have sparked renewed fears of privatization, long a boogeyman in mailing policy debates. The Trump administration in 2018 recommended transitioning the Postal Service "from a government agency into a privately held corporation."

But those positions have mostly been rejected by congressional Republicans whose constituents in rural and suburban areas require postal services more than those in liberal-leaning urban ones.

Adams, the Postal Service spokesman, said that the Postal Service's commitment to operating as a public entity was reinforced by DeJoy's 10-year plan.

"The U.S. Postal Service does not believe in and has not advanced the idea that it should operate as a private entity. In fact, we have advanced the opposite idea," he said. "To carry out our universal service mission, and given our role as a fundamental part of the nation's critical infrastructure, we believe that we must remain an integral part of the United States government."

Dena Briscoe, president of the American Postal Workers Union branch for Washington and Southern Maryland, said contracting out the work felt like a "slap in the face" to her union's members.

"This is the work that they've been doing for years and years and years," she said, "and you're going to segregate it away from them, put in another building, give it to a company that previously had a [top executive] that is now our postmaster general. A lot of our members are taking offense to that."

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The Washington Post's Douglas MacMillan contributed to this report.

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