Mnuchin Paved Way for U.S.P.S. Shake-Up

WASHINGTON — In early February, Treasury Secretary Steven Mnuchin invited two Republican members of the Postal Service’s board of governors to his office to update him on a matter in which he had taken a particular interest — the search for a new postmaster general.

Mr. Mnuchin had made clear before the meeting that he wanted the governors to find someone who would push through the kind of cost-cutting and price increases that President Trump had publicly called for and that Treasury had recommended in a December 2018 report as a way to stem years of multibillion-dollar losses.

It was an unusual meeting at an unusual moment.

Since 1970, the Postal Service had been an independent agency, walled off from political influence. The postmaster general is not appointed by the president and is not a cabinet member. Instead, the postal chief is picked by a board of governors, with seats reserved for members of both parties, who are nominated by the president and confirmed by the Senate for seven-year terms.

Now, not only was the Trump administration, through Mr. Mnuchin, involving itself in the process for selecting the next postmaster general, but the two Democratic governors who were then serving on the board were not invited to the Treasury meeting. Since the meeting did not include a quorum of board members, it was not subject to sunshine laws that apply to official board meetings and there is no formal Postal Service record or minutes of what was discussed.

Nearly six months later, that meeting, along with other interactions between Mr. Mnuchin and the postal board, has taken on heightened significance as the Trump administration confronts allegations it sought to politicize the Postal Service and hinder its ability to handle a surge in mail-in ballots in November’s election. In interviews, documents and congressional testimony, Mr. Mnuchin emerges as a key player in selecting the board members who hired the Trump megadonor now leading the Postal Service and in pushing the agenda that he has pursued.

Mr. Trump’s animus toward the agency dates to at least 2013, but his criticism of its finances escalated once he took office and found new focus in late 2017, when he first bashed it for essentially subsidizing Amazon, another target of his ire. Amazon’s founder and chief executive, Jeff Bezos, owns The Washington Post, whose coverage has often angered Mr. Trump.

“This Post Office scam must stop. Amazon must pay real costs (and taxes) now!” the president wrote on Twitter on March 31, 2018, one of several such attacks over the years.

Twelve days later, he issued an executive order putting Mr. Mnuchin in charge of a postal reform task force. But it was not until earlier this year that the administration found a way to enforce its postal agenda — one that has now collided with the pandemic and the approaching election.

A few weeks after the February meeting with Mr. Mnuchin, one of the attendees, Robert M. Duncan, the chairman of the board of governors, who was appointed by Mr. Trump in 2017, threw a new name for postmaster general into the mix: Louis DeJoy.

Mr. DeJoy, a longtime logistics executive, was known for his hard-charging leadership style and his ability to convert disorganization into efficiency, as well his generous donations to the Republican Party, including to Mr. Trump. In October 2017, Mr. DeJoy had hosted a fund-raiser for the president’s re-election campaign at his North Carolina home.

His résumé was far different than recent postmasters general, most of whom had risen through the Postal Service ranks. Megan J. Brennan, who had announced in October 2019 her intention to retire as postmaster general at the end of January, began her career as a letter carrier in Pennsylvania.

Mr. DeJoy, who ran New Breed Logistics before selling it to XPO Logistics in 2014, would be coming from the private sector to assume control of a highly unionized, sprawling bureaucracy with more than half a million employees. His companies had experience working with the Postal Service, moving bulk shipments of packages from fulfillment centers and ferrying them to local Postal Service centers. But both companies had fewer than 10,000 employees, none of them unionized, and he had never worked in the public sector.

The companies were also the subject of a litany of complaints from workers, including more than a dozen lawsuits accusing managers — but not Mr. DeJoy personally — of presiding over a hostile environment rife with sexual harassment and racial discrimination and where workers were fired for getting sick or injured.

The board’s vice chairman at the time, David C. Williams, raised concerns about Mr. DeJoy’s candidacy and Mr. Mnuchin’s involvement, telling lawmakers during sworn testimony this week that he “didn’t strike me as a serious candidate.” Mr. Williams, a Democratic appointee, resigned before the vote as it became clear that Mr. DeJoy would be the pick.

Three months after the meeting in Mr. Mnuchin’s office, the board of governors announced Mr. DeJoy’s selection as the nation’s 75th postmaster general. Within weeks, he began carrying out changes, including cuts to overtime and limiting mail delivery trips. He curtailed postal hours and mandated that carriers must adhere to a rigid schedule. A July memo from the Postal Service warned that the changes might temporarily result in “mail left behind or mail on the workroom floor or docks.”

The measures matched up with recommendations in the task force report, which blamed the Postal Service for losing billions because of waste, inefficiency and a failure to respond to declining mail volumes.

But the rapid-fire moves just months before the November election concerned Postal Service insiders, who said that, since at least the Obama administration, the agency had generally sought to avoid significant changes within two or three months of a general election.

Soon, mail was piling up at post offices, veterans were not receiving their medications, bills were arriving late and questions began surfacing about the ability of the Postal Service to handle what is expected to be a record number of mail-in ballots this November because of the pandemic.

Amid an outcry from lawmakers, civil rights groups and state officials, Mr. DeJoy suspended many of the changes on Tuesday, including some that had been underway before he took the helm of the Postal Service. Yet he made clear during a Senate hearing on Friday that he planned to move ahead with “dramatic” measures after the election, including raising prices and limiting overtime.

Postal Service employees and union officials say significant damage has already been done. Hundreds of mail-sorting machines have been removed, and the day-to-day changes have caused confusion and delays among drivers, carriers and other workers.

In his Senate testimony on Friday, Mr. DeJoy chalked that up to growing pains as the organization tries to get leaner. “We all feel, you know, bad” he told lawmakers upset about mail delays affecting their constituents.

Mr. DeJoy stressed that the changes had nothing to do with the election and noted that the removal of mailboxes and sorting machines had begun before his tenure. He said that he had been unaware of the equipment removal until it became a source of scrutiny. “This has been going on in every election year, and every year, for that matter,” he said, adding that he had “no idea” that it was happening.

Kevin Tabarus, a local president of the mail handlers’ union, questioned Mr. DeJoy’s qualifications and the selection process. “The guy has been to way more Republican fund-raisers than post offices,” he said, emphasizing just how delayed some of the mail has been under Mr. DeJoy’s watch.

After the task force issued its report, Mr. Mnuchin sought to ensure that the president nominated postal governors who would enact Treasury’s recommendations and would pick a like-minded postmaster general to carry them out. Mr. Mnuchin referred prospective candidates to the White House, according to a Treasury spokeswoman, and then regularly asked his staff for updates, a former Treasury official involved in the process said.

Over the last two years, Mr. Mnuchin met privately on multiple occasions about postal matters with Mr. Duncan, a former chairman of the Republican National Committee who was confirmed by the Senate as a postal board member in August 2018, according to people familiar with the meetings.

Mr. Mnuchin also arranged a meeting with John M. Barger, a California lawyer and financial investment adviser who was recommended to the Treasury secretary by a mutual associate who knew of Mr. Barger’s work as chairman of the board of the Los Angeles County pension fund. After a meeting in Washington, Mr. Mnuchin recommended that Mr. Trump appoint Mr. Barger to the board of governors.

Mr. Barger was confirmed by the Senate last summer, and was tapped to lead the committee to select a new postmaster general. He attended the February meeting in Mr. Mnuchin’s office with Mr. Duncan.

S. David Fineman, a former member and chairman of the Postal Service’s board, called Mr. Mnuchin’s close involvement in the affairs of the Postal Service “absolutely unprecedented.”

During his tenure in the Clinton and George W. Bush administrations, he said the board had minimal interaction with the administrations, and “certainly no communication regarding the hiring of the postmaster general.”

The board hired two search firms to assist in the selection process by conducting a nationwide search. One of them, Russell Reynolds Associates, compiled a database of prospective candidates and provided a subset of dozens of names it deemed most promising to the board.

Mr. DeJoy’s name was not among those initially provided, according to people familiar with the process. But Mr. Duncan raised Mr. DeJoy’s name during a discussion among board members about other prospective candidates. Mr. Duncan, who has been involved in a super PAC that supports Mr. Trump’s re-election, had met Mr. DeJoy through Mr. DeJoy’s wife, Aldona Wos. Both had been appointed by Mr. Trump to help lead the President’s Commission on White House Fellowships.

After the board received a readout from Russell Reynolds, which indicated that Mr. DeJoy was already in the firm’s database and was qualified, Mr. Barger went to lunch with Mr. DeJoy to assess his interest in, and suitability for, the post.

Mr. Barger was impressed, and reported his impressions to the full board the same day. “It’s uncommon to find somebody from outside the Postal Service who also has a history of success working with the Postal Service,” Mr. Barger said in an interview on Friday.

Nearly two months after the meeting in Mr. Mnuchin’s office about the search process, Mr. Duncan wrote a follow-up letter to the Treasury secretary indicating that the board had “narrowed the search to a small number of finalists, each of whom would serve the country well.”

Mr. Barger rejected suggestions that Mr. Mnuchin was playing politics with the Postal Service, noting that Democratic governors had met with top Treasury officials under Mr. Mnuchin. Mr. Mnuchin was not involved in the board’s decision to select Mr. DeJoy, Mr. Barger said, adding that the board “viewed Secretary Mnuchin as a stakeholder who was doing his job in having an interest in how our process was moving forward, but certainly nothing more than that.”

A Treasury spokeswoman acknowledged that Mr. Mnuchin urged the board to act expeditiously to find a new postmaster general when Ms. Brennan announced her retirement. The spokeswoman noted that Postal Service board members are part of the executive branch and that, as the head of the postal reform task force, Mr. Mnuchin had a right to be involved in the selection process and interview board candidates.

On Friday, the Treasury Department released a “fact sheet” to rebut allegations that have been leveled at Mr. Mnuchin in recent days, including that he politicized the Postal Service and used the department’s role as its lender to leverage influence over postal policies.

The department denied that Mr. Mnuchin had a role in selecting Mr. DeJoy and said his contact with board members was part of his “normal course of fulfilling his obligations” as chairman of the Federal Financing Bank, which lends money to the Postal Service and other federal agencies, and the presidential postal task force that produced the 2018 report.

Mr. DeJoy, 63, had transformed his father’s Long Island trucking company from a small shop with 10 employees into a national logistics and supply-chain provider that won lucrative contracts with Boeing, Verizon and the Postal Service. By 2014, around the time that he sold it XPO for $615 million, the company had about 7,000 employees.

That kind of growth came at a cost. In the logistics industry, speed is supreme. New Breed Logistics competed with Amazon in the hustle to deliver products to people’s homes as fast as possible. In pursuit of that goal, New Breed Logistics pushed their workers to extremes, according to a New York Times investigation published in 2018.

The company’s warehouse in Memphis offered a glimpse into the grueling culture that played out under Mr. DeJoy’s leadership. Inside the warehouse, hundreds of workers, many of them women, lifted and dragged boxes that could weigh up to 45 pounds. To save money, there was no air-conditioning, even in the middle of southern summers, causing temperatures to rise past 100 degrees.

Employees at the warehouse were disciplined using a “point system,” in which they could be fired once they racked up 10 points. Asking for a break to go to the doctor could earn you a point, as could taking too long on a break.

In 2013, New Breed was ordered to pay $1.5 million after the Equal Employment Opportunity Commission sued, accusing the company of retaliating against three female employees who said they had been sexually harassed.

There was no reprieve for women who were pregnant or sick, according to interviews and lawsuits. Those who asked for lighter work loads were often denied.

That included women like Tasha Murrell, who pleaded with her supervisor in 2014 to leave early because she was pregnant and lifting had become unbearable. Instead of a reprieve, her supervisor told her to get an abortion, according to a discrimination complaint that she later filed with the employment commission. Shorting after asking for a break, Ms. Murrell woke up in a pool of her own blood. She rushed to the hospital, where she learned that she had miscarried.

“It was like a sweatshop,” Ms. Murrell said. “All they cared about was their profits.”

XPO declined to comment for this article. A spokeswoman previously told The Times the company was “surprised by the allegations of conduct that either predate XPO’s acquisition of the Memphis facility or weren’t reported to management after we acquired it in 2014.”

During his testimony on Friday, Mr. DeJoy said he spoke to Mr. Mnuchin during discussions about the terms of a loan that the Postal Service was receiving as part of the virus economic relief legislation. He said that they did not discuss his operational plans in “grave detail.”

“I told him I was working on a plan,” Mr. DeJoy said, explaining that he had mentioned improving service and gaining “cost efficiencies.”

Mr. DeJoy and Mr. Duncan are scheduled to testify on Monday before the Democratic-controlled House Oversight and Reform Committee, whose members have signaled interest in Mr. DeJoy’s hiring, the changes he enacted and Mr. Mnuchin’s involvement in the Postal Service.

Kenneth Vogel, Alan Rappeport and Hailey Fuchs reported from Washington, and Jessica Silver-Greenberg from New York. Kitty Bennett contributed research.

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