How the Postal Service crisis evolved, before and after Louis DeJoy took over

WASHINGTON — It would be months before Louis DeJoy took the reins of the nation’s mail system, and the U.S. Postal Service already was mired in crisis.

Mail carriers were revolting, fearful they had few protections against the newly emerging coronavirus. The Trump administration was bearing down on its finances, sending USPS officials scrambling over what they saw as a potential illegal takeover of agency operations. And then there was a looming standoff with Amazon, which privately signaled it could take some of its lucrative delivery business elsewhere.

The tensions surfaced at an April 9 meeting, when Amazon executives "stated their concerns" about the Postal Service's economic plight amid the pandemic and questioned its "viability to them as a continued shipping partner," according to a once-secret memo circulated within the agency, which described the situation as an "inflection point." (Amazon founder Jeff Bezos owns The Washington Post.)

The wide-ranging headaches that so troubled the USPS in April ultimately foreshadowed a summer of upheaval, thrusting the once-venerated mail service into a political maelstrom months before a presidential election. Newly disclosed details of these struggles are laid bare in nearly 10,000 pages of emails, legal memos, presentations and other documents obtained by The Washington Post from American Oversight, a watchdog group that requested them under the Freedom of Information Act.

The documents, which mostly span March and April, depict an agency in distress, as its deteriorating finances collided with a public-health emergency and a looming election that would be heavily reliant on absentee ballots. During that period, the USPS occasionally relied on the legal counsel of well-connected Republicans, including Stefan C. Passantino, who once served as a top White House lawyer under President Donald Trump. Passantino, whose role has not been previously reported, is also part of a new pro-Trump legal coalition preparing for the possibility of a contested election, a relationship that has raised new ethical flags among the administration's critics.

The records also offer fresh detail about the Postal Service's precarious position in the White House's early pandemic response. At one point in April, USPS leaders drafted a news release announcing plans to distribute 650 million masks nationwide, enough to offer five face coverings to every American household. The document, which includes quotations from top USPS officials and other specifics, was never sent. But it suggests that the government's initial interest in tapping the Postal Service as part of its campaign to combat the coronavirus may have been far more advanced than initially reported this spring.

The Postal Service declined to discuss its specific dealings with the White House, Treasury Department or Amazon about plans to distribute masks or its finances. David Partenheimer, a USPS spokesman, stressed in a statement that the mail agency is "firmly committed to being a source of constancy and reliability in every community."

"Our more than 630,000 employees are working to make sure our customers can depend on us," he added. "We're on the front lines — delivering needed medicines, supplies, benefit checks, financial statements and the important correspondence every family counts on."

But the emails and other records offer fresh insight about the Postal Service, its philosophical shifts and the little-known board of governors overseeing its operations and finances. Lawmakers already have trained their attention on board leader Robert M. Duncan, a top Republican financier, for his political ties. The board later picked DeJoy, whose support for Trump, history of GOP fundraising and controversial USPS reforms have stoked widespread criticism.

"I see President Trump's fingerprints all over," said Austin Evers, the executive director of American Oversight. "It's clear from the president's public comments, and the actions of his administration, he has a major agenda for the post office — and we see a lot of it in black and white here."

The frantic emails began reaching the Postal Service leadership in March, mere weeks after the coronavirus arrived in the United States. Mail carriers and, in some cases, their spouses practically pleaded with then-Postmaster General Megan Brennan and her top aides for help in protecting themselves on the front lines.

At the time, New York City was emerging as the U.S. epicenter of the pandemic. Yet postal employees continued delivering letters and packages even as broad swaths of the state had started to shut down. A local union leader, whose name is redacted in email records shared with The Post, urged Brennan to follow suit and temporarily cease operations in the city.

"I literally was on the phone today with many of my members screaming at me to do something [and] I don't want to die," the unnamed union official wrote, noting they had 12 confirmed coronavirus cases among the ranks by March 25. "You cannot expect the unions to convince the employees that if they come to work they have nothing to worry about."

» READ MORE: Louis DeJoy’s Postal Service policies delayed 7% of the nation’s first-class mail, a Senate report says

Roughly a week later, USPS publicly pledged to stock up on personal protective equipment and allow employees to more easily take leave as soon as they felt sick. But angry notes continued to flood Brennan's inbox, as postal workers and their families expressed fears for the public health crisis to come.

“WHY IN GOD’S NAME ARE THEY DELIVERING UNESSENTIAL MAIL to EVERY HOUSE in a HIGHLY INFECTED AREA!!!!” wrote an unidentified woman who identified herself as the spouse of a mail carrier in Pennsylvania. “Do you want them to get the coronavirus! … You as post master seem to be the ONLY ONE who can do something about the situation … so DO SOMETHING, before the virus does it for you!”

Brennan did not respond to a request for comment. Partenheimer, the USPS spokesman, said in a statement that "supply chain issues" had affected the mail agency just as it had other businesses and institutions in the early stages of the pandemic. "However, those issues have long since been addressed and we are ensuring millions of masks, gloves and cleaning and sanitizing product are available and distributed to more than 30,000 locations every day through our Postal Service supply chain," he added.

Inside the agency, though, leaders at the time appeared to be scrambling to keep operations running smoothly. The Trump administration had deemed postal workers essential, with the critical task of delivering medicine, supplies and other goods to a nation upended by the pandemic and largely confined to their homes. Unlike other elements of the economy, the U.S. Postal Service simply could not shut down.

Some top administration officials even hoped to tap the mail service's vast network — and its unrivaled ability to reach every U.S. Zip code — to help Americans obtain personal protective equipment. The idea originated out of the Department of Health and Human Services, which suggested a pack of five reusable masks be sent to every residential address in the country, with the first shipments going to the hardest-hit areas.

At the time, the U.S. Centers for Disease Control and Prevention had been working on coronavirus guidance that recommended face coverings, a reversal of its previous position, in the face of mounting evidence that people could spread the coronavirus without experiencing symptoms. The Postal Service prepared for the possibility it might be deputized in the effort, drawing up a news release touting that it was "uniquely suited" to help. The service specifically identified Orleans and Jefferson parishes in Louisiana as the first areas to receive face coverings, with deliveries shortly thereafter to King County, Wash.; Wayne County, Mich.; and New York, according to the newly unearthed document, which is labeled a draft.

Before the news release was sent, however, the White House nixed the plan, according to senior administration officials, who spoke on the condition of anonymity to share internal deliberations. Instead, HHS created Project America Strong, a $675 million effort to distribute "reusable cotton face masks to critical infrastructure sectors, companies, healthcare facilities, and faith-based and community organizations across the country." About 600 million of the 650 million masks ordered have been distributed, according to an HHS spokesperson, including 125 million set aside for schools.

"There was concern from some in the White House Domestic Policy Council and the office of the vice president that households receiving masks might create concern or panic," one administration official said in response to the scrapped mask plan.

The Postal Service, meanwhile, faced a panic of its own. And it soon would try to turn to some of Trump's closest political allies for help.

For years, the agency had been operating in the red. Its mandate to deliver to every U.S. Zip code had come at great cost, and it struggled to meet its workers' sky-high retirement obligations — leaving it $160.9 billion in debt. The pandemic only exacerbated its financial standing, with agency officials in April predicting a $23 billion loss over the next 18 months and expressing fears the mail service could run out of money by October.

To bridge the gap, the Democratically-controlled House proposed setting aside $25 billion for the USPS as part of the March debate over coronavirus relief legislation. But the Republican-led Senate whittled that down to $13 billion, and Trump soon after threatened to veto any bill that included direct aid to the agency. Ultimately, Congress replaced the funding with a $10 billion loan in the package that became known as the Cares Act, a pot of money the Treasury Department was tasked with administering.

The approach appeared to spook the USPS, agency email records show. The money seemed insufficient, the law itself presented serious legal challenges, and some mail service leaders questioned the Trump administration's involvement, according to its emails and other records, prompting them to go on the offensive.

To boost its legal and political standing, the USPS turned to Passantino, a partner at the law firm Michael Best & Friedrich and a former deputy White House counsel for Trump. He departed the administration in fall 2018, but he never fully severed his ties to Trump's orbit. Passantino has since helped the Trump Organization handle investigations led by House Democrats, for example, and he has consulted for a firm assisting his reelection campaign.

Duncan, the USPS board chairman, brought in Passantino and his law firm in part to help ease the agency's financial stress, according to emails and people involved with high-level USPS deliberations, who spoke on the condition of anonymity to provide a frank assessment of the agency. The board also retained Republican lobbyist Rick Hohlt and others to address lingering policy and budget issues in Washington, the records reveal.

An April 1 memo also shows the USPS considered tapping one of Passantino's colleagues — Reince Priebus, the former White House chief of staff and Republican National Committee chairman — believing he could help break a Washington logjam over the need for additional stimulus aid. People familiar with the matter said Priebus never made those calls, and Priebus is barred by executive order from lobbying the White House until 2022.

» READ MORE: Senate report accuses Postmaster General Louis DeJoy of jeopardizing the ‘health of millions of Americans’

Priebus and Hohlt declined to comment. Passantino and his law firm did not respond to requests for comment. The Postal Service did not answer detailed questions about their work, including the extent to which Passantino or Hohlt worked on matters related to the election, but it confirmed the hires came at a time when the board of governors was understaffed.

Ethics watchdogs raised concerns about new evidence showing additional overlap between the Postal Service, which will deliver ballots this fall, and the Republican Party.

"Why did the Postal Service need the services of Stefan Passantino when his primary claim to fame, the primary reason you hire him, is to carry out Donald Trump's personal and political defense work?" asked Evers, the head of American Oversight, who called him the "fox in the hen house."

The document trove also includes three separate email chains referencing calls with Treasury Secretary Steven Mnuchin and other agency officials over nine days in early April. Two people familiar with the matter say Treasury drove a hard line, demanding operating control over the agency in exchange for the $10 billion congressionally approved loan. Such a demand was unprecedented, postal experts said, and appeared to lead the USPS to hire another law firm in the spring to study the legality of the issue. That firm, Mayer Brown, concluded that Treasury's request was illegal.

"Any agreement by the Postal Service to surrender its authority to the Secretary of the Treasury or to the [Federal Financing Bank] therefore would be illegal," lawyers concluded in an unreleased April 24 memo, referring to a federal borrowing entity.

The Treasury Department ultimately backed away from the idea of assuming control of USPS operations, amid swelling opposition from congressional Democrats and Postal Service leaders. During an April 9 meeting between Kip Kranbuhl, a Treasury assistant secretary; Gary Grippo, a career Treasury official; and Postal Service executives, Grippo said Treasury would not seek to take operating control as part of the terms, according to notes from the meeting. But the agency continued to press the idea for weeks, insisting that any loan to the USPS should result in it assuming operational control of the mail agency, three people familiar with the talks said.

» READ MORE: Louis DeJoy’s rise as GOP fund-raiser was powered by contributions from company workers who were later reimbursed, former employees say

Asked about the proposed arrangement, Monica Crowley, a Treasury spokeswoman, said in a statement that the USPS had been losing money — so the Trump administration sought to "protect" billions of dollars in loans ultimately authorized for the mail service.

"As in any arms-length negotiation, some of these proposals were rejected by USPS, while other reforms, such as enhanced monthly and quarterly financial reports, were agreed upon as part of the recent $10 billion loan that Treasury and USPS agreed to terms on last month," she said. "Treasury's proposed financing conditions have at all times been commercially reasonable and consistent with law. It is absurd to describe commonsense conditions on continued taxpayer funding as a 'takeover.' "

But the revelations still troubled some White House critics on Capitol Hill. Sen. Elizabeth Warren, D-Mass., faulted the administration in a statement for being "hell-bent on sabotaging the USPS," adding, "Congress must protect the USPS from attacks by Trump and his cronies — tens of millions of Americans across the country are counting on us to act."

Amazon would prove to be a bigger headache, according to USPS email records, which reveal new details about the e-commerce giant's financial ties to the U.S. mail system.

Trump for years has alleged without evidence that the Postal Service is undercharging companies, particularly Amazon, that rely on it to deliver to addresses the company itself can't reach — or, in industry parlance, the "last mile." In April, the president even called on the agency to "raise the price of a package by approximately four times," marking the latest in a long line of attacks against the company.

But the documents unearthed by American Oversight suggest Amazon is a lucrative client for the mail service. Amazon drove roughly $3.9 billion in revenue, and $1.6 billion in profit, for the USPS in fiscal 2019, according to multiple emails and financial statements obtained via open records laws. The Postal Service delivered 1.54 billion packages on Amazon's behalf last year, about 30% of the company's total volume in 2019, and deliveries and revenue increased this year, the documents also indicate.

Amazon declined to answer questions about its relationship with the USPS. "For more than two decades, Amazon has partnered closely with the United States Postal Service to invent and deliver for our customers, which has resulted in significant revenue for the USPS and thousands of American jobs," company spokeswoman Rena Lunak said in a statement. "USPS continues to be a great partner in serving Amazon customers."

White House spokesman Brian Morgenstern said in a statement that the agency "has been losing billions of dollars for more than a decade and is projected to lose tens of billions more in the next decade."

The tensions came to head in April as Amazon and the USPS attempted to negotiate a new contract to determine the cost at which the country's mail service will deliver packages on Amazon's behalf. The relationship is a crucial one for the USPS, which warned throughout the spring that it stood to "cede" control to its competitors if it raised rates on Amazon too high, according to emails and memos obtained by The Post.

In response to the president’s attacks, the agency appeared to circulate a memo internally that appeared to fact-check his statements. Trump, for example, had claimed during a meeting of his coronavirus task force in late March that the agency “lose[s] money every time they deliver a package” for Amazon. USPS, however, countered that “unfunded government mandates,” such as its retirement obligations, are driving its budget woes — not Amazon.

"Amazon made it very clear that the USPS is alone, globally, among their partners in having this pricing uncertainty," indicated the document. It is not clear who drafted it, or to whom it was sent.

The documents do not indicate the status of the Postal Service's talks with Amazon, but they do presciently list some of the e-commerce giant's lingering questions about the agency amid a roiling pandemic that had thrust the agency and its finances into doubt: "What does the USPS look like in the new few weeks, the next few months and the next several years?"

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The Washington Post’s Jay Greene contributed to this report.