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Congress concludes illegal California biolab had Chinese connections, slams CDC

Biden, Xi silent on issue at summit as evidence and concerns mount.

Published: November 19, 2023 11:19pm

On Thursday, the House Select Committee on the Chinese Communist Party released a long-awaited report on the illegal biological laboratory in California run by a fugitive Chinese national.

Congressional investigators allege that the man who set up the laboratory had significant connections to the Chinese Communist Party apparatus and he ran an illegal laboratory that housed approximately 20 types of infectious disease samples and sold COVID-19 tests without a proper permit.

The same week, President Joe Biden held a meeting with Chinese leader Xi Jinping where the two world leaders discussed the U.S.-China bilateral relationship. During the summit, the the United States and China agreed to resume military to military contacts, partner in countering the fentanyl trade, and inked a new climate statement.

Despite the newfound spirit of cooperation, it appears that neither President Biden nor U.S. representatives brought up the clandestine biolab which operated on American soil unnoticed for years, posing health risks to the community of Reedley, California and taking American COVID-19 relief money to fund its operations.

The Reedley biolab was run first by Universal Meditech Inc (UMI) and later Prestige Biotech Inc, both companies controlled by a man named Jiabei “Jesse” Zhu. The report said that Zhu was "a fugitive from Canada who illegally entered the United States" and had "previously stolen millions of dollars of American intellectual property," although it did not detail any court records relating to those allegations. A court record from the Supreme Court of Canada shows that Zhu was found liable or deceit and civil conspiracy in a civil case under Canadian law and awarded $8.6 million in damages to the American company that had licensed its technology to his company.  

Zhu and his co-conspirators were charged last week with "distributing adulterated and misbranded medical devices in violation of the federal Food, Drug, and Cosmetic Act and for making false statements to the Food and Drug Administration" (FDA), according to a statement from the United States Department of Justice

“UMI and PBI were based in Fresno and Reedley and did not obtain pre-market approval, pre-market clearance, emergency use authorization, or other applicable exemption from the FDA as was required. UMI and PBI received millions of dollars for the sales of the test kits,” the DOJ continued. If convicted, Zhu faces a maximum statutory penalty of three years in prison and a $250,000 fine for the adulterated and misbranding of medical devices charges, and five years in prison and a $250,000 fine for the false statements charge, prosecutors said.

According to the report, after entering the United States under the alias “David He,” Zhu formed new companies with the help of an unnamed accountant who had ties to the Chinese United Front Work Department and wider Chinese Communist Party leadership and borrowed funds from his already established network of companies.

The UFWD is is a component of the Chinese Communist government responsible for influence operations at home and abroad to “co-opt and neutralize sources of potential opposition to the policies and authority” of the Chinese Communist Party, according to the U.S.-China Economic and Security Review Commission.

You can read the committee report here:

 

Zhu’s biolab, operating clandestinely in the small community of Reedley, California on the outskirts of Fresno, was discovered when a code enforcement officer noticed a violation at the site that prompted further investigation. When the officer entered the building, she observed employees in lab attire, biohazard warnings, and at least 1,000 white laboratory mice which employees described as being used for testing, according to the committee’s report.

The code enforcement agent’s discovery prompted a wider investigation from the California health officials and the FDA. After city staff contacted the country and the California Department of Public Health (CDPH) for support, the city obtained an inspection warrant and returned with Fresno County and CDPH staff to further investigate the premises.

The inspectors documented building code violations, COVID and pregnancy tests, observed bodily fluid samples, serums, and “thousands of vials of unlabeled fluids and suspected biological material,” according to the court documents. The team also discovered freezers of various temperatures to store suspected biological material, including an ultraslow temperature freezer, commonly used to store infectious agents.

The inspectors also about 1,000 laboratory mice genetically engineered to simulate a human immune system and designed to “catch and carry the COVID-19 virus,” according to the court documents. The biolab was unable to provide any documentation that certified it for experimentation and breeding of the test mice.

You can read the referenced court document here:

 

“I think what this investigation has revealed is that we don't have in place adequate tripwires to detect and prevent biolabs like this one from being established. And in many cases, you're able to buy these pathogens and this material online. That's unacceptable,” Chairman Gallagher, R-Wis., of the House Select Committee on the Chinese Communist Party told Just the News on Friday.

“The individual in question was a criminal with a long record with dubious ties to the People’s Republic of China. That is a massive problem. We are hoping this will spur productive legislative action,” he continued.

In addition to the biological materials stored at the facility, the committee asserts that Zhu’s Universal Meditech Inc. purchased counterfeit medical test kits from China and resold them in the United States falsely labeled as Made in the USA.

“The Reedley Biolab contained dozens of large boxes full of PRC-made medical device test kits, shipping manifests for these items from the PRC, and bills indicating the acquisition of these test kits from PRC companies,” the committee wrote in the report. The kits included COVID-19, pregnancy, and narcotics tests.

During the period that UMI was allegedly selling fraudulent COVID-19 tests, the company received nearly $150,000 in forgivable loans under the Paycheck Protection Program (PPP). The PPP was a loan program implemented during the coronavirus pandemic to help businesses to pay their employees. Representative Jim Costa, D-Calif., and then-Speaker Kevin McCarthy, R-Calif., sent a letter to the Pandemic Response Accountability Committee—a body created by Congress to oversee the implementation of COVID-19 relief—urging an investigation into UMI’s receipt of relief funding under PPP.

During the time that Zhu’s companies were purportedly selling the fraudulent test kits, the committee also says that Zhu received unexplained payments from Chinese banks totaling more than $1.3 million. The committee admits that this is only a preliminary estimate because it does not have access to complete financial records. The flow of cash from China rather than to China, as would be expected with the purchase of Chinese counterfeit tests, suggests possible money laundering, the committee concluded.

The committee also reported what it described as an “unacceptable” response from the Centers for Disease Control and Prevention’s (CDC) to the Reedley biolab. Local officials told the committee that that CDC initially refused to speak with them and that they had to contact the local House Representative in order to obtain the CDC’s help.

Only after that did the CDC respond to local officials’ request for help. The CDC arrived on scene and classified the biological samples, finding at least 20 “potentially infectious agents,” including Chlamydia, E. Coli, Malaria, and SARS-CoV-2. However, the committee found that the CDC did not test unlabeled biological material, only the material that was clearly identified. This left local health official unable to assess the threat to public safety, the report concluded.

When the local officials arranged for the biological material to be disposed of—in what is known as abatement—they found a freezer labeled “Ebola,” which the CDC failed to identify during its inspection. Ebola is a “select agent,” a special classification by the CDC of a biological agent or toxin that has “been determined to have the potential to pose a severe threat to public health and safety.”

The committee report concluded that the CDC’s lackluster initial response, failure to test samples, and conclusion that no select agents were present despite visual evidence were unacceptable and merits an investigation by Congress about biosafety in the United States.

"I’m floored by the lack of response by the CDC, it’s nothing short of malfeasance,” Congressman Neal Dunn, R-Fla., a member of the Select Committee reportedly said, according to GV Wire, a local news website.

The CDC disputed the committee’s claims about its response in a statement to Just the News on Friday. “CDC strongly disputes the report’s conclusions critical of the agency. The report includes numerous inaccuracies, including both the charge that CDC did not respond to local requests for aid and the false implication that CDC had the authority to unilaterally investigate or seize samples from PBI’s Reedley building,” a CDC official with knowledge of the investigation told Just the News.

“Indeed, CDC has, and continues to be actively engaged, within its regulatory authorities, in the intergovernmental efforts to address issues surrounding the facility,” the official continued.

On Thursday, President Biden met with President Xi Jinping of the People’s Republic of China in California, less than 200 miles from the site of the Reedley laboratory. The meeting appeared productive. This week, President Biden announced that the United States would be resuming military-to-military contacts with China. These contacts under what is called the Military Maritime Consultative Agreement had lapsed in 2020 amid rising tensions.

Biden also touted an agreement to jointly curb fentanyl production. China is one of the major source countries of fentanyl flowing into the United States. The drug, along with other synthetic opioids, are “the main driver of drug overdose deaths with a nearly 7.5-fold increase from 2015 to 2021,” according to the National Institute on Drug Abuse.

A new climate statement was also a product of the meeting between U.S. and Chinese officials. The U.S. Climate Representative John Kerry and his Chinese counterpart released a statement about combating climate change through emissions reductions, despite the more stringent requirements on Americans versus the Chinese. “[The] United States and China reaffirm their commitment to work jointly and together with other countries to address the climate crisis,” the statement reads.

Just the News asked the White House if the Reedley biolab was covered in discussions with the Chinese. The White House has not responded at the time of publication.

Zhu could not be reached for comment. His attorney, Anthony Capozzi, did not respond to a request for comment at the time of publication. Capozzi told the court at Zhu's arraignment hearing this week that Zhu denies doing anything wrong and specifically raised concerns about the congressional report endangering his client. “I am concerned that with the Congressional report that just came out he may be in danger at the jail,” Capozzi said at the arraignment, according to The Fresno Bee. Zhu entered a not guilty plea at the hearing. 

Chairman Gallagher worries that commitments by the Chinese must be treated with skepticism based on China’s past actions. “I worry that coming out of the meeting that there will be some commitment to working together on fentanyl, because like every other commitment Xi has made in modern history, the Chinese Communist Party will violate that commitment,” Chairman Gallagher told Just the News.

“Time and again we fall victim to the trap where we pay cash up front and the CCP’s check is always in the mail,” he continued.

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