Federal agents arrest Chinese operator of illegal Reedley lab for misbranding medical tests

Federal agents have arrested the operator of a clandestine biological lab in Reedley on charges of manufacturing and distributing misbranded medical devices and for making false statements to investigators.

A federal criminal complaint against Jia Bei Zhu, a Chinese resident who formerly lived in Clovis, was unsealed following his arrest. He also has several aliases, including Jesse Zhu, Qiang He and David He, the U.S. Department of Justice said in an update Thursday.

Zhu, 62, is scheduled to make his first court appearance Friday afternoon at the U.S. District Courthouse in Fresno. The case is being investigated by the U.S. Food & Drug Administration’s criminal investigation unit from Los Angeles.

Reedley City Manager Nicole Zieba told The Fresno Bee on Thursday that the arrest was set up after an attorney for Universal Meditech Inc., the company that operated the lab, filed a $30 million claim on Monday for damages against the city over the seizure and destruction of biological agents, equipment and experimental mice that were discovered at the lab inside a Reedley warehouse. A separate claim for $50 million was filed against Fresno County late last week.

“(Zhu’s) filing these claims really led to this arrest,” Zieba said. After the claim was received on Monday, Zieba contacted the FDA to notify its investigators, and then made arrangements with David He, Zhu’s alias, to meet Thursday morning at the warehouse under the pretense of going through the building.

“I met him on the site, shook his hand, and called him ‘David He’ for the last time,” she said, adding that investigators had previously shared his true identity as Zhu. “I was standing next to him when the FDA agents came out from behind the building, guns out, vested up. It was a full-blown arrest.”

The charges so far appear to be limited to the manufacture and distribution of medical test kits, including COVID-19 tests. In various email exchanges with the Fresno County Health Department, Zhu — using the alias David He — held himself out as a representative of both Universal Meditech Inc. and Prestige Biotech Inc., companies that were behind the lab that operated illegally without a business license from a large warehouse in downtown Reedley.

After Reedley city code inspectors learned of the lab in December 2022, follow-up inspections discovered that the warehouse contained dozens of freezers and refrigerators full of various bacterial, viral and parasitic agents including COVID-19, chlamydia, E. coli, streptococcus, Hepatitis B and C, human herpes, HIV (the virus that causes AIDS), rubella and malaria.

“As part of his scheme, the defendant changed his name, the names of his companies, and their locations,” U.S. Attorney Phillip Talbert said in a statement issued following Zhu’s arrest. “The disarray at the Reedley lab led to the glare of publicity he was trying to avoid, and the ensuing investigation unraveled his efforts to circumvent the requirements that are designed to ensure that medical devices are safe and effective.”

Inspectors with the city of Reedley, Fresno County and state and federal health agencies discovered thousands of various test kits stored in the warehouse at 850 I street in downtown Reedley.

An affidavit filed by FDA special agent Jeffrey Maurice alleges that Zhu and others “manufactured, sold and distributed thousands of COVID-19 IVD (in vitro diagnostic) test kits, in addition to IVD test kits for HIV, pregnancy, clinical urinalysis and other conditions, throughout the United States” through both Universal Meditech and Prestige Biotech.

But, the affidavit adds, “UMI and PBI did not obtain the required authorization to manufacture and distribute the test kits, and mislabeled some of the test kits, which makes the test kits misbranded medical devices” under federal law.”

“When these activities were discovered by FDA officials, Zhu made false statements to the officials,” Maurice added. “This included information about Zhu’s own identity, his ownership and control of UMI and PBI, and the activities of UMI and PBI.”

Talbert said Thursday that if convicted, Zhu could face a maximum penalty of three years in prison for misbranding of medical devices, as well as another five years for the charge of making false statements to investigators.

How the investigation unfolded

The criminal complaint details a convoluted and checkered path charted by Zhu from Canada, where he was listed as the owner of IND Diagnostic Inc., to the San Joaquin Valley, where Universal Meditech was formed in 2015.

UMI was initially based in Tulare, where it apparently operated without incident, from 2015 to 2018, when it moved to Fresno. It abruptly abandoned its Fresno lab in November 2022, and moved its equipment and materials to the Reedley warehouse.

The company was registered with the FDA as a manufacturer of medical devices from 2015 through December 2022, when its registration lapsed. But Maurice stated that UMI never received approval from the FDA under rules put in place during the coronavirus pandemic for emergency use authorization to manufacture or distribute COVID-19 test kits.

As the owner of IND Diagnostic, Zhu and the company “were sued civilly in Canada and ordered to pay over $300 million for misappropriating technology related to the separation of sex chromosomes from bull semen,” Maurice stated in the criminal complaint. That judgment does not appear to have ever been paid.

Despite being denied FDA emergency-use authorization to produce COVID-19 test kits, UMI entered a contract with a medical laboratory to manufacture coronavirus test kits, Maurice stated, referring to a civil lawsuit filed in August 2021 in Alabama. That agreement, he added, “was executed after UMI failed to obtain (emergency authorization) for any COVID-19 IVD test kits, which would make the test kits misbranded medical devices” under federal law.

Investigators were able to determine that “David He,” who told local officials that he was merely a representative of UMI and PBI hired only weeks before an April 26 meeting at Reedley City Hall, was actually Jia Bei Zhu through fingerprints collected by federal officials over seven different times when Zhu entered the U.S., and by comparing a photo of David He from an investigator’s body-worn camera with a photocopy of a Canadian driver’s license issued to Zhu and found during a Sept. 23 search under a federal warrant at the Reedley warehouse.

Maurice also noted that Zhu repeatedly identified himself to FDA investigators as Qiang “David” He by showing them an employment authorization card issued by U.S. Customs and Immigration Services – a card that “was confirmed to be authentic by government officials.

“The fingerprints that government officials obtained from Qiang He when he came into the United States from China in 2021 matched the fingerprints obtained from Zhu when (he) came into the country seven times from 2003 through 2008,” Maurice said. “Therefore, I believe Zhu submitted false documents to the government to obtain the USCIS card in Qiang He’s identity.”

The complaint details how, emails to Reedley city officials from a person identified in the affidavit only as “PBI Employee One” came from an email address for Jesse Zhu, one of Jia Bei Zhu’s aliases.

The September search of the warehouse also turned up invoices to another medical lab amounting to 150,000 COVID-19 test kits.

While the company was manufacturing and distributing COVID-19 rapid tests while it was in Fresno, it did so without the required FDA authorization. Universal Meditech issued at least two recalls for its rapid antigen test kits for COVID-19 marketed under the brand names Skippack Medical Lab and DiagnosUs, according to information from the FDA – one covering more than 209,000 kits in April 2022, and another in late December for more than 56,000 COVID-19 test kits. The recalled kits were manufactured between October 2021 and December 2021 and distributed nationwide in January 2022 – time frames when the company was operating in Fresno.

Unclear whether more arrests will come

While federal agents found documents linking UMI to the illegal production and distribution of COVID-19 test kits, they discovered nothing to support speculation on social media and repeated by several politicians that the lab was seeking to produce or weaponize COVID-19 or other contagions.

“Despite media reports that UMI and PBI may have been manufacturing bioweapons, no evidence supporting these reports has been found to date,” Maurice wrote in his Oct. 17 affidavit. “Any and all pathogens and toxins that have been found during the government’s investigation appear to be related to the manufacture and distribution of various IVD test kits.”

Fresno County officials, including from the county health department, came under withering criticism afte the first public reports of the warehouse emerged in late July. Local officials asserted that they had been cautioned to remain largely silent about the case since it involved an ongoing federal investigation.

That was underscored in Maurice’s affidavit. “I request that the court order all papers in support of the requested criminal complaint and arrest warrant be sealed until further order of the court,” he stated to U.S. Magistrate Judge Sheila K. Oberto. “These documents discuss an ongoing criminal investigation that is neither public nor known to all the targets of the investigation.”

“Therefore, there is good cause to seal these documents because their premature disclosure may jeopardize the investigation,” Maurice added, “including by giving the targets an opportunity to destroy or tamper with evidence, change patterns of behavior, notify confederates, and flee.”

While neither Talbert’s statement nor Maurice’s affidavit stated that more arrests may come from the case, the special agent in charge of the FDI’s criminal investigation field office in Los Angeles hinted that additional people may be charged.

“Consumers who unknowingly used these misbranded COVID tests run the risk of incorrect results about their COVID status,” agent Robert Iwanicki said in a prepared statement. “We will continue to investigate and bring to justice those who jeopardize the health of U.S. consumers.”

On Thursday afternoon, Zieba said she still had a lot of adrenaline in her system hours after the arrest. “Relief has washed over me that we are finally seeing what we’ve been begging for, and that’s accountability for what’s going on.”

While she added that she has no specific information on the ongoing federal investigation, “it wouldn’t surprise me if we see more charges added” against Zhu, “and it wouldn’t surprise me if we see more arrests.”

But the bigger picture, Zieba said, is filling gaps in state and federal laws that allow private labs like this one to function largely unregulated. “That’s a soapbox I’m going to continue to stand on,” she said.

The highly publicized Reedley case has drawn congressional scrutiny to the prospect of foreign-owned private labs that are not held to the same standards as laboratories that receive public funding. Two separate panels of the U.S. House of Representatives – the Select Committee on the Chinese Communist Party and the House Energy and Commerce Committee – issued subpoenas last month for the city of Reedley to turn over a trove of documents, photos and videos for examination.

Rep. Jim Costa, D-Fresno, whose 21st Congressional District includes Reedley, described Thursday’s arrest as “a step in the right direction to hold him and those behind the illegal Reedley lab accountable.”

“I am hopeful that further investigations will fully unravel the details and purpose of the lab in Reedley,” Costa added.