How a secret Chinese-run lab in Reedley illegally stored vials of COVID-19, infectious diseases

Jesalyn Harper, the city of Reedley’s code enforcement officer, thought the call would be routine - following up on an anonymous complaint about a business operating without a permit in an old warehouse. But when she found a jury-rigged garden hose sticking through a rear wall and a ventilation fan blowing foul-smelling air through an opened back door, things took a turn.

Harper knocked on the front door of the decades-old cold-storage warehouse for an inspection. What she discovered inside on that December day was almost the stuff of science fiction: Dozens of refrigerators filled with vials of blood, viruses and bacteria; containers of chemicals; hundreds of laboratory mice; and an array of stored laboratory equipment – all inside an unpermitted business operating illegally.

“I wasn’t looking for an unpermitted lab,” Harper told The Fresno Bee this week. “I was just looking for an unpermitted business.”

Prestige Biotech Inc., a company whose owners live in China, was using the building near Reedley’s downtown for storing and shipping an array of diagnostic test kits for COVID-19, pregnancy, drugs and more after apparently being booted out of their Fresno location in late 2022. The inventory of biological agents in the refrigerators include coronavirus and other exotic contagions, such as malaria, Hepatitis B and C, chlamydia, human herpes, and rubella, among others, used in the production of various test kits.

Now, eight months after the surprising discovery, and about five months after the lab was shut down, local, state and federal agencies continue to investigate and clean up a business that has existed within a murky and muddled realm of regulatory authority. It’s apparently a first-of-its kind situation for investigators in the U.S. – even as court documents show that the company is in the midst of efforts to relocate back to Fresno.

“We’re finding out that with these private labs, there really isn’t as much regulation as there is for publicly funded labs, labs that receive grants,” said Harper, who has been involved in the investigation since Dec. 19. “There’s no one technically looking for them.”

The lab inside the warehouse in downtown Reedley operated from December through March, when city officials deemed the building unsafe and padlocked it. The removal of equipment, medical devices and chemicals inside may take another month or two.

As news of the lab’s existence and closure broke last week, The Bee decided to take a deep look at how the illicit lab was able to operate, how it was discovered and shut down, and how news of its existence sparked conspiracy theories rooted in distrust of China and debate over the origins of COVID-19. We spoke to numerous investigators and reviewed hundreds of pages of court documents to compile this report.

Deadly viruses, ‘at least 20 potentially infectious agents’

Prestige Biotech Inc., a company incorporated in Nevada but whose owners live in China, and its predecessor Universal Meditech Inc. previously operated for several years in an industrial building in south Fresno. Following a fire at that site, and amid a dispute with its landlord, the owners relocated the lab and its equipment to leased space inside the Reedley warehouse at 850 I St.

According to experts assisting the city, the lab looked like it was set up for shipping already-assembled test kits and for storage of components, chemicals, and biological agents used to develop test kits, Harper said.

Investigators with the U.S. Centers for Disease Control determined in May that the Reedley warehouse had “at least 20 potentially infectious agents” besides the COVID-19 virus stored in its refrigerators, according to documents filed in Fresno County Superior Court. Those bacterial, viral and parasitic materials included chlamydia, E. coli, streptococcus, Hepatitis B and C, human herpes, HIV (the virus that causes AIDS), rubella and malaria.

In addition to numerous code violations at the site, an array of potentially toxic chemicals was also discovered when officials with the city of Reedley and the Fresno County Department of Public Health were able to make a full site inspection in March, Harper said.

Harper added that part of the warehouse was partitioned as a makeshift plywood room with boxes containing nearly 1,000 laboratory mice, almost 200 found dead.

A news report in the Mid Valley Times, a local Reedley newspaper, about the cleanup gave rise to rampant speculation on social media about the laboratory and its operations and potential connections to China.

Fresno City Councilmember Garry Bredefeld, capitalizing on the brewing social media furor, blasted Fresno County health officials and the county Board of Supervisors in a press conference Monday, accusing them of concealing news about the lab for months since its closure in March until the Reedley newspaper wrote about it last week. He called for county leaders “to let people know what’s going on.”

The COVID pandemic that reached the Fresno region in March 2020 “resulted in the destruction of lives, livelihoods, the economy and business,” Bredefeld said of national, state and local safety mandates that closed businesses and schools or required people to wear masks in public – repeating a criticism he has often voiced. “We had officials locally that were silent and complicit with all the unconstitutional and destructive government orders.”

“And now they’re silent again,” he said in reference to the Reedley lab.

Joe Prado, assistant director of the Fresno County Department of Public Health, said an emergency declaration for the site was not deemed necessary because the property had been shut down and contained in early March by Reedley city officials. “There wasn’t a public notice because it didn’t meet the criteria for an emergency declaration,” Prado told The Bee.

“During this entire time as we are evaluating this process, and all of the 14 federal and state agencies that we’re coordinating with, this is still an ongoing investigation,” Prado said.

“There are going to be some things we can’t talk about” because federal and state agencies are still investigating, he added. Among the agencies involved are the Centers for Disease Control, the U.S. Food & Drug Administration, the U.S. Environmental Protection Agency, the Federal Bureau of Investigation, the state Department of Toxic Substances Control, and the state Department of Public Health and its agencies dealing with medical waste and laboratory field services.

“I can’t speak to any criminal charges because there is this ongoing investigation,” Prado said. “There’s a challenge of finding a balance between maintaining the integrity of the investigation and making sure this doesn’t happen again in Fresno County.”

Harper said Tuesday that more information didn’t come out earlier because “it took time to get all of this (investigation) together.”

“Our response time was longer because this is an unprecedented event,” she said, adding that CDC and FDA officials said a lab situation like this has not been found before in the U.S. “We’re all trying to figure out what we can do, who’s in charge of what, how to organize this, who goes in first. All of that is being learned while we’re going through this process.”

“We’re literally writing the policy and procedure as we’re going along,” Harper added.

‘Genetically modified’ mice prompt speculation

Court documents include a reference to a March 3 statement by Xiuquin Yao, reportedly the president of Prestige Biotech, that indicated mice found at the site were “genetically modified to catch and carry the COVID-19 virus” for testing related to development of diagnostic testing kits.

“At that point in time, that sparked a lot of concern for us,” Harper said, adding that Yao’s English language skills were limited. A subsequent inspection by Nina Hahn, an attending veterinarian at the Lawrence Berkeley National Laboratory, clarified that the mice, while under distress and in neglected conditions, did not appear to be sick or injected with any infectious agent and were simply being stored at the Reedley lab, not subjected to experimentation.

Bredefeld, in his press conference Monday, asserted that the Reedley lab “was producing COVID-19,” and he questioned “what was the purpose and goals of their experimenting with COVID-19 and having mice catch and carry the disease?”

The council member – who is also running for a seat on the Fresno County Board of Supervisors – also raised concerns about Reedley’s proximity to Lemoore Naval Air Station in neighboring Kings County, which is the U.S. Navy’s West Coast base for squadrons of FA-18 Super Hornet strike fighter jets. The Navy base is about 35 miles from Reedley.

“In a war with China, these are the aircraft that we would rely upon to sink Chinese naval vessels and give us victory,” Bredefeld said, quoting an unsubstantiated social media post. He added his own question during his press conference: “Is the location of this lab coincidence or purposeful?”

Bredefeld acknowledged the speculative nature of what he was repeating. “I haven’t verified anything,” he said in response to questions. “I raised the speculation: Could it be a possibility? … Yes, speculation, I was clear that’s what it is.”

On Tuesday, Harper – who has been involved with the investigation since December – discounted such speculation as inaccurate and damaging.

“I understand how the rumor (about the mice) got started, but it’s been debunked by the veterinarian, and it’s not valid,” Harper said.

“The other thing is the idea that they were making some kind of superweapon to take out Lemoore, … unless Lemoore was planning on buying a high volume of pregnancy tests,” she added. “When I see that kind of hysteria going on, it’s unwarranted. It’s putting stress on people that really don’t need it, and it’s just not true.”

Prado dismissed the assertion that the lab “was producing COVID-19,” noting that there was no indication that was happening at the site. The mice, he added, were part of the process of determining whether the test kits manufactured by the company were valid in detecting the virus. “That’s the extent of what COVID looked like in that room,” he said.

Fresno County’s interim health officer, Dr. Rais Vohra, issued three separate health officer orders to the company – on April 21, May 31 and June 9, each also posted as public notices to the health department’s website. The first ordered the lab’s operators to produce an inventory of materials, chemicals and equipment. The subsequent orders called for the closure of business operations and abatement of any biological materials at the lab site – orders that Prestige Biotech and its officials appeared to ignore.

How the clandestine lab came to light

Prestige Biotech leased most of the southern half of the sprawling building at 850 I Street near downtown Reedley and along one of the city’s main thoroughfares.

Harper said that on Dec. 19, she received an anonymous complaint about a possibly unlicensed business in the supposedly vacant warehouse. “All of a sudden there were at least four cars there parked there at any time,” she said.

After a drive-by when she saw cars parked at the entrance, she drove around to the rear of the building and discovered a garden hose protruding from a hole drilled through the warehouse wall and running the length of the building. “That’s a violation because this portion of the warehouse is cold storage from back in the 1950s when this was built,” Harper said. “I thought, ‘They’ve got no plumbing, but they’re doing something where they need water.’”

A nearby doorway was blocked open by a broom or mop handle, and it had an exhaust fan blowing out of the building. “It reeked, the smell was horrible,” Harper said. The fan was being used to blow air, dander and odors from the room where the mice were housed.

Together, the hose and door provided enough cause for Harper to return to the front of the building and ask for access to do a preliminary inspection, she said.

A woman in a lab coat, gloves and a surgical mask answered the door and allowed Harper to enter. She said that she and several other women working at tables were boxing up already-packaged pregnancy tests for shipping. As the women accompanied Harper to the corner of the building where the hose was protruding, she said she noticed the refrigerators, the plywood room for the mice, and manufacturing equipment that was wrapped up and being stored.

The hose was connected to a sink as a water source.

“When I was going through and seeing all the refrigerators and freezers, one of my main concerns is they had non-permitted electrical installed for all of these refrigerators to be plugged into,” Harper said. “It’s a big concern for a fire hazard.”

“Then we had this room with these mice that had a ventilation system and lights, and that was all non-permitted as well,” she added.

Harper and other code officers assisting could see vials of blood or other materials in some of the refrigerators that had glass doors, so they retreated from the building and called the county health department’s Environmental Health Division.

There, a health inspector examined Harper’s emailed photos and explained that the company previously operated in Fresno and that the county had been looking for them. Together, the county and city decided within a day or two of the Dec. 19 visit to make a referral to the FBI. “We didn’t realize what possible crimes could be going on, or how safe it would be for us to return to the property,” Harper said.

The FBI looked into the case and in late January responded that it was safe for city code enforcement and county health officials, and any other enforcement agencies to return, Harper said.

The first joint inspection by city, county and state agencies came on March 3, when the team was allowed into the building by a lone worker there. But a door into the main portion of the warehouse was locked, Harper said. Still, state health inspectors discovered some medical test components that were “embargoed” and sealed, and more electrical violations were found – enough, Harper said, for the city to do a “soft posting” declaring the accessible areas unsafe to occupy, and to go to court and ask a judge to issue an inspection warrant for the rest of the building.

“There is evidence that the … occupants are operating an unpermitted laboratory facility, including the use of potentially dangerous chemicals and rodents as test animals,” the city stated in its first warrant application. “These ongoing and unlawful and unpermitted alterations and conditions constitute an immediate health and safety risk to any occupants or visitors to the property.”

The March 13 warrant granted by Fresno County Superior Court Judge Jeffrey Hamilton authorized cutting locks to get into to the inaccessible parts of the building for city inspectors, state Department of Toxic Substances Control, FBI, state health department and county health inspectors to investigate. That warrant was served and inspections carried out three days later, on March 16, according to court records.

That inspection began what has turned into a months-long process of clearing the property of the laboratory materials and equipment.

Based on the March 16 inspection, Harper and city officials ordered the entire warehouse to be posted unsafe to occupy and locked up the property, and the city went back to court again on March 29 – this time to seek an abatement warrant to seize and euthanize the mice as a result of violations of animal welfare regulations and the unwillingness of Prestige Biotech to relocate or make other arrangements to care for them.

Between the March 16 inspection and April 12, when Harper and veterinarian Hahn returned with the abatement warrant, Harper said it fell to her to feed and water the mice, because the building was closed to Prestige Biotech employees or anyone else.

Harper and Hahn determined that by April 12, 178 mice had died; the remaining 773 living mice were euthanized and ultimately incinerated, except for 10 specimens now in custody of the Reedley Police Department, according to court documents. Harper told The Bee this week that the dead mice are being stored in a police evidence freezer that’s cold enough to preserve DNA and cells.

The mice were preserved “for the owners to reclaim as a result of the abatement,” Harper added. “However, no one has come forward to claim the mice.”

An ongoing lack of cooperation

Harper and other city officials weren’t the only ones facing a lack of cooperation from representatives of Prestige Biotech.

Prado, the county’s assistant health department director, told The Bee this week that before and even after Vohra issued the first county Health Officer Order in April, the company “either had given us misinformation, didn’t understand what we were asking, or intentionally just misled us completely.”

“That was really troubling that the business owner wasn’t forthcoming with information,” he added.

Representatives at the lab “stated that the owner lived in China,” Prado said. “We wanted to interview them face to face, (but) they always presented multiple barriers to be able to really discuss directly with the president and owners of the company.”

Faced with those factors, it was the county’s turn to go to court on June 15 for an abatement warrant. The requested warrant, granted that same day by Hamilton, was “to abate potential sources of communicable diseases” including “all biological material, blood, blood product, serums, other bodily fluids, cultures, viral, bacterial and parasitic agents, human and animal tissue; vials, containers, equipment, fabric and other materials contaminated with blood, serum, bodily fluids or infectious agents.”

The June 15 warrant application stated that in addition to the various building code issues, other violations included operating an unlicensed and unregulated laboratory; storage of biological materials and infectious agents in an unsafe manner in a building not fit for such storage; unsafe maintenance of infectious agents that could potentially kill people; and disposal of medical waste in violation of state law.

The company “has failed to comply with the requirements of proper medical waste transport and disposal” under state law,” the court filing states. “Prestige Biotech was disposing of deceased laboratory mice, considered to be medical waste, without the use of a licensed medical waste hauler.”

Over three days, July 5-7, Fresno County carried out the abatement warrant at the warehouse to clear out the various biological materials and medical waste, as well as containers and equipment that had been contaminated, according to court records. A total of of 127 containers of biological material and medical waste – each holding about 44 gallons – were removed from the property in the three-day period. On July 7, the final day of the abatement, workers disinfected all of the storage units and refrigerators in which the material had been stored.

That cleared the way for the city to once more apply to Hamilton’s court on July 18 for yet another abatement warrant and order, this time to move out equipment that has now been deemed abandoned: furnishings, shelving, refrigerators and freezers and other lab equipment, and to remove all of the non-compliant and unpermitted electrical work or shut off power to the property.

In a court filing, Reedley Fire Chief Jerry Isaak stated that the property was fraught with substandard conditions: A lack of required ventilation equipment, a lack of minimal natural light and ventilation, infestation of mice or other rodents, a partially collapsed roof, improperly installed electrical wiring, and improperly stored combustible materials.

Isaak added that the property owners or lab operators had failed to comply with the city’s orders to correct the problems, “and no attempt has even been made by the property owners to begin to abate the nuisances.”

Hamilton granted the abatement order on July 26.

What’s happening now, and what’s next?

The city’s abatement work under the latest court order began Friday, “and we’re more than likely going into next week” with the cleanup, Harper told The Bee this week.

“Now that the biologicals are gone, our focus is opening up the space for the other agencies to deal with the chemicals and the medical devices,” she said. “We’re removing medical components, the pieces that are used to make these test kits; furniture, appliances, machines, anything that the other agencies don’t have the authority to remove, we’re removing as abandoned items because the business has not been working with us on getting it resolved.”

By Tuesday morning, the 36 refrigerators and freezers had been moved to a covered outdoor area of the property. Before they can be dismantled and recycled, environmental regulations require that the refrigerant chemicals be drained and contained.

And in an alcove of the building, visible through open roll-up doors facing I Street, were dozens of boxes bearing taped seals labeling the contents as “embargoed” by the state health department. Those, Harper said, contained various types of already-assembled test kits, as well as components for the manufacture of additional test kits.

Part of the work being done by crews contracted by the city to help with the abatement is clearing open spaces by moving medical devices and components to one side of the building and chemicals to the other side for future cleanup that is likely to continue for at least another month, and potentially continue into October, Harper said.

The U.S. EPA and state Department of Toxic Substances Control will be the next agencies up, both dealing with the array of chemicals that remain on the site. That’s likely to take one to two weeks, Harper said.

Then the state Department of Public Health will be handling the destruction and disposal of medical test kits and components found on the site – including the boxes taped and labeled as embargoed. That could take another week or two, or longer.

State officials “said they need to open the boxes and determine what is a finished product and what is a component,” Harper said. “The components can be thrown away because they’re just plastic pieces. But these (completed devices and test kits) have to be destroyed in front of a state Health Department officer as proof that they cannot go out into circulation.”

Harper said state officials told her that the company was not registered or licensed to produce the test kits “because they had not gone through a process to verify that they’re making them correctly for human use, so they’re not valid.”

Besides the COVID-19 tests and pregnancy tests that Harper discovered on her first visit to the site in December, “we also found breast milk tests, ketone tests, pH testing for urine, ovulation test kits, drug test kits,” she said. “There were quite a few because they’ve been in operation for quite a while even prior to being open in Fresno.”

Fresno connections for the unlicensed lab

Prior to turning up in Reedley late last year, Universal Meditech had operated a lab in a south Fresno industrial building for several years before running afoul of inspectors from the Fresno County Department of Public Health following a fire in August 2022 at their facility, Prado told The Bee this week.

Prado said the city of Fresno contacted the county health department in October “to make us aware of this laboratory,” at that time housed in a commercial building at 1320 E. Fortune Ave., in an industrial area of south Fresno.

County health officials tried at that time to reach out to the lab operators, Universal Meditech and Prestige Biotech. “We asked them what their operation is and what chemicals and materials and everything they have on site,” Prado said. “We needed to understand how many chemicals they had on site. … If you carry more than a certain amount, you have to submit a hazardous waste plan to our department, and then that has to be approved.”

“As we started the communication, they were not responding to us, and then they left the site,” Prado added. “We didn’t hear from them again until Dec. 20, 2022,” when Reedley officials called about the lab they’d discovered.

The Fresno Business Journal reported in February 2019 that Universal Meditech, then a three-year-old company, had relocated from Tulare to Fresno, manufacturing pregnancy, ovulation and menopause tests. When the COVID-19 pandemic hit, the company added coronavirus test kits to its portfolio.

But the company apparently failed to secure required authorization from the FDA to manufacture or distribute the COVID-19 tests. 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 U.S. Food & Drug Administration – 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.

The Bee attempted to contact Karekin Khatchadoorian, who was the general manager of Universal Meditech when the lab relocated to Fresno in 2019 and began manufacturing COVID-19 test kits in 2020 at the East Fortune Avenue location. A person who answered the door Wednesday at a central Fresno home associated with Khatchadoorian in a public records database did not identify himself, but he offered to pass a reporter’s name and number along to Khatchadoorian.

No response had been received from Khatchadoorian by Thursday morning.

In a June 15 court filing, Prado said Universal Meditech / Prestige Biotech representatives had offered a business address on East Fortune Avenue in Fresno as the address for the person responsible for the Reedley lab. “The Fortune address in the city of Fresno is the same address that (Universal Meditech) previously operated its unlicensed laboratory that it hastily transferred the biologicals, laboratory equipment and mice to the property in Reedley upon threat of eviction from the owner of the Fortune Avenue property.”

In a telephone interview with The Bee, Fresno County Supervisor Nathan Magsig said Monday that he became aware of the Reedley lab in March, but stressed it was his understanding that because the city had already shut the building down and closed the operation, the threat to public health did not warrant the kind of “fearmongering” being sounded now by Bredefeld, the Fresno city councilmember, and others.

“I think if someone just took the time to look at what this site is, what’s been done and what is the true level of concern – if you look at the whole thing … it shouldn’t rise to the level of alarm bells today,” Magsig said. “Garry (Bredefeld) didn’t give me a call; I’m not aware of him calling anyone at the county to try to get that information.”

Bredefeld said at his press event Monday that he had not contacted any of the members of the Board of Supervisors or the county health department.

Magsig added that Prestige Biotech or Universal Meditech may be eyeing a return to Fresno to resume operations. “The county is aware that this company … has filed for a business permit, again in the city of Fresno, at a new location and is going through the process,” Magsig said in a Facebook post Monday. “We do not have a current update on where that is in the city permit approval process.”

In response to a query from The Bee, Fresno City Manager Georgeanne White acknowledged that “Universal Meditech Inc. once leased space from a property owner in Fresno but closed the location at the end of December 2022.” On Thursday, the city issued a statement acknowledging that it had received operational statements in March 2022 and June 2023 from United Meditech / Prestige Biotech for leasing office and warehouse space at 3900 N. Blattella Lane, near Fresno Yosemite International Airport.

The statement added, however, that the city has notified the building owner that without more details about chemicals and medical materials, “the operational statement cannot be approved.” The city also underscored that the building has not received final inspetions or an occupancy permit.

Documents filed in two separate Fresno County Superior Court cases indicate that the company had plans as recently as June to move to a new factory facility in Fresno. “The brand new factory with 18,000 square feet building, located (at) 3900 N. Blattella Ln. in Fresno, CA 93724, will be powered on around June 10th,” company representative David He wrote in a June 3 email to Prado, the county health department’s assistant director. “The final city inspection will be completed within one or two week(s) after that, and the occupancy permit will be issued.”

The email from Univeral Meditech’s He to Prado indicated the company’s intentions to transfer all of the refrigerators and contents, chemicals, reagents and other materials to the new site, thus “completely eliminate potential safety hazards” at the Reedley warehouse.

A lawsuit filed in February by Fresno attorney Justin Vecchiarelli in Fresno against United Meditech and its owners and executives, alleges breach of contract over non-payment of legal fees owed by the company. In the complaint, Vecchiarelli asserted that the company in November “abandoned its massive warehouse it was renting in Fresno … and moved all of its equipment, supplies, and operations to an unknown location.”

The lawsuit also asserts that United Meditech transferred to other related entities “all of its equipment, inventory, assets, operations, etc. so that it was no longer operating under the (United Meditech) name.”

Vecchiarelli said in the court filing that his investigation “uncovered that (Universal Meditech) plans on moving its business operations, which … will be run under a different legal entity, to a new building that is scheduled to be completed in March 2023 at 3900 Blattella Lane” in Fresno, just north of Fresno Yosemite International Airport.

Whether in Fresno or Reedley, the United Meditech/Prestige Biotech situation illustrates that regulation of laboratories is not as comprehensive as one might expect.

“At this time, a local health department has no jurisdiction over laboratories,” Prado told The Bee. “It is all at the state level ... They essentially enforce federal regulations.”

How this story was reported

Several days of reporting for this story included interviews with Joe Prado, assistant director of the Fresno County Department of Public Health; Jesalyn Harper, code enforcement officer for the city of Reedley; Fresno County Supervisor Nathan Magsig; coverage of press conference comments from Fresno City Councilmember Garry Bredefeld; examination of the U.S. Food & Drug Administration medical-device recall database; reviewing and synthesizing more than 370 pages of Fresno County Superior Court documents related to inspection and abatement warrants issued for the Prestige Biotech Inc. laboratory in Reedley and litigation against Universal Meditech Inc., operator of the lab when it was in Fresno; and queries to the city of Fresno. Unsuccessful efforts were made to contact representatives of Universal Meditech Inc., operator of the lab when it was in Fresno.