Warehouse owner to repay costs to clean up illegal Reedley lab. How much does it add up to?

The owner of a warehouse in which a Chinese-owned company set up an illegal biological laboratory in late 2022 will pay a total of more than $260,000 to the city of Reedley and Fresno County to cover the two agencies’ costs for the months-long cleanup of the property.

AY-NC LP, a limited partnership based in Oakland, owns the property at 850 I St. in downtown Reedley that for several months was secretly used by Universal Meditech Inc. and Prestige Biotech Inc. to store dozens of refrigerators filled with vials of blood, viruses and other infectious agents; scores of containers of laboratory chemicals; hundreds of laboratory mice; and an array of stored laboratory equipment.

The Fresno County Board of Supervisors approved a joint settlement agreement with AY-NC and the city of Reedley in a closed session Tuesday. The unanimous 5-0 vote was announced by County Counsel Daniel Cederborg. The agreement had previously been OK’d by the company and the Reedley City Council in December.

The company, which has no known connections to the Chinese owners of Universal Meditech or Prestige Biotech, has agreed to pay almost $135,600 to the city of Reedley and almost $125,000 to Fresno County within 30 days.

“We are absolutely thrilled to have been able to follow this through to the end and that every single taxpayer dollar spent on the cleanup is going to come back to the city,” Reedley City Manager Nicole Zieba told The Fresno Bee on Wednesday.

“It covers all the hard costs like hiring the contractor to abate the property, and soft costs like attorneys and the code enforcement officer’s time,” Zieba added. “It’s about $135,000 for the city, and for a small city like ours, that’s a lot of money.”

Zieba said the city had sent an invoice for the city’s $160,000 share of the cleanup costs to both the property owner and to the lab operators. “I don’t care who pays the bill, as long as it gets paid,” she said. The county, in the meantime, had sent invoices for costs totaling almost $150,000.

The lesser amounts in the settlement agreement reflect a compromise with the property owner representing what the city and county would have spent on administrative processes and hearings had the property owner contested the costs, Zieba told The Bee. “The property owner has been cooperative with us from the very beginning,” she said.

Universal Meditech lab in Reedley

Universal Meditech had previously operated legally in the central San Joaquin Valley, first in Tulare and later in Fresno, before abruptly closing its facility in a south Fresno industrial building. The company manufactured an array of diagnostic testing kits, including pregnancy tests and COVID-19 tests, before hastily relocating its equipment and materials to the Reedley warehouse in December 2022.

But the company operated under the radar. It never obtained a business license from the city of Reedley, and the lab only came to light when a Reedley code enforcement officer noticed a green garden hose sticking out of a hole in the rear wall of the sprawling warehouse.

Subsequent inspections revealed a warehouse crammed with refrigerators, laboratory equipment and cartons of unshipped testing kits, as well as a makeshift room that housed nearly 1,000 laboratory mice.

Among the materials discovered inside were bacterial, viral and parasitic biological samples determined by the U.S. Centers for Disease Control to include “at least 20 potentially infectious agents such as COVID-19, E. coli, streptococcus, Hepatitis B and C, human herpes, HIV (the virus that causes AIDS), rubella and malaria.”

The city of Reedley and the Fresno County Health Department shut down the building, and throughout 2023 cleanup efforts included removing and destroying all of the various biological materials and medical waste found inside, as well as the refrigerators and cartons in which they were kept; and euthanizing and incinerating the mice that had been found in unsanitary and inhumane conditions.

A total of 127 containers of biological materials and medical waste, each holding about 44 gallons, were removed from the warehouse over a three-day period in July to be disposed of.

What’s next for operator and the warehouse?

The discovery of the lab also sparked a federal criminal investigation that resulted in the October arrest of David He, also known as Jia Bei Zhu, a Chinese resident who authorities believe was the operator of Universal Meditech and Prestige Biotech. He has been charged with manufacturing and distributing misbranded medical devices and with making false statements to investigators.

The suspect, whose age is listed as either 59 or 62, remains in the Fresno County Jail on holds from the U.S. Marshal and the U.S. Immigration and Nationalization Service, according to jail records.

The cleanup of the warehouse is nearly complete after the U.S. Environmental Protection Agency last week removed more than 800 containers of various laboratory chemicals, Zieba told The Bee.

About all that remains are hundreds of thousands of testing kits embargoed by state health officials for eventual removal and destruction. Zieba said state officials estimate that should take place within the next one to four months. “Thankfully the city doesn’t have to pay for that,” she added.

Once the warehouse is completely emptied out, Zieba said it will be up to the property owners to decide what to do with the building. While some local residents have told the city they want to see the building demolished, Zieba said the city does not have the legal authority to order that because it is private property.

Among the options for the owners are demolition of the building or fixing the variety of code and safety violations including unpermitted modifications to electrical wiring and bringing it back up to standards.

An online property database indicates that the warehouse dates to the mid-1960s and has a current total assessed value of about $492,000. Connie Shu Fong Au Yeung, a general partner of AY-NC LP, and Ho Nin Au Yeung, both of Brisbane, purchased the property in 2001 from Imperial Bank and the U.S. Small Business Administration after it had been foreclosed upon by a southern California bank in 1998.