Lab property owner to pay Reedley $135K

AY-NC, LP agrees to reimburse city, Fresno County for costs related to closing illegal biolab

Shot from sidewalk outside of south gate, where showroom can be accessed. (Kenny Goodman)
Shot from sidewalk outside of south gate, where showroom can be accessed. (Kenny Goodman)
Darren Fraser
Published January 25, 2024  • 
10:00 am

REEDLEY – Following months of negotiations, the owners of the warehouse at 850 I Street have agreed to pay the city of Reedley thousands of dollars to cover the expenses the city incurred after it closed the illegal lab, where Prestige Biotech, Inc. (PBI) stored thousands of chemicals, infectious agents and COVID-19 and pregnancy tests, as well as initiated abatement proceedings.

The warehouse owners agreed to pay the City of Reedley $135,575 to cover the expenses. Additionally, Fresno County will receive $124,948 to cover the costs the County incurred as a result of its involvement in abatement proceedings.

On Oct. 13, 2023, Reedley sent AY-NC, LP, the building owner, and Universal Meditech, Inc. (UMI), the parent company of PBI, an invoice in the amount of $310,524.01. The invoice was for Reedley’s code enforcement and abatement costs – $160,575 – and the County’s code enforcement and abatement costs – $149,948.

Despite the fact AY-NC, LP had nothing to do with the illegal lab activity at the warehouse, Reedley City Manager Nicole Zieba said the buck stops with the owner.

“Ultimately, it is a property owner’s responsibility to keep their property in compliance,” said Zieba.

Zieba said the city has no criminal charges pending against AY-NC, LP. She said there is no evidence the owners were aware of what was happening in the warehouse.

THE AGREEMENT

Zieba signed the agreement on Dec. 13, 2023. Connie Shui Fong Au Yeung, listed on the agreement as the general partner AY-NC, LP, signed the agreement on Dec. 11. Fresno County Chief Operating Officer Edwin Hill signed the agreement on Jan. 23 of this year.

Zieba said the delay between getting her, Yeung and Hill to sign the agreement had to do with the Fresno County Board of Supervisors and when they could schedule it for a closed session. At its Jan. 23 meeting, the Board voted 5-0 to approve the settlement.

AY-NC, LP, Reedley, and the County agreed to settle for $260,524. The new total reflected what the company would have had to pay in court hearing costs had it challenged the amount of the original invoice.

AY-NC, LP has 30 days to pay Reedley and the County.

THE DISCOVERY

The saga of the illegal lab began in March 2023, when Reedley code enforcement officer Jesalyn Harper discovered a garden hose that had been inserted into the rear wall of the warehouse at 850 I Street.

Harper’s discovery led to an investigation of the lab. The initial and subsequent investigations of the lab revealed thousands of chemicals, many stored in unmarked containers, thousands of boxes stored in haphazard and precarious positions, tens of thousands of testing kits – which were later found to be out of compliance with federal regulations – and a gruesome colony of hundreds of laboratory mice that were either dead or dying. All the mice were eventually euthanized.

The investigations revealed that UMI, and its successor, PBI, had leased the warehouse in December 2022. PBI had been operating out of a location in Fresno. The company ran afoul of Fresno County code enforcement, piling up multiple code violations. It eventually relocated to Reedley. But it never secured a business license and its activities were never disclosed to the public.

Following this, on Oct. 19, 2023, Zieba and Harper reached out to Jia Bei Zhu – who also went by the aliases Jesse Zhu, David He, and Qiang He. Zhu initially told authorities he was a PBI employee. It was later revealed Zhu owned the lab.

In a sting operation orchestrated by the criminal unit of the Food and Drug Administration (FDA), Zieba and Harper contacted Zhu about the warehouse. They asked if he wanted to inspect the facility. Zhu agreed. When he arrived, armed FDA agents arrested him on charges of distributing adulterated or misbranded medical devices and for lying to federal officials.

Zhu is incarcerated in the Fresno County Jail. He is next due in federal court on March 13.

THE WAREHOUSE

The future of the warehouse at 850 I Street is unknown. Prior to PBI leasing it, the building had been vacant for years. Zieba said AY-NC, LP is still the legal owner; the city cannot seize the property.

“I have had a lot of community members ask me if the city is going to demo the building,” said Zieba. “The property owner still has a legal right to their property. We have been very clear with the property owner that if they keep the property, they will need to bring it up to building code standards.”

Zieba said the building has electrical hazards and structural issues.

$30 MILLION CLAIM

After the city and county shuttered the lab and the abatement and cleanup efforts commenced, PBI filed a $30 million claim for damages against Reedley. The lab also filed a $50 million dollar claim against Fresno County.

Reedley denied the claim. Zieba said PBI has six months from the date of the denial to move forward with its claim. She said the city’s deliberate actions, which were criticized by some Reedley residents as not being transparent and being too deliberate, were necessary. She said every abatement action the city took was done under court order and signed off by a judge.

“We knew this (lawsuit) could be a potential and that is why we took the time to go through the processes to get court orders for the abatement,” said Zieba.

Darren Fraser
Reporter