04:50 - Source: CNN
Chao under fire for appearing at family business events
CNN —  

Transportation Secretary Elaine Chao’s public appearances with her family members who run an international shipping company have drawn condemnation from government watchdogs and House Democrats who argue Chao appears to have used her office to benefit her family.

The criticism has largely focused on the way in which Chao has associated her government office and title with her father, James S.C. Chao, the founder of the Foremost Group, a US-based shipping company with business ties to China.

During her time in the Trump administration, Elaine Chao has sat with her father for Chinese-language media interviews, appeared with him at an award ceremony and at a photoshoot listed on her schedule with him and other Foremost Group employees at the media center of the Department of Transportation, which oversees the US shipping industry.

A CNN review of Chinese media reports and other documents finds that Elaine Chao, who previously served as labor secretary during the Bush administration, has accompanied her father or sister, Angela Chao, the current CEO of Foremost Group, to more than a dozen events in China in roughly the last decade, which have included meetings with Chinese government officials.

While Elaine Chao’s financial disclosures show she holds no stake in the Foremost Group, she and her husband, Senate Majority Leader Mitch McConnell, a Kentucky Republican, have received millions from her family – they received a gift valued between $5 million and $25 million, according to McConnell’s 2008 financial disclosures.

Kathleen Clark, a government ethics expert at Washington University in St. Louis, told CNN Chao’s appearances with her father at Department of Transportation facilities violate government ethics rules that prohibit officials from endorsing outside enterprises as well as rules that prohibit the use of public office for private gain.

“She has used government office, her official title, her literal office in the Department of Transportation, to help her father and his business,” said Clark. “I think this is a clear violation.”

In an interview published in April 2017 by The China Press, Chao sat next to her father and described to the interviewer, behind whom were Transportation Department flags, how her father had recently rode on Air Force One and met President Donald Trump. The ethical concerns associated with that interview were first reported by Politico.

Earlier this month, The New York Times reported that Elaine Chao abruptly canceled a planned trip to China after US officials raised ethical questions in 2017 about Chao’s office requesting that her relatives be included in official meetings.

A Transportation Department spokesperson told CNN Chao has done nothing wrong and described allegations against her as political.

“Recent articles attempt to fabricate a web of old, tired innuendos and baseless inferences, reflecting a lack of understanding of the Department’s responsibilities, while demonstrating deep cultural misunderstandings,” the spokesperson said.

In a statement to CNN, a spokesperson for Foremost Group said, “The company does no business with the US government or any US state or local government. Founded in 1964, the company long predates Elaine’s government service and she has no involvement or financial interest.”

Rep. Sean Maloney, D-New York, who chairs the House maritime transportation subcommittee, said on MSNBC last week that he would proceed with an inquiry into Chao and the allegations that she used her position to benefit her family and McConnell.

“It’s nepotism and the public deserves to know what the truth is,” Maloney said.

Founded by Chao’s father in 1964, Foremost Group describes itself as “a global leader in the dry bulk shipping industry” that today transports more than 15 million tons of goods, including grains, soybeans, iron ore and coal, internationally each year, according to the company’s website.

While the company is headquartered in New York City, a large portion of the materials it ships goes to China. Seven out of the company’s top 10 shipping routes by cargo tons since 2013 have involved China, according to VesselsValue, a maritime intelligence platform. A Foremost Group spokesperson said the destinations of its ships are determined by charterers, not the company.

And although Elaine Chao, who has garnered popularity in China as the first Chinese-American to become a US cabinet secretary, has not held any formal position in the company since the 1970s, she has repeatedly attended company-related events with her family members, including some in China.

In 2015, between her stints in government, Chao and her father attended a signing agreement between Foremost Group and the Export-Import Bank of China in which the bank made $300 million in financing available to the company, according to a bank webpage. A Foremost Group spokesperson said financing received from the bank was much lower than $300 million.

That same year, Elaine Chao met with government officials in Wuhan City in China’s Hubei Province along with her father and sister. According to a report by a TV station in Hubei Province, Elaine Chao was introduced as a “former US labor secretary” at the meeting, which promoted “a mutually beneficial cooperation between Foremost Group and Hubei Province in areas such as shipbuilding and marine equipment manufacturing.”

In 2017, as transportation secretary, Elaine Chao appeared next to her father in another video clip featured on a Chinese news website in which her father sends his regards to a development conference in China’s Jiangsu province.

Chao’s father has also previously accompanied her to government events. In 2008, for example, James Chao was listed among the mostly government attendees of a Beijing meeting that included China’s premier and Elaine Chao, the then-US labor secretary, according to a diplomatic cable published by WikiLeaks and first reported by The New York Times.

Experts in Chinese business say the appearance of a connection between a company and a senior government official can boost that company’s perceived credentials in Chinese markets.

“Anybody who is doing business in any place, if the company or the people have associated with powerful individuals or companies or individuals, that’s always a benefit. In China, it’s had an extra special strength because of the strength of the Chinese government related to Chinese business,” said Robert Lawrence Kuhn, an investment banker and author of “How China’s Leaders Think.”

Kuhn added, however, that the perceived benefits of such associations have decreased in recent years in China due to anti-corruption efforts under President Xi Jinping.

Walter Shaub, the former head of the Office of Government Ethics and a CNN contributor, said Chao’s actions appear to constitute a prohibited endorsement of a business by a government official.

“This is the kind of thing you would use in a training class to teach government officials what a misuse of a position looks like,” Shaub said. “This conduct falls into the category of extreme rather than gray.”

CNN’s Audrey Ash, Madeleine Ayer and Jacob Rosen contributed to this report.