Transportation secretary faces investigation over 'troubling' ethics allegations
By HANNAH KNOWLES | The Washington Post | Published: September 16, 2019
WASHINGTON — The House Oversight and Reform Committee on Monday sought documents from Transportation Secretary Elaine Chao as it investigates what it calls "troubling questions" into whether the Trump appointee misused her position for personal and family benefit.
Noting that federal employees are forbidden from using public office for friends' or relatives' "private gain," the committee's letter to Chao cites media reports that allege the secretary leveraged her position to help Foremost Group — a New York-based shipping company that carries goods between the United States and China and that is owned by her father and sisters — to gain "influence and status" with the Chinese government that has given the firm millions in loans.
The sweeping request for documents follows growing scrutiny of Chao and joins a host of inquiries into the Trump administration by a Democratic-led House. The committee cites reporting by The New York Times, which said this summer that the Department of Transportation canceled a planned fall 2017 trip to China after State Department staffers grew leery of Chao's efforts to include relatives in meetings with Chinese officials. House investigators are also examining Chao's appearances with her father, James Chao, in interviews that featured the DOT's seal, and Monday's letter says the secretary's father "touted [Chao's] influence within the United States government and boasted about his access to President Trump on Air Force One."
The Department of Transportation pushed back on claims of ethics violations Monday, saying in a statement to The Washington Post that Chao has not been involved with the family's shipping business for more than four decades. The DOT confirmed it received the committee's letter and said it looks forward to responding.
"Media attacks targeting the Secretary's family are stale and only attempt to undermine her long career of public service," the department wrote.
While Chao does not have a formal stake in Foremost Group, James Chao has given millions to his daughter and her husband, Senate Majority Leader Mitch McConnell, R-Ky., The New York Times reported this summer. And other relatives, including a sister who serves as the company's chief executive, have donated more than $1 million to McConnell's reelection efforts, according to The Times. David Popp, a spokesman for McConnell, told The Post the gift from James Chao was in memory of Chao's mother; he did not provide comment on the House investigation letter.
An article in Politico last year highlighted dozens of media interviews in which Chao stood beside her father - sometimes in conjunction with flags for the DOT or Kentucky. Experts told Politico that the interviews could be interpreted as promoting Chao's father's book or signaling the Chaos' valuable U.S. connections in China.
"There is nothing inappropriate with a Cabinet member appearing with her father or other family members," a DOT spokesperson responded at the time. "The secretary's appearances are intended to share an inspirational story about immigrants from a minority community who have become successful in our country."
But others in the government have questioned Chao's mixing of family and official business since she became head of the DOT in 2017.
"This was alarmingly inappropriate," David Rank, a former State Department staffer, said of the China visit canceled over Chao's attempts to involve relatives, according to The Times.
The Oversight and Reform Committee's letter also probes recent moves by the DOT to cut millions from programs meant to help the U.S. shipping industry, saying the Department's actions "may threaten national security" by making the country potentially more dependent on foreign-flagged ships during war or emergencies. The Department's proposals included ultimately rejected cuts to the Maritime Security Program, which helps ensure that the military can access American-flagged ships in times of need.
Removing domestic maritime funding could have helped Foremost Group because the company owns foreign-flagged ships, the letter says.
The committee raises further concerns about Chao's failure to divest from a construction company reliant on DOT infrastructure allocations until this summer - despite a promise to do so in 2017, before she was confirmed to the position. Chao sold her stock in Vulcan Materials, for which she once served on the board of directors, days after a Wall Street Journal report drew attention to her continued holdings.
Amid scrutiny of the Vulcan shares, a June 13 DOT letter to the Office of Government Ethics described "inadvertent misstatements of fact" in Chao's earlier financial disclosures and an ethics agreement. The Oversight Committee says it is examining these misstatements as well as Chao's compliance with ethics and disclosure requirements.
The committee's letter makes 18 requests for documents and information, ranging from any communications about Foremost involving DOT employees to unredacted copies of documents released to The Times under a Freedom of Information Act request.
It asks that Chao fulfill the requests by Sept. 30.
The investigation could lead to higher penalties for inaccurate financial statements, new disclosure requirements or other changes in the law, according to the letter signed by Reps. Elijah Cummings, D-Md., and Raja Krishnamoorthi,D-Ill.
The DOT disputed the allegations against Chao on many fronts in its statement to The Post on Monday. It suggested that the Chao family's shipping company falls outside the department's purview, saying the DOT's Maritime Administration is "not a major regulator of the maritime industry" and deals mostly with domestic shipping. Foremost Group does not operate U.S.-flagged vessels and is "not involved in the domestic U.S. merchant marine shipping business," the DOT said.
The department countered criticism of its past proposed cuts to domestic shipping programs by saying the Maritime Administration's operating budget is larger than ever. The department requested the full $300 million authorized for the Maritime Security Program for this year and is working to replace training ships for marine academies, it said.
The department added that its ethics officials do not see Chao's stock in Vulcan Materials a conflict of interest and said the secretary has been recused from issues involving the company. Chao sold her stocks anyway, due to a "commitment to going above and beyond what is required," DOT said.
The DOT attributed errors in Chao's ethics disclosures to a "misunderstanding."
The Oversight and Reform Committee did not immediately respond Monday to questions.