A report released Wednesday by the Department of Transportation Office of Inspector General revealed that former Secretary of Transportation Elaine Chao, Senator Mitch McConnell’s wife, repeatedly used her office staff for personal tasks and to promote the reputation of her family’s shipping business, the Foremost Group, which is responsible for “orders at one of China’s biggest state-funded shipyards, and had secured long-term charters with a Chinese state-owned steel maker.” 

A certificate is presented to Ms. Chao in her role as an international adviser to the city of Wuhan.Credit…Imaginechina, via Associated Press Images

In December, the department’s watchdog asked the Justice Department to criminally investigate Elaine Chao over concerns that she misused her office while transportation secretary under President Donald Trump. Two Justice Department divisions declined to pursue any charges. However, the IG determined that Chao, who resigned from her cabinet position on Jan. 7, used her staff and office for personal tasks and to promote the Foremost Group in a blatant violation of federal ethics rules.

The IG’s report discloses that Chao engaged in four kinds of ethics violations. Rep. Carolyn Maloney (D-N.Y.), chair of the House Committee on Oversight and Reform, said in a statement late Wednesday that the IG’s report and relevant documents “demonstrate that Secretary Chao used her official position and taxpayer resources for the benefit of herself and her family.” Maloney added, “Secretary Chao’s flagrant abuse of her office provides further evidence that additional ethics and transparency reforms are needed.”

The ethic violations:

  • Involving family members and personal events in her planned-but-canceled November 2017 trip to China.
  • Providing Transportation Department public affairs and media support to her father.
  • Tasking political appointees with contacting the U.S. Department of Homeland Security about a work permit application from a foreign college student who received philanthropic support from the Chao family and interviewed Chao’s father with the goal of sharing “his story with Chinese millennials.”
  • Devoting departmental resources and staff time to tasks for Chao “that appear to be personal in nature.”

According to the report, in November 2017, Chao “made extensive plans” to include family members in events during a planned trip to China that would have included visits to schools, including visits to Shanghai Maritime University and the Shanghai Jiao Tong University, and other locations that received financial funding from her family’s business. The trip was ultimately canceled, and Chao later consented to refrain from scheduling media events involving her family without asking the ethics office.

Chao directed Department of Transportation (DOT) public affairs staff to help her father, James S. C. Chao (founder of the Foremost Group), with marketing for his book and developing and implementing a media strategy encompassing his work. Chao ordered her staff to compile a list of his awards and edit his Wikipedia page, as well as help coordinate a book signing as part of the trip to China, the report states.

The IG found that Chao, who previously spent eight years as President George W. Bush’s Labor Secretary, also asked her staff to investigate the status of a work permit application for an international student studying at a U.S. university who had received an award from her family’s nonprofit corporation.

And the report concludes that Chao used DOT resources and staff for personal tasks, such as having DOT employees send Christmas ornaments to her family and checking on repairs at a store for her father. In an email to a department staffer regarding the repair, Chao wrote, “Please call the [redacted] owners and tell them to expedite. I used to go into the store with Dr. Chao… tell them I am SOT (Secretary of Transportation).”

House Transportation Chair Peter DeFazio (D-Ore.), one of two lawmakers who requested the investigation, welcomed the report but criticized its timing and the lack of consequences for Chao. DeFazio said in a statement, “While I commend the Department of Transportation’s Office of Inspector General for conducting this review, I am disappointed that it was not completed and released while Secretary Chao was still in office. I am even more disappointed that the Department of Justice declined to further pursue the matters that the IG’s office substantiated in its investigation.”

Ethical questions over how Chao and her family conduct business are nothing new. In 2018, The Paradise Papers revealed that, over a five-year period, millions of dollars were silently funneled to a Chao family foundation through two offshore firms with a New York address not incorporated anywhere in the United States. However, two entities with the same names are incorporated in the Marshall Islands, known as one of the world’s most secretive offshore havens for firms attempting to avoid taxes, and are preferred by the New York-based Foremost Group. At the time, the Foremost Group and a spokesperson for the Department of Transportation declined to comment on where the two donating firms are incorporated.

In a dedication celebration in 2016, Senator Leader Mitch McConnell and Chao attended a ceremony at the Harvard Business School (Harvard is currently under investigation over foreign funding) campus to cut the ribbon on a new building bearing the Chao family name. The building now serves as a center for Harvard’s Executive Education program and was financed by a $40 million gift from the Chao family and its foundation. The money would have been in the public treasury had it not been hidden from the government in complicated offshore tax-havens. According to the university, $5 million of the gift is dedicated to providing financial assistance to students from China.

Family photo of Dr. James S. C. Chao, Chairman, Foremost Group, & Benefactor (center) with dignitaries celebrating the dedication of Ruth Mulan Chu Chao Center, Harvard University. Boston, MA: Harvard University President Drew Faust; Harvard Business School Dean Nitin Nohria; Massachusetts Governor Charlie Baker; Senate Majority Leader Mitch McConnell; U. S. Senator Elizabeth Warren; U. S. Senator Ed Markey. The Chao daughters: May Chao, 4th from left; Grace Chao, 4th from right; Angela Chao, 5th from right, Christine Chao, 6th from right; Elaine Chao, 7th from right.
Photo: Susan Young

The Foremost Group, founded by Mr. Chao in 1964, secured its first significant contract with the U.S. government during the Vietnam War, shipping rice to Southeast Asia. Today, it builds most of its ships in state-owned shipyards in Communist China, often financed by Chinese government loans. The group’s Chinese-backed Chinese-built ships entered long-term contracts to deliver iron ore for a state-owned steel maker on at least two occasions. 

In 2019, recent shipping data showed that more than 70 percent of Foremost’s freight (mostly iron ore) goes to China. The cargo helps support China’s industrial movement, which produces steel products, a topic of dispute in the deepening trade war between the U.S. and the Chinese Communist Party (CCP). Foremost represents itself as a modest international business whose focus on China is no different than any other dry bulk carrier has in a market controlled by Chinese manufacturing.

In concluding their report, the IG commented that they “offered” former Secretary Chao “the opportunity to share her thoughts regarding the ethics issues under investigation” and “was advised that Secretary Chao had nothing to add.”