Boss of US firm given £4bn in UK Covid contracts accused of squandering millions on jets and properties | Coronavirus

In California, state of sunshine and palm trees, a small group of men are locked in a big legal fight over the money made by a US company selling Covid tests to the British government. The founder of Innova Medical Group says his business collected $2bn (£1.6bn) in profits, one of the largest fortunes banked by any medical supplier during the scramble for lifesaving equipment in the early months of the pandemic.

In a storm of claims and counter-claims, Innova’s boss, Charles Huang, is accused by former associates of “squandering” or moving $1bn of those profits, spending lavishly on luxury aircraft, an $18m house in Los Angeles and “homes for his mistresses”.

The previously little-known Chinese-American businessman’s fortune was transformed by the British taxpayer through 11 government contracts worth approximately £4.3bn for lateral flow tests (LFTs) made in China and sold by Innova. The government fast-tracked the company after its British representatives sent a direct email to Dominic Cummings, the chief adviser to the then prime minister, Boris Johnson, in July 2020. And, a Guardian investigation has found, the fast-tracking of Innova was supported by the then chancellor Rishi Sunak’s team at the Treasury.

Innova became for a period of at least four critical months the only company authorised to supply rapid Covid tests in the UK, despite scores of others developing similar kits. At the time, the government spending watchdog raised concerns, saying the lack of competition posed “risks to value for money”.

In his evidence to the Covid inquiry last October, Cummings told how he had pushed through the first Innova contract with backing from Sunak’s team. The intention was to allow the economy to reopen by providing enough kits for up to 10 million people a day to test for the disease. The mass daily testing plan, labelled “moonshot”, was met with scepticism by scientists, including Jonathan Van Tam, the then deputy chief medical officer, who has told the inquiry that he had “real doubts about whether it was workable”. The moonshot plan became part of NHS test and trace, known as the mass testing programme.

“In the autumn [of 2020],” Cummings said in his written statement, “Sunak’s team supported me with the mass testing team as we tried to overcome horrific Whitehall bureaucracy, secretly buy hundreds of millions of fast tests before other countries realised their value and there was a PPE-like panic.”

The UK Health Security Agency has confirmed in response to a freedom of information request that the “secret” buying of tests was the first contract awarded to Innova. Agreed in September 2020, it was worth £103m. The government went on to spend billions more with the company.

The information raises further questions about the UK government’s widely criticised decision-making during the pandemic, and the huge sums of public money spent after normal procurement processes were suspended. The apparent support of Sunak’s team also raises questions about how far the Treasury was involved in the government expenditure of billions of pounds on test and trace and personal protective equipment. Sunak has repeatedly presented his work during the pandemic as a landmark success, telling workers at an event on the first day of the 2024 general election campaign: “You know you can trust me when it comes to the economy: I got our country through Covid.”

‘Risks to value for money’

For Innova, landing any UK government contracts at all was an extraordinary bonanza. The company was only formed in March 2020 by Huang’s California-based financial vehicle Pasaca Capital Inc, said by some of its own investors in the legal claims to have had little money behind it. Huang, a serial entrepreneur, had limited evident success in his track record, according to the legal claims against him.

After the pandemic hit, everything changed. Another investor in Pasaca had a connection with a company in China, Xiamen Biotime Biotechnology, which like many others around the world, including some in the same city of Xiamen, was beginning to manufacture LFT kits.

Kimberley Thonger, Innova’s UK representative, who had previously worked in marketing for a series of shoe companies including Dr Martens, emailed Cummings in Downing Street in July 2020. In that email, published following a freedom of information request by the Good Law Project, Thonger promised that the tests were “a true gamechanger”. Cummings told the Covid inquiry he saw the rapid tests as key to the proposed mass daily testing that he believed could enable “superspreaders” to be isolated and so “allow most of the country to operate as normal”. He immediately referred Thonger to another Downing Street adviser who replied within an hour to tell him “we are very keen”, and introduced him to a leading civil servant. In September 2020, Innova was awarded the first UK government contract, although its test was still not evaluated. It was authorised for use by the Medicines and Healthcare products Regulatory Agency (MHRA) three months later, in December 2020.

The authorisation was based on tests carried out at the government’s high-security Porton Down laboratory, which had been asked to evaluate a number of LFTs and indicated that it had prioritised Innova’s product because contracts had already been awarded to the company. The Department of Health and Social Care identified Innova at that time as the only supplier with a validated test that could produce the large volumes needed and work flexibly.

By March 2021, Innova had already been awarded contracts worth £3.2bn, according to a critical National Audit Office report published in June of that year. The public spending watchdog noted that Innova was still “the only supplier of LFDs [lateral flow devices] for self-test approved by the MHRA”. The report warned that there were “risks to value for money due to a lack of competition and normal regulatory processes”.

Cummings said the government needed to buy these tests secretly, “without alerting the rest of the world”. But countries across Europe were already evaluating rapid tests, and Italy was using them in ports and airports from the summer of 2020. In September 2020, the World Health Organization issued guidance, noting that nearly 100 companies were developing or manufacturing rapid tests. It announced a “global partnership” to supply 120m kits to poorer countries, made by companies in the US and South Korea. In February 2021, the EU published a list of 82 different suppliers, but not including Innova or Xiamen Biotime Biotechnology.

Innova did offer to sell to other countries, but does not appear to have done so in large quantities. In a scathing report published after Innova first distributed them in the US without authorisation, the Food and Drug Administration (FDA) said the tests should be thrown away or returned to the company. It has repeatedly barred attempts to import the tests.

An FDA spokesperson said: “Covid-19 antigen tests produced by Xiamen Biotime Biotechnology Company are being refused admission into the US.”

Innova was included in a later edition of the EU’s approved list, among many other manufacturers, as a “B” supplier; member states were advised to use tests from the “A” list.

The UK government is said to have ordered 1.8bn tests from Innova altogether, paying the company approximately £4.3bn. In one of the legal claims against Huang, the former Innova executive Robert Kasprzak states: “Innova’s UK contracts generated substantially all [sic] of the revenue for Pasaca Group.”

In 2022, Huang was featured in a film, Asian Inspirations, saying Innova had made a profit of $2bn after tax from its Covid contracts. Huang is now contesting legal claims over those profits, from Kasprzak and Innova’s UK representatives, Thonger and Charles Palmer, claiming they should have been paid more.

Kasprzak accuses Huang of having a chequered career and few achievements of substance before Innova’s remarkable fortunes in the pandemic.

Huang is accused in the claim of being “a high-end con artist” who squandered or moved for his own use due to “incompetence, power and greed … more than $1bn of … assets generated from UK sales”. He is alleged to have lavished some of the proceeds on luxury purchases including private jets for $70m, the $18m luxury home with a swimming pool in LA known as “the CEO house”, and “homes for his mistresses”, as well as poor investments in “flailing businesses”.

Kasprzak also claims Huang was trying to secure a knighthood and working on having a film made about himself, titled Overnight Billionaire. He alleges Huang promised to buy out his shares for $75m but never did, and ultimately fired him from the company. Huang has responded by denying the claims and alleging that Kasprzak and the former Innova chief executive Daniel Elliott “stole” millions from the company. Kasprzak and Elliott deny those allegations.

The UK representatives, Thonger and Palmer, are also suing Innova in California, claiming that their company, Disruptive Nanotechnology, was due 10% commission on all UK contracts, and so they should have been paid $500m. They accuse Kasprzak and Elliott of duping them out of that commission and pocketing the money themselves. Instead of the saved commissions being used for the promised purpose, “to keep the price of Innova’s Covid-19 tests competitive”, the claim alleges, Elliott “spent tens of millions of dollars to purchase lavish properties, expensive cars, a private jet, and other luxury items”. They both deny those claims.

The disputes are all ongoing. Whatever the merits of their arguments, this fight on the US west coast is over extraordinarily large amounts of British taxpayers’ money, spent during the pandemic, with one newly formed company, for vast quantities of rapid Covid tests that it was able to deliver.

A spokesperson for Innova and Huang dismissed the allegations against him as “baseless”. Pointing to Innova’s success in being awarded the contracts and having its tests officially validated, the spokesperson said: “We were the largest supplier to the UK of Covid 19 tests for these reasons; we were cost effective – the average price of each test we provided went down on every subsequent contract and we met the significant shipping expenses to the UK ourselves each time – delivered on time and at all times met the urgent requirements of the UK government at a critically important period for the country.”

Mark Holscher, a Los Angeles attorney representing Elliott, said he “categorically denies” any claims against him, and “did not receive any improper compensation” from anybody.

“These tests saved thousands of British lives and prevented many more hospitalisations,” Holscher said, adding that it was “one of the very best performing tests that could be immediately produced and delivered at the massive scale required by the United Kingdom. Providing these tests required herculean and unmatched logistical efforts. Mr Elliott takes great pride in this accomplishment and has been lauded by the UK government for his efforts.”

An attorney representing Kasprzak said he “stands by” his legal claims, and added: “None of these US proceedings has called into question the efficacy of the tests or the UK government process. The tests saved thousands of British lives, as recognised by the UK government itself, and Mr Kasprzak is extremely proud of his role in delivering these tests to the UK.”

A spokesperson for Disruptive Nanotechnology said: “We cannot comment on ongoing legal proceedings.”

Cummings did not respond to requests for comment.

A government spokesperson said in a statement given before the general election was called: “We have always said there are lessons to be learned from the pandemic and we are committed to learning from the Covid inquiry’s findings which will play a key role in informing the government’s planning and preparations for the future. While the inquiry is ongoing, it would not be appropriate to comment.”

The Covid inquiry is due in the spring to turn its attention to the government’s multibillion-pound spending on medical supplies, including lateral flow tests, in the extraordinary circumstances of the pandemic.