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Former White House lawyer: 'I’m not aware of any situation like' Elaine Chao's reported conflicts of interest

This post has been updated after additional comment and information from the Department of Transportation.

Department of Transportation Secretary Elaine Chao’s personal connections are raising concerns on Capitol Hill and beyond amid recent reports of various conflicts of interest.

Recent reports found that the Trump cabinet member created a “special path” for projects favored by Senate Majority Leader and husband Mitch McConnell for his home state of Kentucky; she retained shares in a construction-materials company for more than a year after promising to relinquish them; and she has “extraordinary proximity to power in China” given her family’s American shipping company is largely based in China.

“I am not aware of any situation like this,” Virginia Canter, chief ethics counsel at Citizens for Responsibility and Ethics in Washington, told Yahoo Finance.

“Corruption is the use of public office for private gain,” Canter, who previously served as the White House associate counsel to Presidents Barack Obama and Bill Clinton, added. “And corrupt activity takes place because it tends to promote, or make policies or decisions that benefit the private interests of … their family members, if not themselves directly…. this broadly fits in with ... the broad definition of what corruption is.”

In response to the reports, a spokesperson from the Department of Transportation (DoT) told Yahoo Finance in an email: “These disingenuous attacks are simply political hit jobs filled with innuendos that continue to be rejected every time they are recycled.”

Elaine Chao testifies during her confirmation hearing to be the next U.S. secretary of transportation as her husband, Senate Majority Leader Mitch McConnell (R-KY) (2nd L) looks on, January 11, 2017 in Washington, DC. (Photo by Chip Somodevilla/Getty Images)

‘It’s not politics as usual, it’s nepotism’

House Transportation Committee Rep. Peter DeFazio (D-Ore.), responding to a Politico report about a top transportation official under Chao helping coordinate grant applications made by McConnell’s political allies, said in a statement that “if the Committee gets information that President Trump’s Transportation Secretary Elaine Chao is abusing her position to dole out projects to benefit her husband’s reelection bid, then I would certainly have questions that would need to be answered, and I would use all tools at my disposal to get those answers.”

The statement added: “At this point, all options are on the table.”

And Rep. Sean Maloney (D-NY), one of the members on the committee heading maritime policy, recently told MSNBC that Rep. DeFazio “has given me the green light to proceed with an inquiry on this subject” after a New York Times investigation detailed her family’s deep ties to China’s elite through shipping connections.

Maloney added: “We intend to get the facts about what happened. And we are not going to pre-judge it. We are going to be fair. But there are serious allegations that the Secretary of Transportation has used her position to benefit her family’s business… and to help her husband… that’s wrong. It’s not politics as usual, it’s nepotism. And the public deserves to know what the truth is.”

The DoT spokesperson added that the Politico story “intentionally misleads readers, misrepresents the grant application process and disregards key facts” while the New York Times’ story “demonstrates deep misunderstanding of the work of Department of Transportation and the U.S. maritime industry.”

U.S. Transportation Secretary Elaine Chao speaks as U.S. President Donald Trump holds a Cabinet meeting at the White House in Washington, U.S., October 17, 2018. (Photo: REUTERS/Kevin Lamarque)

‘It’s entirely inappropriate’

The Times investigation detailed how the cabinet member had requested federal officials help coordinate travel arrangements for at least one family member and relatives in meetings with Chinese officials.

“What was alarming is that she was attempting to bring representatives of this company on an official trip to China with her, and they have major interests in China,” said Canter. “There's just a basic principle — you're prohibited as a government official from using public office for private gain… it's entirely inappropriate.”

The NYT also reported that Chao and McConnell “received millions of dollars in gifts from her father,” who ran a shipping business called Foremost Group until last year. Chao has no formal affiliation or stake with the company.

Chao’s father also shares a close relationship with the former head of the Chinese Communist Party, Jiang Zemin.

Furthermore, the Times found that McConnell’s re-election campaigns have received more than $1 million in contributions from Chao’s extended family.

The DoT spokesperson stressed that the “Foremost Company does no business with the U.S. government and does not receive any U.S. government financing.”

U.S. Secretary of Transportation Elaine Chao shakes hands with Chinese Premier Li Keqiang before a meeting at the Zhongnanhai Leadership Compound on April 26, 2018 in Beijing, China. (Photo: Naohiko Hatta - Pool /Getty Images)

The Bluegrass state connection

The other big issue stems from a Politico report that Chao’s office created a special arrangement which allowed McConnell to benefit from $78 million worth of projects for Kentucky.

Chao reportedly designated a special liaison to help with grant applications and other priorities from McConnell’s state of Kentucky. That aide helped steer grants that were important to McConnell, which includes one that had been rejected twice previously, ahead of his reelection campaign. The total amount was estimated to be at least $78 million.

“When you have a cabinet secretary who is behaving in a way that is not traditional and is behaving in a way that helps members of her own family, it certainly raises questions about the way in which taxpayer dollars are being distributed, or being spent in other ways,” John Hudak, a senior fellow in governance studies at the Brookings Institution, told Yahoo Finance.

WASHINGTON, DC - JUNE 09: US President Donald Trump (R) participates in the 'Roads, Rails, and Regulatory Relief roundtable meeting', beside Secretary of Transportation Elaine Chao (L) at the Department of Transportation on June 9, 2017 in Washington, DC. (Photo by Michael Reynolds-Pool/Getty Images)

‘Draining the swamp requires not just stopping illegal behaviors ...’

Looking at the existing issues Chao has been embroiled with, “you don't need explicit corruption — meaning something that an individual can be charged with, or a basis for an impeachment for an individual — for behavior to be sort of swamp behavior,” Hudak said. “If you're looking to drain the swamp, draining the swamp requires not just stopping illegal behaviors, but trying to make individuals within your administration make better decisions, not just public policy decisions, but also better decisions about the optics of how government works.”

And ultimately it came down to the tone — or the optics — that President Donald Trump’s administration is setting, Canter and Hudak emphasized.

“The concern is that this administration has come in with a vast appetite to just come in and exploit their positions for their personal benefit, or for that of their family members,” said Canter. “It greatly exceeds any type of corrupt activity at the highest levels of the government.”

“If you see a president who is working tirelessly to act in an ethical way, people below that President are also going to work more ethically,” said Hudak. “When you see a president who's engaged in behaviors that are questionable… people take a cue then about how far they can push the envelope.”

Aarthi is a writer for Yahoo Finance. Follow her on Twitter @aarthiswami.

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