Mattis Exposed

A couple of days ago, the SEC finally got around to charging Elizabeth Holmes, the founder of the blood-testing company Theranos, with “massive fraud”. As you might remember, Theranos raised hundreds of millions of venture capital money with the bogus promise that it could “disrupt” the blood-testing industry with its Edison machine that could do the same or better analysis as traditional methods at a reduced cost while only needing a single drop of blood instead of a full vial. Theranos fraudulently produced proficiency reports showing the effectiveness of the Edison machine, consistently overstated its income, and also claimed its machines were being used in places they weren’t.

The SEC, in its typical pathetic manner, settled with Holmes for $500,000 and restricted her from serving as an officer or director of a public company for the next decade. Basically, this is less than a slap on the wrist and sends an incredibly weak signal about how the SEC treats “massive fraud”. Holmes, however, will eventually almost certainly face charges from federal prosecutors who have also been looking into the Theranos’ fraud.

In its heyday, Theranos managed to attract some high-profile directors including war criminal Henry Kissinger, former Secretary of State George Schultz, former Secretary of Defense William Perry, and then recently retired general and now Secretary of Defense James Mattis. Theranos choice of directors was probably no accident because the company was focused on selling its bogus technology to the Defense Department. According to the SEC, the company fraudulently claimed that its products “were deployed by the U.S. Department of Defense on the battlefield in Afghanistan and on medevac helicopters”.

Mattis was especially helpful to Theranos, even touting its products while he was still on active duty, according to Vox. He forwarded on Holmes’ complaints about Defense Department skepticism on the product, adding “I have tried to get this device tested in theater asap, legally and ethically. This appears to be relatively straight-forward yet we’re a year into this and not yet deployed.” Mattis also continued to receive his $150,000 per year as a director all the way until January, 2017, long past the late 2015 date on which the Wall Street Journal had exposed the massive fraud at the company.

A few days ago, the owner of the Trump-branded and managed property in Panama forcibly removed employees of the Trump Organization from the property. This Panama property and the sales of units associated with it has long been “riddled with brokers, customers and investors who have been linked to drug trafficking and international crime”. According to a lawsuit filed by the property’s owner, the Trump Organization had not met the minimum benchmarks in years, which formed the basis for the removal of the Trump Organization as manager. According to the Daily Beast, in the first half of 2017, with the Trump Organization still underperforming its benchmarks, the Department of Defense spent $17,000 at the property for no apparent reason. According to the article, “The money was spent to cover general lodging expenses, according to the documents. It isn’t clear why”.

Now, Mattis certainly didn’t sign off on this relatively small expenditure (at least I hope so). But as Secretary of Defense he is responsible for how the money in his department is actually being spent. Moreover, you would think that the Pentagon would scrupulously avoid using Trump properties simply because of the perception and reality of self-dealing by the administration. More than anything, however, this highlights the potential for some cabinet secretaries to cement their place with the President by directly aiding the President’s business. And, as Mattis shows, even the most respected members of Trump’s cabinet are not immune from being involved in some shady dealings.