Secretary of Defense James Mattis sat on the board of a company called Theranos, which engaged in an “elaborate, years-long fraud”, according to the Securities and Exchange Commission -- and more than a year into his tenure within the Trump administration, no one seems to mind.
What is Theranos?
Theranos is biotech startup that claims to have developed revolutionary technology for testing blood: the required sample volume is significantly smaller and can be drawn with a finger prick as opposed to a needle, it costs less than traditional blood testing, and results are ready in a matter of hours.
What did the SEC accuse Theranos of?
The SEC complaint includes various types of fraudulent activity within the ranks of Theranos:
Theranos, led by CEO Elizabeth Holmes and president Ramesh “Sunny” Balwani, “exaggerated or made false statements about the company’s technology, business, and financial performance.”
Basically, their biotech startup was founded on the promise of faster, cheaper, painless blood tests. But their technology was fake.
Theranos’s key technology, called Edison machines, didn’t really work, and Theranos wasn’t actually using them to perform its blood tests, relying instead on older Samsung equipment. Theranos offered lower prices than the competition not because it had an innovative new product, but because it was a money-losing startup burning cash raised from venture capitalists.
How is James Mattis tied to the Theranos scandal?
Mattis served on Theranos’ board of directors; he also continued advocating for it after it was already known to be a scam.
As the SEC complaint describes, a main element of the fraud was that “Holmes, and Balwani claimed that Theranos’ products were deployed by the U.S. Department of Defense on the battlefield in Afghanistan and on medevac helicopters and that the company would generate more than $100 million in revenue in 2014.”
Mattis (who, obviously, has no expertise in medical testing) pushed for the military to use Theranos technology, but it was never actually used because it didn’t work.
Nonetheless, as of December 2015, Mattis was still vouching for the company, telling the Washington Post that he “had quickly seen tremendous potential in the technologies Theranos develops, and I have the greatest respect for the company’s mission and integrity.”
Mattis resigned from the board prior to joining the Trump administration, but his work with Theranos was never raised during his confirmation hearings, despite the fact that the company's troubles were well known.