Arizona Sen. John McCain's love-fest with Theranos and disgraced founder Elizabeth Holmes brings back memories of his 1980s bromance with S&L swindler Charles Keating
U.S. Sen. John McCain received thousands of dollars in contributions from executives at the Silicon Valley healthcare-technology company Theranos. In a symbiotic relationship reminiscent of his involvement in the Keating Five scandal of the late 1980s, the Arizona Republican played cheerleader for the venture online and supported a change in Arizona law to give the company unfettered access to the state’s consumers.
Once the toast of the tech world and formerly valued at an estimated $9 billion, Theranos is now a byword for the industry’s “fake it till you make it” culture. With Theranos’s laboratories shuttered and its claims of revolutionary blood-analysis technology exposed as nothing more than hype, the U.S. Securities and Exchange Commission (SEC) dropped what might be the final bomb on March 14, charging Theranos, its charismatic founder and CEO Elizabeth Holmes, and its former president Ramesh “Sunny” Balwani with an “elaborate, years-long fraud,” during which the company raised $700 million from credulous investors.
Good to see @theranos Founder & CEO Elizabeth Holmes today – remarkable young innovator, glad she's doing biz in #AZ! pic.twitter.com/UFlUCsLr90
— John McCain (@SenJohnMcCain) April 6, 2015
In a press release announcing the federal charges against the company, the SEC alleged that Theranos’ proprietary blood analyzer — which Holmes dubbed “Edison” — “could complete only a small number of tests,” and that the vast majority of blood analysis was actually carried out using “modified and industry standard commercial analyzers manufactured by others.”
Company execs also made false claims that Theranos technology was used on battlefields in Afghanistan and widely misrepresented the amount of revenue the company was generating, according to the commission.
Holmes and Theranos agreed to settle the fraud charges without admitting or denying the SEC’s charges. Holmes has promised to pay a $500,000 fine and relinquish her majority voting shares in the company.
Holmes, whom the media hailed as “the next Steve Jobs” and the world’s “youngest self-made woman billionaire,” now has a net worth of “nothing,” according to Forbes. Her settlement with the SEC bars her from serving as the officer or director of a public company for the next decade. (Balwani did not settle with the SEC, which will continue to litigate its claims against the ex-Theranos president.)
Proud to support bill signed today to expand @theranos in #Arizona & provide cost-effective, quality healthcare for entire state
— John McCain (@SenJohnMcCain) April 6, 2015
McCain, who in 2015 served as a tireless booster for Holmes and Theranos, has been mum on the company’s ignominious slide. The senator is fighting an aggressive form of brain cancer and has not been back to Washington, D.C., since returning home to his Sedona ranch in December. His office did not immediately return phone calls and emails from Front Page Confidential seeking comment.
Despite his precarious health, McCain has some ‘splainin’ to do.
According to filings with the Federal Elections Commission, between October 2015 and June 2016, McCain’s re-election committee, the Friends of John McCain, accepted a total of $15,000 in campaign contributions from Theranos bigwigs, including general counsel Heather King, president and chief operating officer Ramesh “Sunny” Balwani, and vice president of communications Brooke Buchanan. Buchanan, McCain’s former press secretary, left Theranos in 2016 to become a top flack for the Whole Foods grocery chain, which has since been acquired by Amazon.
During much of 2015, McCain championed Theranos and Holmes on Twitter, praising Holmes as a “remarkable young innovator” and posting photos of the two together, sometimes deep in conversation. Holmes participated in that year’s Sedona Forum, the exclusive, invitation-only event sponsored by the McCain Institute for International Leadership, at which billionaires, generals, and foreign dignitaries gather annually to hobnob and discuss world affairs at the Enchantment Resort against the backdrop of the location’s stunning red rock formations.
Great to see @theranos Founder & CEO Elizabeth Holmes @McCainInstitute Sedona Forum kickoff reception pic.twitter.com/YE1rdlLtjo
— John McCain (@SenJohnMcCain) April 25, 2015
With her signature black turtlenecks and claims that Theranos could perform hundreds of blood tests using mere drops of blood from a finger-prick — as opposed to several vials filled from veins — Holmes wowed press and politicians alike, promising that the privately held company’s revolutionary medical advancements would allow patients to obtain lab results for blood tests from a pharmacy, within a matter of hours, for a fraction of the current cost.
In 2013, Palo Alto, California-based Theranos partnered with the Walgreens chain to open “wellness centers” in 40 locations throughout metro Phoenix, where customers could have pinprick blood tests done. The following year, Theranos announced that it would break ground on a new clinical lab in Scottsdale.
Arizona law already allowed for some limited testing without a doctor’s authorization, but Theranos wanted to make the Grand Canyon State its “model” for expansion, so it pushed for state legislation to lift the remaining restrictions on such tests.
“Coming in March: The Stains of John McCain”
Theranos helped write House Bill 2645, which allowed consumers to obtain lab results directly from a licensed clinical laboratory “on a direct-access basis,” without the request or authorization of a healthcare provider. Holmes personally lobbied for the bill, testifying before committees in the state house and senate, wooing legislators with her free-market rhetoric and Silicon Valley stardom. The measure sailed through both chambers of the legislature with scant opposition and was signed into law with much fanfare by Republican governor Doug Ducey on April 6, 2015.
McCain celebrated the big event by issuing back-to-back tweets, one showing a photo of himself with Holmes, another declaring that he was “Proud to support bill signed today to expand @theranos in
#Arizona & provide cost-effective, quality healthcare for entire state.”
In July 2015, as the new law was about to go into effect, McCain tweeted out a Washington Post article that reported on the Federal Drug Administration’s approval of a Theranos finger-prick test for herpes. The story quoted McCain praising the Arizona law and taking credit for endorsing the legislation.
“It basically empowers the individuals to own their own health, and I think it’ll bring about competition in laboratory pricing, making it dramatically less expensive,” McCain told the Post.
Also in July, McCain tweeted op-eds by Holmes in the Arizona Republic and the Wall Street Journal in which she heralded a “new era” in healthcare.
In the Republic opinion piece, Holmes made guarantees that her company would be unable to keep.
“Tests need to be convenient, and accessible on nights and weekends,” she wrote. “Results should be available real-time. And all lab tests should be validated to the highest quality standards — standards set by the FDA — because you deserve results you can trust.”
McCain’s last pro-Theranos tweet, dated October 15, 2015, shows a photo of the senator inside a Theranos lab with Holmes and a technician who’s holding up what looks like a small sample of blood.
“Enjoyed visiting Elizabeth Holmes @theranos lab last night & seeing their innovative blood test in action!
#Theranos,” the caption reads.
Enjoyed visiting Elizabeth Holmes @theranos lab last night & seeing their innovative blood test in action! #Theranos pic.twitter.com/O4Sk4bBqLH
— John McCain (@SenJohnMcCain) October 15, 2015
The timing was ironic. That same day, the Wall Street Journal ‘s print edition published the first of several exposés about Theranos’s business practices by investigative reporter John Carreyrou. On the condition that their names not appear in the story, senior employees told Carreyrou that by the end of 2014 Theranos “did less than 10 percent of its tests” on its blood analyzers. The rest were either done on traditional machines using larger blood samples or on traditional machines rigged to accept smaller but diluted samples.
In other words, Theranos’s “Edison analyzers” weren’t the miracle machines the company maintained they were. Carreyrou wrote that Theranos had “struggled behind the scenes to turn the excitement over its technology into reality.” He revealed that a whistleblower had filed a complaint with federal regulators, alleging that Theranos had not reported “test results that raised questions about the precision of the Edison system.”
A subsequent investigation by the federal Centers for Medicare & Medicaid Services (CMS) resulted in the agency revoking the certification for Theranos’s Newark, California, lab in July 2016. CMS also banned Holmes from owning or operating a blood-testing facility for two years. The month prior, Walgreens severed its partnership with Theranos, shuttering all 40 wellness centers. Later that year, Theranos laid off nearly half of its full-time staff nationwide.
At the beginning of 2017, Arizona Attorney General Mark Brnovich filed suit against Theranos, alleging violations of the state’s consumer-fraud act, for making false claims and providing consumers with “unreliable, inaccurate, and misleading test results.” Without admitting guilt, Theranos entered into a consent decree, reimbursing Arizonans for the full cost of every blood test Theranos performed, a $4.6 million tab.
McCain’s love-fest with Holmes and Theranos and his acceptance of contributions from a questionable donor that cost taxpayers millions mirrors, albeit on a smaller scale, his mutually beneficial bromance with Arizona savings-and-loan swindler Charles Keating, whose criminal mismanagement of the Irvine, California-based Lincoln Savings and Loan caused that institution’s collapse and ultimately cost the American public $3.4 billion.
Over the years, McCain has kinda-sorta admitted an error in taking $112,000 in Keating-related contributions, not to mention free trips on Keating’s corporate jets for him and his family. But McCain always asserted that his actions merely gave off the “perception” of impropriety. He referred to the scandal “my asterisk” — as if it were a one-off in an otherwise exemplary career in public service.
But McCain’s recent dalliance with Theranos suggests that, far from a mere asterisk, questionable ethics comprise a running theme in McCain’s life.
As for the Theranos saga, it has become such a modern-day morality play that a film is already in the works. Adam McKay, who won an Academy Award for Best Adapted Screenplay in 2015 for The Big Short, will write and direct. Jennifer Lawrence has signed on to play Holmes.
Should a cameo role become available for an appropriately ancient actor to portray McCain, Betty White and Danny DeVito come to mind.
Editor’s note: Front Page Confidential writer Stephen Lemons is finishing his forthcoming e-book, The Stains of John McCain. To sign up for a free copy, click the link below:
“Coming in March: The Stains of John McCain“
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