Conflicts of Interest: Two Case Studies


It can be perfectly legal, and still an unacceptable ethical conflict of interest

It can be perfectly legal, and still an unacceptable ethical conflict of interest

Few things are more subversive to the values of a democracy than conflicts of interest in government officials. At the least, they create the appearance of impropriety; at their worst, they are both corrupt and corrupting. Here are two case studies from Trump Administration appointments that illustrate the evil that is a conflict of interest.

Dr. Scott Gottlieb, from 2015-2017, was a shareholder in and a member of the Board of Directors of Kure, Corp, a franchise-based vaping retailer. Kure markets e-cigarettes in flavors that are designed to appeal to kids like cotton candy and sugar cookie. Kure also presents vaping and e-cigarettes as a fun recreational activity. In 2017, President Donald Trump nominated Gottlieb to serve as the chair of the Food and Drug Administration (FDA). The FDA regulates – or is supposed to regulate – the e-cigarette and vaping industry. That’s a severe conflict of interest. But on May 19, 2017, Gottlieb was confirmed by the U.S. Senate, on a party-line vote.

A little over three months later, Commissioner Gottlieb announced a four year delay in implementation of an FDA rule that would have sharply curtailed the vaping industry. The excuse was to allow development of a more comprehensive rule, but the reality is that it allowed the vaping industry to continue business as usual, including sale of flavors that appeal only to kids, helping them develop a lifetime addiction to nicotine products. Gottlieb’s announcement was wrapped in the political equivalent of cotton candy flavoring, but the practical effect was that Kure and its fellow vaping businesses got to continue selling to kids.

Dr. Thomas R. Frieden, the former director of the Centers for Disease Control and Prevention called Commissioner Gottlieb’s decision “public health malpractice.” He was exactly right. The vaping business boomed during Gottlieb’s dubiously-justified delay. In 2018, a new federal survey data showed that teen vaping had jumped sharply in the past year, driven by the popularity of Juul, and that more than three million American high school students had tried e-cigarettes. And Kure, Corp made millions. And this year a whole different kind of epidemic has occurred, of some 1,479 vaping-related illnesses and more than 30 deaths.

Gottlieb left the FDA in April 2019. The legacy of his soft treatment of the vaping industry continues.1

Dr. Gottlieb’s investments in the vaping industry were a sharp conflict of interest. At a minimum, they created the appearance of impropriety. The conflict colors how any thoughtful citizen views his decision to delay FDA regulation of vaping. Even if Dr. Gottlieb divested himself of his shares in Kure, he could not divest himself of the relationships with the industry. His appointment was corrupt and corrupting.

The second example is U.S. Secretary of Transportation Elaine Chao.2 Secretary Chao is married to Senator “Moscow Mitch” McConnell.3 McConnell, when he can take time from his work for Russia, nominally represents Kentucky. Ms. Chao has allegedly named a top Department of Transportation staffer to act as special liaison between DOT and the state of Kentucky. Oddly enough, no other state has a special liaison at DOT. The New York Times reports,

According to an analysis by Politico, in her first 14 months as transportation secretary, one in four of the scheduled meetingswith local officials on Ms. Chao’s calendar were with Kentuckians. (The two states next on the list, Indiana and Georgia, accounted for only 6 percent each.) Some of the meetings were set up at the request of McConnell staff members, who let his wife’s office know which officials were “friends” or “loyal supporters.”

A DOT spokesperson denied any impropriety. But Moscow Mitch’s reelection campaign tweeted out the Politico article about Ms. Chao’s meetings as proof that “Mitch McConnell is a Kentucky Asset.” Chao seems to be prostituting the Department of Transportation to benefit her husband, and her husband is bragging about it.

But Secretary Chao’s problem with conflicts of interest hardly stops there. Her family owns the Foremost Group, a New York-based shipping company. It’s privately held by her father and sisters. There’s evidence that Secretary Chao is leveraging her position to benefit her family’s company. Chao has repeatedly used her connections and celebrity status in China to boost the profile of the company. In 2017, Ms. Chao’s first official trip to China as a Trump cabinet officer was canceled after ethics concerns about her request to include family members in meetings with Chinese officials were referred to officials in the State and Transportation Departments.

Secretary Chao has no longer has any official affiliation with or stake in Foremost. But the Secretary and Moscow Mitch have benefited handsomely from her Chao’s family’s good fortunes. In 2008, Secretary Chao’s father gave her and her husband somewhere between $5 and $25 million, according to disclosure reports. Those gifts – at least we hope those were gifts – made Moscow Mitch a multi-millionaire, with a net worth of $10,564,070 to $43,291,000. Secretary Chao’s extended family has contributed more than $1 million to Mr. McConnell’s re-election campaigns. If you don’t think that has an influence on both Moscow Mitch and Secretary Chao, WC has a terrific deal for you on the Cushman Street Bridge, in Downtown Fairbanks.

Secretary Chao’s conduct was alarming enough that the late Rep. Elijah Cummings (D, Maryland) and Raja Krishnamoorthi, head of the subcommittee on economic and consumer policy, reminded Secretary Chao in writing that federal regulations prohibit using one’s public office for “the private gain of friends, relatives, or persons with whom the employee is affiliated in a nongovernmental capacity.”

Commissioner Gottlieb and Secretary Chao are hardly the only Trump appointees with grave conflicts of interest. But they illustrate nicely the evils of conflicts of interest. Governing the United States is challenging enough without compromising your ability to do so with conflicts of interest.

 

 

 

 

Chao: https://www.nytimes.com/2019/10/16/opinion/elaine-chao-mitch-mcconnell.html?action=click&module=Well&pgtype=Homepage&section=Editorials


  1. Dr. Gottlieb also said he “doubts nicotine causes cancer.” Mind you, there are some pretty compelling studies that show it does. In any event, it is indisputably a highly addictive drug, and that addiction leads to long-term smoking. He is a member of the Koch Brothers-funded American Enterprise Institute, which may explain Dr. Gottlieb’s “doubt.” 
  2. WC had a soft spot for Elaine Chao; she helped save the United Way after the Aramony Scandal in the early 1990s. But she left United Way in 1996 and her record since contains little that is admirable. And her “service” in the Trump Administration disqualifies her from any lingering gratitude. 
  3. Yes, the nickname is a bit childish. But Senator McConnell dislikes it so much that WC is unable to resist. 

One thought on “Conflicts of Interest: Two Case Studies

  1. Conflicts of interest and revolving doors with FDA, SEC, DOT, USDA and other appointed positions and watch dog entities for many years during many admnisitrations. It is sadly nothing new but this administration has been working diligently to raise the “art of the deal” to a new level.

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