[grow_thumb image=”http://telecareaware.com/wp-content/uploads/2016/04/Yak_52__G-CBSS_FLAT_SPIN.jpg” thumb_width=”150″ /]Now that Elizabeth Holmes is the former CEO of Theranos,
many of the publications who huzzahed their ‘revolutionary’ blood testing system three short years ago are publishing their post-mortem analyses, often of how the wool was pulled over their eyes.
Jenny Gold from Kaiser Health News and NPR has a short ‘alarming’ tale of her press visit in November 2014 to a Theranos testing site at a Palo Alto Walgreens for an NPR feature. At Walgreens, she spoke with patients on the record and was invited to witness their blood draw–not the finger prick Theranos (and Walgreens) promoted, but a standard volume blood draw. After multiple and telling upset reactions from her company press handlers, including demanding Ms. Gold erase her audio recording (!) and accusing her of harassment, alarms went off at the Walgreens store for a non-existent fire. She was baited with an interview with Ms. Holmes–which never happened–and wound up with a corporate attorney instead who made unsupported statements. Ms. Gold canceled her story, which if she tracked the bad smell would have been likely the first press shot across the bow. What this post-mortem tells us is the extent of the coverup and the sheer (and unethical) fawning flackery that appeared in places like the New Yorker, Forbes, Inc., and Fortune. NPR
The FT further digs into our gullibility, our wanting to believe that someone in a black turtleneck could put the Big Labs out of business, how we in the press hungered for a new and female Steve Jobs to shake up the status quo. Andrew Hill: “Trouble often hits, though, when leaders stick to their story after it has diverged from reality, swerving into embellishment, mythmaking and, in Ms Holmes’s case, apparently fraud.”
But we were no smarter than those who gave Ms. Holmes and Mr. Ramesh ‘Sunny’ Balwani $700 million in Mad Money. (more…)
[grow_thumb image=”http://telecareaware.com/wp-content/uploads/2016/11/jacobs-well-texas-woe1.jpg” thumb_width=”150″ /]Our New Year’s 2018 prediction (after December’s $100 million loan from Fortress Investment Group): “Ms. Holmes will be removed and replaced, then the company will be reorganized and/or renamed.”
Fortress did not have to wait long or get their hands dirty. Today, the Securities and Exchange Commission (SEC) charged both founder and now former CEO Elizabeth Holmes and past CEO/president Ramesh ‘Sunny’ Balwani with securities fraud. While Mr. Balwani will fight the charges, Ms. Holmes escaped trading her black turtleneck for an orange jumpsuit by agreeing to pay a penalty of $500,000 to the SEC, give back 18.9 million shares to the company, give up her uniquely Silicon Valley perk of super-voting equity rights, and is now barred from serving as a public company director or officer for 10 years. From the Theranos release: “As part of the settlement, neither the Company nor Ms. Holmes admitted or denied any wrongdoing.”
This penalty may seem puny in the light of other securities fraud cases, but it appears that Ms. Holmes took little salary out of the company, with most of her long-gone billions in presently worthless remaining stock.
The exact meaning of fraud, as determined by the SEC in cases like these, is not casual. We can say that we never believed the Edison or miniLabs would work despite the press hype. We can observe that patients and doctors were misled in test results, resulting in major human cost (our Ch. 22). The fraud here is directly tied to representations made to investors that enabled Theranos’ massive funding, in multiple rounds, of over $700 million between 2013 to 2015. These misleading representations included demonstrations, reports on the functioning of its analyzers, inflating its relationships such as with the DOD, and its regulatory status with the FDA.
It also does not matter that all the funds were privately raised. The SEC in its statement firmly stated that it will treat private equity as it does public when it comes to investments (pay attention, health tech companies): (more…)