Theranos, The Trial of Elizabeth Holmes, ch. 12: all bucks stop with the CEO (updated)

December 2, 2021 | by

Tuesday was the last day this week of Elizabeth Holmes’ cross-examination by Federal prosecutors. Despite Monday’s excursion by the defense into how emotional and physical abuse by her live-in partner and corporate president could have warped her business judgment (a ‘me-too’ variation on the infamous Twinkie Defense relating to diminished capacity), and perhaps concealed from her the depth of Theranos’ problems, the cross-examination returned to the essentials. Who was the boss? Assistant US Attorney Robert Leach drew from her this: “Ultimately all roads led to the CEO?” “Yes,” she replied. “The buck stops with you.“ “I felt that.” 

The prosecution was highly effective in drawing out of her how Holmes controlled the company, and despite her claims of not knowing its finances, she knew what to say to round up funding. This countered the emotional drama of the prior day around ‘Svengali’ Balwani’s abuse and controlling actions. Holmes confirmed that she was the New Elizabeth in her hands-on role in altering pharma company reports, marketing materials, investor presentations, knowing their financials–and trying to kill unfavorable stories:

  • She added logos to Theranos’ pharma reports about partnerships with Pfizer and Schering-Plough to make it appear that the documents came from them. Add to these an altered analysis that came from GlaxoSmithKline (GSK), where Holmes admitted adding a logo but couldn’t recall deleting the conclusion “finger prick/blood draw procedure was difficult (needed larger lancet and better syringe system).”
  • She hired lawyers to review the Theranos website for claims at the time of the Walgreens launch in 2013. The language drew quite the critical eye for its language in their report to her. Our Readers will recognize these walk-backs on superiority claims: replacing “highest quality” with “high quality,” “highest levels of accuracy” with “high levels of accuracy,” and “more precise” to “precise.” Claims made needed to be substantiated. It’s not clear from the articles whether these were made.
  • Where walk-backs on these claims were most certainly not made were the investor presentations, including not disclosing that most testing was done on third-party machines, leaving the impression that Theranos labs were capable of running 1,000 tests.
  • Texts between Balwani and Holmes confirmed she knew that Theranos was in critical financial shape throughout 2013, burning through funding like tinder. 2014 was ‘fake till you make it’ time with sunny (sic) revenue projections–convincing to PFM Management and the DeVos family office, kicking in funds totaling close to $200 million, and then a cascade of funds following them. All of whom should have known better, admittedly.

In 2015, Holmes went directly to one of her investors, Rupert Murdoch, CEO of News Corporation and owner of the Wall Street Journal, to have John Carreyrou’s investigative reports killed. To Murdoch’s great credit, not only did the stories run, but also Carreyrou was legally defended against the mad-dog attorneys of Boies Schiller snapping at his heels. Boies Schiller also harassed and tracked former employees-turned-whistleblowers Erika Cheung and Tyler Shultz. Holmes also approved hiring the killer ‘oppo’ research of Fusion GPS. The latter became infamous a year later in sourcing and promoting now-debunked ‘evidence’ of Russian ties to then-candidate Donald Trump.

To counter the rising tide of negative news, Holmes went on CNBC’s ‘Mad Money’, hosted by, in this Editor’s opinion, the ever-credulous, often unhinged, and in recent years de trop Jim Cramer, and bald-face lied that “Every test we run on our laboratory can run on our proprietary devices.”–when only 12 did, not even the 15 Carreyrou documented.

It isn’t known yet whether Holmes will return to the stand next week for more cross-examination or a rebuttal by the defense. What is most likely is that the defense will continue with the themes of diffusion and deflection, creating cognitive dissonance in the jurors’ minds that while Holmes acted in control and committed fraudulent acts, Balwani had so thoroughly emotionally abused her that she was not in control of herself even after he departed. Look for expert testimony from Mindy Mechanic, an expert on intimate partner violence and abuse, to show that words of ‘love’ in 500-odd texts isn’t love at all. (Cue ‘What’s Love Got To Do With It’)

The Verge, CNBC, Yahoo Finance, Ars Technica

Updated: Theranos junkies (Judge Davila’s pronunciation of which is the subject of an entire Mercury News article) may want to follow John Carreyrou’s podcast, epically titled Bad Blood: The Final Chapter. He’s up to 11 episodes and close to 11 hours, so if you think your Editor is focused on this…it’s a deep dive indeed from the reporter who found that Theranos should have been spelled with an F for Fake. The link here is to the ThreeUncannyFour player, but Sony Media has made it available on other podcast platforms such as Spotify.

To be continued…

TTA’s earlier coverage: Chapter 11, Chapter 10, Chapter 9, Chapter 8, Chapter 7, Chapter 6, Chapter 5, Chapter 4 (w/comment from Malcolm Fisk), Chapter 3, Chapter 2, Chapter 1

 

The Theranos Story, ch. 49: CEO Holmes reportedly raising funds for a new company–and feeling like Joan of Arc

June 13, 2018 | by
[grow_thumb image=”https://telecareaware.com/wp-content/uploads/2016/11/jacobs-well-texas-woe1.jpg” thumb_width=”150″ /]Here’s the place where your money will go if you’re an investor. John Carreyrou has now compiled his reporting for the Wall Street Journal on Theranos into a new book, Bad Blood: Secrets and Lies in a Silicon Valley Startup, and it is a Must Read for this Editor and anyone interested in the nexus of Tech, Healthcare, and Hype. (The link goes to AbeBooks, a worthy marketplace for independent booksellers.)

According to Mr. Carreyrou, the founder/CEO Miss Elizabeth Holmes–still leading the company despite settling with the SEC on fraud charges, surrendering her voting control, barred from serving as a public company director or officer for 10 years, and still fighting civil lawsuits–is raising fresh funds for a new venture.

Your eyes did not fool you.

Theranos was a Dogpile of Deceit. From hacking standard Siemens blood testing machines to work with tiny samples, falsifying test results, faking up the Edison test machine, to company financials, it was one lie on the other, chronicled for our Readers in nearly 50 chapters and multiple references. 

Mr. Carreyrou was asked by former Timesman and Vanity Fair reporter Nick Bilton whether, in this unmistakable pattern, Ms. Holmes was a sociopath. Mr. Carreyrou wisely refrained from diagnosis based on a used DSM-V, being a reporter and not her psychiatrist. From Mr. Bilton’s interview podcasted on ‘Inside the Hive’:

“At the end of my book, I say that a sociopath is described as someone with no conscience. I think she absolutely has sociopathic tendencies. One of those tendencies is pathological lying. I believe this is a woman who started telling small lies soon after she dropped out of Stanford, when she founded her company, and the lies became bigger and bigger,” Carreyrou said. “I think she’s someone that got used to telling lies so often, and the lies got so much bigger, that eventually the line between the lies and reality blurred for her.”

Mr. Carreyrou, and by inference anyone who doubted her, like her CFO, and especially those who went public with criticism–well, we are the Bad Guys:

“She has shown zero sign of feeling bad, or expressing sorrow, or admitting wrongdoing, or saying sorry to the patients whose lives she endangered,” he said. He explained that in her mind, according to numerous former Theranos employees he has spoken to, Holmes believes that her entourage of employees led her astray and that the bad guy is actually John Carreyrou. “One person in particular, who left the company recently, says that she has a deeply engrained sense of martyrdom. She sees herself as sort of a Joan of Arc who is being persecuted,” he said.

Mr. Carreyrou was set upon by this ‘martyr’s’ legal pitbulls, one David Boies, until he wisely exited stage left with a bushelful of worthless stock [TTA 21 Nov 16].

(And what is it about Stanford University that fosters people like Ron Gutman, recently ousted from HealthTap over employee abuse and intimidation charges in what may be a Silicon Valley First? [TTA 3 May] Here we have someone who plays with people’s lives and health in vital blood testing. Aren’t some ethics courses long overdue?) 

Mr. Bilton makes the extremely fine point that Silicon Valley will continue to be magnetically attracted to founders equipped with a ‘reality-distortion field’ (as he termed Steve Jobs). SV will relegate Theranos to a biotech outlier. Yet as long as Silicon Valley MoneyMen like Tim Draper will back the likes of Elizabeth Holmes as long as they have a good line of (stuff), despite being embarrassingly proven not just (and only) wrong, but now perpetrating fraud, the Jobsian Myth and black turtlenecks will rise again like Dracula. (Another analogy comes to mind, but precocious children might be reading this.)

We haven’t heard the last of her.

An excellent interview by Tom Dotan of Mr. Carreyrou is podcasted on The Information’s 411 in “You’re So Vein”, which gets the award for Title of the Week (trial signup required, or listen on SoundCloud). Starting at 15:00, interesting comments on the why of Sunny Balwani and Ms. Holmes’ series of ‘marks’ including George Shultz. Also Gizmodo and Politico’s Morning eHealth newsletter.

The Theranos Story, ch. 25: is the nadir the $400,000 harassment of whistleblower Tyler Shultz?

November 18, 2016 | by
[grow_thumb image=”https://telecareaware.com/wp-content/uploads/2016/11/jacobs-well-texas-woe1.jpg” thumb_width=”150″ /]A story to make your blood…boil. Tyler Shultz is a 26 year old Stanford University grad with a biology undergraduate degree. He ‘fell in love’ with the Theranos vision of quick small blood sample testing after visiting his grandfather’s home near the campus and meeting, of all people, Elizabeth Holmes in 2011. Tyler snagged a summer internship and then a full time job during their salad and steak days (September 2013). He worked on the assay validation team, which verified the accuracy of blood tests run on Edison machines before they were deployed in the lab for use with patients.

Then it all went sideways…and down. Ms Holmes was at his grandfather’s because he is George Shultz, 95 year old former secretary of state and Fellow at the Hoover Institution based at Stanford. Mr Shultz was one of the numerous Washington alumni lending luster to the Theranos board (now advisers), such as Henry Kissinger, Sam Nunn, James Mattis and Bill Frist (the last the only one with an MD).

Tyler Shultz soon discovered, like many new graduates, that his dream job wasn’t all that it was cracked up to be. Except that it wasn’t the hours or the quality of the snacks. He discovered that the Edison machines had highly variable results when tests were rerun with the same blood sample–and they routinely discarded the outliers from the validation reports. Edison testing for a sexually-transmitted infectious disease had a claimed 95 percent sensitivity. “But when Mr. Shultz looked at the two sets of experiments from which the report was compiled, they showed sensitivities of 65% and 80%.” It only got worse when he moved to the production team, where quality control standards were routinely flunked and President Sunny Balwani pressed lab employees to run the tests anyway. Mr Shultz went directly to Ms Holmes, twice, received a nastygram from Mr Balwani for the second, and quit–but not before anonymously sending results to the New York officials who administered a proficiency-testing program and who confirmed that the results sounded like ‘PT cheating’.

The rest of the story by John Carreyou is one of corporate harassment and family estrangement: legal harassment (including private investigators) by none other than David Boies’ law firm on the pretext of ‘confidential information’; the manipulation, currying of favor and misleading of a great but aged man; and a family’s trust fractured if not broken, despite the grandson being proven right, ironically, by the same Washington agencies that his grandfather so loyally served. Mr Shultz is now working on the Cloud DX team for the VITALITI Diagnostic Android Application in the running for the Qualcomm Tricorder XPRIZE. Wall Street Journal  See here for the 24 previous TTA chapters in this Continuing Saga.