The Theranos Story, ch. 47: the post-mortem, blaming–and ghost chasing–begin

click to enlargeNow 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. MarketWatch‘s post-mortem reveals that there were no financial statements audited by an independent public accounting firm. In the private placement, there were packets of press coverage and lots of projections, but “Conspicuously absent from the package that went to investors are income statements, balance sheets and cash-flow statements audited and signed by a qualified public accounting firm.” 

Wired, which had shared in the fawning (see this list from ZeroHedge via Vetr), attributes it to the startup culture of “fake it till you make it” and stretching the truth. There’s no solving of concrete problems. Instead it’s ‘Let me explain to you how the world’s going to be’ in puffed up pitch decks and media glow.

The capper is Stat’s gimlet-eyed investigation of the ghostly Mr. Balwani, who while Theranos’ president was barely seen and has no extant photos nor media presence save Twitter. He was Ms. Holmes’ sometime former and older boyfriend, having met in China in the early 2000s. Having run out of tech and time by 2009, Mr. Balwani came to the rescue financially (he was wealthy from a software company sale) and ‘invented’ the Theranos Myth. The SEC documents paint a damning picture of his activities in falsifying projections. He also harassed an early insider whistleblower, Tyler Shultz [ch. 25] who discovered as a result of his position on the assay validation team that his dream job wasn’t all that it was cracked up to be. He’s fighting the SEC charges, which usually carry substantial penalties. Given his assets, and wanting to send a message to all those private placements, the SEC may well be seeking…blood.

Our extensive back coverage of Theranos is here.

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