What went wrong at Theranos led by Elizabeth Holmes ?

Theranos is a blood testing start-up firm that promoted a purportedly ground breaking technology claiming more than 200 test reports with just single pin prick of blood. They promised the world to revolutionise medicine and save lives all across the world by automated, quick and affordable blood testing technology. They were finally charged for allegedly deceiving investors, patients and employees for making false promises depending upon an unproved and not certified testing method which resulted in false blood test reports. She was a college dropout who hoodwinked many venture tycoons which created turmoil in the Silicon Valley.

Here are the initial warning signs which led to a $9 billion fraud plan but were ignored:

Unknown Technology

  • Walgreens executives were prohibited from examining data in the lab.
  • The covert lab was unknown to CMS surveyors.
  • They cited “Trade secrets” as justification.
  • Employees were prohibited from sharing information with one another and worked in silos.

Affectionate to the new female Steve Jobs

  • Despite the lack of research, Forbes assessed the worth at $9 billion ($9,000,000,000).
  • Sales were never greater than $100 million.
  • Influential Board members (including former senator Bill Frist, retired general of the armed forces James Matt, and former secretaries of states George Schultz and Henry Kissinger) disregarded glaring at the flaws.
  • Appeared on the covers of the Wall Street Journal, the New York Post and Time.
  • Demanded public Speaker.

The Retaliation Culture

  • Some employees questioned the veracity of the findings.
  • There was a high turnover rate.
  • Workers were let go for disagreeing with Elizabeth Holmes.
  • Sunny Balwani, a tyrannical COO.
  • Covenants that were signed upon termination.

Interested Investors

  • Investors did not contest aggressive boast.
  • Elizabeth’s potential for innovation that may “change health care” mesmerised investors.
  • Never asked the question, “Does this thing actually work?”.

Consensual Endorsements

  • Consensual Endorsements
  • Staff members published glowing reviews of the company’s goods.
  • Workers branded reports with the insignia of pharmaceutical firms.

Introduced faulty machines

  • Received money from Walgreens for testing.
  • No diagnostic tools available.
  • Told a lie to Walgreens instead of asking for extra time.
  • 42 wellness centres were opened in 2013 in AZ, 2 in CA, and 1 in PA.
  • Misrepresented third-party testers as being its own.
  • Engineers altered industry-standard testing equipment to resemble Theranos’s new “mini-Labs”.

Liar, Liar, Pants on Fire!

  • Lied to the media about the number of tests that could be conducted.
  • Used those false articles to entice investors.
  • Authored a “Peer-reviewed” article about her.
  • Secret relationship with the COO.

Lack of Compliance Expert

  • There was no compliance committee until 2016.
  • Elizabeth, the founder, chairwoman, and CEO, had the majority of the voting shares and no one to challenge her.
  • In Silicon Valley start-ups, total founder control is not unusual.

Holmes explains the process as follows:

More Importantly, Holmes outlined the steps saying, A chemical reaction is carried out in order to produce a signal from the chemical interaction with the sample, which is subsequently translated into a result and examined by certified lab personnel.

The Legal proceeding highlights:

  1. Holmes agreed to a settlement with the SEC for “massive fraud”.
  2. She was not required to admit wrongdoing.
  3. She was forced to give up control of Theranos.
  4. Barred from being a director or officer of any public company.
  5. She was required to return 18.9 million shares of stock.
  6. She was fined $500,000.
  7. The FBI conducted a significant criminal investigation.
  8. Sunny Balwani is imprisoned.
  9. “I am not sure, 600+ times” Elizabeth said in 2017 deposition.
  10. Homes had to report the prison on 27th April, 2023 after her second child.
  11. This is now delayed as she appealed early in April to remain on bail while a contest to the original conviction is considered.

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