Theranos founder Elizabeth Holmes is facing jail time for fraud. I have talked about how the once darling of Wall Street and her co-conspirator, top executive and boyfriend, Ramesh “Sunny” Balwani, had hoodwinked a Board of Directors, investors and, for a brief period, the healthcare community.
If you are unfamiliar with Theranos and Elizabeth Smart, it is a book in and of itself (and in fact, “Bad Blood: Secrets and Lies in a Silicon Valley Startup,” was a New York Times bestseller).
The very shorthand version is that Holmes, a blond, blue-eyed and young Stanford graduate, convinced people who should have known better that she had a technology to analyze blood. In fact, she claimed that barely a few drops of a patient’s blood could analyze an entire array of tests eliminating the need for blood tubes, blood draws and all the inconveniences that patients so dislike. They devised a tiny tube supposedly able to analyze virtually every blood test, and it could be sent into the Theranos laboratory.
However, her laboratory “scientists” and seemingly, well-stocked laboratory, were essentially window dressing to perpetuate a scam. The company faked most of the results of the blood tests they performed. Elizabeth Holmes, no longer the youngest, best and brightest, has been claiming she was unaware of the extent of the scam. It is a weak defense.
As the Trial Draws Near
Elizabeth Holmes should have realized that in this digital age, there are no secrets. The prosecution has discovered correspondence between Homes and Balwani that go back to 2014. In the early days of November 2014, the operation was already in trouble. Allegedly, the laboratory was slow and inaccurate with reporting results. In truth, they couldn’t test much of anything with accuracy.
According to the Justice Department, “In a late-night November 2014 exchange, Balwani allegedly described one section of the Silicon Valley lab as a “f—ing disaster zone.”
No one quite knows what constituted a disaster zone. Perhaps the disorganization was more highly valued than the truth. There were several texts that wanted the lab to look more professional. It didn’t fool anyone with a penchant for the truth.
In 2015, another text revealed the couple of fraudsters had “turned religious.” Following an inspection of the lab by the Centers for Medicare and Medicaid Services, the inspectors concluded (the lab was) an “immediate jeopardy to health and safety.”
This led to the following exchange of texts from Balwani to Holmes: “Our validation reports are terrible. Really painful going thru this process… Going bad so far. Pray.”
“Praying … Praying continually,” Elizabeth Holmes allegedly replied.
The response was at once an attempt at posturing along with a scam in the process being revealed. The Theranos lab could not do all of the tests from a single, tiny tube. Their miracle equipment did not work, and it never worked. They were analyzing a few common blood chemistry results and essentially faking the rest.
Holmes sent another text to Balwani saying that they needed “to fix the root causes.” The root cause was that the blood test results were fake and the equipment was completely flawed.
The Lifestyle
As investor money came rolling in, Elizabeth Holmes, the billionaire CEO with luxury cars and a mansion, lived a luxurious lifestyle, a trait the early-thirties woman had in common with many other fraudsters. She was so certain of her scam that when investigators started sniffing out the problems, she sent a text to Balwani saying “Anything that happens in this company is my responsibility, at the end of the day.”
The investigators have taken that comment to heart. She was responsible and the texts I mention above, and several more, indicate she understood where the scam was leading.
I have asked myself if the major investors and the impressive board of directors who were duped were in awe of her imagined brilliance and good looks, or if they had never done due a shred of due diligence. Were they looking for the female equivalent of Mark Zuckerberg or were they caught up in the need for money that the firm allegedly promised?
Elizabeth Holmes, using every charm she could muster, sold investors a company that could not deliver from the beginning and she knew it. She took the opportunity to deceive and ran with it. The cash, “the toys,” the life-style gave her all she needed. It was about the money.
How could the young woman rationalize her scam? I believe she felt that the technology could eventually catch up with the desired results. It was backwards thinking. Unfortunately, patients whose blood was analyzed using fake or farmed out tests were all placed at risk. I don’t believe she cared.
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