The “players” in the Theranos saga have gone from the lab rats and the misled board members to the heavy hitters and the guys with the money bags. Frankly, Brian Grossman’s tale is embarrassing.
Brian Grossman is a hedge fund manager at PFM Health Sciences who had a lot of money to invest. He ultimately invested $96 million in the failed diagnostic testing company. However, it is the back-story that is ethically fascinating.
The short-hand version of the story is this: Brian Grossman did his due-diligence when interviewing Elizabeth Holmes. She extolled the virtues of the technology, and how even the U.S. military was using it. He was especially fascinated by the fact that from a single drop of blood, Theranos could conduct 300 blood tests.
Being a good hedge fund manager, Grossman went to a Walgreen’s to get a “finger stick.” Except it wasn’t a finger stick. It was a conventional blood draw. That, in an of itself, should have triggered several alarms and some skyrockets. It didn’t.
In an article by Yasmin Khorram (November 16, 2021) for CNBC:
“Balwani assured him it was because his doctor ordered an unusual test, Grossman said.
Still, PFM invested $96.1 million in Theranos in February 2014. That investment included $2.2 million from a friends and family fund, which Grossman said had money in it from low-income people.”
That is correct. Despite reservations about the technology, Grossman invested anyway.
Piling on the Stuff
The first time Grossman met with Holmes, around December 2013, according to Grossman:
“Ms. Holmes was actually very clear that they could match any test on a LabCorp and Quest menu of tests.”
In truth, previous testimony has revealed that at best, the Theranos equipment could not run 300 tests as promised, but a mere 12. In fact, Grossman was never told that blood tests were being run on conventional machines because the Theranos MiniLab machines were incapable of doing anything more.
Though Grossman claimed under oath that Holmes assured him the Theranos technology could promise results in less than four hours at Walgreens and within an hour in a hospital setting, Grossman’s blood work was badly delayed for inexplicable reasons.
In addition, he and the PFM team learned that the army had not been working with the technology nor were hundreds of millions of dollars being generated from the army field tests.
The suspicion of fraud led PFM to sue Theranos to get its money back. While the award of the lawsuit remains confidential, in an article by Sarah Buhr (May 1, 2017), Theranos through its counsel apparently responded to the award by stating:
“Theranos is pleased to have resolved both lawsuits with PFM. Although we are confident that we would have prevailed at trial, resolution of these two cases allows our tender offer to go forward and enables us to return our focus where it belongs, which is on executing our business plans and delivering value for our shareholders.”
Another way of looking at it, is that Theranos, in an attempt to keep the scam going, elected to pay off a major player who finally started to see through the bait and switch tactic.
Now What?
We are slowly coming to the conclusion of the government’s case against Theranos. Now, it is time for the defense case.
Ethically, it is incumbent upon us to hear out the Theranos side, meaning Holmes and Balwani. Holmes and Balwani have already turned on one another. Holmes will claim that Balwani controlled her. Balwani vociferously denies the allegation. He will be separately tried.
The PFM case, even if only $1 was awarded, shows that another jury determined that Theranos had been less than truthful. Will that information be admitted? If so, what impact will that have?
We have already discussed that the defense, in putting Holmes on the stand, could be taking a calculated risk. Should they, or shouldn’t they? Her credibility is in question and her appeal is tarnished along with her honesty.
Holmes seems to be a silver-tongue orator who must now fight for her very life – or at least 20 years of it. What surprises will her defence team yield or will their case simply be about the failed entrepreneur who tried her best?
Will the weight of her unethical behavior collapse in on her, or will she and Balwani be able to mount a set of reasonable arguments to exonerate her in the eyes of the law?
LEAVE YOUR COMMENTS!
