As a business ethics keynote speaker, business ethics consultant and book author, who has seen this type of bait-and-switch many times before, I suppose I could have also titled this post: “The Death of Fake It ‘til You Make It.”
Theranos tried faking its technology for years. They collected a lot of money from gullible investors, knowing they would never make it.
Two Characters
The two main architects of the Theranos fraud, Ramesh “Sunny” Balwani and Elizabeth Holmes, are facing jail sentences of 13 and 11 years, respectively. The former business partners and relationship partners have done their best to drag one another down. Holmes is fighting this until the bitter end; her walking into jail April 2023. Balwani seems a bit more resigned though his lawyers will most certainly appeal.
Stephanie Hinds, prosecuting US Attorney said: “Sunny Balwani’s decision to deceive doctors and patients also put the health of patients at risk. Ms. Holmes and Mr. Balwani now will be justly punished for their illegal conduct.”
The couple knew they were deceiving investors, and they knew they were intentionally mis-diagnosing and mis-testing customers. Though the company said it could perform more than 200 tests from a single drop of blood, they could barely conduct 12. They faked everything else when it came to their technology. They created false endorsements. They put thousands of patients at risk by representing their technology was actually working (they used standard laboratory equipment to supplement the paltry results from their own “invention.”)
Rather than admitting the technology had no chance of working, they kept faking it and deceiving wealthy investors and indeed, they raised close to $1 billion. The company was once valued at $9 billion based on their lies.
To make the company seem more attractive, they added “celebrities” to their board, but the celebrities such as Henry Kissinger and Alexander Haig were mere figureheads and totally clueless in regard to the technology.
Balwani and Holmes faked product endorsements on fake letterheads “issued” by Big Pharma companies and the U.S. Army. No outside agency ever tested their failed technology.
Not unexpectedly
The company went out of business in 2018 and shortly after Balwani and Holmes were indicted. At first, they faced the fire together, then they acrimoniously parted. The strategy of Holmes was to accuse Balwani of abuse; sexual and psychological. He became a Svengali-type character, a charge to which he adamantly denied.
Balwani was found guilty on 12 charges of fraud he stands fines of $250,000 for each count. Holmes was charged with 11 counts.
Meanwhile, Holmes has gotten married and is pregnant. The courts are not typically sympathetic to that strategy as a defense.
The fall of Ramesh “Sunny” Balwani is a study of Silicon Valley Greed. Elizabeth Holmes’ idol was Steve Jobs, who was famous for the fake it until you make it strategy. However, there are glaring differences in play. “Forgetting” to tell investors the computer prototype is not ready is one thing; deciding to fake a blood result could cause a death. Holmes and Balwani faked many tests and faked major investors. They were never going to make it.
Despite all the legal wrangling, both will see jail cells. Undoubtedly, there will be time off for good behavior. Aside from that, they are paying consequences for lousy choices. In the end, they faked nothing.
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