IT’S NOW CLEAR THAT TWO CLINICAL LABORATORY EXECUTIVES COMMITED one of the largest corporate fraud schemes in the past century.
Reading the federal indictments against Elizabeth Holmes and Ramesh “Sunny” Balwani unsealed Friday provides insights into the extensive scale and wide scope of the alleged fraud the two Theranos executives perpetrated against patients, doctors, and investors.
When combined with the media reporting on Theranos, the information in the federal indictments provides compelling evidence that Theranos would at least equal, if not exceed, most of the biggest business frauds, Ponzi schemes, and accounting scandals that have occurred since 1900.
If we view who was hoodwinked in this dark story of deception and intrigue, the list is impressive. It starts with some of the smartest investors in the Silicon Valley, who, after being among the first to invest in Theranos, noticed that the lab testing products Holmes was developing did not function properly, that Holmes was turning over staff and executives who challenged her with the reality of how these systems were failing, and that Holmes was misrepresenting the performance of these products when she presented them to potential customers and investors.
Then in 2013, there was the illustrious and ballyhooed board of directors. Comprised of multiple former cabinet officers, generals, and admirals from the highest ranks of the military, they lent their names to—and bet their reputations on—Theranos. Next were the executives of Safeway and Walgreens. Both companies made sizeable investments in Theranos without fully understanding whether Theranos could deliver on its promises. During this time, many in the mainstream media were eagerly leading cheers for Holmes without seriously investigating her company’s representations.
Following the media hype, once-shrewd investors rushed to put hundreds of millions of dollars into Theranos. We should not overlook the thousands of physicians and their patients who trusted Theranos with their lab tests, only to learn months later that these test results were fraudulent.
Theranos is a business scam of unprecedented scope. It may not have ripped off billions as Bernie Madoff did, but Holmes and her company certainly took advantage of wide array of people and institutions.