S
AN FRANCISCO — A grand jury has indicted CEO Elizabeth Holmes and her former No. 2 Sunny Balwani for alleged fraud at Theranos, the disgraced Silicon Valley company that once promised to revolutionize blood testing in a pitch that was too good to be true.
The criminal charges filed by federal prosecutors allege that Holmes and Balwani bilked investors out of hundreds of millions of dollars while also defrauding doctors and patients through years of lies that put thousands of people in personal danger.
Holmes is also out as CEO, the company announced in a statement. David Taylor, the company’s general counsel, will take over as CEO. Holmes remains chairman of the company’s board.
JUNE 15, 2018
Jeffrey Coopersmith, the attorney representing Balwani, said in a statement on Friday that his client denies the charges against him. “Mr. Balwani is innocent, and looks forward to clearing his name at trial,” Coopersmith said.
The indictment comes three months after Holmes and her company settled fraud charges brought by the Securities and Exchange Commission. The SEC alleged that she had lied and exaggerated for years about what the company’s technology could do and where its finances stood.
The criminal charges disclosed Friday go well beyond the SEC’s civil allegations, which Balwani has contested. In its indictment, the Department of Justice echoed the SEC’s claims of defrauding investors and added on charges that Theranos lied to patients and doctors, selling blood tests it knew were faulty and thus putting patients at risk.
The indictment echoes the story that’s been coming into clearer focus after its first contours were reported by The Wall Street Journal’s John Carreyrou in October 2015: Holmes and Balwani lied brazenly about their technology’s capabilities — even though they knew it was inaccurate, unreliable, slow, and limited in terms of the tests it could perform.
They marketed their blood test sold in Walgreens stores to consumers in Arizona and California, the indictment says, even though they knew it could not consistently report accurate levels of calcium, chloride, and potassium, among other medical tests. They told investors that they were using their own proprietary machines to test patients’ blood, when in fact they were using commercially available analyzers they’d purchased.
They also lied about the state of their business, the indictment says. They told investors that Theranos would bring in more than $100 million in revenue and break even in 2014 before generating $1 billion in revenue in 2015 — when in fact they knew Theranos would make hardly any money at all in those years, according to the indictment.
Holmes’s departure as CEO marks the end of a saga that began when she dropped out of Stanford as a 19-year-old sophomore to found Theranos. Her company reached a $9 billion valuation, the most of any venture-backed company working in health care, on the promise that by a simple prick of a finger, it could make blood testing cheaper and faster. But the company’s troubles mounted, and in June 2016, Forbes estimated that its value had fallen to close to zero.
Holmes has become a well-known corporate villain. Once a media darling who graced the cover of magazines in her trademark black turtlenecks, she spent months publicly denying any wrongdoing at Theranos before assuming a low profile in recent months as the government sanctions and investigations piled up.
Balwani, Holmes’s ex-boyfriend who for years ran the company alongside her as a duopoly, is a more shadowy figure, with virtually no online trace. Known within Theranos as a mercurial and easy-to-anger manager, he left the company in 2016, as the company’s troubles were building amid sanctions from federal regulators and a darkening storm of bad press.
Meanwhile, Theranos may soon go out of business. The company has repeatedly laid off employees in an effort to cut costs and is staring down debts that could force it to liquidate as early as this summer, the Wall Street Journal has reported.
Both Holmes and Balwani appeared in federal court in San Jose, Calif., on Friday, according to the indictment. Their case has been assigned to Judge Lucy Koh, who’s handled a number of high-profile cases involving Silicon Valley.
https://www.statnews.com/2018/06/15/theranos-elizabeth-holmes-indicted-fraud/
List of Theranos postings on this blog :
- Theranos: Scandal hit blood-testing firm to shut
- Theranos founder Elizabeth Holmes indicted for alleged fraud, out as CEO
- The rise and fall of Elizabeth Holmes ...
- Lesson of Theranos: Fact-Checking Alone Isn't Enough
- A 31-year-old's fight to disrupt a $75 billion industry
- TEDMED: Elizabeth Holmes Lab testing reinvented
- Blood, Simpler: One Woman's Drive to Revolutionize Medical Testing
This post is on Healthwise
