Friday, December 2, 2022

Theranos: Elizabeth Holmes Fraud Downfall (2015- 2022)

Theranos: Elizabeth Holmes Fraud Downfall (2015-2022)


Elizabeth Holmes
            There are many health technology companies that have been very successful in the work they do but Theranos is not one of those companies. The young start-up company was on track for big things but soon faced issues on many accounts of fraud and lying. In March of 2004 this was the start of Theranos, Elizabeth Holmes dropped out of Stanford to pursue her dreams of creating this startup company. Her goal of the company was to be able to diagnose diseases and medical conditions from a single drop of blood. After becoming one of the biggest and richest companies it was soon shut down for unethical and fraud reasons to their investors. In this case she completed many unethical actions that she didn’t follow any of the ethical theories. An individualist would say that she did not maximize profit within the law. A utilitarian would also say that she never maximized happiness of others she only maximized her own for a short moment before she was caught. In Kantianism she did not follow the formula for humanity, Holmes did not follow the rational way of life. Personally, I would also agree that she did not follow these ethical theories.


            The case of Elizabeth Holmes did not start until 2018 but there were many years that the case was unfolding until the first court appearance. This whole case starts with Holmes dropping out of Stanford at 19 and she went to start her dreams of creating Theranos start-up. She also had a partner named Ramesh Balwani also known as Sunny. He joined her as the president of the start-up at the age of 20. There were many companies that invested in Theranos as you will read in the next paragraph about all the stakeholders that invested until the downfall of Theranos. The case controversy started when Wall Street Journal did an investigation on Holmes and said that she wasn’t doing what she promised and that she was lying about the single drop of blood method that she has promised she was doing. This was the start of when big name companies like Walgreens started to pull out. Many other

Machine that was used to Test the Blood

small companies at the time also decided to pull out because of the claims that were being made against their labs. In 2016 Balwani steps away from Theranos and the company ends up voiding two years of blood test results that no one can see the results of. In June/July of 2016 she was worth $0 and lost her lab deals with Walgreens that were the ones making her the most money, she also got banned from running labs for two years because of the rumors. Many companies started to sue Theranos like Walgreens they wanted their $140 million that they originally invested into the company. Elizabeth decided to settle for the companies that wanted to sue her. March 2018 came the massive charge of fraud against her which involves more than $700 million from the investors. The fraud involved “elaborate, years-long fraud in which they exaggerated or made false statements about the company’s technology, business, and financial performances” (Doubek). When 2018 rolled around Balwani and Holmes were both indicted on criminal fraud charges, and both pleaded not guilty. Holmes then stepped down as the CEO of the company and in September of 2018 it then dissolves and Theranos is no longer a company. In March of 2021 Holmes was pregnant and she delayed her case until August 2021 when the trial begin. In January 2021 she was found guilty of four out of 11 of the charges and was going to face 20 years and a fine of $250,000 for each count of fraud. All of these charges were related to 1 account of defraud on investors and 3 wire fraud counts on investors (O’Brien).

            In July of 2022 there was talks from Elizabeth and she asked for an overturn conviction due to new evidence and lack of evidence in the last trail. Then in August 2022 she was seen pregnant again just as she wanted to start a new trail again. I don’t think that this was a coincidence rather than a plan attempt to keep pushing dates and final decisions back. In October of 2022 she went to the court hearing to ask for a new trail, she did this because a key witness visited her house a month before they raised fairness of the trail. Her former lab director went to her house and spoke with her husband Billy Evans about the case and how she should be granted a new trial because “the government made things worse than they really are” (Allyn) according to Holmes attorney claim Rosendorff. There was claims

Elizabeth Leaving Court with Husband after Verdict

of new evidence and they were granted a limited hearing from the Judge to allow him to explain himself. His claim on the witness stand was that Holmes is a mother of 1 and there may be a second on the way and she can’t be alone from her children that long and that they need a mother. On November 18th Holmes was allowed to be seen in court again they decided that she will be sentences to 135 month in prison or 11.25 years and then followed by 3 supervised years after prison. This was almost 9 years less than the other decision because of what Rosendorff said to the judge. She will now be sentenced to go to prison in April of 2023. But you never know if a pregnancy could affect this or push this back more.


            Theranos was dependent on their stakeholders and the relationships with their stakeholders that did not last very long. The stakeholders trusted Elizabeth and the visions that she had to Theranos, but they were greatly misled. In the end of 2013, she got her first sponsorship with Walgreens, and they planned to make Theranos testing nationwide at the time. Theranos had many investors, but they soon began to pull out in the end of 2015. An example is Safeway who invested $350 million in the company to make blood tests available and have labs around the nation. The family of Betsy Devos was an investor in the company and gave their money because they believed in what Elizabeth was saying and they thought that this would be innovative for the health care industry. Lisa Peterson was also a stakeholder in the company, she was the co-founder of Amway, she invested $100 million in 2014. The families were all given fake revenue projections like $990 million in revenue in 2015. The DeVos family was one of the biggest investors and the family invested their money based on the information that Holmes provided to them. A family called the Walton’s, created Walmart, they “invested $150 million into the company” (Keown) also. There are many investors that made this start-up work like Riley Bechtel, chairman of constriction business Bechtel Group, and Cox Enterprises. This was all part of her plan to get lots of stakeholders to invest and be private donors so that she could safely run her company. She also was smart and would surround herself with my political figures that were into helping the pilot program for blood testing technologies.


            According to Freidman’s Individualism as a business you want your main goal and maybe your only goal to maximize the profit of your company by following the law (Salazar) for the owner, so in this case Elizabeth Holmes, or the stakeholders which are listed above. It is also phrased as that anyone who works for an organization is responsible for themselves and what they do, they should focus on themselves and help change their behavior to help the company benefit. An Individualist would say Elizabeth Holmes did not profit within the law, and she did quite the opposite. According to an Article Verdict in fraud case of Theranos founder Elizabeth Holmes offers lessons for investors she supposedly raised $945 million from investors based on her false blood-testing claims. She made sure that Theranos had the money that it needed even though it was true that the company ever even had a prototype that worked. Elizabeth Holmes was only worried about herself and the company that she created. For example, when Theranos started she was one of the richest women in America with $4.5 billion and looking back at it know she probably only cared about the money that she now owned rather than the company. She also was individual because she only looked out for herself when the company started to downfall. They layed off 155 employees in 2017 and she obviously did not care about the workers and doing the right thing because she would just continue to lie and settle when a lawsuit came along. In 2018 she stepped down as CEO when the company lost all profits, and she knew that the company would not come back from this. Once the investors and the profits went, she also knew that it would be best to leave and to try and stay aways from all the laws she broke but it caught up with her in the long run.


            Utilitarianism is seen as “happiness or pleasure are the only things of intrinsic value” (Salazar) It is seen as happiness of yours and others matters even when some things don’t bring happiness you should still do those things. A utilitarian would view this as an unethical case because of how Holmes went about her company, and she didn’t care for anyone else including the customers/patients, workers, and stakeholders. According to the book utilitarian’s are also concerned about the well-being of the community, Elizabeth Holmes was only concerned about her own happiness with money, and she seemed as if she could care less about the stakeholders. She gave them and the media false hope for what she was creating. When she lied to the stakeholders, she broke a rule of utilitarianism, and this resulted in them withdrawing from the company and also wanting to sue Theranos in the later years.  The stakeholders of this company wanted to maximize happiness with everyone and make sure that Theranos had money to produce the results that they needed. The number of total stakeholders are not given but they were harmed badly and lost trust in medicine. Based on an estimated number Theranos and Elizabeth Holmes sold 1.5 million blood tests from 2013-2016 and 7.8 million tests results for over 175,000 buyers. Holmes hurt many people in this situation and that included “more than 10% of all Theranos test results for 176,000 Arizona consumers were later voided or corrected” (Goodkind). From a utilitarian’s view Elizabeth is not able to see clearly right from wrong and how her decisions effect millions of people. People needed real diagnosis but were left in disbelief and distrust against Elizabeth.   The employees needed to also feel like they were creating happiness but when they have to lie about what they did in the labs it is very unethical. When the company was making false readings, this is a liability to the patients when they need this important information.


            Kantianism which was created by Immanuel Kant was not to act irrationally and to consider rationales beings and have dignity and be respected. To respect people and be consistent in your actions that other people would also follow your actions. A Kantianism person would not be on the side of Elizabeth Holmes because mostly some if not all her decisions were made irrationally, and no one should follow her as an example. Under Kantianism the Formula for Humanity states “so act that you treat humanity, whether in your own person or in the person of any other, always at the same time as an end, never merely as a means” (Plato. Stanford). Holmes in the beginning showed people that she was making a difference in the science world but in reality, she was not making a difference at all. She was very respected in the beginning when people saw that she dropped out of Stanford to pursue her dream and became very rich but according to Kantianism she acted irrationally, and her dignity was gone in the end when she lost it all. Holmes was lying a lot and this false information led to her case being unethical and against mostly all the theory’s. One thing that was present was the motivation that Holmes had to keep Theranos afloat, she was motivated to make Theranos a reality when she first started in 2003 but that motivation became overpowered by the view of money and the fear of failing. When Elizabeth got caught by the stakeholders she lost respect from everyone and the motivation to save Theranos also disappeared.


Going back a long time was when Aristotle created the Virtue Theory, virtues “are things that enable for something to function well or be good” (Salazar) The Virtue theory consists of four virtues of character and these are courage, temperance/self-control, honesty, and justice/fairness. To add, there is intellectual virtue and prudence is associated with that, it is liability to make good decisions for your future self. These theories were created for people to differentiate between the good and the bad. When people realized what they were doing was good and their purpose they would then achieve what they needed to, it would result in virtue. The courageous part of this case was the whistleblower in this case Tyler Shultz, he was “not only the Theranos Whistleblower, but he was the first to report troubling

Tyler Shultz Whistleblower

findings at the company to regulators” ( He was being a bold person in doing this because he knew what she was doing was wrong and that the world needed to know about all the money that they were wasting on Theranos. When thinking about the virtue characters honesty is the first one that comes to mind because that is the thing that Elizabeth was not. She was never honest to her patients, stakeholders, workers, and everyone in the world. Elizabeth said “At a relatively young age, I began to believe that building a business was perhaps the greatest opportunity for making an impact, because it’s a tool for making a change in the world” ( When reading this it made people think that she was doing the right thing but she did the opposite and was dishonest. Elizabeth Holmes is not a courageous person because she lied and never could get herself to come clean about her work. If she had courage she would stick up for Theranos and find a way for it to survive. She had no temperance when it came to money that she and her company were gaining her self- restraint was zero in this company. In the self- control side, she should have been able to control everything if it went out of hand but she was not able to. She relates to fairness/ Justice because she may have felt that the original court ruling was not fair so she asked for a retrial. The judges thought otherwise that the case was fair and the information provided was liable. She was brought to justice and punished for her crimes, she will face the 11 ½ years in prison. Lastly, she did not contain the characteristic of prudence, she set her future self-up for failure by her unethical ways described above.


            After reviewing this case and the new decision that was just made for Elizabeth Holmes, I agree with the judge in the decisions that they made. The opportunity that she wanted for a retrial was unnecessary which I agree with them that nothing would have changed her case because all of her evidence was so public, and she could not have taken back what she did. In this case mostly everything that she did with Theranos was non permissible. She was lying constantly to keep the investors and try to make her dreams come true. Theranos actions were very unethical, and I can’t see how she would have gotten away with this no matter how hard she tried. They stole millions of dollars and poured the money into a failed project that scientifically could have never worked. It is pretty impossible to test for millions of diseases with just one drop of blood, there are not enough molecules in one drop of blood for this to work. She deserves the time that she was sentenced because of her unethical actions and the effect that it had on people in negative ways.


            In conclusion, Elizabeth Holmes got what she deserved in her second round of being Infront of the judge after asking for the retrial. Her and Sunny both got in equal trouble for what they did. Elizabeth’s current pregnancy will be in question as she gets closer to her prison date, and we will see if it get pushed away even longer. She continued to play many games with the law throughout her time with Theranos and even throughout her court trials. Elizabeth lived a very unethical life from a young age, and I will not understand how she could live with herself lying everyday about the work that she did. She was supposed to be the future for healthcare technology but instead she lied to just get money and become more famous. In the case her husband Billy Evans and her parents are still very supportive of her and are on her side. This is shocking after all she has done.






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