Theranos: Elizabeth Holmes Fraud Downfall (2015-2022)
ABSTRACT
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| Elizabeth Holmes |
ETHICS CASE CONTROVERSY
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
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| 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
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| 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.
STAKEHOLDERS
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.
INDIVIDUALISM
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
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
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.
VIRTUE THEORY
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
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| Tyler Shultz Whistleblower |
findings at the company to regulators” (npr.org). 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” (Brainyquote.com) 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.
JUSTIFICATIED ETHICS EVALUATION
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.
CONCLUSION
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.
REFERENCES
Allyn, Bobby. “Theranos Whistleblower Celebrated Elizabeth
Holmes Verdict by 'Popping Champagne'.” NPR,
NPR, 5 Jan. 2022,
https://www.npr.org/2022/01/05/1070474663/theranos-whistleblower-tyler-shultz-elizabeth-holmes-verdict-champagne.
DesJardins, Joseph. “Chapter 3.” An Introduction to Business Ethics.
Dumas, Breck. “Key Witness in Elizabeth Holmes Trial Stands
by His Testimony.” Fox
Business, Fox Business, 17 Oct. 2022,
https://www.foxbusiness.com/technology/key-witness-elizabeth-holmes-trial-stands-by-testimony.
Elizabeth Holmes Case Takes on More Drama Ahead of Sentencing.
https://www.nytimes.com/2022/10/17/technology/elizabeth-holmes-case-adam-rosendorff.html.
“Elizabeth Holmes Quotes.” BrainyQuote, Xplore,
https://www.brainyquote.com/authors/elizabeth-holmes-quotes.
Jdickler. “Verdict in Fraud Case of Theranos Founder
Elizabeth Holmes Offers Lessons for Investors.” CNBC, CNBC, 4 Jan. 2022,
https://www.cnbc.com/2022/01/04/verdict-in-fraud-case-of-theranos-founder-elizabeth-holmes-has-lessons-for-investors.html.
Keown, Alex. “Rep for Wealthy Theranos Stakeholder Describes
Holmes' Investor Courting Practice.” BioSpace,
BioSpace, 27 Oct. 2021,
https://www.biospace.com/article/wealthy-theranos-stakeholder-describes-meeting-with-holmes-ahead-of-100-million-investment/.
Kerstein, Samuel. “Treating Persons
as Means.” Stanford Encyclopedia of Philosophy, Stanford University, 13
Apr. 2019,
https://plato.stanford.edu/entries/persons-means/#:~:text=One%20formulation%2C%20often%20called%20the,1785%3A%20429%2C%20italics%20removed).
O'Brien, Sara Ashley. “The Rise and Fall of Elizabeth
Holmes: A Timeline | CNN Business.” CNN,
Cable News Network, 17 Nov. 2022,
https://www.cnn.com/2022/01/04/tech/elizabeth-holmes-rise-and-fall/index.html.
Salazar, Heather. Business Ethics PowerPoint Slides
Ushe, Naledi. “Elizabeth Holmes's
Trial Left Theranos Patients without Justice.” POPSUGAR Entertainment, 2
Mar. 2022,
https://www.popsugar.com/entertainment/what-happened-to-elizabeth-holmes-theranos-patients-48735060.
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