Theranos: Elizabeth Holmes Fraud Downfall (2015- 2022)

Theranos: Elizabeth Holmes Fraud Downfall (2015-2022)

ABSTRACT

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.

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

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 18^th 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

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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Theranos: A Company Made to Deceive (2015-2021)

 Theranos: A Company Made to Deceive (2015-2021)

Case Controversy:

In 2003, Elizabeth Holmes, a 19-year-old Stanford student dropped out of college and launched Theranos inc. Theranos was a blood testing company whose business model revolved around the idea that they could run blood tests using proprietary technology that required only a finger prick and a small amount of blood. These tests were allegedly supposed to be able to detect medical conditions like cancer and high cholesterol using small, automated devices (Hartmans Leskin Jackson 8). Between the years of 2004 and 2007 Theranos attracted investors and raised millions of dollars. Theranos’ valuation went from about $30 million in 20014 to $197 million in 2007.

In 2009 Ramesh Balwani, who was romantically involved with Holmes’ at the time, joined the company. Balwani would serve as president and CEO of Theranos. Balwani and Holmes would continue to grow the company and in 2013 Theranos’ blood tests were available to the public through a partnership with Walgreens. Theranos’ value would skyrocket as it reached $9 billion. Holmes’ net worth was now $4.5 billion, and she was considered the youngest self-made billionaire on planet Earth (Tun 3). 

On October 15, 2015, an article published by the Wall Street Journal exposed the shortcomings of Theranos. The article claimed that the blood tests were not being run on proprietary technology but instead on commercial blood analyzers. The effectiveness and accuracy of Holmes’ breakthrough blood testing machine “Edison'' was also brought into question in the article as it was reported the device could only perform 15 tests which is not what Theranos’ website claims. The article stated, “But Theranos’s outside lawyer, David Boies, acknowledges that the company isn’t yet using the device for all the tests Theranos offers. The transition to doing every test with the device is “a journey,” he says. Asked about the claim on the company’s website, Mr. Boies replied that using the device for the “full range” of blood tests is a goal Theranos will eventually achieve.” (Carreyrou 9). In the midst of the Wall Street Journal’s reporting Theranos deleted claims on their website that their test only required a few drops of blood among other things. They would come out publicly and say that the website alterations were done for marketing accuracy. 

Holmes continued to back her company and claimed that they were in a pause period while waiting for federal approval of their proprietary technology. However, in January of 2016 during an inspection by the Medicare and Medicaid services it was discovered that Theranos’ California lab which housed its proprietary technology had deficiencies that posed immediate health and safety risks to patients. The four-page letter from the Medicaid and Medicare services included major infractions in five different categories including Hematology tests. Hematology tests are extremely important for patients with diabetes and with blood coagulation issues. The tests determine whether patients should be put on anticoagulation medication whose side effects are life threatening (Carreyrou 12). Shortly after the inspection Balwani would leave Theranos for good in May 2016

In October 2016, about a year after the Wall Street Journal's initial reporting Theranos made the decision to close its medical lab operations. About 6 months later the Arizona attorney general announced that all Arizonians could get a full refund if they purchased a Theranos product as part of a $4.65 million settlement with the company. In 2018 after another $100 million settlement with an investment firm Theranos collapsed. In March of 2018 the Securities and Exchange commission charged Theranos, Holmes, and Balwani with civil securities fraud. Theranos and Holmes reached settlements without admitting or denying liability. On June 18, 2015, federal prosecutors brought criminal fraud charges to Holmes and Balwani. The initial indictment detailed two counts of conspiracy to commit wire fraud and nine counts of wire fraud. “According to the indictment, the charges stem from allegations that Holmes and Balwani engaged in a multi-million-dollar scheme to defraud investors, and a separate scheme to defraud doctors and patients.  Both schemes involved efforts to promote Theranos, a company founded by Holmes and based in Palo Alto, California.” (United States Department of Justice 1). The indictment further explained how Holmes and Balwani knew Theranos’ tests were not able to produce accurate and reliable tests and that Theranos’ technology was likely to produce inaccurate and unreliable results. It is stated that Holmes was aware that Theranos claimed to use their own proprietary technology for blood tests but instead was using third party, commercial blood analyzers. (United States Department of Justice 2). The indictment continues to allege that, “defendants used a combination of direct communications, marketing materials, statements to the media, financial statements, models, and other information to defraud potential investors.  Specifically, the defendants claimed that Theranos developed a revolutionary and proprietary analyzer that the defendants referred to by various names, including as the TSPU, Edison, or minilab.” (United States Department of justice 5).

Holmes’s lawyer has repeatedly stated that “Failure is not a crime” to counter assistant US attorney general Robert Leach who, “painted Ms. Holmes as an executive who took shortcuts to try to keep her company solvent and lied to keep investor money flowing” (Randazzo 2). During the opening statements of Holmes' trial on September 8th. While the trial is yet to conclude Holmes is facing up to 20 years in prison. This is an unusually long sentence for a Silicon Valley startup failure. Reasoning for this is, “The reason Holmes is facing up to 20 years in prison, rather than a slap on the wrist, has to do with the brazenness, magnitude and longevity of her alleged deceits, which included secretly sending blood samples for outside lab tests rather than using the company’s own technology.” (Oremus 7)

Stakeholders: 

 

         The stakeholders in this specific case are the company, Theranos, Elizabeth Holmes, investors, the patients and doctors that used Theranos’s technology, and the stores that sold Theranos’ products. Theranos is an obvious stakeholder in this case. As a company, before the allegations of inaccurate test results and findings, Theranos was worth billions of dollars. After the allegations and charges, the company was forced to collapse and is now no longer a thing. Elizabeth Holmes as her reputation as an entrepreneur, valuation, and future are all affected by this case. Holmes' reputation as an entrepreneur is at stake as it now appears she is willing to deceive and mislead investors in order to get their money. Before the case Holmes was valued at $4.5 billion and was named the youngest self-made billionaire of all time. After the case her net worth is now estimated to be zero due to her entire net worth being her 50% stake in Theranos. Now that Theranos has collapsed that value is gone (Herper 2). Her future is at stake as she is currently at trial for her role in the Theranos scandal and is facing up to 20 years in federal prison. The many people that invested mass amounts of money into Theranos were greatly affected as they lost all of their money due to the collapse of the company. The doctors who implemented and used Theranos supposedly proprietary technology are affected as they could have possibly run false and misleading tests on their patients. This could lead to serious life-threatening repercussions for patients and could ruin a doctor’s reputation and credibility. Patients who were given blood tests administered by Theranos’ technology are also affected by this. Due to many tests, being inaccurate and unreliable, patients ' health and safety is severely at risk. The companies and stores that distributed Thernaos’ product such as Walgreens and Safeway, are also affected. These companies are obviously forced to no longer sell these tests and will have to revert to the old products they used to distribute

Utilitarianism: 

Under utilitarianism, businesses should ​​ aim to maximize happiness for all parties that are involved in the business action. This happiness should be maximized not only in the short term but also in the long term. Utilitarians must compare the business actions with other possible actions to find out which possible actions would benefit happiness in the long term (Salazar 17). A utilitarian would view Elizabeth Holmes, and her company Theranos as very unethical as they didn't maximize the short term or long-term happiness of all the stakeholders involved in their business actions. For Elizabeth Holmes, her happiness was maximized in the short term, with the wealth she acquired, but was not maximized in the long term as she would end up losing all her money, and potentially facing jail time for her role in the Theranos scandal. The investors that pumped money into Theranos At the start of the fraudulent product also did not have their happiness maximized. Like Holmes, the investors would end up being happy in the short term as the company's value steadily grew, but in the long term they would suffer as the company was found out to be fraudulent and collapsed. The doctors that were involved in this case due to using Theranos’ “new technology'' did not benefit from this case at all. By using the technology, doctors were making false and unreliable blood test readings for their patients. This puts patients at short- and long-term health risks. Patient’s happiness in this case was not maximized in the short or long term. Theranos’ inability to produce effective blood testing kits put the patients in a situation where they had to make important health decisions based on false readings. Patients that received these false readings most likely had to return to their respective doctor and get new readings done with the proper testing kits. They were also forced to most likely change medications based on new results. There were also many instances where the original medication a patient was put on due to the false readings had side effects that were life threatening and could have ended up being deadly if used incorrectly. Theranos’ partners, Walgreens, Safeway, and Capital BlueCross are also unhappy. Due to them distributing Theranos’ blood testing kits it makes them have to revert back to their previous contract with another company that had reliable blood testing kits. This costs money and time in the long term. Overall, none of the Stakeholders involved in this case benefited from the actions of Theranos. A company that would be considered ethical under a utilitarian viewpoint would maximize their stakeholder’s happiness. Unfortunately, Theranos almost maximized unhappiness for its stakeholders in both the short term and the long term. Theranos deceived not only the investors that trusted them with their money, but the everyday person that trusted them with their health and safety.

Individualism:

Under individualism, businesses should act in order to maximize their profits while remaining with the constraints of the law. Milton Friedman developed the doctrine as a theory of business ethics that states that “an entity’s greatest responsibility lies in the satisfaction of the shareholders.”  He also said Friedman “there is one and only one social responsibility of business—to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition, without deception or fraud” (DesJardins 2014).

Those quotes and this theory go alongside how Holmes and Sunny had strategic advertising and marketing plans and were able to gather over $700 million from investors. Holmes and Sunny promised this revolutionary type of testing that brought so much hope to not only consumers but also investors making them so willing to contribute and invest in the company. These two were trying to maximize their company’s profits and make the most money however they failed to follow the single most important part of individualism, which is remaining within the constraints of the law. The defendants Holmes and Sunny knew Theranos was not capable of consistently producing accurate and reliable results for certain blood tests even though they allegedly knew they were likely to contain inaccurate and unreliable results yet continued the company while scamming their investors. Not only were the two wrong for scamming their investors but they also “misled doctors and patients about the reliability of medical tests that endangered health and lives," said John F Bennett of the Federal Bureau of Investigation. Since they failed to produce devices that were FDA approved as well as mislead patients to believing these tests were reliable, Theranos failed to maximize profits for the owners, and failed to stay within the constraints of the  law, therefore rendering their practices unethical and destroying the company that was once worth 9 billion dollars. 

Kantianism:

A Kantian would view Theranos’ way of handling the situation as incredibly unethical and impermissible. Kantianism’s basis for deciding whether or not an action is ethical or permissible uses consistency within a person’s judgement and their actions performed. In order for a person and their action to be considered permissible and ethical, they would have to not treat anybody as a mere means in order to achieve a result and act as though everyone is a person who should be respected. This would be the basis for the Formula for Humanity. That person would also have to act rationally and not out of bad intentions or motivations. Deceit and lying would be a form of bad intention because you are not complying with Categorical Imperatives which include the opposite of irrational actions. In our case, Elizabeth Holmes is caught lying and spreading false information to everybody including the stakeholders. This would be an immediate form of deceit which would then deem this case as unethical. 

Virtue Theory:

Virtue theory is best described as that something is inherently good if it serves its function well. There are five main virtues in virtue theory, and these main virtues help us get along with the rest of society. These five virtues are courage, honesty, temperance/self-control, justice, and fairness. When looking at the case of Elizabeth Holmes and her company, these virtues are well represented in both positive and negative ways. Someone who displayed multiple virtues was John Carreyrou, the writer for Wall Street Journal. He went into the company and observed their environment. This led to him finding issues within the company and calling them out on it. He received backlash from the company, and the company even threatened to sue him for becoming a perceived enemy to the company. Also, there were reports of company employees starting a chant saying, “F*** you Carreyrou”. Despite all this backlash, he still displayed courage and was able to fight for what is right. He promoted honesty by not trying to hide what was going on with the company. The reason he was honest was because he wanted to promote justice and fairness in order to make things right and not allow this company to take advantage of anymore people.  Elizabeth Holmes and Ramesh Balwani were two people who displayed almost the opposite of all these virtues. These two individuals were the masterminds behind all of the company’s success. When looking at the five main virtues, it is safe to say that they lacked all five of these virtues. They did not have courage because they were hiding and operating in secret for an entire decade before they were eventually forced to go public. They lacked any sort of honesty as they lied and manipulated many different investors into investing millions of dollars into the company. They also had no self-control because of how quickly they gave in to their desires. They saw a market to manipulate people and make money in the blood testing business and went straight for it, without even considering the negative aspects of it. They did not promote justice in any way because they were sneaking around and doing illegal things. They had no interest in doing what was right, and they only cared about doing what would make them the most money. Lastly, they did not have any fairness either. There were reports of them running tests while using other companies' technology. They did not play by the rules or play fair and would use whatever cheap tricks they could to gain an advantage over the competition.

​​Overall, none of the Stakeholders involved in this case benefited from the actions of Theranos. Not only were the two wrong for scamming their investors but they also “misled doctors and patients about the reliability of medical tests that endangered health and lives," said John F Bennett of the Federal Bureau of Investigation. Unfortunately, Theranos almost maximized unhappiness for its stakeholders in both the short term and the long term, broke the law while trying to maximize their profit, had poor judgement deeming their actions impermissible, and broke the virtues of honesty, justice and fairness . Theranos deceived not only the investors that trusted them with their money, but the everyday person that trusted them with their health and safety.

Action Plan:

Theranos’ main problem revolved around the company's dishonesty about what their technology and products were capable of doing. The CEO of Theranos, Elizabeth Holmes, and the COO, Ramesh Balwani were consistently dishonest about their capabilities of their new blood testing technology, in order to deceive investors into dumping hundreds of millions of dollars into the company. This all came crashing down when it was discovered that Theranos’ technology was ineffective and nothing like it was marketed to be. Theranos as a company collapsed after Balwani and Holmes were charged with fraud. 

If Theranos as a company stayed afloat it would need to seriously change their values and mission. Theranos mission moving forward should have been to produce innovative, effective blood testing devices that are smaller and cheaper than anything made prior. As a company, Theranos values convenient, simple, and cheap medical care, but most importantly the health and well being of all their customers 

As a company Theranos needs to establish new core values. Before the scandal it seemed as if Theranos valued things such as making money, dishonesty, and deception. Holmes and Balwani were not in the industry to improve other people's lives but they were solely trying to improve their own lives. A new look Theranos would have core values that prioritize patient safety, convenience, innovation, and honesty. These values would guide the company to doing what they initially intended to do, make innovative and effective medical equipment. By committing to patient safety, Theranos will make it their main goal to put patients first, they will be sure to research and test new testing devices effectively before putting them to market and will never prioritize profit over safety which they had previously done. Convenience and innovation are important values for the company as they are looking to release the smallest and cheapest blood testing devices on the market. By doing this they will be like no other medical technology/equipment company in the world. Honesty is obviously something Theranos needs to value. There was no honesty in the company run by Holmes and Balwani, and transparency will be of the utmost importance in order to gain back patients and doctors' trust.

To ensure ethical business procedures are being abided by, Theranos will obviously need to hire a new CEO and COO. Theranos should target leaders who value the same things that they as a company value. Theranos also needs to make sure that the engineers, doctors, and lab workers they employ in order to produce and analyze the tests are competent and qualified enough for their job. By doing these things, Theranos will be able to actually produce what they initially set out to produce. This will guarantee profit as it is already proven that the proposed technology will attract investors and distributors. This time around, Theranos just has to execute what they say they are trying to. 

Brian Geitner, Anthony Kelliher, Destiny Swierkosz, Ryan McCann

References: 

Avery Hartmans, Paige Leskin. “The Rise and Fall of Elizabeth Holmes, the Theranos Founder Who Is Now on Trial for Fraud.” Business Insider. Business Insider, August 31, 2021. https://www.businessinsider.com/theranos-founder-ceo-elizabeth-holmes-life-story-bio-2018-4.

Bloomberg. “Theranos Founder Elizabeth Holmes Charged with Wire Fraud.” Time, Time, 15 June 2018, https://time.com/5313978/elizabeth-holmes-indicted-wire-fraud/.

Carreyrou, John. “Hot Startup Theranos Has Struggled with Its Blood-Test Technology.” The Wall Street Journal. Dow Jones & Company, October 16, 2015. https://www.wsj.com/articles/theranos-has-struggled-with-blood-tests-1444881901.

DesJardins, Joseph R. An Introduction to Business Ethics. New York, NY: McGraw-Hill Education, 2020.

Elizabeth Holmes Trial: Key Takeaways from Week 8 - the ... www.nytimes.com/2021/10/27/technology/elizabeth-holmes-trial-takeaways.html

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Herper, Matthew. “From $4.5 Billion to Nothing: Forbes Revises Estimated Net Worth of Theranos Founder Elizabeth Holmes.” Forbes. Forbes Magazine, March 22, 2019. https://www.forbes.com/sites/matthewherper/2016/06/01/from-4-5-billion-to-nothing-forbes-revises-estimated-net-worth-of-theranos-founder-elizabeth-holmes/?sh=74ad60a13633.

Khorram, Yasmin. “Elizabeth Holmes Said She Was the 'Ultimate Decision Maker' at Theranos in 2017 Deposition as Her Defense Team Argues the Opposite in Criminal Trial.” CNBC, CNBC, 4 Nov. 2021, www.cnbc.com/2021/11/04/elizabeth-holmes-said-she-was-decision-maker-at-theranos-in-2017-deposition.html.

Oremus, Will. “Analysis | Elizabeth Holmes's Trial Spotlights Silicon Valley's Thin Line between Hype and Deceit.” The Washington Post. WP Company, September 1, 2021. https://www.washingtonpost.com/technology/2021/09/01/elizabeth-holmes-theranos-trial-analysis-silicon-valley/.

Randazzo, Sara. “The Theranos Trial: Elizabeth Holmes, the Charges and What Else to Know.” The Wall Street Journal. Dow Jones & Company, September 23, 2021. https://www.wsj.com/articles/the-theranos-trial-elizabeth-holmes-the-charges-and-what-else-to-know-11625865236.

Salazar, H. The Business Ethics Case Manual. N.d.

“Theranos Founder Hit with Criminal Charges.” BBC News, BBC, 15 June 2018, www.bbc.com/news/business-44501631. 

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Tun, Zaw Thiha. “A Timeline of Theranos's Troubles.” Investopedia. Investopedia, August 3, 2021. https://www.investopedia.com/articles/investing/020116/theranos-fallen-unicorn.asp.

“U.S. v. Elizabeth Holmes, Et Al..” The United States Department of Justice, October 12, 2021. https://www.justice.gov/usao-ndca/us-v-elizabeth-holmes-et-al.

Barbaro, Michael, Michael Simon Johnson, Clare Toeniskoetter, Neena Pathak, Diana Nguyen, Paige Cowett, Marion Lozano, and Chris Wood. “The United States v. Elizabeth Holmes.” The New York Times. The New York Times, September 16, 2021. https://www.nytimes.com/2021/09/16/podcasts/the-daily/elizabeth-holmes-trial-theranos-silicon-valley.html.

Carreyrou, John. “Hot Startup Theranos Has Struggled with Its Blood-Test Technology.” The Wall Street Journal. Dow Jones & Company, October 16, 2015. https://www.wsj.com/articles/theranos-has-struggled-with-blood-tests-1444881901.

“Elizabeth Holmes Trial Week 10 Recap: 'Hostile' Behavior from Theranos' Former COO, and 60,000 Voided Tests.” Yahoo! News. Yahoo! Accessed November 15, 2021. https://news.yahoo.com/elizabeth-holmes-trial-week-10-173918502.html.

Herper, Matthew. “From $4.5 Billion to Nothing: Forbes Revises Estimated Net Worth of Theranos Founder Elizabeth Holmes.” Forbes. Forbes Magazine, March 22, 2019. https://www.forbes.com/sites/matthewherper/2016/06/01/from-4-5-billion-to-nothing-forbes-revises-estimated-net-worth-of-theranos-founder-elizabeth-holmes/?sh=2ab06c0c3633.

Jackson, Sarah. “Theranos Founder Elizabeth Holmes' Fraud Trial Is Now Underway. Here Are Some of the Big Players Listed as Potential Witnesses in the Case.” Business Insider. Business Insider, September 8, 2021. https://www.businessinsider.com/elizabeth-holmes-theranos-fraud-trial-witness-list-2021-9?utm_source=yahoo.com&utm_medium=referral.

Lagasse, Jeff. “CMS Letter to Theranos Claims Test Failed to Spot Prostate Cancer.” Healthcare Finance News. Accessed November 15, 2021. https://www.healthcarefinancenews.com/news/cms-letter-theranos-claims-test-failed-spot-prostate-cancer.

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Roper, Caitlin. “This Woman Invented a Way to Run 30 Lab Tests on Only One Drop of Blood.” Wired. Conde Nast, February 18, 2014. https://www.wired.com/2014/02/elizabeth-holmes-theranos/.

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Salazar, H. The Business Ethics Case Manual. n. d.

Theranos: The Blood Testing Company That Wasn't (2015)

Elizabeth Holmes, founder of Theranos

The Controversy:

As a 19 year old Stanford dropout, Elizabeth Holmes founded a blood testing company named Theranos that revolutionized how blood samples could be analyzed. She found backers and investors and began raising money, as she developed herself into the world's youngest self-made female billionaire. At its hight- before it began to be questioned by John Carreyrou, a healthcare reporter for The Wall Street Journal- Theranos was valued at 9 billion dollars. Its claim to fame was pain-free tests that could look for up to 70 different markers in a single drop of blood, and have the results delivered to your phone in hours. This type of technology seems too good to be true, as it revolutionizes the way blood samples can be processed. It would be a great improvement- if it actually worked, however. The first red flags came up when Carreyrou noticed Holmes had difficulty explaining how it worked. When asked, she replied with, “a chemistry is performed so that a chemical reaction occurs and generates a signal from the chemical interaction with the sample, which is translated into a result, which is then reviewed by certified laboratory personnel.” I doubt anyone could listen to that statement and believe she has any idea of what she's talking about. So naturally, Carreyrou began poking around and made an interesting discovery. He discovered that single drop samples can not be accurately tested, so Theranos diluted the samples and ran them through other machines made by Siemens, instead of their own “Edison.” After the article produced by Carreyrou, the FDA looked into the case and told Theranos to stop using its “nanotainers,” another product of theirs. Holmes came out and fought these allegations, however she didn't provide any data to counter the article’s claims. Later it was uncovered that Theranos had run a flawed blood-clotting test on over 80 patients for six months, which meant that Theranos’ tests were throwing off medical decisions. Theranos’ tests also failed at least a third of all internal quality control checks.

The original Theranos laboratory, in Palo Alto, 2014.

Stakeholders:

Theranos has several different types of stakeholders. Corporations like Walgreen's, Safeway, and Capital Blue Cross all partnered with Theranos in the beginning. They have invested money into the company, and have contracts with it. There are also people that have been negatively affected by the company's false technology. Since you cannot accurately analyze blood samples as small as drop of blood, Theranos has thrown off medical decisions for the patients who have used their machines. Theranos should be held responsible for these mishaps, since Holmes knew their technology was faulty and not as real as they portrayed. 

Example of the machines designed by Theranos to
 analyze blood samples.

Individualism:

There are two main ideas for the Individualism perspective- maximizing profits and staying within the law. When analyzing this case, it seems at first that it is ethical in the eyes of an individualist. Theranos did become a huge success- a massive operation worth 9 billion dollars. They weren't originally flagged down by the FDA or the CLIA (Clinical Labs Improvement Amendments), suggesting that they were acting within the constraints of the law. However, once Theranos was investigated, it soon came out that they had failed to produce devices that were FDA approved. In the long run, it also did not maximize profits. At Holmes's peak, she was worth 4.5 billion dollars. After this scandal, Forbes evaluated her worth to be $0. So, Theranos failed to maximize profits for the owners, and failed to stay within the law, therefore rendering their practices unethical. 

It seems the small size of the sample would
make everyone happy, but that is not the case.

Utilitarianism:

A Utilitarian viewpoint focuses on the overall happiness of the stakeholders- an ideal utilitarian company will maximize their happiness. When looking at the Theranos situation, it is apparent that the company did not maximize the happiness of any stakeholders. Theranos lost pretty much all of its value, including all of the investor's money. Its partners, Walgreen's, Safeway, and Capital Blue Cross are also unhappy, as they had contracts to use their devices. Now they have to change back to the old technology that worked, which takes time. The unhappiness continues as you consider the patients and their doctors, who have had to make medical decisions based on the false readings from faulty devices. The only one in this whole case that I can see as being happy about this outcome is Siemens, the company who made the units that Theranos used instead of their "Edison" machine. It is very clear that Theranos was unethical from a utilitarian perspective, because it seems that it actually maximized unhappiness.

Kantianism:

Kantianism is mainly concerned with respect and rationality. The company should respect their own rationality and the rationality of others. Kantianism also says that you should only do something if it is for the right motive. Did the actions of Theranos come from Good Will? Was Theranos created for the sole purpose of helping people because it is the right thing to do? It seems that the company started as a botched ploy to get rich quick. From the very beginning, Theranos was lying to the public, and especially the patients who used their product. Holmes wasn't respecting the patients. She didn't give them the right of accurately analyzing their blood. Instead, she sabotaged their medical decisions. If a Kantian theorist were to analyze this case, they would argue that Theranos acted in an unethical way. 

Virtue Theory:
The virtue theory is a little bit different than the other theories mentioned above. In order to be successful, one must, "Act so as to embody a variety of virtuous or good character traits and so as to avoid vicious or bad character traits." There are a couple main virtues that apply to this case in particular. For example, some virtuous traits that one should strive to exemplify include Authenticity, Dignity, Generosity, and Integrity. Elizabeth Holmes and her company Theranos, have displayed none of these virtues- in fact, she presented the exact opposite. Holmes's whole company was founded on lies and deceit. The Holmes showed no dignity when she tried to lie her way out of the situation instead of coming out and telling the public the truth and working to fix it. Instead of being generous by providing a pain-free service to analyze blood samples, Theranos threw off medical decisions by not being accurate.

Justified Ethics Evaluation
I personally believe that Theranos acted in a very unethical way. I can't see how anything they did in their process could be considered acceptable. Elizabeth Holmes and her company made billions of dollars and their product didn't even work. Their blood analyzing machines weren't accurate and they knew it. However, they sold them to other companies and used them for a massive profit. I also think that Holmes handled the situation wrong when she got caught with fraudulent devices. I think she should have come clean and admitted what her company has been doing, and apologized to the public, as well as the companies that partnered with her. Instead she tried to make it seem as if she'd done nothing wrong, solidifying the concern of her unethical behavior. 

References

Lapowsky, Issie. "Theranos’ Scandal Exposes the Problem With Tech’s Hype Cycle." Wired. Conde Nast, 15 Oct. 2015. Web. 04 Apr. 2017.

Stockton, Nick. "Everything You Need to Know About the Theranos Saga So Far." Wired. Conde Nast, 04 May 2016. Web. 04 Apr. 2017.

Stockton, Nick. "Fixing the Laws That Let Theranos Hide Data Won’t Be Easy." Wired. Conde Nast, 20 Oct. 2015. Web. 04 Apr. 2017.

Bilton, Nick. "Exclusive: How Elizabeth Holmes's House of Cards Came Tumbling Down." The Hive. Vanity Fair, 07 Sept. 2016. Web. 04 Apr. 2017.