By now, most people probably have at least some inkling of the story of Elizabeth Holmes (b. 1984), the founder and CEO of Theranos. On Monday, a jury found her guilty on various counts of fraud and criminal conspiracy.
Her now-defunct $9 billion company was supposed to improve blood tests by making them more affordable, less invasive, quick and convenient. The claim was that a finger prick of blood run through a compact blood analyzing device called the Edison could deliver a wide range of blood tests. The Edison was kept out of sight, even among employees and never made progress. Tests were done instead on everyday technology already available.
Investors included heavyweights like Oracle’s Larry Ellison ($100 million), media mogul Rupert Murdoch ($125 million), Walgreens and a number of well-known venture capital and private equity firms. Unlike most sistema grifts, this one has gotten plenty of media exposure, and we submit that it’s because those heavyweights lost heavily on their investment.
The following “60 Minutes Australia” video from August 2021 offers the basic backstory.
Elizabeth Holmes exposed: the $9 billion medical ‘miracle’ that never existed | 60 Minutes Australia
Holmes, much like Fyre Festival founder Billy McFarland (b. 1991), spent an enormous amount of time and focus on promoting her concept and raising funds ($1.3 billion) but had no real idea how to deliver. Over time, both the magical thinkers Holmes and McFarland appeared to become increasingly drunk on media- and celebrity-hyped recognition, lauding them for successes they had not yet achieved.
Rather than admit they were in over heads, they chose to fake it and hoped they’d make it. But they never did.
When exposed, rather than return remaining funds to investors, Theranos stubbornly lawyered up and squandered the rest of their ill-gotten largesse playing dirty pool and delaying the inevitable.
The revelation that these Millennial emperors “wore no clothes” was not the direct result of criminal investigations or crack reporters. In McFarland’s case, the discovery was made when festivalgoers arrived on island for event that would never take place. For Holmes, the reckoning was the result of a handful of whistleblowers both inside and outside the company. Ultimately, Wall Street Journal reporter John Carryrou broke the story. Ironically, WSJ is Murdoch’s paper.
Holmes affected a ridiculously deep baritone voice, especially when she was making her pitch (see video below). She would sometimes briefly switch back to her normal voice. In her business style, she mimicked her idol Steven Jobs by wearing his trademark black turtleneck. Her seductive pitch was steeped in neuro-linguistic programming, New Age happy talk and wide blue eyes.
Elizabeth Holmes Fake Deep Voice? | Real Voice Comparison
The marks wanted to celebrate a brilliant female innovator in an age of female empowerment. The term “brilliant” was liberally applied to this con woman, including by Bill Clinton. Forbes magazine in 2015 named Holmes the youngest and wealthiest self-made female billionaire in America.
With the financial mania advanced by several levels since 2015 one can only imagine how many and how large such “genius” grifts are today.
The company was totally built around yes men, pajama people, hyper-positivity and fantasy (aka cartoon world). Anybody inside the company seeking corrective measures or who tried to shed sunlight on Theranos was quickly read the riot act and fired — sometimes even threatened. As the luster wore off, Holmes’ company — much like McFarland’s — was gutted of its key employees. Employees today talk about that turnover process taking around six to nine months after employment.
A main focus of Winter Watch are the methods sociopaths and criminals use to run rings around the public at large. As such, we were most interested in the testimonies of two Theranos whistleblowers. One is Tyler Shultz, the grandson of former U.S. Secretary of State George Schultz. George was on Theranos’ board of directors and a financial backer. Apparently, Tyler is made of different stuff. Then there is Theranos lab tech Erika Cheung, shown in the video below.
The video should start at the most pertinent part of their Stanford presentation [00:09:14]. Watch for about 10 minutes, but be sure to catch the part where they speak about company’s culture. It seems that when Tyler Schultz was alerted to fraud in the assay results, he naively felt he and Cheung could turn to his grandfather, George. Instead, company attorneys served him with a cease and desist order.
Employees apparently had signed a hardened non-disclosure agreement, which meant to shut down any reporting of fraud and criminal conduct even internally. Ultimately, Tyler ran up a $400,000 legal bill. He says in hindsight he wouldn’t have gone the whistleblower route given that the fall of this company was merely a matter of time.
Theranos ran a fear regime against employees and monitored, spied on and fired non-pajama people. There were strict warnings against office gossip. Performance was measured by blind compliance. Those who didn’t question and rubber stamped fictitious outcomes pleased top management. Truthful outcomes were penalized. Many employees were foreigners who were dependent on work visas to stay in the U.S. The workforce was largely reduced to nothing but the compliant.
The whistleblowers said the employees were siloed (their term for separated) and not allowed to see the other’s work or to compare notes. Schultz said he was in assay validation for three months before even seeing an Edison. It was obvious that the machine was defective, flawed and overhyped. Initially, he approached Holmes, thinking she was a family friend. He was quickly gaslighted, a term both whistleblowers used. Once these whistleblowers left the company, they were tracked by goons and otherwise intimidated.
Spilling the Blood of a Silicon Valley Unicorn
Essential to the grift and large-round capital raises was nailing down a major contract with Walgreens. Theranos was to provide Edison products to Walgreens new blood-testing clinics at their locations — this, despite not having a product. Other investors assumed Walgreen’s had done their due diligence. Walgreens eventually ended their agreement. But they never properly vetted the deal on the front end.
Theranos was scheduled to run demonstrations for pharmaceutical company partners. When their devices didn’t work live, they ran fake demonstrations instead. Requests from a Walgreens due diligence executive to run validation tests on their machines were dismissed. When the exec reported this back at headquarters, senior Walgreens management ignored it.
In January 2016, the Centers for Medicare and Medicaid Services (CMS) sent a warning letter to Theranos after an inspection of its Newark, California laboratory uncovered irregularities with staff proficiency, procedures and equipment.
The key to the Walgreen deal coup, according to the San Francisco Business Times, was when Well Fargo CEO Richard Kovacevich agreed to serve on Theranos’ board after multiple conversations with George Shultz. This was conducted at the private San Francisco-based Bohemian Club at Bohemian Grove, and a meeting with Holmes that was set up by Shultz. Kosacevich had close business and personal ties with Walgreens management and was able to grease the skids.
Kovacevich recalled in a July 2013 email to Holmes a conversation with Shultz at Bohemian Grove in which Shultz said he “wants Wells Fargo to be involved with (Theranos).”
Holmes responded by email nearly three hours later, telling Kovacevich, “I will raise the Wells Fargo relationship with Walgreens CEO and CFO in the context of our discussion with them about partnerships with financial institutions.”
Walgreens had been a customer of Wells Fargo, with the bank handling “a lot of their cash” and payment systems, Kovacevich said in a deposition.
In June 2018, a federal grand jury indicted Holmes and Theranos chief operating officer Ramesh Balwani on a total of 11 counts ranging from wire fraud to conspiracy to commit fraud, with the victims being investors and patients. The trial was postponed until August 2021 due to Covid-19. Balwani’s trial is still pending. Holmes has been convicted on four counts. The 37-year-old now faces up to 20 years in federal prison and undoubtedly millions in restitution and fines. Oh, and she recently married a 29-year-old San Diego hotel heir.
Throughout her trial, Holmes asserted she’s the victim. She claimed Balwani — a dot-com multi-millionaire and 19 years Holmes’ senior — was her secret ex-boyfriend and, though his Svengali-like prowess, controlled and dominated her. In 2010, the two had fired the company’s CFO after discrepancies were raised. Conveniently, Theranos operated without a CFO for seven years, and nobody seemed to care.
Among those who apparently didn’t care was Theranos’ board of directors. They included
- U.S. General James “Maddog” Mattis
- U.S. Secretary of State Henry Kissinger
- U.S. Secretary of State George Schultz
- U.S. Navy Admiral Gary Roughead
- Former Wells Fargo CEO Dick Kovacevich
- U.S. Education Secretary Betsy DeVos
- U.S. Defense Secretary William Perry
- U.S. Senator Sam Nunn
Practically none among these cast of characters have financial, medical or R&D backgrounds. So clearly, the goal was not R&D or medicine or building a profitable company with a future. Rather, it was about creating the appearance of credibility and respectability among people with deep pockets. It was about garnering clout and international connections to global markets and military contracts.
You might be rightly wondering how a young 20-something girl with only two months of college could enlist U.S. officials and retired military mucky mucks for a corporate board of a fictitious product. Well, perhaps daddy played a role.
Holmes’ father, Christian Rasmus Holmes IV, was a vice president at Enron — the energy company that committed the biggest fraud in U.S. history prior to banking debacle and housing bust of 2009. Think PG&E in California. You can’t make this stuff up.
Americas financial press heralded Enron as “America’s Most Innovative Company” (Forbes) throughout the 1990s. By 2001, the name of the $100 billion company became synonymous with rampant corporate fraud and unbridled corruption. The implosion of its massive and complex financial schemes led to the enactment of the Sarbanes–Oxley Act of 2002. Enron founder and CEO Kenneth Lay was convicted on 10 counts of fraud and conspiracy, but he died just before sentencing. George H.W. Bush attended his funeral.
Like many other Enron executives, Holmes IV parachuted out of Enron just before the shit hit the fan. He soft landed in executive positions in government such as the United States Agency for International Development (USAID), the Environmental Protection Agency (EPA) and the United States Trade and Development Agency (USTDA). His wife was a foreign response and defense aid for Congress.
If that’s not enough to be considered a member of “The Club,” Holmes IV is a wealthy heir of Jewish decent. His second great-grandfather (Elizabeth’s third great-grandfather) Charles Louis Fleischmann was a Hungarian Jewish immigrant who founded Fleischmann’s Yeast, according to Wikipedia.