This is the second post in a series of four posts about corporate takedowns.  Last week’s post was about American Apparel.  Today’s post is about Theranos.  The third post on April 17 is about Facebook, focused on the recent Cambridge Analytica data sharing revelations.  The fourth and final post, on April 24, will discuss Gawker.

For an in-depth discussion of the corporate history and culture of Theranos, check out this post.

A variety of business ethics and cultural practices contributed to the failures at Theranos both as an enterprise and in fraudulent representations made by its founder and CEO, Elizabeth Holmes, to investors and the public.

• Any discussion of Theranos must start with John Carreyrou’s seminal reporting for the Wall Street Journal, beginning in 2015. This was the initial expose of the efficacy and accuracy issues with the blood testing technology that Theranos was touting as disruptive and revolutionary. This article incited a nasty and defensive response from Theranos, especially its CEO Elizabeth Holmes and her most loyal backers. It’s interesting to consider it now (the response is discussed in more detail in this recent Fast Company article, It’s worth remembering how Theranos first responded to the WSJ’s expose) given that the pervasive fraud at Theranos that this article merely suggested, has been fully revealed: Hot Startup Theranos Has Struggled With Its Blood Test Technology
• This 2016 investigation into Theranos, and Holmes specifically, by Nick Bilton for Vanity Fair provides fascinating and damning detail as to the extent of the deceptive and intentional misrepresentation that underscored the fraud. Interestingly, one of Holmes’s main motivations for lying about her company’s technology was that she wanted to keep the game running for longer in hopes that she could still make good on the promises that she fully knew were false. The romanticism of Silicon Valley start-up culture, where big, bold risks are glorified, failures are verboten, and the best defense is a good offense, played a major role in how long the fraud was perpetrated: How Elizabeth Holmes’s House of Cards Came Tumbling Down
• The Theranos whistleblower was Tyler Shultz, grandson of former Secretary of State George Shultz, who was on the company’s board of directors. Schultz reported his suspicions regarding inaccuracies in the research and development results for the blood testing devices to officials in the state of New York in 2014. Another piece in the Carreyrou’s series for the Wall Street Journal describes the complex and conflicted process through which Shultz decided to speak up and out, and the professional and personal consequences he experienced for this action: Theranos Whistleblower Shook the Company – and His Family
• In charges stemming from a federal investigation launched in 2016 (after Carreyrou’s articles exposing the questions raised by Shultz’s whistleblowing, and a massive amount of other media attention around the increasingly secretive company and its prickly CEO), the Securities and Exchange Commission charged the company, its former president Ramesh “Sunny” Balwani, and Holmes with what the SEC referred to as “massive fraud”: Theranos and CEO Elizabeth Holmes charged by the SEC with defrauding investors
• This Bloomberg article discusses how money from venture capitalists both fueled and inspired Holmes and other to make increasingly false statements about the company’s technology, endorsements from business partners, and its long-term strategy and viability: Blood, Fraud and Money Led to Theranos CEO’s Fall From Grace

For more on the compliance and ethics issues which are common threats to the sustainability of business ventures such as Theranos, check out this post and this post.

Check back next Tuesday, April 17, for the next post in this series, which will discuss Facebook and the data-sharing scandal with Cambridge Analytica.