JPMorgan has worked closely with the company for years, providing both equity and debt for the company as . Simply by using a pin prick, blood could be analyzed quickly for diseases. Course Hero is not sponsored or endorsed by any college or university. The Theranos scandal has dominated headlines, and both fascinated and appalled readers worldwide, since John Carreyrous shatteringreportfirst broke in 2015. Explain. Test results could be delivered to a patients phone in hours, and a single test would cost less than half of the reimbursement rate of Medicare and Medicaid. Theranos, the brainchild of former CEO Elizabeth Holmes and her COO Ramesh Sunny Balwani, raised more than $900 million from investors. 2023 BBC. The Theranos Story: Blood is Thicker Than Ethics. The Theranos scandal highlights the need for transparent corporate governance. There were actually alot of ethical issues in Theranos. Filter by Surname A - Z View Featured Authors, Your questions about Elizabeth Holmes and the Theranos scandal. UT Star Icon. Initially valued at $10 billion dollars, the company has become an epic fail with. "It seemed a bit odd, but I didn't come away thinking it was a fraud.". "Her tragic error," Marketwatch columnist Francine McKenna wrote, "was touting financial projections that never materialized based on technology that she never delivered." Looking from the Virtue Theory part of view, Theranos had violated some ethical issues. They failed to conduct effective research and. Many investors backed the company based on the promise of the technology. Theranos's business model was based around the idea that it could run blood tests, using proprietary technology that required only a finger . For example, some virtuous traits that one should . "She accepts no responsibility," they wrote in court filings. If so, how might it affect her judgments and actions? In October 2015, Wall Street Journal reporter John Carreyrou wrote his first story about Theranos Inc., a blood-testing company accused of the biggest-ever fraud in Silicon Valley. She could face 20 years, or she could walk away with a new book deal, television appearances and another movie. Everything You Need to Know About the Theranos Saga So Far In the end, just as my longer trips go from a distant time zone to the time zone that matches or kitchen clock, so too does ethical behavior guide us to where we must be, or should have been. The pressure and unrealistic expectations she created formed an incredibly toxic work culture. Entrepreneur and its related marks are registered trademarks of Entrepreneur Media Inc. How the failed startup Theranos can teach us valuable lessons. What harms were caused by Theranos and Holmes making false and misleading statements? Before criminal charges were filed, Holmes stepped down as CEO of Theranos. One of the massive ethical issues involved the CEO and founder Elizabeth Holmes, who, apparently had almost total control of the company even in the presence of the board members, whose fiduciary and oversight duties were an epic fail as a result. In January 2022, Holmes was found guilty on four charges of defrauding investors, and in November she was sentenced to over eleven years in prison. . "And she just seemed absolutely confident of her own brilliance. The company offered a solution to a longstanding problem - the arduous, expensive and time-consuming process of carrying out blood-based diagnostics. Ethical Issue 1 One of the massive ethical issues involved the CEO and founder Elizabeth Holmes, who apparently had almost total control of the company even in the presence of the board members' whose fiduciary and oversight duties were an epic fail as a result. In September 2018, it was announced that, with the approval of the companys board of directors and shareholders, Theranos would begin the process of corporate dissolution. The story of Theranos is a cautionary tale where one lie leads to another and before you know it the story snowballs out of control and coverups ensue. What Happened to Theranos? - Ethics Sage Holmes founded Theranos in 2003 as a 19-year-old Stanford dropout. He is executive chair of the Jefferson Innovation Summit, presented with CNBC to convene national leaders from business, government, academia, media and the arts for a constructive conversation about creating a robust entrepreneurial ecosystem. Amazon announced in mid-February it would ask its employees to come back to the office at least three days a week. After an investigative report in the Wall Street Journal, things begin to fall apart. "When I testified, we could do it, I fully believe we could do it," said Holmes. She already settled with the Securities and Exchange Commission (SEC) for a $500,000 penalty and 10-year ban on serving as an officer or director of a public company. Theranos CEO defends company against Wall Street Journal - Fortune If convicted they each face a maximum fine of $250,000 and 20 years in prison. How Not To Do It: Elizabeth Holmes and Theranos What are the ethical and professional issues of Theranos? Holmes showed overconfidence regarding the efficacy of her product that was not borne out by testing. To be a CEO of a small start-up, or a large Fortune 500 company, bestows tremendous responsibility. In 2018 Theranos was dissolved. Purdue University, West Lafayette, USA If employees make a mistake in this type of environment, they'll be less likely to try to conceal or cover up their error. She was "the world's youngest self-made female billionaire", trumpeted Forbes magazine. Copyright 2023 Entrepreneur Media, Inc. All rights reserved. Let's consider a case study's functional area of unethical product development. ">, The Stakeholder Podcast: Leadership, Inequality and Power The Inventor: Out for Blood in Silicon Valley is the latest documentary from Oscar-winner Alex Gibney, director of Taxi to the Dark Side. Create a culture and system that cultivates an environment of trust amongst your employees. Generated with Avocode.Watch the Next Video United Airlines: Grounded. Holmes received glowing profiles in news magazines, was featured on television shows, and presented keynote addresses at tech conferences. In 2014, Theranos, a blood-testing startup pitching a supposedly revolutionary technology, was flying high. https://arstechnica.com/tech-policy/2018/03/sec-charges-theranos-with-massive-fraud-ceo-holmes-stripped-of-control/, Hot Startup Theranos Has Struggled With Its Blood-Test Technology describes many moments that are likely to turn the stomachs of lawyers and law professors who keep legal ethics in mind. Holmes' company raised $6.9m in early funding soon after its foundation, gaining a $30m valuation. May 11, 2022. The Inventor: Out for Blood in Silicon Valley; a documentary produced and directed by the Oscar-winning Alex Gibney was released in 2019 and a feature film is in development. He told HBO in a documentary that if a hundred people who had syphilis came and got tested on the Theranos devices, the company would only tell 65 of them that they had syphilis and told the other 35 that they were healthy: no need for medical intervention. Holmes and Balwani both pleaded not guilty and await trial as of June 2018. There are a couple main virtues that apply to this case. Holmes's attorneys had said she should not face prison time on the grounds that she was not a danger to society. Investors saw this impressive Board though, and opened their checkbooks. The Wall Street Journal reported that Holmes and Theranos addressed their lack of ethics and compliance representation on their board back in 2016. She was passionate about that defense, and then it somewhat faded away into the standard, stock line of I believed we could do it. In addition to Balwani, she has thrown former subordinates under the bus and denied she had any knowledge of problems. It alleged the defendants were aware of the unreliability and inaccuracy of their products but concealed that information. The long term impact will be immeasurable. They offered testimony from more than 130 people on her behalf, including Senator Cory Booker. The core values of EIE are beliefs in service and community, innovation, integrity, transparency, diversity and inclusion. The Theranos scandal is all about unethical behavior. Theranos' tests also failed at least a third of all internal quality control checks. At first, Holmes vehemently denied the claims made against her and the company. Theranos did become a huge success- a massive operation worth 9 billion dollars. Fears of excessive interference cloud proposal for protecting children whose genomes were edited, as He Jiankui's release from jail looks imminent. Theranos: Who Has Blood on Their Hands? (A) - Harvard Business School University of Virginia Darden School of Business Professor Jared Harris worked with Theranos whistleblower Tyler Shultz to develop a series of cases that reveal how the advanced nature of the technology allowed the ruse to go on so long and the high cost Shultz paid for his part bringing down the house of cards. The defendants represented to investors that Theranos would generate over $100 million in revenues and break even in 2014 and that the company was expected to generate approximately $1 billion in revenues in 2015; when, in truth, Theranos would generate only negligible or modest revenues in 2014 and 2015. Carreyrou said the big red line was crossed when, in 2013, Holmes and her business/romantic partner made the decision to go live with their flawed blood testing technology instead of pulling back. Read about our approach to external linking. "She just stared through me," Dr Gardner told the BBC. She didnt want to hear No. Is it possible that someone who went to Stanford, who patterned her dress after genius Steve Jobs, and who was constantly praised as the young woman who was going to revolutionize health care in the United States might naturally suffer from the overconfidence bias? https://www.nytimes.com/2018/06/15/health/theranos-elizabeth-holmes-fraud.html, Web Privacy Policy 5. Holmes believed the testing procedures were a revolution in the way diagnostics were done and preventative medicine. When analyzing this case, it seems at first that it is ethical in the eyes of an individualist. Over the past two years, a highly secretive Silicon . By 2007, Theranos's valuation hit $197m after it raised another $43.2m in early-round funding. I was encouraged to see evidence that it's possible to have a good outcome from a bad situation. You can sign up for our newsletter and learn more about Dr. Mintzs activities at: https://www.stevenmintzethics.com/. Jason Hennessey 2003: Theranos is founded. Three months later the company officially shut down following investigation by the FBI, leaving thousands of former employees, many of whom John found to be talented people with integrity, unaware of the companys fraudulent activity, uncertain about their future. Theranos was very secretive about the workings of the machinery and knew it did not working as intended. Read about our approach to external linking. The lessons attorneys and law students can learn from Bad Blood are highly complex. I understand that the data I am submitting will be used to provide me with the above-described products and/or services and communications in connection therewith. But the excitement of investors and the promise of the technology did not translate into success. Carrs applied research, which has examined entrepreneurial dynamics, social networks, venture capital and financial crises, has resulted in award-winning books, articles, case studies, digital media and numerous teaching materials. Comments (0), Tags: as the company had promised. In pitching her flawed company, she was not averse to stealing Big Pharma logos and putting them on faked reports, hiding the touted technology, intimating an endorsement from the U.S. Army, or reporting results taken on conventional lab equipment as having been analyzed on Theranos equipment.