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The Dark Lesson of Elizabeth Holmes’s Theranos Is That Corporate Bullying Works

The Silicon Valley superstar may finally be facing trial, but the fact that her company got away with the crimes for as long as it did is still disturbing.

Former Theranos founder Elizabeth Holmes leaves the courthouse where she is standing trial for fraud.
Justin Sullivan/Getty Images
Former Theranos founder and CEO Elizabeth Holmes leaves the Robert F. Peckham U.S. Federal Court in San Jose, California, where she is on trial for allegedly engaging in a multimillion-dollar scheme to defraud investors with the Theranos blood-testing lab services.

Did Elizabeth Holmes’s signature black turtleneck hide bruises? The founder and chief executive of Theranos is preparing to stand trial for fraud and conspiracy to commit wire fraud, and her defense will present Holmes as the victim of Theranos’s second-in-command, Ramesh “Sunny” Balwani. The two had  “an abusive intimate-partner relationship,” according to a court filing, “in which Mr. Balwani exercised psychological, emotional and [REDACTED] over Ms. Holmes.” The details of this abuse are similarly redacted in a ribbon of blacked-out lines. Holmes is notoriously mendacious—it’s what she’s on trial for—but we can’t assume these accusations, when we hear them, will be untrue. (Balwani, whose trial will follow Holmes’s, denies it.) It wouldn’t be the first time that a strong woman was terrorized by a male bully.

True or false, it’s doubtful Holmes’s claim that she was abused will bear much relevance to the fraud charges. But the “Sunny made me” defense that Holmes has settled on seems thematically appropriate, because the Theranos story is more a cautionary tale about the terrifying efficacy of bullying than it is about the sufferings of venture capitalists. In this narrative, however, it’s Holmes who’s the abuser and her onetime employees who are the abused. The sad lesson is that corporate bullying works.

Holmes is on trial for the harm she allegedly did to Theranos’s investors (and its thankfully few customers, some of whom sued successfully for damages). But it’s difficult to feel sorry for a bunch of rich people who loved being told lies until they didn’t. The real crime, as opposed to the legal one, is what Holmes did to the people on her payroll who tried to tell the truth. Those bruises go unmentioned in her indictment.

The first truth-teller, according to John Carreyrou’s authoritative 2018 book, Bad Blood: Secrets and Lies in a Silicon Valley Startup, was the company’s chief financial officer, Henry Mosley. Theranos was developing a product that allowed people to prick their fingers, squeeze a few drops of blood into a plastic cartridge shaped like a credit card, pop the cartridge into a toaster-shaped “reader,” then beam the information necessary to analyze the blood to a medical professional. Mosley was troubled to discover that a live demonstration of the product for the European drugmaker Novartis was faked. One of two readers brought to Switzerland for the demonstration didn’t work, so a bioinformatics team back in California beamed in a counterfeit result.

In a private meeting, Mosley told Holmes, “We’ve been fooling investors. We can’t keep doing that.” In Carreyrous’s telling, “Elizabeth’s expression suddenly changed.… She leveled a cold stare” and said, “Henry, you’re not a team player.” Holmes fired Mosley on the spot. Later, a false rumor somehow circulated within the company that Mosley got fired for embezzlement.

The rest of the book repeats variations of that story over and over. Some knowledgeable employee reports to Holmes or Balwani that the technology isn’t working as advertised (it never did) and can’t seriously be expected to (it never could: The engineering problem was that a few tiny drops of blood weren’t sufficient to yield reliable lab results). That person gets frozen out and, nearly always, fired. If that person tries to alert investors, or government regulators, or the press, Theranos’s very aggressive legal team, led by Theranos board member David Boies, threatens financial ruin.

You can argue that the fact that Theranos was finally caught out, and that I’m able to relate all these details to you, demonstrates that corporations can’t bully truth-tellers into silence forever; eventually the facts will out. Even if Carreyrou hadn’t broken the fraud story in The Wall Street Journal, evidence that the Theranos product didn’t work would have accumulated (probably at the cost of some lives). Eventually the product would have been taken off the market.

But how long “eventually” might have been is hard to guess. Look at the chronology. Mosley raised his alarm in 2006. Carreyrou’s first Journal piece about the company wasn’t published until 2015. That’s nine years during which it was impossible to state out loud that Theranos’s home blood tests were garbage. Nine years during which Holmes became a darling of Sand Hill Road and the business press and Theranos’s valuation climbed to $9 billion. Nine years when anybody who tried to alert the public would get sued into oblivion.

The most painful personal story in Carreyrou’s book concerns Tyler Shultz, grandson of George Shultz, the late secretary of state who died in February. The younger Shultz met Holmes after his grandfather joined the Theranos board in 2011—Holmes packed the board with establishment types like George Shultz and Henry Kissinger who knew absolutely nothing about biomedicineand Tyler went to work at Theranos after graduating from Stanford. 

He noticed pretty quickly that the blood tests, which were then starting to be marketed to the public, were extremely unreliable. Balwani, he learned, was ordering employees to ignore quality-control failures. Tyler alerted Holmes in an email that all was not right at her company. Holmes didn’t reply, but Balwani wrote Tyler a threatening email (“had this email come from anyone else in the company, I would have already held them accountable for the arrogant and patronizing tone and reckless comments”). In response, Tyler quit. He later agreed to talk to Carreyrou.

Tyler also talked to his grandfather, who refused to believe him, prevailed on him to sign a confidentiality agreement, then introduced him to a lawyer who handed him a temporary restraining order. The resulting litigation cost Tyler $400,000 in legal fees.

The Journal published the Theranos story in October 2015, ignoring legal threats from Boies and others. This is possibly the only story you will ever read in which Rupert Murdoch, whose News Corp. owns the Journal, is a hero; printing Carreyrou’s takedown cost Murdoch his $125 million investment in Holmes’s company.

But ask yourself: How many news organizations in the United States would have been in a financial position even to consider publishing such a story? I count three or four: the Journal (full disclosure: I’m a proud news-side alumnus), The New York Times, The Washington Post, perhaps the Los Angeles Times. Certainly not the TV networks or cable news channels. Probably not The New Yorker, which had already puffed Holmes in a Ken Auletta profile

Many news organizations can stand up to libel threats after a story is published, but it’s the rare one that can withstand aggressive legal bullying of the type Theranos brought to bear before a word was even written. Carreyrou reports in Bad Blood that Theranos hired investigators who were able to identify and intimidate multiple background sources for his stories. They stood their ground, but that might well have gone another way, foiling Carreyrou’s efforts to get the story into the paper.

We now know about Theranos’s bullying, and in that sense, of course, it failed. But what about the bullying we don’t hear about? Holmes and Balwani and Boies and Theranos didn’t invent the tactics they used to suppress the truth. We don’t hear about this sort of bulllying much because it usually works. There are plenty of ways to hide bruises besides wearing a black turtleneck.