The reason they bailed out the banks was that when one bank that was not bailed out failed, the impact was pretty substantial. No one really cares if this company fails, except the investors. Plenty of investors have lost plenty of money on plenty of companies without being bailed out.
As for why no one went to jail, you got me.
The likelihood of a government bailout for Theranos is nonexistent. Theranos does not have (or appear to have) any systemic importance to the economy, its products (such as they are) are not used by the government in any quantity, and the company has just a couple hundred employees left.
Criminal charges against Holmes are likely. She committed a pretty blatant multi-year fraud against her shareholders. It’s always tough to tell who will actually wind up behind bars in white collar cases, even big ones, but it wouldn’t surprise me if she ends up doing some time.
Matthew Yglesias: James Mattis is linked to a massive corporate fraud and nobody wants to talk about it, including me because he’s one of the few sane voices in the administration protecting us from pointless nuclear war with Korea. Shhhh!
Also the middle class, to be scrupulously fair. White collar crimes in general and high flying crimes in particular get kiddie gloves.
The upthread parallels to the financial crisis were apt. The consequences of large scale fraud can be rather devastating to the economy and by extension our nation’s health, but while 6 and 7 figure frauds are the criminal’s problem, 9 and 11 figure frauds are the public’s problem.
Yes, we need new laws and a bigger supply of pitchforks. I’m not even especially vengeful: I think 1-3 year sentences handed out to scores of executives might focus minds a tad.
She cheated investors. People who are assumed to be knowledgeable and sophisticated. Given the number of people who went to jail after the 2008 financial meltdown (ie none), I would have a very hard time sending her to jail.
While I’ve been disgusted to see light sentences being given to some of these people, it’s an illusion that “white collar crime” has little consequence. From a WSJ blog article:
*"Here are the 10 longest prison sentences for white-collar crimes. Let us know if we missed any.
1.) Sholam Weiss, 59
Sentence: 835 years
Release date: 11/23/2754
2.) Keith Pound
Sentence: 740 years
Died in prison in 2004 at the age of 51
3.) Norman Schmidt
Sentence: 330 years
Died in prison in 2013 at the age of 78
4.) Robert Thompson, 47
Sentence: 309 years
Release date: 12/29/2277
5.) Bernie Madoff, 75*
Sentence: 150 years
Release date: 11/14/2139
6.) R. Allen Stanford, 63
Sentence: 110 years
Release date: 4/17/2105
7.) Will Hoover, 62
Sentence: 100 years
Release date: 5/13/2049
7.) Richard Harkless, 69
Sentence: 100 years
Release date: LIFE
8.) Karen Bowie **
Sentence: 80 years
Release date: n/a
9.) Frederick Brandau, 68
Sentence: 55 years
Release date: 8/08/2047
10.) Scott Rothstein, 51
Sentence: 50 years
Release date: n/a
10.) Thomas Petters
Sentence: 50 years
Release date: 4/25/2052
10.) Tim Durham, 51
Sentence: 50 years
Release date: 1/25/2056
?.) Keith Simmons, 48
Sentence: ???
Release date: ???
11.) James Koenig, 61
Sentence: 44 years
Release date: n/a
- Martin Sigillito, 64
Sentence: 40 years
Release date: 2/15/2047
Notice that Mr. Madoff lands at the center of the list. Douglas A. Berman, a law professor at the Ohio State University, pointed out that his sentence has become an important benchmark. “Nobody can say, ‘Well Madoff only got 50 and I wasn’t nearly as bad,’ ” Mr. Berman said."
*to save you having to look up Sholam Weiss, this is part of his Wikipedia entry: "On February 15, 2000, the Middle District Court of Florida (Orlando) sentenced Weiss, to a term of imprisonment of 845 years, for racketeering, wire fraud, and money laundering, and a restitution of $125,016,656 (amount of loss is attributable to him but did not take into account any liquidated assets recovered by the receivers), and a fine of $123,399,910, in connection to the collapse of National Heritage Life Insurance Company.[2][3]
On July 28, 2016, the government acknowledged by “notice to the court” that Weiss’ $125 million restitution had been paid in full."
He was originally sentenced to 845 years but got 10 years taken off, which makes all the difference.
She doesn’t need jail time. She just needs to be permanently and personally on the hook for the entire 700 million. Jail is getting off lightly, to a fraud artist. Being in deep crushing personal debt for the rest of her life is what she’s really afraid of.
To clarify my stupid sounding post: I think fraud artists such as this should just be compelled to live in society while personally making full restitution, plus paying both actual and punitive damages to every person affected, or literally die trying.
Here’s an Ars Tech post about the criminal charges filed against Elizabeth Holmes -
The suspiscions that Holmes was getting off lightly compared to Martin Shkreli appear to be unfounded. OTOH - the suspicions about the people who threw money at Holmes remains plausible.
No fool like an old fool.
I think the Music Man analogy is a good match. Holmes charmed investors and the public in much the same way Harold Hill charmed River City, with the same lack of substance behind it.
If only Liz had met her Marian, it might have been different.
What I’m wondering is how early did the fraud begin? At one point, she was a Stanford undergrad with a neat idea who dropped out to pursue it. By itself, surely not such an unusual story. I’ll bet half or more of the students (and faculty) at Stanford are looking for a gold mine. But surely she had some proof of concept that she used to demonstrate the validity of her idea, and which convinced the VCs to give her money.
Or are they so hungry for the Next Big Thing that they don’t bother to run a sanity check on a proposal?
For anyone interested in the case, I highly recommend Bad Blood: Secrets and Lies in a Silicon Valley Startup by John Carreyrou, the journalist who first broke the story. I’m halfway through it, and it’s fascinating. He absolutely rips Holmes to shreds in every way, to the extent that I wonder if she killed his puppy or something.
There are also multiple documentaries coming out about Holmes and Theranos. One is being shown at Sundance this week, and ABC has a 6-part podcast releasing starting today, with a preview shown tonight (Jan 23) during Nightline. A movie adaptation of Bad Blood is reportedly in the works with Jennifer Lawrence as Holmes.
The book goes into this a bit. The groundwork for fraud was there pretty much from the beginning: over-promising the technology, unrealistic sales estimates, and faked demonstrations. It became outright fraud when they reached the point that they had to actually fudge numbers to maintain the fiction.
The book argues that Safeway and Walgreens (the two big companies who bought into it) stayed in it way longer than reasonable because of “fear of missing out” on a revolutionary technology. One of the Walgreens execs made a comment about not wanting to see a Theranos device in every CVS store in a couple years because Walgreens got cold feet. Holmes was pretty adept at blocking attempts to validate the technology, and at ingratiating herself to C-level execs who would then push back on their own people when concerns were raised.
[rhetorical] And how, exactly, was that done, in this case? :rolleyes: [\rhetorical]
As I remember, their big claim that received all the attention was that they said they’d be able to do all the usual blood tests with just a drop of blood from a pinprick, rather than several vials as is usually done. So that was always bullshit? Didn’t any of the VCs or corporations like Walgreens test them on these claims?
It’s difficult to believe, but no, the VCs and corporations didn’t test them, or they granted them extreme leeway when tests didn’t work or equipment wasn’t ready.
The selling points were a pinprick of blood, tested in a “portable” automated machine that could be installed in stores or homes, and results within minutes. Theranos was really trying to make this happen (it didn’t start out as a scam), but they starting selling the product before they figured out how to make the machines work.
They had a machine that kind of worked for one specific type of blood test. It was very unreliable in performance and accuracy, but maybe they could have done something with it in a few years. But a major problem is that Holmes told Walgreens they could provide a single machine that ran several types of blood tests, then set about trying to figure out how to make it work after closing the deal. They never got close to anything that could do that.
An example of Holmes’ M.O.: Safeway was going to create “wellness centers” in their stores where shoppers could get their blood tested while they waited. They actually remodeled several stores in anticipation of this. When it came time for the trial run in a few stores, Safeway was surprised that instead of machines, Theranos put phlebotomists in the stores, and then sent the samples to their lab (and they were withdrawing complete vials of blood, not a pinprick). Then Theranos would run the tests with other commercial equipment or even send samples to other labs. And on top of all that, the results weren’t even reliable due to shoddy practices.
It’s truly unbelievable how long they were able to get away with stuff like this.
Damn. Sounds like honesty is the only thing holding me back from wealth and fame. (I remember the heyday of the dotcom insanity, when the stupidest ideas got all sorts of VC funding. It never made any sense to me that people would throw money at many of those companies.)
I think a lot of people were, and still are, under the spell of Amazon. With enough hubris and good intention, you can convince yourself and a lot of people your idea is going to make millions using the internet.
Amazon does make money, just not in the core business. And that’s mostly by design, as far as I can tell. They make a pile of money through AWS and a growing ad business.
Jon Lovett (former Obama speechwriter, current Pod Save America pundit, and generally pretty cynical guy) told a story on his show about meeting Holmes at a party a while back. This was, IIRC, before charges were public but definitely after news about Theranos being fraudulent had broken.
He said she seemed completely sincere and passionate, and that he walked away thinking she was either a truly brilliant humanitarian inventor being raked over the coals by jealous vultures or an absolute sociopath. And leaning towards believing the former.
She clearly has an astonishing talent for seeming credible.