Former Theranos founder and CEO Elizabeth Holmes was once the darling of the press, and investors, for creating a revolutionary technology company. But she quickly fell out of favor with most people once it came to light that her company had allegedly engaged in a multimillion-dollar scheme to defraud investors with its blood testing lab services.
Holmes, who became the world’s youngest self-made female billionaire, claimed that Theranos had discovered a new way of doing blood testing, one able to do dozens of tests with just a prick of a finger and few droplets of blood.
A new ABC podcast, “The Dropout,” tracks the Stanford University dropout-turned-entrepreneur’s journey from helming a tech company which was meant to revolutionize the health industry to her now looking at a 20 year-prison term if convicted.
ABC News’ chief business correspondent Rebecca Jarvis, along with producers Taylor Dunn and Victoria Thompson, take listeners on a journey that includes three-years-worth of investigations.
On Jan. 23, ABC News’ “Nightline” aired a special preview of the documentary and ABC Radio launched part one of the six-part podcast with the same title. New podcast episodes will be made available each Wednesday.
“The Dropout” also focuses on the role of Indian American Ramesh ‘Sunny’ Balwani, who served as the Palo Alto, Calif.-based company’s president and chief operating officer before he quit in 2016.
“The Dropout” features the first sit-down interview with Jeff Coopersmith, the attorney representing Balwani, along with exclusive access to never-before-aired deposition tapes of key players, including Holmes, Balwani, Christian Holmes, Elizabeth’s brother; Tyler Shultz, Theranos whistleblower and more.
Part one of the podcast, “Myth Making,” revolves round Holmes, her early life and how she sold the idea of Theranos to employees and investors. It also highlights that after Steve Jobs’ former number two, Avie Tevanian, who led the software team that developed Mac OS X left, Holmes forged ahead but was running out of cash and was trying to find new investors. She then brought in Balwani, a former software executive.
“I think it was about $20 million,” Holmes recalled to the U.S. Securities and Exchange Commission in a deposition obtained by “Nightline.”
After loaning the money, Balwani, a flashy entrepreneur, said the documentary, joined the company, becoming the most powerful person at Theranos after Holmes.
“Did he have any qualifications in the lab testing business?” SEC attorney Jessica Chan asked Holmes in the deposition. “He did not,” Holmes replied.
“Or in pathology or anything like that?” Chan asked. “Not to my knowledge,” Holmes said.
The two worked together to strike a partnership with Walgreens, which involved getting Theranos’ technology into each of its more than 8,000 stores, according to the ABC report. After a number of negotiations, they cut a $140 million deal with Walgreens, added the report.
Balwani was also dating Holmes, who is 30 years his junior.
In her deposition testimony, when one of the prosecutors asked Holmes if she ever told the investors that she was romantically linked with Balwani at the time she was asking them to invest in Theranos, she replied in the negative.
The blood testing firm was first exposed in a Wall Street Journal report of misleading claims about the efficiency of its tests following which Theranos begin to disintegrate.
Holmes and Balwani were charged with “massive fraud” by the U.S. Securities and Exchange Commission. The U.S. Department of Justice alleges they perpetrated multimillion-dollar schemes to defraud investors, doctors and patients; they have both pleaded not guilty but face up to 20 years in prison if convicted. In 2018, Holmes reached a settlement with the SEC, which included a $500,000 fine, according to the documentary, but Balwani still faces the SEC lawsuit. (Read earlier India-West story here: https://bit.ly/2oPhgLq)
Coopersmith told Nightline that if he were to give Balwani a grade for his job at Theranos it would be “an A+ for dedication and effort.”
“Obviously when we look at this after the fact it has been a business failure... And you know Mr. Balwani is very sorry about that... but that is not fraud,” he added.
Coopersmith also asserted to Nightline that “the company would have been a great success if it had been allowed to run,” adding, “The unfortunate thing is that, in our system of health care there’s mistakes that are made every day. There’s no perfect answer.”