The Theranos Story: Blood is Thicker Than Ethics. Over its 12-15-year lifespan, Theranos raised almost $1 billion, with over 75% of that funding raised after the technology was commercialized. Sometimes, as Shefrin points out, people engage in wishful thinking. Other allegations include: Tyler Schultz claimed to know something unethical was going on and could have major repercussions on the company. But the excitement of investors and the promise of the technology did not translate into success. Harris has written extensively on the topics of executive compensation and other governance-related topics. On November 18, 2022, Holmes was sentenced to 135 months, or 11.25 years, in prison with three years of supervised release beginning on April 27. Steven Mintz Ethics on Facebook. Early in 2015, Carreyrou got a call out of the blue, from Dr. Adam Clapper, a pathologist who often blogged about scams in the laboratory space. The whole process was sort of a black box, which had mysterious or unknown internal functions or mechanisms. Get full access to this article. Holmes was a Stanford dropout with barely a year and a half of medical studies under her belt, who had apparently revolutionized medicine, and I knew thats just not how things work, Carreyrou said. Holmes' company raised $6.9m in early funding soon after its foundation, gaining a $30m valuation. One of the major issues, through the life of the company and that sprung at around 2015 was with massive management, incompetence as the CEO and the company exaggerated the capabilities of their proprietary, technology. The Food and Drug Administration and the Centers for Medicare & Medicaid Services opened investigations into Theranos. She agreed to pay a $500,000 penalty, return her 18.9 million shares, give up voting control of Theranos, and be prohibited from serving as director of a public company for 10 years. For example, as you grow from one employee to perhaps hundreds, you need systems in place to manage accountability. The "next Steve Jobs", said Inc, another business magazine that put her on the cover. 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. 3. Before long she had developed a pattern, befriending older man after older man to believe in and champion her. He asked, Have you heard of this wunderkind out of Silicon Valley named Elizabeth Holmes and her startup, Theranos? Carreyrou had, in fact, read a New Yorker profile and had already been skeptical. Many investors backed the company based on the promise of the technology. Holmes received glowing profiles in news magazines, was featured on television shows, and presented keynote addresses at tech conferences. 24 June 2021 What Theranos Can Teach Us About Ethical Challenges in Murky High Tech Waters Insights from Jared D. Harris Interview by Sean Carr The world has been captivated by the stunning collapse of Theranos and its supposedly wunderkind founder Elizabeth Holmes, who now faces trial for fraud. 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She told the reporter that This was not an environment, that is not a culture, where they really care about what consequences this might have on patients.. In the video, Tyler explains the issues he encountered and how he decided to blow the whistle on the company. Blood could be diagnosed easily without the need for many vials of blood drawn from patients veins or expensive lab work. Ethical practices help business to meet stakeholder's expectations more effectively while stakeholders demand going more complicated and hard to achieve. ", Theranos founder hit with criminal charges, When to fire the boss: A tale of three sackings, Street fighting in Bakhmut but Russia not in control, Saving Private Ryan actor Tom Sizemore dies at 61, Russian minister laughed at for Ukraine war claims. She was in too deep to stop. We can throw up all kinds of excuses, roadblocks or irrelevant side trips, but whether in a court of law, an executive suite, a virtual accounting office or the manufacturing floor of a medical device company, we eventually approach our ethical behavior. The disasters cost the lives of 346 passengers and crew. The company owed at least $60 million to unsecured creditors. https://www.wsj.com/articles/theranos-has-struggled-with-blood-tests-1444881901, Blood, Simpler The reaction from Theranos was astonishing. Authors Affiliations. Create core values that convey your principles. His research centers on the interplay between ethics and strategy, with a particular focus on the topics of corporate governance, business ethics and interorganizational trust. Live those values in all your interactions. Our experts can deliver a British Petroleum: Corruption Involving Ethics essay. She was raised in a comfortably well-off family in Washington DC, and was a polite but withdrawn child, according to people who knew her. The support lent her credibility, as did her demeanour. There were actually alot of ethical issues in Theranos. At conservative gathering, Trump is still the favourite. The literature on ethical issues and challenges in the research stage of the overarching research-and-innovation process is substantial. In 2014, Elizabeth Holmes, then 30 years old, was on top of the world. After an investigative report in the Wall Street Journal, things begin to fall apart. She was able to raise hundreds of millions of dollars until Tyler Schultz blew the whistle. as the company had promised. ">, Investing Responsibly: ESG and the Well-Intentioned Investor The technology she touted didn't work at all, and by 2018 the company she founded had collapsed. A Stanford University drop-out, she had founded a company valued at $9bn (6.5bn) for supposedly bringing about a revolution in diagnosing disease. However, the claims later proved to be false. This signals a weakness in her leadership style and portrays her in a negative light. She was sentenced on Friday to 11 years and three months in prison. She has maintained that (according to the AP, December 7, 2021): "Theranos was on the verge of perfecting a blood-testing technology that she began working on in 2003 after dropping out of Stanford University to start the company.". Eight short videos present the 7 principles of values-driven leadership from Gentile's Giving Voice to Values. In January, she was convicted by a jury in California on four counts of fraud, each of which carries a maximum sentence of 20 years in prison. Medina Williams. https://www.sec.gov/news/press-release/2018-41, The Theranos Con It was John Carreyrou, twice-Pulitzer-prize-winning journalist of The Wall Street Journal who first broke the story in 2015. The FDA estimated the cost of misdiagnosis at nearly $800,000. https://www.vanityfair.com/news/2016/09/elizabeth-holmes-theranos-exclusive, Everything You Need to Know about the Theranos Saga So Far The Daniels Fund Ethics Initiative has allowed us the opportunity to bring fascinating speakers like Mr. Carreyrou to the Business School, said Ira Selkowitz, DFEI Director at CU Denver. 17. For twelve years, Holmes essentially ran a Ponzi scheme by attracting investment funds from primarily venture capitalists that saw it as a unique opportunity to cash in on the boom in Silicon Valley. 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. The reaction from Theranos was astonishing. 7. His work has been cited byThe New York Times,The Wall Street Journal, theFinancial Times,Newsweek, NPR and CNBC. The grant is used to instill a deep and unwavering ethical foundation through course curricula, events, and community collaboration. Accept it, make corrective action and move forward in a no-blame environment. Web Accessibility, Copyright 2023 Ethics Unwrapped - McCombs School of Business The University of Texas at Austin, Being Your Best Self, Part 1: Moral Awareness, Being Your Best Self, Part 2: Moral Decision Making, Being Your Best Self, Part 3: Moral Intent, Being Your Best Self, Part 4: Moral Action, Ethical Leadership, Part 1: Perilous at the Top, Ethical Leadership, Part 2: Best Practices, Financial Conflicts of Interest in Research, Curbing Corruption: GlaxoSmithKline in China, https://www.vox.com/2015/10/20/9576501/theranos-elizabeth-holmes, https://www.forbes.com/sites/petercohan/2015/10/16/theranos-is-made-for-hollywood-silicon-valley-scandal/#104196ea86ee, https://www.vanityfair.com/news/2016/09/elizabeth-holmes-theranos-exclusive, https://www.wired.com/2016/05/everything-need-know-theranos-saga-far/, http://fortune.com/2015/10/31/theranos-timeline/, https://www.forbes.com/sites/matthewherper/2016/10/08/bad-blood-the-decline-and-fall-of-elizabeth-holmes-and-theranos/#20622504c335, https://arstechnica.com/tech-policy/2018/03/sec-charges-theranos-with-massive-fraud-ceo-holmes-stripped-of-control/, https://www.wsj.com/articles/theranos-has-struggled-with-blood-tests-1444881901, https://www.newyorker.com/magazine/2014/12/15/blood-simpler, http://fortune.com/2014/06/12/theranos-blood-holmes/, https://www.sec.gov/news/press-release/2018-41, https://www.forbes.com/sites/hershshefrin/2018/04/14/the-theranos-con/2/#7cb4245a974a, https://arstechnica.com/tech-policy/2018/06/disgraced-theranos-founder-elizabeth-holmes-indicted-on-criminal-charges/, https://www.nytimes.com/2018/06/15/health/theranos-elizabeth-holmes-fraud.html. After publication of Carreyrous article, others publicly came forward about the inaccuracy of results they had received from Theranos. These Sisters Quit Their Jobs Mid-Pandemic to Risk It All for Their Brand. 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. The cult of the genius young founder has been a problem in Silicon Valley for decades, Carreyrou said. Using a machine called the Edison, pharmacies were able to use this portable blood test from a drop of blood. Ethical Issues of Theranos. "I stand before you taking responsibility for . What's the least amount of exercise we can get away with? Initially valued at $10 billion dollars, the company has become an epic fail with. Fears of excessive interference cloud proposal for protecting children whose genomes were edited, as He Jiankui's release from jail looks imminent. . She is fighting to avoid eating toast in a jail cell for the next 20-years. It began to unravel in 2015 when a whistleblower raised concerns about Theranos' flagship testing device, the Edison. Of the real-life people who saw the rise and fall of Theranos, one is Erika Cheung, a whistleblower who blew open the Theranos faade alongside fellow former employees Tyler Shultz and Adam Rosendorff. While doing what is right should be a no-brainer, there may be hurdles that start-ups need to address as they begin their entrepreneurial journey. He recently publishedThe Strategists Toolkit,a primer on strategic thinking, with Darden Professor Mike Lenox. "I knew she'd had this brilliant idea and that she had managed to convince all these investors and scientists," said Dr Jeffrey Flier, the former dean of Harvard Medical School, who met her for lunch in 2015. The gender factor also played a role, as Carreyrou highlighted in his book: "There was a yearning to see a female entrepreneur break out and succeed on the scale that all . Unethical products are those goods and services that any stakeholder believes may damage society. There are a couple main virtues that apply to this case. Explain. But by 2015, the seams were coming apart, and within a year, Holmes was exposed as a fake. All Rights Reserved. UT Star Icon. The fact that a young woman led the company was part of its broader appeal. Introduction and background of the scandal | Legal, Social, Ethical and Professional issues relating to Theranos: The company by Elizabeth Holmes Discover the world's research Public. Despite intimidation and threats of legal action, former Theranos employees Erika Cheung and Tyler Schultz, whose Grandfather George Schultz was a member of the Theranos board, began sharing their experiences of the company, its technology and practices with John. Video, Russian minister laughed at for Ukraine war claims, convicted by a jury in California on four counts of fraud, AOC under investigation for Met Gala dress, Mother who killed her five children euthanised, Alex Murdaugh's legal troubles are far from over, The children left behind in Cuba's exodus, US sues Exxon over nooses found at Louisiana plant, Biden had skin cancer lesion removed - White House. 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. How did Elizabeth Holmes and Theranos demonstrate overconfidence bias? By the time the credits rolled, this darling of the media, formerly valued at $10 billion, had suffered a corporate meltdown as a dramatic as the demise of the Wicked Witch of the West - to the . ">, 11 Key Characteristics of a Global Business Leader . Holmes believed the testing procedures were a revolution in the way diagnostics were done and preventative medicine. Media tycoon Rupert Murdoch lost 120m he had invested in Theranos, Dr Phyllis Gardner told Holmes her idea would not work, On stage with former US President Bill Clinton in 2015. Comments (0), Tags: The engrossing. The company claimed that its technology could offer over 240 tests from just a prick of the finger. I followed the story with particular interest as an entrepreneur. But three months later she was arrested, along with Mr Balwani, on criminal charges of wire fraud and conspiracy to commit wire fraud. While the Board was made up of successful and well-respected older men, none had any knowledge of medicine or diagnostics. If convicted they each face a maximum fine of $250,000 and 20 years in prison. Defining a company's culture early on is essential. The CU Denver Business School and the CU Law School each received a five-year grant in 2015 from the Daniels Fund to participate in the Daniels Fund Ethics Initiative Collegiate Program, aimed at strengthening ethics education for students and extending ethical behavior beyond campus and into the community. Maintain integrity broadly. The Miracles Of Creation Theranos stood as the next big breakthrough innovator in the healthcare industry offering an affirming achievement of the value of human ingenuity. Here is their story and what happened to it over time. She was ethically straying further from the honest, cold-hearted truth. The protagonist in the Theranos sequel duped an audience that believed with all their hearts that their heroine was in search of an ethics-based dream - be it love of family or better health. The story of the Theranos scandal; the soaring rise and shocking fall of the multibillion-dollar Silicon Valley startup once expected to change the world, as told by the prize-winning Wall Street Journal investigative journalist who first broke the story and pursued it to the end. All rights reserved. In Holmes' case, the intent to defraud holds serious weight and could result in up to 20 years in federal prison and millions of dollars in fines. Apart from Holmes and Balwani, the board of directors and employees had a moral responsibility to protect patients using the blood tests from harm because they had information that the technology did not provide accurate results. Physicians could not get information on how the tests were done. When Holmes took the stand at her trial, the media was quick to say that she refused to accept full responsibility for her actions and tried to place the blame on others. A TV adaptation of the scandal, also called The Dropout, came out in March 2022 internationally across Hulu and Disney+, and starred Amanda Seyfried as Holmes for which she won a Primetime Emmy Award.