7 ms·

A company has not only totally failed in the market but employed deception which lead to a lawsuit, my question is how do they have any money left at all? Isn'

A company has not only totally failed in the market but employed deception which lead to a lawsuit, my question is how do they have any money left at all? Isn't this such a miss that whatever was left should just be returned to investors and the company close down. Does anyone have a scenario where this company becomes viable?

jackmott 9y ago
Indeed, why isn't the entire board, and upper management in jail?
- frgtpsswrdlame 9y ago
  Have you looked at their board? It's basically the ultra-elite. How would you even go after James Mattis? It's kind of sad but a brilliant illustration of how much money can protect you. Theranos the company will fail but Theranos the people will be fine, except for the whistleblower that is.
  - jackmott 9y ago
    All we have to do is elect people who don't care about that crap.
    - trizzump 9y ago
      We have. And the sewer/swamp is being drained as we speak. It's a slow process, but it's happening regardless of how you feel emotionally.
  - swamp40 9y ago
    Mattis resigned from the board in 2016.
    - rgbrenner 9y ago
      He joined in 2013.. this story broke in oct 2015 in the wsj. And he resigned in December (along with other boards he was on) to join the trump admin. So there's an open question about when he knew about this fraud. But clearly he didn't have a problem staying on even after it became public knowledge. And there's also this: In 2012, for instance, Holmes began talking to the Department of Defense about using Theranos’s technology on the battlefield in Afghanistan. But specialists at the D.O.D. soon uncovered that the technology wasn’t entirely accurate, and that it had not been vetted by the Food and Drug Administration. When the department notified the F.D.A. that something was amiss, according to The Washington Post, Holmes contacted Marine general James Mattis, who had initiated the pilot program. He immediately e-mailed his colleagues about moving the project forward. Mattis was later added to the company board when he retired from the service. (Mattis says he never tried to interfere with the F.D.A. but rather was “interested in rapidly having the company’s technologies tested legally and ethically.”) https://www.vanityfair.com/news/2016/09/elizabeth-holmes-theranos-exclusive https://www.vanityfair.com/news/2016/09/elizabeth-holmes-the... So he was told by the DOD that it didn't work after he initiated a pilot program for Theranos.. and continued to push it internally.
- leeoniya 9y ago
  because the board is stacked with billionaires, former senators and secretaries of state. too big to jail
  - ghostbrainalpha 9y ago
    >> On April 21, 2017, the Wall Street Journal reported that an investor had alleged that Theranos Inc. had misled company directors about its practices concerning laboratory testing. According to a lawsuit filed by the investor, Theranos had used a shell company to secretly buy lab equipment to run fake demonstrations with. The company lied to its own board of directors and investors. I don't think they are the ones who need to be jailed.
  - swamp40 9y ago
    >> *billionaires, former senators and secretaries of state* Those people are all gone from the board now.
- deleted 9y ago
  [deleted]
- cat199 9y ago
  dig deep.. see also the board and Ian Gibbons suicide.. The whole thing smacks of an outright fraud to skim funds from obamacare and elsewhere via pharmacy blood testing fees..
  - patrickg_zill 9y ago
    "outright fraud to skim funds from obamacare" You just described the business model of about 1/8th of all companies operating in the US healthcare business...
- Bartweiss 9y ago
  Didn't they lie to the board about how/whether the tests worked? Doesn't get upper management off the hook, but I don't actually know how responsible boards are when they're being mislead.
- bpodgursky 9y ago
  Why would the board be in jail? They are the ones who invested and may be losing money. Who did they defraud? Prison isn't a random card you can play to threaten people who you don't like, unless you want to go back to the USSR.
  - jackvalentine 9y ago
    The Board of Directors is charged with overseeing the conduct of the business. Whilst I've only held board memberships in Australia I expect it's a concept that translates somewhat to other countries. Board members can be held personally responsible for the misconduct of a company (criminally as well as civilly).
lowken10 9y ago
My question is why isn't Elizabeth Holmes in prison? She is a disgrace. And I was a huge fan of hers (I thought she would be a good role model for my daughter) before her crimes came to light.
- georgeecollins 9y ago
  In case you were in a coma 2008-2009, the US justice system likes to settle with corporations, but almost never actually tries to convict white collar criminals. Here is a whole book subtitled "Why the justice department fails to prosecute executives." https://www.amazon.com/dp/B06XBZFQR2/ref=dp-kindle-redirect?_encoding=UTF8&btkr=1 https://www.amazon.com/dp/B06XBZFQR2/ref=dp-kindle-redirect?... It is very well reviewed.
  - futun 9y ago
    Exactly this. White collar crime is typically punishable by a fraction of one's winnings -- if it is even stopped at all. In other words, white collar crime is an attractive business model.
  - CalChris 9y ago
    Well, the book didn't get out of the first sentence for me. > each a realm unto itself, run by a US Attorney who is almost untouchable by headquarters in faraway DC. In fact, each US Attorney can be fired at will by the President. At will and not for cause. The Fed Chair can be fired but only for cause. This leads to US Attorneys living in a very political world. They are politically appointed (Chris Christie), Senatorially confirmed (Jeff Sessions USAG) and politically removed (George W Bush). So defendants who are politically connected are not going to get prosecuted and that's that.
    - 24gttghh 9y ago
      When was GWB a US Attorney? Or are you referring to this[0]? [0]https://en.wikipedia.org/wiki/Dismissal_of_U.S._attorneys_controversy https://en.wikipedia.org/wiki/Dismissal_of_U.S._attorneys_co...
Bartweiss 9y ago
In all sincerity: does Theranos have anything left? This isn't 23andMe where a viable product got caught up in legal fights over reporting. As I understood it, the fraudulent component here was "everything at all worthwhile about the product". Are they just a shell at this point, trying to use the team and leftover money as a basis for a new project? Do they have some existing offering which isn't totally valueless? What's happening here?
- thinkpad20 9y ago
  The only thing that comes to mind is the sunk costs fallacy. Although it's hard to imagine Theranos ever becoming a success (and certainly, I won't be rooting for it), it might be harder for those who poured millions into the company to let go. That's my guess anyway.
  - seanp2k2 9y ago
    Why stop operating when you can continue until bankruptcy and beyond? Serious question...if there's no reputation left to lose and everyone is still getting paid, what incentive do they have to stop?
    - awinder 9y ago
      If you're an investor, do you want to get some pennies back on the dollar, or do you want to get 0 pennies back on the dollar? If they liquidate they can take that cash and pay out something, at least to some class of investors.
      - abduhl 9y ago
        I would imagine writing the whole thing off as a loss is better from a tax perspective.
        parthpatel1001 9y ago
        Please excuse my ignorance, but I don't understand this. Scenario 1: I have $100 in gains this year. I owe $30 in taxes. I am left with $70. (Say $100 is 30% bracket) Scenario 2: I have $100 in gains this year. I write off a $10 loss. (Say $90 is 25% bracket). I owe $22.5 in taxes. I am left with $67.5. Is it the case that writing off the loss is better, if you can be bumped so far down the brackets that (gains - loss)(1-lower_tax_rate) > (gains) (1 - higher_tax_rate)?
mathattack 9y ago
I suspect that the lawsuit thought process from Walgreen's was, "We can get a huge judgement that will put you into bankruptcy where we fight everyone else for the scraps, or we settle for something more modest and leave you with just enough money to shut down."
Uhhrrr 9y ago
Maybe if they have patents which become extremely relevant.

jackmott 9y ago

Indeed, why isn't the entire board, and upper management in jail?

frgtpsswrdlame 9y ago
Have you looked at their board? It's basically the ultra-elite. How would you even go after James Mattis? It's kind of sad but a brilliant illustration of how much money can protect you. Theranos the company will fail but Theranos the people will be fine, except for the whistleblower that is.
- jackmott 9y ago
  All we have to do is elect people who don't care about that crap.
  - trizzump 9y ago
    We have. And the sewer/swamp is being drained as we speak. It's a slow process, but it's happening regardless of how you feel emotionally.
- swamp40 9y ago
  Mattis resigned from the board in 2016.
  - rgbrenner 9y ago
    He joined in 2013.. this story broke in oct 2015 in the wsj. And he resigned in December (along with other boards he was on) to join the trump admin. So there's an open question about when he knew about this fraud. But clearly he didn't have a problem staying on even after it became public knowledge. And there's also this: In 2012, for instance, Holmes began talking to the Department of Defense about using Theranos’s technology on the battlefield in Afghanistan. But specialists at the D.O.D. soon uncovered that the technology wasn’t entirely accurate, and that it had not been vetted by the Food and Drug Administration. When the department notified the F.D.A. that something was amiss, according to The Washington Post, Holmes contacted Marine general James Mattis, who had initiated the pilot program. He immediately e-mailed his colleagues about moving the project forward. Mattis was later added to the company board when he retired from the service. (Mattis says he never tried to interfere with the F.D.A. but rather was “interested in rapidly having the company’s technologies tested legally and ethically.”) https://www.vanityfair.com/news/2016/09/elizabeth-holmes-theranos-exclusive https://www.vanityfair.com/news/2016/09/elizabeth-holmes-the... So he was told by the DOD that it didn't work after he initiated a pilot program for Theranos.. and continued to push it internally.
leeoniya 9y ago
because the board is stacked with billionaires, former senators and secretaries of state. too big to jail
- ghostbrainalpha 9y ago
  >> On April 21, 2017, the Wall Street Journal reported that an investor had alleged that Theranos Inc. had misled company directors about its practices concerning laboratory testing. According to a lawsuit filed by the investor, Theranos had used a shell company to secretly buy lab equipment to run fake demonstrations with. The company lied to its own board of directors and investors. I don't think they are the ones who need to be jailed.
- swamp40 9y ago
  >> *billionaires, former senators and secretaries of state* Those people are all gone from the board now.
deleted 9y ago
[deleted]
cat199 9y ago
dig deep.. see also the board and Ian Gibbons suicide.. The whole thing smacks of an outright fraud to skim funds from obamacare and elsewhere via pharmacy blood testing fees..
- patrickg_zill 9y ago
  "outright fraud to skim funds from obamacare" You just described the business model of about 1/8th of all companies operating in the US healthcare business...
Bartweiss 9y ago
Didn't they lie to the board about how/whether the tests worked? Doesn't get upper management off the hook, but I don't actually know how responsible boards are when they're being mislead.
bpodgursky 9y ago
Why would the board be in jail? They are the ones who invested and may be losing money. Who did they defraud? Prison isn't a random card you can play to threaten people who you don't like, unless you want to go back to the USSR.
- jackvalentine 9y ago
  The Board of Directors is charged with overseeing the conduct of the business. Whilst I've only held board memberships in Australia I expect it's a concept that translates somewhat to other countries. Board members can be held personally responsible for the misconduct of a company (criminally as well as civilly).

lowken10 9y ago

My question is why isn't Elizabeth Holmes in prison? She is a disgrace. And I was a huge fan of hers (I thought she would be a good role model for my daughter) before her crimes came to light.

georgeecollins 9y ago
In case you were in a coma 2008-2009, the US justice system likes to settle with corporations, but almost never actually tries to convict white collar criminals. Here is a whole book subtitled "Why the justice department fails to prosecute executives." https://www.amazon.com/dp/B06XBZFQR2/ref=dp-kindle-redirect?_encoding=UTF8&btkr=1 https://www.amazon.com/dp/B06XBZFQR2/ref=dp-kindle-redirect?... It is very well reviewed.
- futun 9y ago
  Exactly this. White collar crime is typically punishable by a fraction of one's winnings -- if it is even stopped at all. In other words, white collar crime is an attractive business model.
- CalChris 9y ago
  Well, the book didn't get out of the first sentence for me. > each a realm unto itself, run by a US Attorney who is almost untouchable by headquarters in faraway DC. In fact, each US Attorney can be fired at will by the President. At will and not for cause. The Fed Chair can be fired but only for cause. This leads to US Attorneys living in a very political world. They are politically appointed (Chris Christie), Senatorially confirmed (Jeff Sessions USAG) and politically removed (George W Bush). So defendants who are politically connected are not going to get prosecuted and that's that.
  - 24gttghh 9y ago
    When was GWB a US Attorney? Or are you referring to this[0]? [0]https://en.wikipedia.org/wiki/Dismissal_of_U.S._attorneys_controversy https://en.wikipedia.org/wiki/Dismissal_of_U.S._attorneys_co...

Bartweiss 9y ago

In all sincerity: does Theranos have anything left? This isn't 23andMe where a viable product got caught up in legal fights over reporting. As I understood it, the fraudulent component here was "everything at all worthwhile about the product". Are they just a shell at this point, trying to use the team and leftover money as a basis for a new project? Do they have some existing offering which isn't totally valueless? What's happening here?

thinkpad20 9y ago
The only thing that comes to mind is the sunk costs fallacy. Although it's hard to imagine Theranos ever becoming a success (and certainly, I won't be rooting for it), it might be harder for those who poured millions into the company to let go. That's my guess anyway.
- seanp2k2 9y ago
  Why stop operating when you can continue until bankruptcy and beyond? Serious question...if there's no reputation left to lose and everyone is still getting paid, what incentive do they have to stop?
  - awinder 9y ago
    If you're an investor, do you want to get some pennies back on the dollar, or do you want to get 0 pennies back on the dollar? If they liquidate they can take that cash and pay out something, at least to some class of investors.
    - abduhl 9y ago
      I would imagine writing the whole thing off as a loss is better from a tax perspective.
      - parthpatel1001 9y ago
        Please excuse my ignorance, but I don't understand this. Scenario 1: I have $100 in gains this year. I owe $30 in taxes. I am left with $70. (Say $100 is 30% bracket) Scenario 2: I have $100 in gains this year. I write off a $10 loss. (Say $90 is 25% bracket). I owe $22.5 in taxes. I am left with $67.5. Is it the case that writing off the loss is better, if you can be bumped so far down the brackets that (gains - loss)(1-lower_tax_rate) > (gains) (1 - higher_tax_rate)?

mathattack 9y ago

I suspect that the lawsuit thought process from Walgreen's was, "We can get a huge judgement that will put you into bankruptcy where we fight everyone else for the scraps, or we settle for something more modest and leave you with just enough money to shut down."

Uhhrrr 9y ago

Maybe if they have patents which become extremely relevant.