60 Minutes Rewind: The Theranos Scandal

Introduction

• Elizabeth Holmes: Founded Theranos at age 19 after dropping out of Stanford University.
• Vision: Revolutionize blood testing with a device that could run hundreds of tests from a finger-prick of blood.
• Claims: Holmes called it "the most important thing humanity has ever built."
• Peak Valuation: Theranos was valued at nearly $10 billion.
• Reality: Uncovered as a massive fraud by the Wall Street Journal.

Theranos' Technology and Promises

• Invention: The "Edison" - a miniaturized blood analyzer.
• Industry Disruption: Aimed to disrupt the $60 billion lab testing market dominated by LabCorp and Quest Diagnostics.
• Public Image: Holmes likened the Edison to "the iPod of healthcare."
• Backers: Included high-profile board members like Henry Kissinger, James Mattis, and George P. Schultz.

Inside the Company

• Tyler Schultz: Joined Theranos, initially impressed but became disillusioned.
• Partnership with Walgreens: Announced the placement of Edison machines in stores, although the technology was faulty.
• Faulty Technology: Employees like Doug Macci and Erica Chung noted inaccuracies and malfunctions.
  • Edison machines couldn’t complete tests accurately.
  • Tests were often conducted manually by scientists, not the Edison.

Deceptive Practices

• Investors and Demonstrations: Investors were shown staged demonstrations.
• Fabricated Claims: Documents falsely claimed FDA validation and military use.
• Manipulated Test Data: Employees pressured to produce favorable results.

The Downfall

• Media Investigation: John Carreyrou’s Wall Street Journal article exposed the truth.
• Public Reaction: Initial disbelief; Holmes compared herself to great innovators like Steve Jobs.
• Regulatory Action: Federal regulators invalidated nearly one million test results.
• Financial Collapse: Investors lost millions; high-profile investors included Betsy DeVos and Rupert Murdoch.

Legal Consequences

• Charges: Holmes and Balwani faced SEC charges for "massive fraud."
• Company Valuation: Once valued more than companies like Uber and Spotify, now worth zero.
• Ongoing Investigation: A federal criminal investigation is ongoing.

Conclusion

• Holmes' Status: Remains CEO, seeking further investment despite looming financial collapse.
• The Theranos saga serves as a cautionary tale about ethics and oversight in ambitious tech innovations.