Indictment of Theranos executives offers lessons for journalists

Photo: Len Bruzzese/AHCJWall Street Journal reporter John Carreyrou spoke about his award-winning investigation of Theranos at Health Journalism 2018.

The story about the fall of Theranos provides an important lesson for journalists about how we should be more diligent when reporting on the spin that companies use to promote themselves.

Last week, a federal grand jury returned an indictment against Elizabeth Holmes, the founder and former CEO of Theranos, and Ramesh “Sunny” Balwani, who served in various roles for the clinical laboratory testing company in Palo Alto, Calif. In an indictment unsealed Friday, the federal Department of Justice announced in a news release that Holmes and Balwani were alleged to have perpetrated multimillion dollar schemes designed to defraud patients, doctors and investors. Note that the release includes a link to a PDF of the indictment itself.

During an arraignment on Friday in U.S. District Court for the Northern District of California, San Jose Division, Holmes and Balwani each was charged with two counts of conspiracy to commit wire fraud and nine counts of wire fraud. If convicted, Holmes, age 34, and Balwani, 53, face a maximum sentence of 20 years in prison, and a fine of $250,000, plus restitution, for each count of wire fraud and for each conspiracy count, the DOJ said. Ken Sweet did the math, reporting for the Associated Press that if Holmes and Balwani are convicted they could face prison sentences that would keep them behind bars for the rest of their lives and fines totaling $2.75 million each.

Also on Friday, John Carreyrou reported for The Wall Street Journal that Holmes had stepped down as CEO and that the indictments were the culmination of a 30-month investigation by the U.S. attorney’s office in San Francisco that was sparked by his reporting since October 2015. In April, Carreyrou was the keynote speaker at AHCJ’s Health Journalism 2018 in Phoenix, as my colleague Rebecca Vesely reported in a blog post last month, “‘Don’t believe the hype:’ Carreyrou talks about reporting the Theranos story.”

In reporting on his presentation, Vesely wrote, “Theranos had received a lot of good press and was a darling of Silicon Valley when Carreyrou began his research. Carreyrou was wary of Silicon Valley, which has had a longstanding acceptance of “vaporware” – a promising software or hardware that has not yet been released or, possibly, even created. “There’s this sort of looseness, this hope that reality catches up,” he said of the sector.

Health News Review covered this same angle in a guest post last week, “Pathologists predicted the Theranos debacle, but their voices were missing from most news coverage.” The author of the post was Benjamin Mazer, M.D., a hospital resident in the departments of pathology and laboratory medicine at Yale-New Haven Hospital. A pathologist, Mazer wrote, “Had journalists consulted pathologists as expert sources, the news coverage of Theranos might have been less fawning and more skeptical. Patients might have been spared erroneous tests.”

Holmes promised to disrupt the lab testing business by saying traditional methods in pathology were outdated and that drawing blood using a venous puncture could be considered inhumane, Mazer wrote. “Health and technology reporters regularly quoted her making such claims,” he added. “Yet as ‘Bad Blood’ revealed, Holmes hired a dermatologist as her laboratory director after a pathologist questioned the company’s commitment to safety and accuracy, ultimately quitting as director.”

Bad Blood: Secrets and Lies in a Silicon Valley Startup,” is the title of Carreyrou’s book about his investigation. Clearly, his work shows that the signs were there for us to see.

1 thought on “Indictment of Theranos executives offers lessons for journalists

  1. Terry Griffin

    I learned a lot about solid reporting from his presentation at the conference. I also learned how important it is to have a supportive editor and a resource budget.

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