SAN JOSE, Calif .– Much to her praise in 2015, Elizabeth Holmes, the entrepreneur who founded blood testing start-up Theranos, was named “Woman of the Year” by Glamor. Time has put her on his list of 100 luminaries. And she’s been on the cover of Fortune, Forbes, Inc. and T Magazine.
Theranos collapsed in a scandal three years later, failing in its mission to revolutionize the healthcare industry. But it changed the world in another way: it helped poison the media in Silicon Valley.
This point was reiterated on Thursday when Roger Parloff, a reporter who wrote Fortune’s cover on Ms. Holmes and Theranos in 2014, testified in a federal courtroom in San Jose, Calif., Where Ms. Holmes is on trial for 12 charges. of fraud. Mr Parloff said Ms Holmes made false statements to him, including about the volume and types of tests Theranos could perform, as well as his work with military and pharmaceutical companies.
Theranos’ law firm Boies Schiller had introduced it to the start-up, Mr Parloff said. The law firm had told him that “the real story was this remarkable company and its remarkable founder and CEO, Elizabeth Holmes,” he said, looking directly at Mrs Holmes from across the courtroom. .
The discovery that Ms. Holmes, the most famous female entrepreneur in the tech industry, was misleading the world about her business marked a turning point in the tech press, ending a decade of largely positive coverage. Journalists pulled themselves together at the glowing articles they wrote about tech companies that turned out to have stretched the truth, glossed over the negative consequences of their products, or generally abused their public trust.
“Holmes just becomes this fable of ‘You can’t just buy what they sell,’ said Margaret O’Mara, a University of Washington professor and Silicon Valley historian. “’It wasn’t what it claimed to be, and we fell for it. “
Understanding the trial of Elizabeth Holmes
Elizabeth Holmes, founder of blood testing start-up Theranos, is currently on trial on two counts of conspiracy to commit wire fraud and 10 counts of wire fraud.
After the Wall Street Journal published exposed in 2015 and 2016, showing that Theranos was not what it appeared to be, coverage of tech companies generally got deeper.
Reporters looked at Facebook’s role in the 2016 presidential election, as well as scandals at Uber and a series of #MeToo accusations and union uprisings at tech companies. The change came along with the realization that the tech industry was no longer the niche area of idealistic computer geeks. It had become the dominant force in the world economy and needed to be held more accountable.
Now that Ms Holmes, 37, is on trial, the role of the media in the rise and fall of Theranos has been exposed in great detail. Ms Holmes used positive articles like Fortune’s to gain credibility with investors, who poured $ 945 million into Theranos, prosecutors argued.
These investors have often been seduced by the media coverage. Chris Lucas, a venture capitalist whose company had invested in Theranos, said reading the Fortune article made him “very proud of the situation, proud that we are involved, very proud of Elizabeth, of all of this”. Lisa Peterson, who managed a $ 100 million investment in Theranos on behalf of the wealthy DeVos family, picked up the language directly from the Fortune article in a report she prepared.
The media were also eager to embrace Ms Holmes’ account of a brilliant dropout from Stanford University on the verge of becoming the next Steve Jobs. Here is a self-made billionaire young woman who was compared to Einstein and Beethoven. She embraced iconography, dressing like Mr. Jobs in black turtlenecks, as well as an esoteric lifestyle, telling Mr. Parloff that she was a vegan Buddhist who avoided coffee for green juice.
“There was a thirst for that kind of story, and she took that opportunity and worked very carefully,” Ms. O’Mara said.
The media fascination with Ms Holmes became so intense that in 2015, her then business partner and boyfriend Ramesh Balwani, known as Sunny, warned her that the hype was getting risky.
“FYI, I’m concerned about overexposure without a solid substance, which is lacking right now,” Balwani wrote in a text message included in court documents.
Mrs. Holmes brushed aside the warning. The media coverage had helped Theranos with an apparent potential trade deal, she wrote, adding, “The more it works, the more enemies will hate.”
Later that year, the Journal revealed that Theranos’ technology did not do what the startup claimed, prompting a surprise inspection by regulators that led to the company’s collapse.
Theranos forcefully denied the Journal report. On CNBC, Ms. Holmes called the article “what happens when you work to make a difference.” She and Mr. Balwani have plotted a libel lawsuit, according to text messages included in court documents. Together they led Theranos employees to psalmody an expletive to John Carreyrou, the reporter of the Journal.
Shortly thereafter, Mr. Parloff issued a long correction to his Fortune article describing the ways Theranos and Mrs. Holmes had misled him. He also blamed himself for not including some of Ms Holmes’ more elusive and opaque answers to his questions.
In court, exhibits revealed Ms Holmes showed Mr Parloff the same falsified validation reports – which appeared to show drug companies approved Theranos’ technology when they had not – which ‘she had sent to investors. Mr Parloff also said Ms Holmes told him that the military was using Theranos in Afghanistan, but the fact was so sensitive that he could not publish it or even question General James Mattis, a member of the board of directors. of Theranos, on this. As it turns out, the Theranos machines were never used on the battlefield.
“She was very concerned about trade secrets,” Mr. Parloff said.
Even though she faces up to 20 years in prison if convicted, Ms Holmes continues to fight the media. Throughout the trial, his lawyers lobbied to limit Mr Parloff’s testimony. They filed a motion to require him to turn over all of his report notes, even though he had previously provided tapes of his interviews with Ms Holmes to both sides of the case under a subpoena.
The purpose of this motion was to show that Mr Parloff “was tainted with bias” and “a desire to blame mistakes he allegedly made in his original article on Ms Holmes,” said John Cline, Ms Holmes’ attorney. Holmes, in a hearing in October.
A judge dismissed the request, calling it a “fishing expedition”.
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