Theranos

When I look out my office window in Palo Alto, California, I can stare at the next potentially big fraud: Theranos. As I watched the construction of the company’s impressive new headquarters in 2014, I thought Theranos would become another iconic Silicon Valley firm. I had no idea that the shiny glass and steel facade was possibly hiding a labyrinth of secrets, lies and half-truths.

In 2003, Elizabeth Holmes, then 19, dropped out of Stanford University to begin Theranos and develop an innovative blood-testing device that she said would give quicker results using just one drop of a patient’s blood.

On Oct. 15, 2015, Holmes, Theranos’ chairman and CEO, appeared on the CNBC program, “Mad Money,” with Jim Cramer to defend her company from a scathing Wall Street Journal article published that day. (See Theranos CEO fires back at WSJ: I was shocked, by Abigail Stevenson, CNBC, Oct. 15, 2015.)

The WSJ article, citing multiple sources of current and former employees, claimed that the $9 billion company was in fact a huge fraud based on unproven science, stellar marketing, impressive connections, the media’s love affair with Holmes’ origin story and a team of cutthroat lawyers willing to do anything to keep the company veiled in secrecy. (See Hot Startup Theranos Has Struggled With Its Blood-Test Technology, by John Carreyrou, The Wall Street Journal, originally published on Oct. 15, 2015, and updated on October 16.)

Although Holmes had been a previous guest on “Mad Money,” this interview was quite different. Instead of lauding her vision of working to change the world, Cramer pressed her to defend her company and herself against the WSJ’s accusations. In many fraud examinations, the first interview with an accused fraudster can be one of the most telling. Confrontation can elicit a fight-or-flight response. Holmes decided to fight. However, the media reported additional details of various investigations by regulators and law enforcement agencies that clearly contradicted her statements in this and other interviews. (See Theranos Retreats From Blood Tests, by John Carreyrou and Christopher Weaver, The Wall Street Journal, Oct. 6, 2016.)