Theranos

Ethics Quiz: The Elizabeth Holmes Sentence

/ Jack Marshall / 20 Comments

A Federal judge sentenced Theranos, Inc. founder Elizabeth Holmes  to eleven years and three months in prison last week. Essentially the judge had limitless options, with only execution being off the table. Based on the maximum sentences for each the four crimes she was convicted of, she theoretically could have been given the equivalent of life in prison.  Prosecutors asked for a 15-year sentence, three years of supervised release, and more than $800 million damages. The layers for Holmes, now 38, had asked for home detainment, community service, and no more than 18 months in prison. (My son spent half that in jail for a reckless driving offense when he was 18. Just for perspective….)

What did Holmes do? Wikipedia has an excellent one-stop summary: the short version is that she invented a purported blood testing system that didn’t work, faked data, sucked in investors, doctors and patients, made billions, and engaged in all manner of lies, threats, manipulations and schemes to avoid the consequences of her actions. The government argued that Holmes deserved a severe punishment because “dozens of investors lost $700 million and numerous patients received unreliable or wholly inaccurate medical information from Theranos’ flawed tests, placing those patients’ health at serious risk.” This is undoubtedly true. Her defenders counter than “she didn’t kill anybody,”  she is a first time offender, and her crime was one of non-violence. This is also true.

Your Ethics Alarms Ethics Quiz of the Day is….

Is Holmes’ 11 years+ sentence for her massive, 15-year fraud fair, just, proportionate and in the best interests of society—in short, ethical?

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Morning Ethics Warm-Up, 6/19/2018: Double Standards And Greed

/ Jack Marshall / 132 Comments

Time for a Good Morning song!

1. Life on Facebook. A lawyer friend who should know better posted a comment that began, “You wouldn’t think that posting something like ‘Taking children away from their parents and sticking them in cages is wrong’ would be controversial, but in almost every case where one of my friends has said something like this, at least one of his/her friends feels the need to argue about it…” Later he compared the statement “Taking children away from their parents and sticking them in cages is wrong” to “Torturing kittens is wrong.” I told him that as a lawyer, he should be objecting to and explaining the transparent deceit of “Taking children away from their parents and sticking them in cages is wrong”—a half-truth designed to stifle argument, not attacking those who are correctly pointing out the emotionalism and dishonesty of that tactic.

I should count up the number of lawyers whose comments on Facebook on this issue are pure “Think of the children!” with no substantive legal and policy analysis whatsoever. My friend also made the typical suggestion that only Trump voters—you know: morons—would argue with “Taking children away from their parents and sticking them in cages is wrong” as a fair and conclusive verdict on the current policy.

2. Theranos.  Elizabeth Holmes, founder and CEO of Theranos, as well as Ramesh Balwani, the company’s former president ( and Holme’s love interest, were indicted yesterday on charges of conspiracy and wire fraud. The Theranos debacle is a classic corporate fraud story on par with Enron, if not as wide-reaching.

I missed it. This is embarrassing for an ethics blog, and for someone who thinks he scours various news sources thoroughly enough to catch the major ethics stories. I blame Donald Trump, but I also blame the various news sources in 2015 that chose to report fake news, trivial news, future news and theoretical news rather than give a major corporate scandal the attention it deserved. If I missed the story, and I’m looking for it, what chance do normal people with sensible occupations have?

The civil fraud charges in the case were filed in March by the Securities and Exchange Commission, though the scandal had broken earlier, when the Wall Street Journal published its 2015 exposé.  Holmes and Balwani allegedly raised millions of dollars using false statements about how well the company’s  blood-testing device worked, while using  a contract with the Department of Defense and a partnership between Theranos and the pharmacy chain Walgreens to con pharmacies, doctors and the public. The apparent scam created a Business of Cards that, at its peak, had more than 800 employees and a paper valuation of $9 billion.

There is a book out about the Theranos scandal by the reporter who broke the story… Continue reading →