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12. Beth Kowitt, "How Chipotle Survived a Food Safety Crisis and a Pandemic to Debut on the This Year's Fortune 500," Fortune (June 3, 2021), https:// fortune.com/2021/06/02/chipotle-fortune-500-ceo -brian-niccol-interview/. Accessed June 25, 2021. Geoff Williams, "Chipotle's E.coli Crisis: P.R. Experts Say It's Handling It Right," Forbes (November 4, 2015), http://www.forbes.com/sites 13. /geoffwilliams/2015/11/04/can-chipotle-survive-its -e-coli-crisis-pr-experts-seem-to-think-so-and-offer -advice/#6d8544ab1644. Accessed June 25, 2021. 14. Chipotle, "Our Safety Advancements," https://www .chipotle.com/foodsafety. Accessed June 25, 2021. 15. Sam Oches, "Chipotle Struggling to Get Customers Back," QSR (March 17, 2016), https://www .qsrmagazine.com/news/chipotle-struggling-get -customers-back. Accessed June 25, 2021. 16. Ibid. 17. "Chipotle Employees Blow the Whistle on Food Safety Problems," Bad Food Recall (February 11, 2020), https://www.badfoodrecall.com/2020/02 Over the next several years, investors poured more than $400 million into the company, which by 2016/2017 was valued at $9 billion. The Theranos corporate board was populated with prestigious directors, including for- mer U.S. Secretaries of State George Shultz and Henry Kissinger, former U.S. Senator Sam Nunn, former CEO of Wells Fargo Richard Kovacevich, and former director of the Centers for Disease Control and Prevention William H. Foege. Holmes struck up partnerships with Walgreens and Safeway to use the new technology in their stores. Like many hot startup "unicorns," Theranos seemed well on its way to an initial public offering. Case 4 The Theranos Story and Fake Blood Testing: Culture, Crime, and Hubris* Stanford University dropout Elizabeth Holmes was desper- ate to make her mark in the business world. In 2003, she dropped out of Stanford's electrical and chemical engineer- ing program at the age of 19 to create a company to develop a revolutionary blood-testing machine. She raised nearly $6 million through family connections, formed a company called Theranos, and hired a PhD student at Stanford as her first employee. One problem popped up, however. Despite best efforts, including a team of former Apple researchers that Holmes wooed to the company, the blood-testing machine called Edison did not work. Worse yet, it seemed that Holmes and /chipotle-employees-blow-whistle-food-safety -problems/. Accessed June 27, 2021. 18. NewDesk, "State Investigates Chipotle near Denver for Likely Norovirus Outbreak," Food Safety News (May 19, 2021), https://www.foodsafetynews .com/2021/05/chipotle-mexican-grill-cmg-location -near-denver-investigated-for-likely-norovirus -outbreak/. Accessed June 27, 2021. 19. See Mary Meisenzahl, " "Chipotle e Has Been Sued by New York City Over Claims It Violated Scheduling Sick Leave Laws, and Now Owes Over $150 Million to Workers," Business Insider.com (April 28, 2021), https://www.businessinsider.com/nyc-lawsuit -chipotle-over-labor-law-violations-2021-4. Accessed June 27, 2021; Noah Scheiber, "Chipotle to Saad Is Sued by New York City Over Scheduling Practices," The New York Times (April 28, 2021), https://www.nytimes.com/2021/04/28/business /chipotle-new-york-illegal-scheduling.html. Accessed June 27, 2021. *This case was written by lill & Brown Bentley University in 2021 20. Ibid. her chief operating officer/president and romantic partner Ramesh "Sunny" Balwani were involved in a deep cover-up of Edison's failures.' A New Yorker magazine profile of Holmes called Holmes's explanations of the Theranos tech- nology "comically vague." Wall Street Journal reporter John Carreyrou led the charge to expose the Theranos scam, and eventually 70 former employees helped recon- struct the story, which Carreyrou turned into a book, Bad Blood: Secrets and Lies in a Silicon Valley Startup. The Edison was going to revolutionize blood testing- offering more than 240 tests ranging from cholesterol to cancer-with technology that would work with just a finger prick.However, in 2014-2015, several Theranos employees went to regulators complaining that the company was exag- gerating its achievements and failing to report test results that raised questions about the accuracy of the Edison sys- tem. Their complaints seemed to fall on deaf ears. In 2015, President Barack Obama named Holmes a U.S. ambassa- dor for global entrepreneurship. That same year she was awarded the prestigious Horatio Alger Award by the Horatio Alger Association of Distinguished Members, which is said to symbolize "the Association's values, including personal initiative and perseverance, leadership and commitment to excellence."" Additionally, the award-winning members are said to be "similar to characters in stories by Horatio Alger, Jr.; they traditionally have started life in 'humble' or eco- nomically challenging circumstand 10 Holmes was also

12. Beth Kowitt, "How Chipotle Survived a Food Safety Crisis and a Pandemic to Debut on the This Year's Fortune 500," Fortune (June 3, 2021), https:// fortune.com/2021/06/02/chipotle-fortune-500-ceo -brian-niccol-interview/. Accessed June 25, 2021. Geoff Williams, "Chipotle's E.coli Crisis: P.R. Experts Say It's Handling It Right," Forbes (November 4, 2015), http://www.forbes.com/sites 13. /geoffwilliams/2015/11/04/can-chipotle-survive-its -e-coli-crisis-pr-experts-seem-to-think-so-and-offer -advice/#6d8544ab1644. Accessed June 25, 2021. 14. Chipotle, "Our Safety Advancements," https://www .chipotle.com/foodsafety. Accessed June 25, 2021. 15. Sam Oches, "Chipotle Struggling to Get Customers Back," QSR (March 17, 2016), https://www .qsrmagazine.com/news/chipotle-struggling-get -customers-back. Accessed June 25, 2021. 16. Ibid. 17. "Chipotle Employees Blow the Whistle on Food Safety Problems," Bad Food Recall (February 11, 2020), https://www.badfoodrecall.com/2020/02 Over the next several years, investors poured more than $400 million into the company, which by 2016/2017 was valued at $9 billion. The Theranos corporate board was populated with prestigious directors, including for- mer U.S. Secretaries of State George Shultz and Henry Kissinger, former U.S. Senator Sam Nunn, former CEO of Wells Fargo Richard Kovacevich, and former director of the Centers for Disease Control and Prevention William H. Foege. Holmes struck up partnerships with Walgreens and Safeway to use the new technology in their stores. Like many hot startup "unicorns," Theranos seemed well on its way to an initial public offering. Case 4 The Theranos Story and Fake Blood Testing: Culture, Crime, and Hubris* Stanford University dropout Elizabeth Holmes was desper- ate to make her mark in the business world. In 2003, she dropped out of Stanford's electrical and chemical engineer- ing program at the age of 19 to create a company to develop a revolutionary blood-testing machine. She raised nearly $6 million through family connections, formed a company called Theranos, and hired a PhD student at Stanford as her first employee. One problem popped up, however. Despite best efforts, including a team of former Apple researchers that Holmes wooed to the company, the blood-testing machine called Edison did not work. Worse yet, it seemed that Holmes and /chipotle-employees-blow-whistle-food-safety -problems/. Accessed June 27, 2021. 18. NewDesk, "State Investigates Chipotle near Denver for Likely Norovirus Outbreak," Food Safety News (May 19, 2021), https://www.foodsafetynews .com/2021/05/chipotle-mexican-grill-cmg-location -near-denver-investigated-for-likely-norovirus -outbreak/. Accessed June 27, 2021. 19. See Mary Meisenzahl, " "Chipotle e Has Been Sued by New York City Over Claims It Violated Scheduling Sick Leave Laws, and Now Owes Over $150 Million to Workers," Business Insider.com (April 28, 2021), https://www.businessinsider.com/nyc-lawsuit -chipotle-over-labor-law-violations-2021-4. Accessed June 27, 2021; Noah Scheiber, "Chipotle to Saad Is Sued by New York City Over Scheduling Practices," The New York Times (April 28, 2021), https://www.nytimes.com/2021/04/28/business /chipotle-new-york-illegal-scheduling.html. Accessed June 27, 2021. *This case was written by lill & Brown Bentley University in 2021 20. Ibid. her chief operating officer/president and romantic partner Ramesh "Sunny" Balwani were involved in a deep cover-up of Edison's failures.' A New Yorker magazine profile of Holmes called Holmes's explanations of the Theranos tech- nology "comically vague." Wall Street Journal reporter John Carreyrou led the charge to expose the Theranos scam, and eventually 70 former employees helped recon- struct the story, which Carreyrou turned into a book, Bad Blood: Secrets and Lies in a Silicon Valley Startup. The Edison was going to revolutionize blood testing- offering more than 240 tests ranging from cholesterol to cancer-with technology that would work with just a finger prick.However, in 2014-2015, several Theranos employees went to regulators complaining that the company was exag- gerating its achievements and failing to report test results that raised questions about the accuracy of the Edison sys- tem. Their complaints seemed to fall on deaf ears. In 2015, President Barack Obama named Holmes a U.S. ambassa- dor for global entrepreneurship. That same year she was awarded the prestigious Horatio Alger Award by the Horatio Alger Association of Distinguished Members, which is said to symbolize "the Association's values, including personal initiative and perseverance, leadership and commitment to excellence."" Additionally, the award-winning members are said to be "similar to characters in stories by Horatio Alger, Jr.; they traditionally have started life in 'humble' or eco- nomically challenging circumstand 10 Holmes was also

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432 Case 4: The Theranos Story and Fake Blood Testing: Culture, Crime, and Hubris named one of the 100 Most Influential People in the World by Time magazine, and Glamour magazine anointed her one of its eight Women of the Year." By 2018 the story had turned, however, and Elizabeth Holmes, once the "darling of Silicon Valley," was being investigated by the Securities and Exchange Commission and the federal government for defrauding investors out of hundreds of millions of dollars and deceiving hundreds patients and doctors.12 Balwani was also indicted. The SEC charges of wire fraud were settled in 2018 and the company ceased operations in September that year. The Edison was supposed to imitate what a chem- ist does in a lab: take samples, dilute them, add antibod- ies and a reagent, and reveal a result. 13 Inside the Edison, which was designed to look like an Apple product, a robotic arm was supposed to do the work. Tyler Shultz, a former Theranos employee and one of the first whistleblowers, told 60 Minutes in 2018 that it just did not work.14 Pieces of the machine would fall off, doors would not close, and the tem- perature could not be regulated. In 2016, Theranos wiped out two years of blood tests because federal regulators said they were putting patients' health and safety at risk.15 The stories about the cover-up speak to a culture of secrecy, intimidation, and fear, allegedly led by Balwani and Holmes. Carreyrou, in his book, points to the culture of secrecy inspired by Apple because Holmes was obsessed. with Apple and idolized Steve Jobs (Holmes reportedly wore black turtlenecks and allegedly lowered her voice to sound more like Jobs). 16 According to Carreyrou, poten- tial whistleblowers were threatened with lawsuits, and those who were critical f leadership practices were either fired or marginalized." Holmes came to be described as a "smart, charming bully" with parallels to Bernie Madoff. 18. The rise and fall of the Theranos blood-testing com- pany seems like something out of a novel on how business should not be done. And yet, Elizabeth Holmes's lawyers, during her early defense hearing, suggested that Theranos succumbed to the "Silicon Valley startup culture" that invites exaggeration the funding process.19 Prosecutors consequently warned the judge about giving Holmes too much room to argue that her actions were not any different than any other start-ups, and Judge Edward Davila agreed. As of 2021, Holmes was still awaiting trial on fed- eral charges. In March 2021, Holmes announced she was pregnant with her husband, hotel heir Billy Evans, and she was expected to give birth in July 2021, further delaying her trial.20 If convicted, Holmes could be sentenced up to 20 years in prison. The Theranos story, with its intriguing founder and Silicon Valley connections, remains a popular topic for the media. In addition to Carreyrou's book, which received critical claim and several awards, the story was adapted for a movie called Bad Blood, starring Jennifer Lawrence as Holmes, due out in late 2021-2022. In 2019, HBO released the documentary The Inventor: Out for Blood in Silicon Valley, and ABC News produced a podcast, The Dropout, hosted by Rebecca Jarvis, which is scheduled to be made into a limited series on Hulu. More limited series and podcasts have followed, as the world tunes in to see what the consequences will be for Holmes and Balwani in the wake of the "bad blood" scandal. Questions for Discussion 1. 2. What are the major issues in this case? Consider the corporate culture of Theranos. How might this have influenced the decisions that Holmes and Balwani made to keep forging ahead, even as the Edison continued to fail? 3. What do you think of the defense strategy that puts blame on the "Silicon Valley startup culture"? 4. Is there any justification for the actions of Holmes and Balwani? 5. Consider the actions of whistleblower Tyler Shultz. Would you have gone to regulators if you were in his position? Why why not? Endnotes 1. See John Carreyrou, "Hot Startup Theranos Has Struggled with Its Blood-Test Technology," The Wall Street Journal (October 16, 2015), https:// www.wsj.com/articles/theranos-has-struggled-with -blood-tests-1444881901; Avery Hartmans and Paige Leskin, "The Rise and Fall of Elizabeth Holmes, the Theranos Founder Whose Federal Fraud Trial Is Delayed Until 2021," Business Insider (August 11, 2020), https://www.businessinsider. com/theranos- -story-bio-2018-4.. com/th -founder-ceo-elizabeth-holmes-life 8-4. Accessed June 29, 2021. 2. Lydia Ramsey Pflanzer, "How Elizabeth Holmes Convinced Powerful Men like Henry Kissinger, James Mattis, and George Shultz to Sit on the Board of Now Disgraced Blood-Testing Startup 1000-Testing Theranos," Business Insider (March 19, 2019), https://www.businessinsider.com/theranos-former -board-members-henry-kissinger-george-shultz -james-mattis-2019-3. Accessed June 29, 2021. Kate Knibbs, "How John Carreyrou Exposed the Theranos Scam," The Ringer (May 22, 2018), https://www.theringer.com/2018/5/22/17378494 /bad-blood-theranos-john-carreyrou-interview. Accessed June 29, 2021. 3. 4. See Sheelah Kolhatkar, "The Founder of Theranos Tries to Change the Subject," The New Yorker (August 2, 2016), https://www.newyorker.com /business/currency/the-founder-of-theranos-tries -to-change-the-subject. Accessed June 29, 2021; Ken Auletta, "Blood Simpler," The New Yorker (December 8, 2014), https://www.newyorker.com /magazine/2014/12/15/blood-simpler. Accessed June 29, 2021; Zaw Thiha Tun, "Theranos: The Fallen Unicorn," Investopedia (June 16, 2021), https://www.investopedia.com/articles/investing /020116/theranos-fallen-unicorn.asp. Accessed June 29, 2021. 5. John Carreyrou, Bad Blood: Secrets and Lies in a Silicon Valley Startup (Penguin Random House, 2018). Copyright 2023 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203 Copyright 2023 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
Transcribed Image Text:432 Case 4: The Theranos Story and Fake Blood Testing: Culture, Crime, and Hubris named one of the 100 Most Influential People in the World by Time magazine, and Glamour magazine anointed her one of its eight Women of the Year." By 2018 the story had turned, however, and Elizabeth Holmes, once the "darling of Silicon Valley," was being investigated by the Securities and Exchange Commission and the federal government for defrauding investors out of hundreds of millions of dollars and deceiving hundreds patients and doctors.12 Balwani was also indicted. The SEC charges of wire fraud were settled in 2018 and the company ceased operations in September that year. The Edison was supposed to imitate what a chem- ist does in a lab: take samples, dilute them, add antibod- ies and a reagent, and reveal a result. 13 Inside the Edison, which was designed to look like an Apple product, a robotic arm was supposed to do the work. Tyler Shultz, a former Theranos employee and one of the first whistleblowers, told 60 Minutes in 2018 that it just did not work.14 Pieces of the machine would fall off, doors would not close, and the tem- perature could not be regulated. In 2016, Theranos wiped out two years of blood tests because federal regulators said they were putting patients' health and safety at risk.15 The stories about the cover-up speak to a culture of secrecy, intimidation, and fear, allegedly led by Balwani and Holmes. Carreyrou, in his book, points to the culture of secrecy inspired by Apple because Holmes was obsessed. with Apple and idolized Steve Jobs (Holmes reportedly wore black turtlenecks and allegedly lowered her voice to sound more like Jobs). 16 According to Carreyrou, poten- tial whistleblowers were threatened with lawsuits, and those who were critical f leadership practices were either fired or marginalized." Holmes came to be described as a "smart, charming bully" with parallels to Bernie Madoff. 18. The rise and fall of the Theranos blood-testing com- pany seems like something out of a novel on how business should not be done. And yet, Elizabeth Holmes's lawyers, during her early defense hearing, suggested that Theranos succumbed to the "Silicon Valley startup culture" that invites exaggeration the funding process.19 Prosecutors consequently warned the judge about giving Holmes too much room to argue that her actions were not any different than any other start-ups, and Judge Edward Davila agreed. As of 2021, Holmes was still awaiting trial on fed- eral charges. In March 2021, Holmes announced she was pregnant with her husband, hotel heir Billy Evans, and she was expected to give birth in July 2021, further delaying her trial.20 If convicted, Holmes could be sentenced up to 20 years in prison. The Theranos story, with its intriguing founder and Silicon Valley connections, remains a popular topic for the media. In addition to Carreyrou's book, which received critical claim and several awards, the story was adapted for a movie called Bad Blood, starring Jennifer Lawrence as Holmes, due out in late 2021-2022. In 2019, HBO released the documentary The Inventor: Out for Blood in Silicon Valley, and ABC News produced a podcast, The Dropout, hosted by Rebecca Jarvis, which is scheduled to be made into a limited series on Hulu. More limited series and podcasts have followed, as the world tunes in to see what the consequences will be for Holmes and Balwani in the wake of the "bad blood" scandal. Questions for Discussion 1. 2. What are the major issues in this case? Consider the corporate culture of Theranos. How might this have influenced the decisions that Holmes and Balwani made to keep forging ahead, even as the Edison continued to fail? 3. What do you think of the defense strategy that puts blame on the "Silicon Valley startup culture"? 4. Is there any justification for the actions of Holmes and Balwani? 5. Consider the actions of whistleblower Tyler Shultz. Would you have gone to regulators if you were in his position? Why why not? Endnotes 1. See John Carreyrou, "Hot Startup Theranos Has Struggled with Its Blood-Test Technology," The Wall Street Journal (October 16, 2015), https:// www.wsj.com/articles/theranos-has-struggled-with -blood-tests-1444881901; Avery Hartmans and Paige Leskin, "The Rise and Fall of Elizabeth Holmes, the Theranos Founder Whose Federal Fraud Trial Is Delayed Until 2021," Business Insider (August 11, 2020), https://www.businessinsider. com/theranos- -story-bio-2018-4.. com/th -founder-ceo-elizabeth-holmes-life 8-4. Accessed June 29, 2021. 2. Lydia Ramsey Pflanzer, "How Elizabeth Holmes Convinced Powerful Men like Henry Kissinger, James Mattis, and George Shultz to Sit on the Board of Now Disgraced Blood-Testing Startup 1000-Testing Theranos," Business Insider (March 19, 2019), https://www.businessinsider.com/theranos-former -board-members-henry-kissinger-george-shultz -james-mattis-2019-3. Accessed June 29, 2021. Kate Knibbs, "How John Carreyrou Exposed the Theranos Scam," The Ringer (May 22, 2018), https://www.theringer.com/2018/5/22/17378494 /bad-blood-theranos-john-carreyrou-interview. Accessed June 29, 2021. 3. 4. See Sheelah Kolhatkar, "The Founder of Theranos Tries to Change the Subject," The New Yorker (August 2, 2016), https://www.newyorker.com /business/currency/the-founder-of-theranos-tries -to-change-the-subject. Accessed June 29, 2021; Ken Auletta, "Blood Simpler," The New Yorker (December 8, 2014), https://www.newyorker.com /magazine/2014/12/15/blood-simpler. Accessed June 29, 2021; Zaw Thiha Tun, "Theranos: The Fallen Unicorn," Investopedia (June 16, 2021), https://www.investopedia.com/articles/investing /020116/theranos-fallen-unicorn.asp. Accessed June 29, 2021. 5. John Carreyrou, Bad Blood: Secrets and Lies in a Silicon Valley Startup (Penguin Random House, 2018). Copyright 2023 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203 Copyright 2023 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
12. Beth Kowitt, "How Chipotle Survived a Food Safety Crisis and a Pandemic to Debut on the This Year's Fortune 500," Fortune (June 3, 2021), https:// fortune.com/2021/06/02/chipotle-fortune-500-ceo -brian-niccol-interview/. Accessed June 25, 2021. 13. Geoff Williams, "Chipotle's E.coli Crisis: P.R. Experts Say It's Handling It Right," Forbes Experts Say (November 4, 2015), http://www.forbes.com/sites 14. 15. Case 4: The Theranos Story and Fake Blood Testing: Culture, Crime, and Hubris 431 /geoffwilliams/2015/11/04/can-chipotle-survive-its dical#6 -e-coli-crisis-pr-experts-cessed -advice/#6d8544ab1644. Accessed J dvancement VICCH Chipotle, "Our Safety Advancements," https://www .chipotle.com/foodsafety. Accessed June 25, 2021. Sam Oches, "Chipotle Struggling to Get Customers Back," QSR (March 17, 2016), https://www .qsrmagazine.com/news/chipotle-struggling-get -customers-back. Accessed June 25, 2021. June 25, 2021. -seem-to-think-so-and-offer 16. Ibid. 17. "Chipotle Employees Blow the Whistle on Food Safety Problems," Bad Food Recall (February 11, 2020), https://www.badfoodrecall.com/2020/02 Over the next several years, investors poured more than $400 million into the company, which by 2016/2017 was valued at $9 billion. The Theranos corporate board was populated with prestigious directors, including for- mer U.S. Secretaries of State George Shultz and Henry Kissinger, former U.S. Senator Sam Nunn, former CEO of Wells Fargo Richard Kovacevich, and former director of the Centers for Disease Control and Prevention William H. Foege. Holmes struck up partnerships with Walgreens and Safeway to use the new technology in their stores. Like many hot startup "unicorns," Theranos seemed well on its way to an initial public offering. One problem popped up, however. Despite best efforts, including a team of former Apple researchers that Holmes wooed to the company, the blood-testing machine called Edison did not work. Worse yet, it seemed that Holmes and /chipotle-employees-blow-whistle-food-safety -problems/. Accessed June 27, 2021. 18. NewDesk, "State Investigates Chipotle near Denver for Likely Norovirus Outbreak," Food Safety News (May 19, 2021), https://www.foodsafetynews .com/2021/05/chipotle-mexican-grill-cmg-location -near-denver-investigated-for-likely-norovirus IN -outbreak/. Accessed June 27, 2021. *This case was written by Jill A. Brown, Bentley University, in 2021. 19. See Mary Meisenzahl, "Chipotle Has Been Sued by New York City Over Claims It Violated Scheduling Sick Leave Laws, and Now Owes Over $150 Million SIGN Ecav to Workers," Business Insider.com (April 28, 2021), https://www.businessinsider.com/nyc-lawsuit -chipotle-over-labor-law-violations-2021-4. Accessed June 27, 2021; Noah Scheiber, "Chipotle Is Sued by New York City Over Scheduling Practices," The New York Times (April 28, 2021), https://www.nytimes.com/2021/04/28/business /chipotle-new-york-illegal-scheduling.html. Accessed June 27, 2021. Case 4 The Theranos Story and Fake Blood Testing: Culture, Crime, and Hubris* Stanford University dropout Elizabeth Holmes was desper- ate to make her mark in the business world. In 2003, she dropped out of Stanford's electrical and chemical engineer- ing program at the age of 19 to create a company to develop a revolutionary blood-testing machine. She raised nearly $6 million through family connections, formed a company called Theranos, and hired a PhD student at Stanford as her first employee. 20. Ibid. her chief operating officer/president and romantic partner Ramesh "Sunny" Balwani were involved in a deep cover-up of Edison's failures. A New Yorker magazine profile of Holmes called Holmes's explanations of the Theranos tech- nology "comically vague." Wall Street Journal reporter John Carreyrou led the charge to expose the Theranos scam, and eventually 70 former employees helped recon- struct the story, which Carreyrou turned into a book, Bad Blood: Secrets and Lies. a Silicon Valley Startup. The Edison was going to revolutionize blood testing- offering more than 240 tests ranging from cholesterol to cancer with technology that would work with just a finger prick." However, in 2014-2015, several Theranos employees went to regulators complaining that the company was exag- gerating its achievements and failing to report test results that raised questions about the accuracy of the Edison sys- tem. Their complaints seemed to fall on deaf ears. In 2015, President Barack Obama named Holmes a U.S. ambassa- dor for global entrepreneurship. That same year she was awarded the prestigious Horatio Alger Award by the Horatio Alger Association of Distinguished Members, which is said to symbolize "the Association's values, including personal initiative and perseverance, leadership and commitment to excellence." Additionally, the award-winning members are said to be "similar to characters in stories by Horatio Alger, Jr.; they traditionally have started life in 'humble' or eco- nomically challenging circumstances."10 Holmes was also Copyright 2023 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203 Copyright 2023 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it
Transcribed Image Text:12. Beth Kowitt, "How Chipotle Survived a Food Safety Crisis and a Pandemic to Debut on the This Year's Fortune 500," Fortune (June 3, 2021), https:// fortune.com/2021/06/02/chipotle-fortune-500-ceo -brian-niccol-interview/. Accessed June 25, 2021. 13. Geoff Williams, "Chipotle's E.coli Crisis: P.R. Experts Say It's Handling It Right," Forbes Experts Say (November 4, 2015), http://www.forbes.com/sites 14. 15. Case 4: The Theranos Story and Fake Blood Testing: Culture, Crime, and Hubris 431 /geoffwilliams/2015/11/04/can-chipotle-survive-its dical#6 -e-coli-crisis-pr-experts-cessed -advice/#6d8544ab1644. Accessed J dvancement VICCH Chipotle, "Our Safety Advancements," https://www .chipotle.com/foodsafety. Accessed June 25, 2021. Sam Oches, "Chipotle Struggling to Get Customers Back," QSR (March 17, 2016), https://www .qsrmagazine.com/news/chipotle-struggling-get -customers-back. Accessed June 25, 2021. June 25, 2021. -seem-to-think-so-and-offer 16. Ibid. 17. "Chipotle Employees Blow the Whistle on Food Safety Problems," Bad Food Recall (February 11, 2020), https://www.badfoodrecall.com/2020/02 Over the next several years, investors poured more than $400 million into the company, which by 2016/2017 was valued at $9 billion. The Theranos corporate board was populated with prestigious directors, including for- mer U.S. Secretaries of State George Shultz and Henry Kissinger, former U.S. Senator Sam Nunn, former CEO of Wells Fargo Richard Kovacevich, and former director of the Centers for Disease Control and Prevention William H. Foege. Holmes struck up partnerships with Walgreens and Safeway to use the new technology in their stores. Like many hot startup "unicorns," Theranos seemed well on its way to an initial public offering. One problem popped up, however. Despite best efforts, including a team of former Apple researchers that Holmes wooed to the company, the blood-testing machine called Edison did not work. Worse yet, it seemed that Holmes and /chipotle-employees-blow-whistle-food-safety -problems/. Accessed June 27, 2021. 18. NewDesk, "State Investigates Chipotle near Denver for Likely Norovirus Outbreak," Food Safety News (May 19, 2021), https://www.foodsafetynews .com/2021/05/chipotle-mexican-grill-cmg-location -near-denver-investigated-for-likely-norovirus IN -outbreak/. Accessed June 27, 2021. *This case was written by Jill A. Brown, Bentley University, in 2021. 19. See Mary Meisenzahl, "Chipotle Has Been Sued by New York City Over Claims It Violated Scheduling Sick Leave Laws, and Now Owes Over $150 Million SIGN Ecav to Workers," Business Insider.com (April 28, 2021), https://www.businessinsider.com/nyc-lawsuit -chipotle-over-labor-law-violations-2021-4. Accessed June 27, 2021; Noah Scheiber, "Chipotle Is Sued by New York City Over Scheduling Practices," The New York Times (April 28, 2021), https://www.nytimes.com/2021/04/28/business /chipotle-new-york-illegal-scheduling.html. Accessed June 27, 2021. Case 4 The Theranos Story and Fake Blood Testing: Culture, Crime, and Hubris* Stanford University dropout Elizabeth Holmes was desper- ate to make her mark in the business world. In 2003, she dropped out of Stanford's electrical and chemical engineer- ing program at the age of 19 to create a company to develop a revolutionary blood-testing machine. She raised nearly $6 million through family connections, formed a company called Theranos, and hired a PhD student at Stanford as her first employee. 20. Ibid. her chief operating officer/president and romantic partner Ramesh "Sunny" Balwani were involved in a deep cover-up of Edison's failures. A New Yorker magazine profile of Holmes called Holmes's explanations of the Theranos tech- nology "comically vague." Wall Street Journal reporter John Carreyrou led the charge to expose the Theranos scam, and eventually 70 former employees helped recon- struct the story, which Carreyrou turned into a book, Bad Blood: Secrets and Lies. a Silicon Valley Startup. The Edison was going to revolutionize blood testing- offering more than 240 tests ranging from cholesterol to cancer with technology that would work with just a finger prick." However, in 2014-2015, several Theranos employees went to regulators complaining that the company was exag- gerating its achievements and failing to report test results that raised questions about the accuracy of the Edison sys- tem. Their complaints seemed to fall on deaf ears. In 2015, President Barack Obama named Holmes a U.S. ambassa- dor for global entrepreneurship. That same year she was awarded the prestigious Horatio Alger Award by the Horatio Alger Association of Distinguished Members, which is said to symbolize "the Association's values, including personal initiative and perseverance, leadership and commitment to excellence." Additionally, the award-winning members are said to be "similar to characters in stories by Horatio Alger, Jr.; they traditionally have started life in 'humble' or eco- nomically challenging circumstances."10 Holmes was also Copyright 2023 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203 Copyright 2023 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it
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