News

Theranos shutting down permanently

CEO tells shareholders embattled blood company negotiating with creditor

1701 Page Mill Road, the former site of Theranos. Photo by Veronica Weber.

Theranos Inc., the Palo Alto-based blood-testing company whose former CEO and chief operating officer were indicted by a federal grand jury earlier this year for allegedly defrauding investors and patients in a multimillion-dollar scheme, is shutting down, according to the company's CEO and general counsel David Taylor.

In a letter to stockholders, Taylor said Theranos had been working with an investment bank that had reached out to more than 80 potential buyers over the past four months.

"Unfortunately, none of those leads has materialized into a transaction. We are now out of time," Taylor wrote.

Taylor said the company plans to seek board and shareholder consent to begin dissolving Theranos on Sept. 10.

The company has already begun negotiating a settlement with Fortress Credit to take ownership of Theranos, Taylor said. Theranos was in default for a loan with Fortress and owes at least $60 million to unsecured creditors, Taylor said.

Under the settlement, Fortress would take ownership of all assets, and Theranos would be allowed to distribute its remaining cash, about $5 million, to creditors.

Because the company's cash is not nearly sufficient to pay all of its creditors in full, there will be no distributions to shareholders, according to Taylor.

Chief Operating Officer Ramesh "Sunny" Balwani and Theranos founder Elizabeth Holmes, who dropped out of Stanford University at the age of 19 to found Theranos in 2003, were charged with two counts of conspiracy to commit wire fraud and nine counts of wire fraud last March. The pair allegedly carried out a multimillion dollar scheme against their investors and a separate one against doctors and patients. Holmes and Balwani allegedly used advertisements and solicitations to persuade doctors and patients to use the company's services, despite knowing certain blood tests wouldn't provide accurate results, according to the indictment. Neither Theranos nor Holmes admitted or denied any wrongdoing.

In early April, the company laid off most of its employees, save for two dozen or fewer, the Wall Street Journal reported at the time.

In June, Holmes resigned as CEO and Taylor replaced her.

---

Follow the Palo Alto Weekly/Palo Alto Online on Twitter @PaloAltoWeekly and Facebook for breaking news, local events, photos, videos and more.

— Weekly staff report

Comments

19 people like this
Posted by wayne douglass
a resident of another community
on Sep 5, 2018 at 10:20 am

wayne douglass is a registered user.

This was old news awhile ago, and the inevitable happened. The Weekly has done a good job covering this scam by the "female Steve Jobs" and her co-conspiritor, and she will go to jail, unless she can negotiate a stay in a "country club" prison in West Virginia, like Martha Stewart. Another high-tech "entrepreneur" bites the dust, and good riddance to her.


31 people like this
Posted by Misogynist much?
a resident of Menlo Park
on Sep 5, 2018 at 10:51 am

Hey Wayne Douglass, I agree with you that Holmes acted egregiously and illegally, but instead of holding her up to Martha Stewart and pointing out that, gasp, she's FEMALE, maybe focus on the crimes and wrongdoings at hand?
-What Martha Stewart did was child's play compared to Bernie Madoff and so many other MALES who've defrauded people -- the blokes of Enron, the list could be endless. Yet if one googles "insider trading," Stewart is one of the top 10 names/photos to come up. Her actions harmed so few; the dollar amounts were a pittance.
-Of all the vile human beings 45 has put up for key positions, the only one who was close to not being approved was Betsy DeVos. Wretched human being, yes. As a parent of public school children, I abhor her. I disagree with her on every position. I would've loved her not to be approved. But is she worse than Steve Bannon the abject white supremacist? Or so many others T has in his inner circle?
-Similarly, people want to drag Melania and Ivanka through the mud. They're awful, especially the daughter, but why are they such easier targets than the mastermind himself, or those close to him doing far more actual damage?

[Portion removed.]


17 people like this
Posted by Lennie
a resident of Barron Park
on Sep 5, 2018 at 11:08 am

Lennie is a registered user.

The comment by Misogynist Much tells us a lot more about this person than about Theranos or the subject at hand. Did Wayne Douglass say or imply that only women commit crimes or that they commit more crimes or worse crimes than men? I don't think so.


13 people like this
Posted by Francine
a resident of Green Acres
on Sep 5, 2018 at 11:22 am

I do think Holmes has been treated worse by the media, or maybe it's more that the story is more sensationalized, because she's a woman. One thing I found so awful about Theranos was that they defrauded people in regard to their health. Also, she had such a strange board of directors, no one to really push the leadership team on whether the science was valid. In my opinion, what Theranos did is way worse than anything Martha Stewart ever thought about, and to compare the two is a strange comment. Why, do you think she will go to a cushy prison because she's a woman? Lots of white-collar male criminals get off in resort-like prisons. I'm just sick for the people who made medical decisions based on Theranos' incorrect information. I'd feel that way whether it was a male or female CEO.


Posted by Name hidden
a resident of Downtown North

on Sep 5, 2018 at 11:38 am

Due to repeated violations of our Terms of Use, comments from this poster are automatically removed. Why?


Posted by Name hidden
a resident of Downtown North

on Sep 5, 2018 at 11:40 am

Due to repeated violations of our Terms of Use, comments from this poster are automatically removed. Why?


17 people like this
Posted by Sanctimonious City
a resident of Barron Park
on Sep 5, 2018 at 12:39 pm

Sanctimonious City is a registered user.

The obsession by Liberal Progressives to focus on sexism is clouding their vision. This could be the ultimate example of conservative, right-wing cronyism and corruption and you don't even see it.

The Board of Directors and investors read like a Neocon who's who list and two are currently in the Trump administration as high ranking officials.

Board Members
Former Secretary of State - George Shultz
Former Secretary of Defense - William Perry
Former Secretary of State - Henry Kissinger
Former U.S. Senator - Sam Nunn
Former U.S. Senator - Bill Frist
Former USN Admiral - Gary Roughead
Former General, Current Secretary of Defense - James Mattis
Disgraced former Chairman and CEO of Wells Fargo - Richard Kovacevich
Former Chairman and CEO at Bechtel Group - Riley Bechtel

Investors
Walton family ($150 million)
Rupert Murdoch ($121 million)
Current Secretary of Education - Betsy DeVos ($100 million)
Cox family (of Cox Media Group) ($100 million)

It is likely one of the most disgusting and repugnant examples of political bread buttering, back scratching and trough feeding in recent history. The global elite corruption syndicate of both parties needs to go.

Here's your chance. Have at it. Drain the swamp.


1 person likes this
Posted by Anon
a resident of Another Palo Alto neighborhood
on Sep 5, 2018 at 1:20 pm

Posted by Sanctimonious City, a resident of Barron Park

>> This could be the ultimate example of conservative, right-wing cronyism and corruption and you don't even see it.

>> The Board of Directors and investors read like a Neocon who's who list and two are currently in the Trump administration as high ranking officials.

>> It is likely one of the most disgusting and repugnant examples of political bread buttering, back scratching and trough feeding in recent history. The global elite corruption syndicate of both parties needs to go.

>> Here's your chance. Have at it. Drain the swamp.

We agree! Someone must be operating a Quantum Improbability Drive nearby. Or, maybe it is the quantum computing machines: Web Link



4 people like this
Posted by Sanctimonious City
a resident of Barron Park
on Sep 5, 2018 at 1:47 pm

Sanctimonious City is a registered user.

Awww, I think we are having a moment :-)

Another possibility is the Infinite Monkey Theorem. I will keep posting until I eventually write Shakespeare.

Web Link


6 people like this
Posted by Responsible senior
a resident of Menlo Park
on Sep 5, 2018 at 9:27 pm

The sham that Elizabeth and Sunny propagated could have caused irreversible health damage to thousands and even millions if responsible sensible people persisted in questioning the research. George Shultz’s Grandson is a hero and a couple of the researchers with scruples are heroes. Thank you ever so much. Just goes to show that we must have knowledgeable oversight of our breakthroughs so people are not hurt.
To the State of California: please prosecute these dangerous narcissists.


5 people like this
Posted by Chris Zaharias
a resident of Duveneck/St. Francis
on Sep 6, 2018 at 9:52 am

Chris Zaharias is a registered user.

For every Theranos you hear about, dozens of other startup founders willfully defraud investors and earnest employees alike, never to be exposed to the light of day. Things I've seen founders do:

1) lie to employees, investors and customers about critical aspects of product readiness;
2) pay themselves a one-time 'bonus' with the last $500k-$2m in the company's bank account before its death or low-exit demise (Boards often collude in this in return for the founder's help hiding the true end-story from the market);
3) lie to employees about shares outstanding and/or preference structure;
4) lie about foundational BizDev relationships or addressable market size despite empirical data;

I consider Theranos to be a great story because the founder got caught and prosecuted, unlike hundreds of others who should be in jail.


8 people like this
Posted by wayne douglass
a resident of another community
on Sep 6, 2018 at 1:17 pm

wayne douglass is a registered user.

As usual, somebody--in this instance, @Misogynist much?--tries to hijack the discussion, by perceiving "all of the barely-restrained misogyny" in my comment to accuse me of being a misogynist. Based on what, @Misogynist much? You don't know me, or at least I don't think so--but how would I know, since you use a handle and I don't? You tell me what I said "just makes my skin crawl." Well, too bad, @Misogynist much?, the rest of your body can crawl with your skin. I have nothing else to say in my defense; @Lennie has said it for me. Thanks, @Lennie, you get it.

@Francine sort of gets it, too: "I do think Holmes has been treated worse by the media, or maybe it's more that the story is more sensationalized, because she's a woman." Could be. That's probably how Elizabeth Holmes was dubbed "the female Steve Jobs," in the first place. A little hype sells newspapers. @Chris Zaharias definitely knows whereof he speaks. After 25 years in high tech, I've witnessed all the things he talks about. He knows where a lot of bodies are buried, and so do I. We should have a drink together some day and swap stories.

The rest of the discussion has been all over the lot, dropping names like George Schulz, Betty DeVos, and the mysterious 45(?) @Sanctimonious City is puzzling as ever, simultaneously peddling right-wing fantasies about "Liberal Progressives focus[ing] on sexism [that] is clouding their vision" and hilarious references to the Infinite Monkey Theorem. Hey, @Sanctimonious City, I call your Web link to Wikipedia and raise you one of my own (Web Link). I saw Bob Newhart do his bit on (I think) The Ed Sullivan Show, and it has stuck with me all this time.


1 person likes this
Posted by in her defense
a resident of Esther Clark Park
on Sep 6, 2018 at 4:08 pm

Holmes oversold her technology to investors just like countless other founders. These are sophisticated investors who should have known better. They should have done technical due diligence before investing. They should accept their losses and move on.

Holmes probably believed in the eventual perfection of Theranos technology. It's really hard to prove something will never ever work unless it is ruled out by laws of physics. I think they are being too hard on her.

It will stifle innovation to impose jail time. Risky startups are needed.


Like this comment
Posted by musical
a resident of Palo Verde
on Sep 6, 2018 at 10:04 pm

^ You can't cheat an honest man.


10 people like this
Posted by Shaking Head
a resident of Community Center
on Sep 7, 2018 at 10:00 am

"I think they are being too hard on her."

Give me a break. Seriously?


2 people like this
Posted by Apple Stockholder
a resident of Los Altos
on Sep 7, 2018 at 3:12 pm

> the "female Steve Jobs"

Except that his stuff (1) worked, (2) sold in large numbers & (3) made Apple stockholders very happy.

Not so with Elizabeth Holmes. Perhaps the only thing they have in common is an undesirable personality.


5 people like this
Posted by Sanctimonious City
a resident of Barron Park
on Sep 9, 2018 at 4:51 pm

Sanctimonious City is a registered user.

@Wayne Douglas

Yes, Bob Newhart was a comedic genius. His satire and dead pan delivery were unmatched in his generation.

Who can ever forget the innovative and among-the-best-of-all-time series ending for Newhart. Web Link

Humor is the antidote to tyranny. Hipocrisy wilts in the sunlight of satire. Where there is laughter there is freedom of the mind and spirit.

Thanks for sharing


Don't miss out on the discussion!
Sign up to be notified of new comments on this topic.

Email:


Post a comment

Posting an item on Town Square is simple and requires no registration. Just complete this form and hit "submit" and your topic will appear online. Please be respectful and truthful in your postings so Town Square will continue to be a thoughtful gathering place for sharing community information and opinion. All postings are subject to our TERMS OF USE, and may be deleted if deemed inappropriate by our staff.

We prefer that you use your real name, but you may use any "member" name you wish.

Name: *

Select your neighborhood or school community: * Not sure?

Comment: *

Verification code: *
Enter the verification code exactly as shown, using capital and lowercase letters, in the multi-colored box.

*Required Fields

He said – she said – who is lying? Justice Brett Kavanaugh or PA resident Christine Ford
By Diana Diamond | 31 comments | 1,254 views

Global Warming Diet
By Laura Stec | 5 comments | 1,187 views

Couples: "Taming Your Gremlin" by Richard Carson
By Chandrama Anderson | 0 comments | 1,036 views

Preparing for kindergarten
By Cheryl Bac | 0 comments | 566 views

 

Pre-registration ends tomorrow!

​On Friday, September 21, join us at the Palo Alto Baylands for a 5K walk, 5K run, 10K run, or—for the first time—half marathon! All proceeds benefit local nonprofits serving children and families.

Learn More