SAN JOSE, Calif. — At the height of her acclaim in 2015, Elizabeth Holmes, the entrepreneur who founded the blood testing start-up Theranos, was named Glamour’s “Woman of the Year.” Time put her on its list of 100 luminaries. She graced the covers for Fortune, Forbes, Inc., T Magazine, and more.
Three years later, Theranos was in scandal and had failed in its mission to revolutionize health care. However, it did make a difference in another way: It helped to sour Silicon Valley’s media.
Roger Parloff, a journalist that wrote the Fortune cover story about Ms. Holmes in 2014, was called to testify in a federal courtroom, San Jose, Calif., where Ms. Holmes is being tried for fraud. Mr. Parloff stated that Ms. Holmes had misrepresented to him the volume and types test Theranos could perform, as well its work with the military, pharmaceutical companies, and other entities.
Theranos’s law firm, Boies Schiller, had introduced him 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 C.E.O., Elizabeth Holmes,” he testified, looking directly at Ms. Holmes across the courtroom.
The discovery that Ms. Holmes, the tech industry’s most celebrated female entrepreneur, was misdirecting the world about her company marked a turning point in the tech press, ending a decade-long run of largely positive coverage. Reporters cringed at glowing articles about tech companies that hid the truth, omitted the negative consequences of the products, or abused the trust they enjoyed with the public.
“Holmes just becomes this fable of ‘You can’t just buy what they’re selling,’” said Margaret O’Mara, a professor at the University of Washington and a historian of Silicon Valley. “‘This was not what it purported to be, and we fell for it.’”
The Elizabeth Holmes Trial: Understand it
Elizabeth Holmes, founder of Theranos blood testing company, is currently on trial for 10 counts of wire fraud and two counts of conspiracy.
After The Wall Street Journal published exposés in 2015 and 2016 showing that Theranos was not what it appeared to be, coverage of tech companies generally became more probing.
Reporters dug into Facebook’s role in the 2016 presidential election, as well as scandals at Uber and a series of #MeToo accusations and labor uprisings at tech companies. The tech industry was no longer a niche for idealist computer geeks. It had become the dominant force of the global economy and should be held accountable more.
Now as Ms. Holmes, 37, stands trial, the media’s role in Theranos’s rise and fall has been laid out in painstaking detail. Ms. Holmes used positive articles like Fortune’s to gain credibility with investors, who poured $945 million into Theranos, prosecutors have argued.
The media coverage often impressed these investors. Chris Lucas, a venture capitalist whose firm had invested in Theranos, testified that reading the Fortune article had made him “very proud of the situation, proud we were involved, very proud of Elizabeth, the whole thing.” Lisa Peterson, who managed a $100 million investment in Theranos on behalf of the wealthy DeVos family, lifted language directly from the Fortune article into a report she prepared.
The media was likewise eager to embrace Ms. Holmes’s narrative of a brilliant Stanford University dropout on her way to becoming the next Steve Jobs. This was a young female billionaire who had made her own fortune and was often compared to Einstein or Beethoven. She adopted iconography, dressing up as Mr. Jobs in black turtlenecks and an esoteric life, telling Mr. Parloff that her vegan Buddhist faith meant she eschew coffee in favor for green juice.
“There was a hunger for that kind of story, and she seized that opportunity and worked that very carefully,” Ms. O’Mara said.
The media’s fascination with Ms. Holmes became so intense that in 2015, her business partner and boyfriend at the time, Ramesh Balwani, who is known as Sunny, warned her that the hype was getting risky.
“FYI, I am worried about over exposure without solid substance, which is lacking right now,” Mr. Balwani wrote in a text message that was included in court filings.
Ms. Holmes ignored the warning. Media coverage had helped Theranos with an apparent potential business deal, she wrote, adding, “The more it works the more haters will hate.”
Later that year, The Journal revealed that Theranos’s technology did not do what the start-up claimed, spurring a surprise inspection by regulators that led to the company’s unraveling.
Theranos forcefully denied The Journal’s report. On CNBC, Ms. Holmes dismissed the article as “what happens when you work to change things.” She and Mr. Balwani plotted a defamation suit, according to text messages included in court filings. Together, they led Theranos employees in chanting an expletive at John Carreyrou, The Journal’s reporter.
Soon after, Mr. Parloff published his Fortune article correction. It detailed how Theranos & Ms. Holmes had misled Parloff. He also blamed himself for not including some of Ms. Holmes’s more evasive and opaque answers to his questions.
In court, exhibits revealed that Ms. Holmes had shown Mr. Parloff the same falsified validation reports — which appeared to show that pharmaceutical companies had endorsed Theranos’s technology when they had not — that she had sent to investors. Mr. Parloff also stated that Ms. Holmes had told her that Theranos was used by the military in Afghanistan, but that this was so sensitive that he couldn’t publish it or ask Gen. James Mattis about it. It turned out that Theranos machines weren’t used on battlefields.
“She was very concerned about trade secrets,” Mr. Parloff said.
Other outlets that had hailed Ms. Holmes followed Mr. Parloff’s mea culpa. Forbes revised Ms. Holmes’s net worth, once estimated at $4.5 billion, to zero. Glamour has updated its Woman of the year award for Ms. Holmes after the Securities and Exchange Commission accused her of fraud.
Ms. Holmes continues her fight against the media, even as she faces up 20 years in prison if she is convicted. Throughout the trial, her lawyers have pushed to limit Mr. Parloff’s testimony. They filed a motion to compel Parloff to turn over all his reports notes, even though he had already provided recordings from his interviews with Holmes to both sides under subpoena.
The goal of that motion was to show that Mr. Parloff “was colored by bias” and “a desire to blame any errors he made in his initial article on Ms. Holmes,” John Cline, a lawyer for Ms. Holmes, said in a hearing in October.
A judge denied the motion as a “fishing expedition.”
Source: NY Times