pathologists remained civil and respectful despite her evasiveness. There were no boos or catcalls. The decorum broke down only briefly when Holmes turned to leave the stage at the end of the Q&A. “You hurt people,” a voice yelled out from the dispersing crowd.
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IF HOLMES HAD HOPED to rehabilitate her image and change the media narrative by unveiling the miniLab, that hope was dashed by the flurry of critical articles published in the wake of the event. A headline in Wired captured the reaction best: “Theranos Had a Chance to Clear Its Name. Instead, It Tried to Pivot.”
In an interview with the Financial Times, Geoffrey Baird, a professor of pathology at the University of Washington, said Holmes’s presentation had included “a comically small amount of data” and had “the feel of someone putting together a last-minute term paper late at night.” Other lab experts were quick to note that none of the miniLab’s various components were novel. All Theranos had done was make them smaller and pack them into one box, they said.
One of the miniLab tests Holmes had showcased at the conference was for Zika, the mosquito-borne virus that had damaged the brains of thousands of newborns around the world. Theranos had applied to the FDA for emergency-use authorization of the test, billing it as the first finger-stick blood test of its kind. But in another embarrassing setback, FDA inspectors soon discovered that the company had failed to include basic patient safeguards in its study, forcing it to withdraw the application.
The possibility that Holmes might pull a rabbit out of her proverbial hat at the AACC meeting had kept Theranos’s restless investors from launching a mutiny. After her appearance was panned and the Zika fiasco made headlines, one of them decided it had had enough: Partner Fund, the San Francisco hedge fund that had invested close to $100 million in the company in early 2014, sued Holmes, Balwani, and the company in Delaware’s Court of Chancery, alleging that they had deceived it with “a series of lies, material misstatements, and omissions.” Another set of investors led by the retired banker Robert Colman filed a separate lawsuit in federal court in San Francisco. It also alleged securities fraud and sought class-action status.
Most of the other investors opted against litigation, settling instead for a grant of extra shares in exchange for a promise not to sue. One notable exception was Rupert Murdoch. The media mogul sold his stock back to Theranos for one dollar so he could claim a big tax write-off on his other earnings. With a fortune estimated at $12 billion, Murdoch could afford to lose more than $100 million on a bad investment.
David Boies and his law firm, Boies, Schiller & Flexner, stopped doing legal work for Theranos after falling out with Holmes over how to handle the federal investigations. Another big law firm, WilmerHale, took their place. A month after Holmes’s AACC appearance, Heather King returned to Boies Schiller as a partner based in its Palo Alto office. Boies left the Theranos board a few months later.
Walgreens, which had sunk a total of $140 million into Theranos, filed its own lawsuit against the company, accusing it of failing to meet the “most basic quality standards and legal requirements” of the companies’ contract. “The fundamental premise of the parties’ contract—like any endeavor involving human health—was to help people, and not to harm them,” the drugstore chain wrote in its complaint.
After initially attempting to appeal the CMS ban, Holmes resigned herself to the inevitable and closed the California lab as well as the company’s second lab in Arizona, which had used only commercial analyzers. During an inspection of the Arizona facility days before it was shuttered, CMS found a multitude of problems there too.
Under a settlement with Arizona’s attorney general, Theranos subsequently agreed to pay $4.65 million into a state fund that reimbursed the 76,217 Arizonans who ordered blood tests from the company.
The number of test results Theranos voided or corrected in California and Arizona eventually reached nearly 1 million. The harm done to patients from all those faulty tests is hard to determine. Ten patients have filed lawsuits alleging consumer fraud and medical battery. One of them alleges that Theranos’s blood tests failed to detect his heart disease, leading him to suffer a preventable heart attack. The suits have been consolidated into a putative class action in federal court in Arizona. Whether the plaintiffs are able to prove injury in court remains to be