years-long fraud.” To resolve the agency’s civil charges, Holmes was forced to relinquish her voting control over the company, give back a big chunk of her stock, and pay a $500,000 penalty. She also agreed to be barred from being an officer or director in a public company for ten years. Unable to reach a settlement with Balwani, the SEC sued him in federal court in California. In the meantime, the criminal investigation continued to gather steam. As of this writing, criminal indictments of both Holmes and Balwani on charges of lying to investors and federal officials seem a distinct possibility.
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THE TERM “VAPORWARE” was coined in the early 1980s to describe new computer software or hardware that was announced with great fanfare only to take years to materialize, if it did at all. It was a reflection of the computer industry’s tendency to play it fast and loose when it came to marketing. Microsoft, Apple, and Oracle were all accused of engaging in the practice at one point or another. Such overpromising became a defining feature of Silicon Valley. The harm done to consumers was minor, measured in frustration and deflated expectations.
By positioning Theranos as a tech company in the heart of the Valley, Holmes channeled this fake-it-until-you-make-it culture, and she went to extreme lengths to hide the fakery. Many companies in Silicon Valley make their employees sign nondisclosure agreements, but at Theranos the obsession with secrecy reached a whole different level. Employees were prohibited from putting “Theranos” on their LinkedIn profiles. Instead, they were told to write that they worked for a “private biotechnology company.” Some former employees received cease-and-desist letters from Theranos lawyers for posting descriptions of their jobs at the company that were deemed too detailed. Balwani routinely monitored employees’ emails and internet browser history. He also prohibited the use of Google Chrome on the theory that Google could use the web browser to spy on Theranos’s R&D. Employees who worked at the office complex in Newark were discouraged from using the gym there because it might lead them to mingle with workers from other companies that leased space at the site.
In the part of the clinical lab dubbed “Normandy,” partitions were erected around the Edisons so that Siemens technicians wouldn’t be able to see them when they came to service the German manufacturer’s machines. The partitions turned the room into a maze and blocked egress. The lab’s windows were tinted, which made it nearly impossible to see in from the outside, but the company still taped sheets of opaque plastic to the inside. The doors to the corridor that led to the lab rooms, and the lab rooms themselves, were equipped with fingerprint scanners. If more than one person entered at a time, sensors set off an alarm and activated a camera that sent a photo to the security desk. As for surveillance cameras, they were everywhere. They were the kind with dark blue dome covers that kept you guessing about which way the lens was directed. All of this was ostensibly to protect trade secrets, but it’s now clear that it was also a way for Holmes to cover up her lies about the state of Theranos’s technology.
Hyping your product to get funding while concealing your true progress and hoping that reality will eventually catch up to the hype continues to be tolerated in the tech industry. But it’s crucial to bear in mind that Theranos wasn’t a tech company in the traditional sense. It was first and foremost a health-care company. Its product wasn’t software but a medical device that analyzed people’s blood. As Holmes herself liked to point out in media interviews and public appearances at the height of her fame, doctors base 70 percent of their treatment decisions on lab results. They rely on lab equipment to work as advertised. Otherwise, patient health is jeopardized.
So how was Holmes able to rationalize gambling with people’s lives? One school of thought is that she became captive to Balwani’s nefarious influence. Under this theory, Balwani was Holmes’s Svengali and molded her—the innocent ingénue with big dreams—into the precocious young female startup founder that the Valley craved and that he was too old, too male, and too Indian to play himself. There’s no question that Balwani was a bad influence. But to place all the blame on his shoulders is not only too convenient, it’s inaccurate. Employees who saw the two interact up close describe a partnership in which Holmes, even if she