Here at University Diaries, we respond to high-profile fraud cases like the Elizabeth Holmes thing by scrolling back to the fraudsters’ university years. That happens to be our angle.
Stanford University celebrated its high-profile alumna – and why wouldn’t it? No one knew until a year or so ago that she was lying about her blood testing technology in order to get money out of investors – and one of Stanford’s celebrations quotes her wit and wisdom.
Which includes that thing about the lack of a backup plan… which, in retrospect, doesn’t sound all that wise. Assuming she’s no Bernie Madoff, chances are awhile back she realized she was hemorrhaging, and – having no backup plan… like, say, admitting there was blood all over the floor and returning investor money… she just kept, uh, bleeding out until the SEC noticed.
March 15th, 2018 at 5:00PM
I’ve been reading the WSJ coverage for awhile. I don’t think there’s a LOT of room to assume she’s not a Bernie. Or if she isn’t, she pretended to be a lot smarter than she is.
March 15th, 2018 at 6:34PM
Michael: Hm. I haven’t read as extensively as you, but one thing I picked up on is that she never paid herself much of anything… But maybe this isn’t the whole story.
March 16th, 2018 at 7:53AM
I doubt that it was a total scam, in the sense of the founder hyping a technology that she knew wouldn’t work. More likely, it started as “it’s going to take a while to make it work right, meanwhile, we’ve got to stretch the truth a little to keep the company alive”…and moved on to greater and greater levels of deception. It seems also that the Board members she had chosen were mostly there for their PR value rather than for their knowledge of relevant technologies/industries or even of startup businesses in general, and that some of them–George Schultz in particular, it appears–weren’t interested in hearing bad news.
But if the WSJ article is correct, this case went beyond financial fraud and may well have put patients at risk. If this is the case, I would put it in the category of knowingly selling bad aircraft engine parts.
Which reminds me…I vaguely recall reading Arthur Miller’s “All My Sons”, which centers around a company selling bad cylinder heads, under the pressure of WWII military aircraft production. Perhaps some parallels.
March 16th, 2018 at 7:57AM
David: I think you probably have it just right. Though that doesn’t mean she doesn’t belong in jail for awhile.
March 16th, 2018 at 8:08AM
I suspect a high % of financial fraud cases, including some at quite-large corporations, have these dynamics. But “I did it to save the company and everybody’s job and investment” can’t be allowed to be an excuse, any more than “I did all these holdups so my family could stay in a nice apartment in a nice neighborhood” can be an excuse for armed robbery.
The putting of patients at risk, if shown to be true, is an even more serious matter, which ‘m pretty confident carries criminal penalties on its own.
March 19th, 2018 at 8:20AM
There was a narrative here that people wanted a piece of. Young, plucky, progressive woman beats the boys with inventions that are almost ready for prime time. Like Bill G., and Steve J., and Mark Z., she dropped out of college rather than continue to bridle her brilliance. Along with that white lab coat, what greater credential is there? She herself fervently believes in her own genius and leadership and knows in her heart of hearts that with just a little more money and time, her company will revolutionize, democratize, and JustAboutAnythingElseFuzzy-ize the industry. For the investors, this is not some boring bullshit industry that makes aluminum cans, light bulbs, sweat pants, etc., where we put on our green eyeshades and worry about expenses and margins and market share and actual product. This is the future, and we better get in on the ground floor. It’s an old story on Wall Street. In any event, the fund managers say, if it goes south, hey, we bought ourselves some diversity insurance for when Sister Mary Indignant of the Sisters of Perpetual Outrage uses her order’s one share at the annual meeting to demand to know how we are supporting social justice.
Fortunately for Elizabeth, since she is photogenic, plucky, confident, sincere, supporting the right progressive causes and candidates, etc., etc., we won’t come down hard on her, unlike the odious Shkreli, even though her fraud was 10X bigger. She and Marissa Mayer can collaborate on a book about how the patriarchy undermined their leadership. $29.95, coming soon to the remainder table at your local bookstore. Both available at $5-10K/throw to talk to your biz school about the wicked treatment of women entrepreneurs by Wall Street.
March 19th, 2018 at 9:13AM
tp: Your cynicism could power New York City, but here I agree with most of what you say. It’s absurd that she might not like Shkreli suffer jail time … though she might, so let’s hold off on that one. A tiny portion of the contempt the world has for Shkreli might not be a bad thing either.
March 19th, 2018 at 3:51PM
I plead guilty to the cynicism charge, but I’m hoping for no jail time.