
U.S. Bans Theranos CEO Elizabeth Holmes from Operating Labs for Two Years - kevinnk
http://www.wsj.com/articles/u-s-regulator-bans-theranos-ceo-elizabeth-holmes-from-operating-labs-for-two-years-1467956064?tesla=y
======
bane
I hope that Holmes' bizarre behavior as the issues went public keep her from
ever running anything even remotely close to things that matter for people's
lives and well being.

Even as the questions were building and the noose was tightening, she would
announce a public talk to reveal and openly share information on the company's
tech, then mysteriously cancel a short while later -- she did this over and
over.

I'm still not convinced that Theranos was meant to be a scam, or at least not
a scam in the way most people are thinking about it. But it has definitely
produced a similar output, and that makes it functionally equivalent.

I hope, _really_ hope, that someday the true story about all the WTF-ness
around Holmes and Theranos comes out.

I've been on the inside of a company like this once and I ran away as soon as
I realized the place was up to no good. What still bothers me about my
personal experience is that I, even as a person on the inside, still don't
know the truth about _that_ company due to all the same weird kind of cult of
secrecy things we've seen at Theranos. The truth in these kinds of things, I
suspect, lives only inside the heads of the people who run these kinds of
organizations and it may not ever be possible to get at what the truth
actually is depending on how far down the delusion hole they've fallen.

Real kudos to the press who broke and made very public the stories. This was
the media at its finest. Those journalists may have helped save many lives.

~~~
rcarrigan87
Not sure if scam is the right word. Everyone is capable of deluding themselves
into believing their current, morally questionable actions will be seen as
justified in the future (when everything works, out of course). I'm sure even
Bernie Madoff believed at some point he would win it all back and no one would
ever know or be harmed.

~~~
scott_s
I don't agree with your characterization of Bernie Madoff. He _knew_ he was
running a scam. He was clearly lying in his marketing materials, saying his
fund performed certain trades that they never did. (See Harry Markopolos'
book, "No One Would Listen"; that's how Markopolos figured out it was a scam.)
I think Madoff is, at the least, a borderline sociopath. (If not an outright
one.) A sociopath may think they can get away with it, and no one will know,
but they probably don't think no one will be harmed - a sociopath does not
care about harming others.

I think it's possible Holmes fits your description - she was in over her head,
never set out to scam anyone, and slid down a very bad path without ever
intending to. I don't _know_ this is the case, but I believe it's possible.
That, however, is not Madoff.

~~~
tps5
I never paid much attention to the details of the Madoff case but I think
people on the internet throw out the "sociopath" label way too freely.

Not much is gained from that label, in my opinion. And I certainly wouldn't
apply it to Bernie Madoff or Holmes based on what I know of their situations.

~~~
gnaritas
> but I think people on the internet throw out the "sociopath" label way too
> freely.

Not an argument.

> And I certainly wouldn't apply it to Bernie Madoff or Holmes based on what I
> know of their situations.

Not an argument.

If you're going to disagree with someone, generally, some logic as to why is
useful, not just "I don't agree". Madoff certainly deserves that label, he
ruined lives by running the biggest investment scam in history: he clearly
didn't in any way care about what happened to those other people, completely
lacking in empathy, they were used and discarded.

~~~
oldmanjay
What definition of "sociopath" are you using here? How do you third-hand
diagnose a man as completely lacking in empathy? Can we somehow use this skill
for good instead of boring internet commentary?

~~~
gnaritas
I'm not third hand diagnosing anyone, I'm not diagnosing anyone, and I'm not
the one who even brought up the term sociopath as I'm not the OP; I simply
said he deserves the label given what he's done. So if you're bored, feel free
to go somewhere else.

------
kumarski
I've talked to over 100 hematologists.

This business, didn't pass a basic litmus test of objective criticism from
people who work in the space.

There seems to be this bravado among founders who believe they're sticking it
to all the people who say something's amiss. I think if there's an elephant in
the room though, it probably should be assassinated with a huge body of
transparent evidence.

~~~
ryporter
To be fair, that is how innovation occurs. There are many examples of
"ridiculous" ideas that ended being wildly successful. Where would Elon Musk
be if he listened to all of the incumbents who said that his ideas would never
work? Obviously, the putative innovators massively failed in this case, but I
don't think that the outcome proves that their original idea was fatally
flawed, or at least that it wasn't worth attempting.

~~~
legulere
> the incumbents who said that his ideas would never work

which ideas? Is there really that much innovative stuff by elon musk?

My impression is, that it was always more about economic feasibility than
technical feasibility. Competitors to Tesla and SpaceX existed before those
were founded but they lacked the investment.

~~~
givinguflac
I would say at the very least, the construction of the Model S and the
supercharger network are hugely innovative.

~~~
untog
But Tesla cars are just that - cars. Nor were they even the first electric
cars.

Don't get me wrong, they're fantastic and innovative, but the basic
technological underpinnings have been long established.

~~~
mikeash
I'd say Tesla's main innovation was on the business end: they realized that
batteries are expensive, so EVs must be expensive, and trying to cut corners
everywhere else to bring the price down just results in a crappy car people
don't want to buy. Instead, make it a great car that's really expensive, but
so good that it justifies the high price. Any incumbent could have done this,
they just... didn't.

------
arcticbull
Hear that? That's the sound of $9B in valuation disappearing :| There is
really a thin line between delusion and brilliance.

~~~
BinaryIdiot
I'm beginning to wonder if at any point they will pack their bags, return
what's left to investors and close up shop...or maybe they'll just keep going
until it's completely dead? Hell maybe they pivot to be a traditional lab with
traditional equipment?

~~~
ACow_Adonis
As a general rule that will serve everyone well on hacker news throughout
their lives:

Don't ever expect someone who has gotten their hands on your money to
voluntarily close up shop and give it back :p

They'll take it to the casino and bet it all on black, or siphon it off
somewhere else before that ever happens...because all your money gone and them
giving it back to you is the same thing to the person who no longer has it.

~~~
jacquesm
> Don't ever expect someone who has gotten their hands on your money to
> voluntarily close up shop and give it back :p

Maybe you shouldn't expect it, but I have seen a start-up or two that failed
and that did exactly that.

And start-ups that fail have a whole pile of clauses triggered in the various
shareholder agreements that count towards a 'liquidation event'. That's what
liq-prefs are for and the immediate consequence usually is that the latest
investors stand the best chance of getting some or all of their money back.

~~~
ACow_Adonis
Yep. There's always some events that restore faith in humanity and make you go
"wow, I'll remember that/them, full respect/kudos".

But just don't expect it...

~~~
jacquesm
I think it seriously increases your chances of getting funded with a new
project later on.

On the other hand, if you're scamming consumers of course it is only a very
small step to scam investors (and easier to get away with).

------
deftnerd
Sometimes company leaders have severe problems with ethics. As mentioned in
other comments, even YC has had companies that have bundled adware/malware
with software, practiced dark patterns, hidden news of security breaches, etc.

I tend to see YC as being more "evolved" than other VC's, but I also think
that these problems are more ingrained into the human condition.

YC could consider making funding contingent on all high level company officers
attend or participate in some kind of ethics course. It could even be remote.

There could also be penalties built into VC agreements. If a company violates
contracted ethical rules, then penalties could include replacement of staff,
more shares being given to the VC, low share buyback prices for the VC, etc.

It could also be a two-way street. If YC violates some kind of ethical rule,
then they could be punished by having to do something for the companies they
represent.

Ethics are important but so far they have just been "best practices" in our
industry and not something contracted and enforced.

~~~
elmar
Hacking sometimes puts you in a grey area :)

Airbnb: The Growth Story You Didn't Know [https://growthhackers.com/growth-
studies/airbnb](https://growthhackers.com/growth-studies/airbnb)

Airbnb Cofounder Was One Of The Worst Spammers In The World, Says His Freshman
Roommate

[http://www.businessinsider.com/airbnb-co-founders-
freshman-r...](http://www.businessinsider.com/airbnb-co-founders-freshman-
roommate-says-hes-a-spammy-scumbag-2011-10)

~~~
untilHellbanned
What's interesting about the spammer link is that the YC narrative and
everyone thinks about Obama O's and Brian Chesky's hustle making this
business. Whereas its clear that mass emailing in the spirit of all publicity
is good publicity is what created huge awareness amongst potential customers.

~~~
55555
Yeah I don't really mind the spam so much, but I really hate when people
pollute others' senses of reality with misinformation. If the AirBnB story is
all about cereal and photographers walking around NYC, then you teach others
to have a less accurate view of reality and you destroy their ability to make
good decisions. They will start companies with an unearned sense of optimism,
etc.

Go ahead and spam if you're a spammer, but be honest about it.

------
fnbr
I have no sympathy for her. It's incredibly irresponsible to do what she did-
play marketing games with medical technology. Theranos' unethical behaviour
has made it much more difficult for future innovation in the medical field,
and has potentially cost lives. This sanction is appropriate.

My fiancee works as a laboratory scientist in a hospital conducting patient
sample testing, and her and her co-workers take their work incredibly
seriously- checking, and re-checking their work, with complex protocols to
guarantee the accuracy of their testing. It's disappointing to see that same
attitude lacking in Theranos.

~~~
Fricken
Trying to imagine myself willfully misleading her investors and the public for
as long as she did, and at that scale extends beyond my capacity for empathy.
I suspect she's genuinely delusional. I don't know how else someone could do
something like that.

~~~
ben_jones
I honestly think most entrepreneurs are capable of it. The hype level of
Theranos is present at MOST start-ups.

I.E.

A Large software company that allowed user data to be stolen because of known
security issues. Software company does not inform the public of the breach
until forced to.

A large medical company that allowed a very large failure rate of testing
devices from known issues. Medical company does not inform the public of the
breach until forced to.

~~~
wiz21c
What scares me most is that the failure are always seen as morally acceptable
loss to the founders : "it's that or we have to fire half the company", "it's
that or we can't pay salaries", "it's that or closing the company", "it's that
or we're in even bigger legal troubles". It basically boils down to "I know
I'm doing something wrong but I have no choice". I've personally met one these
people. Very smart guy, but unable to say "I'm doing something wrong, so it's
better to stop now".

Ethics should be hammered in some people's head...

~~~
solidsnack9000
"I know it's wrong but those are my orders..."

------
joeyrideout
Ouch. Sanctions mean "shutting down and subsequently rebuilding the Newark lab
from the ground up, rebuilding quality systems, adding highly experienced
leadership, personnel and experts, and implementing enhanced quality and
training procedures". There is a chance to appeal, but "such appeals have
rarely succeeded in the past". Couple that with an "unspecified monetary
penalty" and this looks like a very big nail in the Theranos coffin.

Side note: Anyone else have trouble viewing the WSJ article? I had to read the
full text through a private news outlet, even though I tried signing in to WSJ
with Facebook :/

Edit: Added a sentence of detail to the last paragraph, for those who still
can't see the article.

~~~
aerovistae
Whenever you can't view a WSJ article due to paywall, copy/paste the article
headline into google search then click the article out of the google results.
Paywall will vanish.

If you're talking about a different problem, sorry, no idea.

~~~
kilroy123
I just use this chrome extension which does it automatically:

[https://chrome.google.com/webstore/detail/bypass/ekfnpmbmfml...](https://chrome.google.com/webstore/detail/bypass/ekfnpmbmfmlnbphalelfmiodjmbbjlmp?hl=en)

------
yeukhon
And she went to Stanford? What a joke. Seriously, I am tired and sick of
government and regulators not sending people to trials at all. I was watching
Elizabeth Warren's hearing in the Senate on finance issues, and she brings up
a good point. Wall Street banks have not been punished hard enough. In case of
evident and deliberated fraud and cover up, no one was sent to trial. This is
stupid.

FYI, I am not the kind of guy goes around and preach about reform. But this
shit is stupid as hell. I think major offense like these should be sent to
trial or even requires congressional hearing and congressional punishment.

------
Animats
The WSJ article and the Theranos press release [1] don't agree. There's no
mention of the 2-year ban in the press release. The press release indicates
it's business as usual for Theranos at their Arizona lab. Supposedly only
their Newark (CA) lab is being shut down.

[1]
[http://www.businesswire.com/news/home/20160707006570/en/Ther...](http://www.businesswire.com/news/home/20160707006570/en/Theranos-
Receives-Notice-Sanctions-Centers-Medicare-Medicaid)

~~~
joeyrideout
First bullet point in the list of sanctions in the Theranos press release you
linked:

"Revocation of the laboratory’s CLIA certificate which, as dictated by the
regulations, includes a prohibition on owners and operators of the lab from
owning, operating or directing a lab _for at least two years from the date of
revocation_ " (emphasis mine)

~~~
foota
Wouldn't Theranos be the owner and operator of the lab?

~~~
krisdol
Can't they work around this by renting the lab?

~~~
amdavidson
Your comment is a bit unclear, but the answer is the same.

If they rent the lab out to someone else, they're still the owner.

If they rent the lab from some third party owner, they're the operator.

Either way they're violating the terms of the ban.

------
dcgudeman
I wonder how long she will be able to hold the CEO position?

~~~
fnbr
On the one hand, hopefully not long, as she can't provide any effective
leadership with this in place.

However, my understanding is that Theranos has an unusual corporate structure
that gives Holmes control of most of the votes, so if she doesn't want to
leave, I don't know if anyone can force her.

~~~
dcgudeman
Seems like an odd arrangement for investors to agree to, one I am sure they
are currently regretting...

~~~
dekhn
Ms Holmes is a close personal family friend of Venture Capitalist Tim Draper,
who continues to support her and say that everybody else in the world is a big
meanie who is out to get her. He hasn't repented and I don't expect him to.

------
redmaverick
The difference between a startup like Theranos/uBeam and a product based
"soft"ware company is that in one case you can make outrageous claims and then
use sheer determination, will power and lots of money to make it happen
retroactively but you cannot change the fundamental laws of nature.

------
mkagenius
little more text than wsj (unsubscribed): [http://medcitynews.com/2016/07/cms-
fines-theranos/](http://medcitynews.com/2016/07/cms-fines-theranos/)

------
aabajian
The trajectory of this company is just terrible. They surmounted the most
difficult obstacle in healthcare - breaking into existing strongholds (e.g.
Walgreens). At that point if there was any doubt that their technology worked
they should've used existing tools to run their lab tests. Yes they would've
lost money, but they could have used the time to build out their rapid
technology or pivoted to a different business model. Getting a contract with
Walgreens or any major vendor in the healthcare space is an incredible
accomplishment, but such unethical behaviour will make it even harder for
future startups to secure such partnerships.

~~~
dekhn
They _did_ switch to using existing tools to run their lab tests. That's
_exactly_ what they did. That's why they started doing venous draws instead of
just nanoliter draws from pinpricks. This was documented repeatedly in the
media.

They also invalidated all their Edison (their specific nano device) results
for two years, and it turns out they weren't even running other people's
devices correctly and had to invalidate results for that too!

------
jasonlaramburu
The article mentions that the company's current governance structure may
prevent the board from terminating Holmes. Does that mean she is the majority
shareholder?

~~~
w1ntermute
She is a majority shareholder, but also her shares are of a class that gives
her 100 votes/share.

~~~
zackbloom
She really did a great job with that negotiation, if only her company had
actually had any value.

------
josh_carterPDX
This is a great example of needing to do more due diligence. Walgreens and all
of the investors were swept up by the whole "disruption" rhetoric. They should
have spent more time understanding how Holmes and her team were going to
handle compliance. It's clear none of that was done. This is what happens when
disruption pushes back.

------
sndean
If they're going to ban her from operating labs for two years, does that mean
they think she'll be, in some way, rehabilitated and capable of soundly
running labs after that?

Maybe there is little precedent, but that length of time seems a bit arbitrary
(and too short?).

~~~
ben_jones
_Revocation of the laboratory’s CLIA certificate which, as dictated by the
regulations, includes a prohibition on owners and operators of the lab from
owning, operating or directing a lab for at least two years from the date of
revocation_

I think it's a case where the company had a certificate revoked as part of
that process is a direct ban on the person in charge of said lab, which
bubbled up to Holmes. I would've supported a direct levy on her but this just
seems to be aimed at the company.

------
rgbrenner
The article says it isn't clear what the monetary penalty would be.. but the
letter CMS sent to theranos in March (re the newark lab) proposes a 10000$/day
penalty for noncompliance that would continue until the lab is brought into
compliance.

[http://online.wsj.com/public/resources/documents/cms20160412...](http://online.wsj.com/public/resources/documents/cms20160412.pdf)

~~~
schappim
That's only 3.65M (or 2.4M if they only count business days) per year. Having
no idea of the US system here, could they just continue in noncompliance mode?

It wouldn't be the first time a valley business powers on and pays for
noncompliance. I understand that Uber pays the fines it's drivers receive
where it's service is illegal...

~~~
jacquesm
That fine could be increased if they continue to not be compliant, it could
also be supplemented with different charges.

------
Fede_V
I'm usually a huge fan of pg, but in his essay about founders, there was one
section which I wasn't very comfortable with:
[http://www.paulgraham.com/founders.html](http://www.paulgraham.com/founders.html)

Specifically, when he talks about naughtiness, he says:

Morally, they care about getting the big questions right, but not about
observing proprieties. That's why I'd use the word naughty rather than evil.
They delight in breaking rules, but not rules that matter.

I have absolutely no interest in trying to play language games - and maybe I'm
misunderstanding what pg is saying, but it has always seemed to me that the
judgement of whether the rule that was broken was consequential or not is
post-hoc. For example: had airbnb gotten in serious trouble and floundered in
the aftermath of when they started scraping craigslist for listings, they
wouldn't be clever and naughty, but reckless and foolish. Had zenefits managed
to grow even more or hire some key lobbyists and get the law changed in time,
their CEO would be hailed as a visionary genius that cut through pointless red
tape.

Anyway: the reason I brought that up is that a lot of the ethically dubious
things that Elizabeth Homes did are very similar to things which a lot of tech
companies did at one time or another. Trying to push ambitious young men and
women to look at rules and regulations as something they should take pride in
hacking and bypassing is a dangerous game - even more so in fields that are
highly regulated.

Addendum: part of the original hacker ethic was to ignore stupid rules. For
example, we take delight in Feynmann cracking safes at Los Alamos, or finding
some clever hack to bypass a pointless procedure. However: I think it's one
thing to hack a system to make a point about how stupid it is, but it's
completely different if you add a monetary incentive, and suddenly the rules
that get broken are those that stand in the way of you making money. The two
sets have a fairly small overlap.

Addendum two: in a complex society like the one we live in, we have a lot of
dumb rules. I'm not trying to defend them - we should obviously get rid of
them, even in healthcare. A lot of economists have written intelligently about
how to make the approval process of the FDA more agile.

~~~
_Codemonkeyism
Evidence A: How Paul defended shady AirBnB tactics here on hackernews.

~~~
makomk
Evidence B: His defence of the Y Combinator-funded startup that was paying
companies to bundle unwanted software into their installers and tricking users
into installing it.

~~~
a_small_island
I just did a quick google search, are you referring to InstallMonetizer?

[https://www.techdirt.com/articles/20130115/17343321692/why-a...](https://www.techdirt.com/articles/20130115/17343321692/why-
are-y-combinator-andreessen-horowitz-backing-drive-by-toolbaradware-
installer.shtml)

------
impostervt
Folie à plusieurs

[https://en.wikipedia.org/wiki/Folie_%C3%A0_deux](https://en.wikipedia.org/wiki/Folie_%C3%A0_deux)

------
tardo99
Still waiting for the perp walk...

------
acosmism
hopefully forever!

------
abpavel
I've personally heard Tim Draper blaming regulation for her downfall. So in
the eyes of SV giants, it's us and the government who are delusional, and we
should let her do her thing.

------
dannylandau
Schadenfreude is probably merited in this case, but I for one think one needs
to consider that this could quickly spiral down and end up in Holmes taking
drastic action that we will all regret. Hope my meaning comes through here.

~~~
drjesusphd
Not really...

~~~
thingexplainer
They're concerned Holmes will commit suicide.

------
gravypod
I cant read this article. Can someone provide some backstory? What is
Theranos? Why was it shut down?

~~~
rgbrenner
click web > go to article from google

~~~
gravypod
I have read the article (there was no 'web' button but some other comment
posted a working link). Still have no idea what Theranos is or what they have
done.

Apparently they worked fro Walgreen or something?

~~~
rgbrenner
i think wikipedia has you covered:
[https://en.wikipedia.org/wiki/Theranos](https://en.wikipedia.org/wiki/Theranos)

~~~
gravypod
Thanks, everyone else just downvoted. Thanks for taking the time to link.

Has there been any clue as to why this ban has come about? That seems rather
harsh for a "simple" (I'm using that very loosely) mistake. Is there evidence
of faking data or other nefarious deeds on the side of the company?

~~~
umanwizard
People downvoted because going to Wikipedia is something you could have very
easily done yourself. This is like if I commented "what's China?" on a post
about the Chinese economy.

