View from Washington: Theranos 3 – Me too

During the pre-trial process in the Theranos fraud case last year, presiding District Judge Edward Davila issued a ruling that surprised virtually everyone following the case: co-defendants Elizabeth Holmes, the founder and CEO of the failed blood-testing company, and Ramesh ‘Sunny’ Balwani, her former partner and from 2009 Theranos’ COO, would be tried separately and not together as originally expected.

In early September, unredacted portions of her legal team’s filings revealed why. Holmes’ defence will partly depend on demonstrating that she was subjected to “a pattern of abuse and coercive behaviour” during the relationship whereby Balwani was a toxic influence who drove her into a resulting pattern of deception towards potential shareholders and members of staff. The abuse included, it will be alleged, verbal bullying, puppet-like control of Holmes’ behaviour and public image, and instances of attempted physical violence.

It needs to be said that Balwani’s lawyers have already issued an outright denial of the allegations. Evidence will also likely be offered that Holmes deceived investors before Balwani formally joined Theranos, notably in claiming that the company had secured a contract with US armed forces.

There is a lot of scepticism around Holmes’ claims but the more detailed filings on which Judge Davila based his decision are yet to be made public. This largely sets them apart from the more in-depth reporting about what happened in Theranos’ offices and during negotiations with investors. The abuse charges have come as something of a surprise to most.

However, as with the use of the ‘fake it ‘til you make it’ defence strategy (covered in Part Two), the introduction of a ‘Me Too’ element to the trial is already seen as potentially having wider implications for US technology’s reputation.

The hard reality is that Silicon Valley has a big problem with how women are treated and respected. Since the Weinstein scandal broke, too many well-documented examples of bullying and abuse have emerged in tech as well as film and TV. The underrepresentation of women (and minorities) in the engineering workforce, particularly in senior positions, has also been documented. And despite initiatives that are said to be addressing the problem, further claims continue to arise, with recent ones placing the likes of Apple and Google under scrutiny.

The problem does go much further. The highest-profile 'Me Too' case in recent times forced the Governor of New York, Andrew Cuomo, to resign just weeks ago. But ‘bro culture' has become particularly associated with digital industries over more than a decade.

It has grown from a shorthand for aggressively ambitious young men who had switched their ‘get rich quick' focus from the East to West Coast to one that implies a more widely dismissive and manipulative attitude towards anyone who does not fit into an overwhelmingly white, middle-class, male caste.

To their credit, many Valley leaders recognise the problem, even that they themselves may have – they say – unwittingly contributed to it in the past. It is also frequent to point to the unquestioned success of Lisa Su as CEO of AMD, recently making her the highest-paid leader in the business. An incredibly impressive figure who has indeed risen entirely on merit, she does show that more women can and, more importantly, should be at the very top. Su is a shining example and could not be more different a figure compared to Holmes.

But, the irony remains that until Theranos’ ignominious fall, Holmes was promoted – and ruthlessly promoted herself – in the same light as not just a youthful billionaire but also the founder of an ultimately-not-so-truly disruptive company.

Putting forward the notion that this was overseen by a Svengali-like Balwani, who coerced Holmes into a $700m fraud, cuts deep. Particularly as it seems likely that her lawyers will seek to show that 'Me Too' problems are widespread in the sector. Can a case be made that Holmes was struggling against not simply an abusive individual but a prevailing trend? Many legal analysts believe it will be extremely hard to make such a defence work in the context of a fraud and, given what is known about Holmes’ actions and behaviour, that it is a deeply cynical strategy in this specific instance.

Whatever Holmes’ and Balwani’s eventual fates, there is widespread worry that the court of public opinion for such a high-profile trial could still find heavily against a sector that is struggling to put its house in order. And again, only a few people know right now what evidence will be presented on this topic even if much of the rest of the Theranos story has been documented.

In Part Four, we’ll look at another major theme, this time for the prosecution: trust in technology as digital players seek public confidence as players in global healthcare.