Bad Blood: Even More Red Flags That Were Simply Ignored

Theranos had both in-house and outside lawyers teams. What went wrong?

Elizabeth Holmes (Photo by Kimberly White/Getty Images)

I recently wrote Bad Blood: A Story Of Numerous Red Flags That Were Simply Ignored, where I discussed the three red flags: toxic culture, an authoritative CEO, and a veil of secrecy, that may have led to the downfall of Theranos. Of course, John Carreyrou’s book, Bad Blood: Secrets and Lies in a Silicon Valley Startup, paints a more in-depth picture of these events, so I invited my readers to share their observations. Generally speaking, I received two sets of comments.

Looks can be very deceiving

A number of readers pointed out that looks may be deceiving and that all professionals should analyze their investments (time, money, and energy) beyond good looks, perceived leadership qualities, charm, grooming, and being well-dressed. I particularly liked the comment from David Springhetti, a teacher from Wisconsin:

Your Above the Law piece entitled Bad Blood was succinct and insightful. Thank you. I agree the three fundamental elements cited, toxic culture, authoritative CEO, and veil of secrecy are fundamental to this kind of fraud.

I won’t explain it away by citing greed, because greed is systemic, integral as in the air we breathe. I speak reticently.

There is something inherit, vested about trusting a well-groomed professional, especially a woman, especially in the field of medicine, even in a competitive entrepreneurial environment. Elizabeth Holmes’s pictures on Wikipedia, Forbes, Vanity Fair, The Verge, Fortune, Business Insider, Chicago Tribune, Times, Wired, Inc, and numerous other reputable publications all depict a beautiful lady, appropriately groomed, and, as you stated, depicting the gaze of honesty and integrity. Her looks are disarming. How can she deceive when she looks so trustworthy?

I believe her charm and attractive appearance played a role in disarming the media, investors, and business community. Of course, charm and deception are equal opportunity. A man could have as easily been in her place.

What about all the in-house lawyers?!

Theranos had both in-house and outside lawyers teams. In fact, according to the book, the lawyers may have had an instrumental role in carrying out the deception, keeping employees in line, and preserving the status quo. A number of my readers have pointed this out to me. For example, Joseph Fuisz, a lawyer who works predominantly in the pharmaceutical industry as the founder of Fuisz Pharma LLC.:

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I am not sure Theranos ever had an  impartial, highly trained counsel. It seems that their early in-house counsel were absurdly inexperienced. Then, their GC was placed by Boies, Schiller & Flexner LLP, which did not have a conventional firm-client relationship with the company. For example, the firm is known for taking fees in stock. The fraud, to the extent missed, was missed by counsel deliberately picked to fail. This is consistent with a larger management picture of a CEO-COO pair with a relationship, and the CEO’s brother’s role at the Company.

Joseph Fuisz disclosed that Theranos accused him and his father, Richard Fuisz, of stealing documents of a patent they were to file. A parallel case against McDermott, Will & Emery was dismissed by a judge in late 2014, stating there was no evidence of theft.

Other readers questioned to what extent the in-house team was empowered to identify and address the deception and fraud, especially in light of what seemed like complex board and leadership dynamics. For example, Randy Heinig, attorney and Managing Director at Risk Compliance Analytics, observed:

I agree with your assessment that Theranos suffered from a toxic culture, an authoritarian leader, and an overwhelming cult of secrecy. This clearly would limit the role and effectiveness of its in-house counsel team (who were probably heavily staffed with IP lawyers, who would not have been given a larger view of the legal and corporate elements of the business). These factors wouldn’t have given the in-house legal team much of a voice or even much knowledge of the affairs of the two senior leaders of the company.

But there is another factor in the mess — David Boies. Boies is the #3 villain in Carreyrou’s story and plays an outsized role in the legal operations and tone (including, but not limited to, the fact that he was also an investor), even before he takes a seat in the boardroom. When an external lawyer is such a big figure, and has the ear of a secretive and authoritarian CEO/Founder, it limits the voice and role of the inside legal team. This set of conflicts (described here by ATL and here by the NYTimes) gets even thornier with the fact that Theranos’s GC was a former Boies, Schiller & Flexner LLP partner who went back to the firm after Theranos. In my opinion, Boies is the linchpin of the legal story for Theranos (even for the in-house team) and it isn’t particularly flattering.


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Olga V. Mack is an award-winning general counsel, operations professional, startup advisor, public speaker, adjunct professor at Berkeley Law, and entrepreneur. Olga founded the Women Serve on Boards movement that advocates for women to serve on corporate boards of Fortune 500 companies. Olga also co-founded SunLaw to prepare women in-house attorneys become general counsel and legal leaders and WISE to help women law firm partners become rainmakers. She embraces the current disruption to the legal profession. Olga loves this change and is dedicated to improving and shaping the future of law. She is convinced that the legal profession will emerge even stronger, more resilient, and inclusive than before. You can email Olga at olga@olgamack.com or follow her on Twitter @olgavmack.