What You Should Learn from the Elizabeth Holmes Trial
Your business will be faced with many ethical decisions. Make the right choice
BY HOWARD TULLMAN, GENERAL MANAGING PARTNER, G2T3V AND CHICAGO HIGH TECH INVESTORS@TULLMAN
Elizabeth Holmes, founder of the famously
failed biotech startup Theranos who is now on trial in federal court in
California, recently took the stand in a last-ditch effort to charm and finesse
her way out of 11 counts of fraud and related criminal activities. This is a precarious
move by any defendant, but it must have seemed inevitable to her attorneys as
the prosecution continued to roll out one convincing witness after another. The
witness list included defrauded investors, disillusioned ex-employees, duped
pharma partners and other customers and, finally, misled patients. Imagine how
you'd feel being told you may have HIV or cancer based on test results known to
be flawed and highly unreliable.
Federal prosecutors have built a case which -
even given the many vagaries of the jury system and a boatload of bogus
sympathy for a new mother - looks to be quite strong. Unfortunately, criminal
trials are all about false precision, nit picking, and form over substance.
That makes it especially difficult where intention is an element of the
required proof, as jurors struggle to pierce the fog of confusion, irrelevant
material and baseless objections emitted by the defense attorneys.
Anything less than a convincing conviction --
which makes a boldfaced and clear distinction between "trying" and
"lying" -- will be a black eye for entrepreneurs across the board.
And especially for young women trying to build new businesses. This unfortunate
outcome is possible because the defense strategy is to try to walk the Theranos
tightrope and turn this former paper billionaire and "mistress of the
universe" into a damaged doofus who was way over her head and didn't know
what was going on in her own business. She's being portrayed as a naïf in all
matters legal and financial and an abused victim who was manipulated, lied to,
and taken advantage of by all the smart older men around her. Poor dear.
Holmes finished her direct and clearly rote
testimony, and now the red meat of the entire proceeding, her
cross-examination, has begun. Holmes spent several days on direct testimony
using a lot of fancy scientific jargon to describe Theranos' early days while
steadfastly avoiding any discussion of the critical last years of the company's
existence, when it was abundantly clear that her miracle machines were deeply
flawed and couldn't remotely do the tasks she continued to brag to the world
about. That's when the overt lies and growing concealment began in earnest.
Most recently, she's added an alleged rape in college to her repertoire, which
she now says is what caused her to drop out. She also claimed that her
live-in lover and former COO forced her to have unwanted sex in the home they
secretly shared for years.
In some ways, I'm sure Holmes was as anxious
to get to this contested and competitive phase of the trial as the rest of us
are. She's gonna show all of us just how smart she is and blow that jury away.
In some ways, her trial performance (sans the Steve Jobs costume) could simply
be the last futile manifestation of a belief that she can con anyone in the
"fake it 'til you make it" tradition of the Valley. Unfortunately for
her, half a lie is still a lie. Overall, the current defense plan appears to be
to avoid, confuse, commingle and ignore a staggering number of inconvenient
facts, documented misrepresentations and outright lies and then go on and blame
it all on the many older men in her life.
Whatever the final verdict, there are abundant
lessons for all of us trying to build new businesses and change the future. To
find them, you have to look into the tired explanations, cheap dodges, blame
shifting, and other ongoing efforts by the defense attorneys to justify and
excuse her many wretched excesses and bald-faced lies.
Remember this trial as you deal with your own
problems and crises every day, because it's easy for anyone to fall into these
kinds of sloppy rationalizations and offer them up as excuses. The trick to
avoid them, and the resultant embarrassment and misery, is to keep them top of
mind and dodge them like the plague.
Understand that every entrepreneur in every
business at one time or another faces painful moments and ethical choices. The
best resist the temptation to adopt situational ethics and rationalize their
own actions by claiming that it's what everyone else is doing, my intentions
are pure, it's only a little lie, I'll fix it on Friday, or that oldest
rationalization of all - the ends justify the means. And honestly, if you don't
easily recognize a few of the dodges outlined below, you're either a saint or
seriously deluded.
In their efforts to defend Holmes, her
attorneys have seized on every one of these assertions and we can expect to
hear a constant further stream of BS as her testimony continues.
Here are the Top Ten Elizabeth Excuses:
·
Fake It (Part 1) - I was
a true believer and just trying really hard.
·
Fake It (Part 2) - I was
just doing what everyone else does.
·
Fake It (Part 3) - I was
misunderstood - these were all aspirations, not current realities. Some of my
statements were almost true.
·
Blame Game (Part 1) - These
were all sophisticated investors - shame on their due diligence for not finding
out that I was lying to them.
·
Blame Game (Part 2) -
Employees are supposed to be smart, experienced people and they all screwed up
and lied to me about it.
·
Blame Game (Part 3) -
Employees were "Chicken Littles" who got unduly upset about
falsifying test results and sending them to real patients.
·
Blame Game (Part 4) -
Patients and their doctors should have done more tests on their own. The
patients were cheapskates looking to save money on tests and they got what they
paid for.
·
The Little Me Defense
(Part 1) - I was CEO but actually had no clue about what was going on in the
labs, who we were doing business with, or what investors and regulators were
being told.
·
The Little Me Defense
(Part 2) - I was just a young woman, and I was dominated and sexually abused
for years by my secret lover, Sunny Balwani, who was actually in charge and
running everything.
·
The Little Me Defense
(Part 3) - Oh, did I mention that after my indictment and shortly before formal
trial proceedings began, I got pregnant and had a child. Twenty years in jail
would be so tough on both of us.
And
finally, there's the Trump truism: A lie is not a lie if the truth should not
be expected.