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Theranos, CEO Holmes, and Former President Balwani Charged with Fraud

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Re: Theranos, CEO Holmes, and Former President Balwani Charged with Fraud

#491

Post by dnautics »

jyrkesh wrote: post #449
dnautics wrote: post #378

Earlier quoted context omitted.

I think incorrect (or even correct, but rare) narratives are dangerous. Especially when they're the feel-good type that people tell to make themselves feel better about the way the world works. (meritocracy, egalitarianism, etc) Anecdata, but: I left academic hard science because I realized it was too difficult to get ahead; moved to the bay since I can code and it was a way to create a runway and find myself, and pi…

Yeah, I don't think any of your friends offered you a position because you're they're friend. They offered you a position because they knew you AND they knew you were smart/talented/a coder/whatever. I got my first foot in the door via an internship on a referral from a friend who had interned there the year before. I had no formal credentials (just taking CS classes on the side of an Econ degree in college), but I h…

my contention is not that I got any jobs because I was a friend (or a contact of a friend) but rather that I very likely wouldn't have gotten any jobs if I weren't a contact of a friend.

A lot of the SV narratives circle around meritocracy (or other ways of 'hacking the signalling game' even. And when you say "it's SUPER unlikely", I think you're 100% correct. And so challenging the meritocracy myth is important.

Re: Theranos, CEO Holmes, and Former President Balwani Charged with Fraud

#492

Post by ta76567656 »

kahnjw wrote: post #481
c3534l wrote: post #455

Earlier quoted context omitted.

I had to go through a bunch of SEC cases for an accounting project a while back. One thing stood out to me more than anything: the SEC goes after cases that are easy more than anything else. Multiple crimes committed with lots of evidence and easy-to-spot damages. It actually gave me the impression that avoiding the ire of the SEC is relatively easy if you set your mind to committing fraud without getting caught.

>It actually gave me the impression that avoiding the ire of the SEC is relatively easy if you set your mind to committing fraud without getting caught. I assure you, it is only possible to avoid risk if you're a small fish and extremely careful. For instance, you have a good chance of getting away with skimming a neighborhood stock fund you setup. If you are managing or receiving millions of dollars in investment, y…

What about Madoff though?

In 1999, financial analyst Harry Markopolos had informed the SEC that he believed it was legally and mathematically impossible to achieve the gains Madoff claimed to deliver. According to Markopolos, it took him four minutes to conclude that Madoff's numbers did not add up, and another minute to suspect they were likely fraudulent.[73] After four hours of failed attempts to replicate Madoff's numbers, Markopolos believed he had mathematically proved Madoff was a fraud.[74] He was ignored by the SEC's Boston office in 2000 and 2001, as well as by Meaghan Cheung at the SEC's New York office in 2005 and 2007 when he presented further evidence. He has since co-authored a book with Gaytri Kachroo (the leader of his legal team) titled No One Would Listen. The book details the frustrating efforts he and his legal team made over a ten-year period to alert the government, the industry, and the press about Madoff's fraud.

https://en.wikipedia.org/wiki/Bernard_Madoff#Investment_scan...

Re: Theranos, CEO Holmes, and Former President Balwani Charged with Fraud

#493

Post by c3534l »

kahnjw wrote: post #481
c3534l wrote: post #455

Earlier quoted context omitted.

I had to go through a bunch of SEC cases for an accounting project a while back. One thing stood out to me more than anything: the SEC goes after cases that are easy more than anything else. Multiple crimes committed with lots of evidence and easy-to-spot damages. It actually gave me the impression that avoiding the ire of the SEC is relatively easy if you set your mind to committing fraud without getting caught.

>It actually gave me the impression that avoiding the ire of the SEC is relatively easy if you set your mind to committing fraud without getting caught. I assure you, it is only possible to avoid risk if you're a small fish and extremely careful. For instance, you have a good chance of getting away with skimming a neighborhood stock fund you setup. If you are managing or receiving millions of dollars in investment, y…

The counterpoint to that is Bernie Madoff, who was a big fish and careless and by the time he was caught there was an orgy of evidence against him. I think it has more to do with low-hanging fruit than anything else. That doesn't mean SEC investigators aren't diligent and hardworking, but you need to leave behind evidence. Very few schemes struck me as particularly creative frauds, it's like the most obvious stuff you can think of: either just pocketing money or lying to investors like a dumbass, or simple schemes involving capitalizing expenses, or over-payment scams. No Repo 105 or any sophisticated Enron stuff like that. It's like if you studied cyber security in school, and all the big fish are falling because they set their password to hunter5 or got phished.

Re: Theranos, CEO Holmes, and Former President Balwani Charged with Fraud

#494

Post by kahnjw »

ta76567656 wrote: post #492
kahnjw wrote: post #481

Earlier quoted context omitted.

>It actually gave me the impression that avoiding the ire of the SEC is relatively easy if you set your mind to committing fraud without getting caught. I assure you, it is only possible to avoid risk if you're a small fish and extremely careful. For instance, you have a good chance of getting away with skimming a neighborhood stock fund you setup. If you are managing or receiving millions of dollars in investment, y…

What about Madoff though? In 1999, financial analyst Harry Markopolos had informed the SEC that he believed it was legally and mathematically impossible to achieve the gains Madoff claimed to deliver. According to Markopolos, it took him four minutes to conclude that Madoff's numbers did not add up, and another minute to suspect they were likely fraudulent.[73] After four hours of failed attempts to replicate Madoff'…

1. A sufficiently large distribution will contain outliers. 2. Where is Madoff now?

Re: Theranos, CEO Holmes, and Former President Balwani Charged with Fraud

#495

Post by jpatokal »

casawa wrote: post #426
ravitation wrote: post #399

Earlier quoted context omitted.

Wait... How did he have his life destroyed? It just says that he hasn't talked to his grandfather in awhile... He went on to start a biotech company (that seems to be doing alright) and was a Forbes 30 under 30 in 2017... I don't see how his life was destroyed...

"He and his parents have spent more than $400,000 on legal fees" for doing the right thing https://www.wsj.com/articles/theranos-whistleblower-shook-th...

Here are Tyler Shultz's grandfather and his wife:

https://en.wikipedia.org/wiki/George_P._Shultz

https://en.wikipedia.org/wiki/Charlotte_Mailliard_Shultz

It's unlikely that $400k will drive the family to bankruptcy.

Re: Theranos, CEO Holmes, and Former President Balwani Charged with Fraud

#496

Post by kahnjw »

c3534l wrote: post #493
kahnjw wrote: post #481

Earlier quoted context omitted.

>It actually gave me the impression that avoiding the ire of the SEC is relatively easy if you set your mind to committing fraud without getting caught. I assure you, it is only possible to avoid risk if you're a small fish and extremely careful. For instance, you have a good chance of getting away with skimming a neighborhood stock fund you setup. If you are managing or receiving millions of dollars in investment, y…

The counterpoint to that is Bernie Madoff, who was a big fish and careless and by the time he was caught there was an orgy of evidence against him. I think it has more to do with low-hanging fruit than anything else. That doesn't mean SEC investigators aren't diligent and hardworking, but you need to leave behind evidence. Very few schemes struck me as particularly creative frauds, it's like the most obvious stuff yo…

What I'm hearing is "avoiding the ire of the SEC is relatively easy" because "Bernie Madoff."

IMO that is naive. He is an outlier. Sort of like saying committing mass acts of terrorism is easy because 911.

Re: Theranos, CEO Holmes, and Former President Balwani Charged with Fraud

#497

Post by sk5t »

kqr2 wrote: post #336
nathanaldensr wrote: post #2

Theranos and Holmes have agreed to settle the fraud charges levied against them. Holmes agreed to pay a $500,000 penalty, be barred from serving as an officer or director of a public company for 10 years, return the remaining 18.9 million shares that she obtained during the fraud, and relinquish her voting control of Theranos by converting her super-majority Theranos Class B Common shares to Class A Common shares. Du…

Most likely she also has Directors and Officer's Liability Insurance: https://en.wikipedia.org/wiki/Directors_and_officers_liabili... As part of the settlement, there was no actual admission of wrongdoing or fraud, so it's quite possible that the insurance would pay the fine.

Maybe, maybe, if the insurer had the option to direct any defense, but it's still mighty hard to insure against willful acts.

Re: Theranos, CEO Holmes, and Former President Balwani Charged with Fraud

#498

Post by c3534l »

kahnjw wrote: post #496
c3534l wrote: post #493

Earlier quoted context omitted.

The counterpoint to that is Bernie Madoff, who was a big fish and careless and by the time he was caught there was an orgy of evidence against him. I think it has more to do with low-hanging fruit than anything else. That doesn't mean SEC investigators aren't diligent and hardworking, but you need to leave behind evidence. Very few schemes struck me as particularly creative frauds, it's like the most obvious stuff yo…

What I'm hearing is "avoiding the ire of the SEC is relatively easy" because "Bernie Madoff." IMO that is naive. He is an outlier. Sort of like saying committing mass acts of terrorism is easy because 911.

Also, actual SEC filings. But fine, here's a paper: https://business.illinois.edu/accountancy/wp-content/uploads...

I can't find it now, but I do recall the SEC itself putting the number of frauds they uncovered in the low single digits. I might ask my SEC friend himself what percentage of the iceberg he thinks is uncovered.

Re: Theranos, CEO Holmes, and Former President Balwani Charged with Fraud

#499

Post by ta76567656 »

kahnjw wrote: post #494
ta76567656 wrote: post #492

Earlier quoted context omitted.

What about Madoff though? In 1999, financial analyst Harry Markopolos had informed the SEC that he believed it was legally and mathematically impossible to achieve the gains Madoff claimed to deliver. According to Markopolos, it took him four minutes to conclude that Madoff's numbers did not add up, and another minute to suspect they were likely fraudulent.[73] After four hours of failed attempts to replicate Madoff'…

1. A sufficiently large distribution will contain outliers. 2. Where is Madoff now?

1. Enron? WorldCom? The entire real estate bubble collapse that blindsided the country, including the SEC and other regulators?

2. Madoff was caught because his scheme fell apart, not due to any SEC or other government action.

Re: Theranos, CEO Holmes, and Former President Balwani Charged with Fraud

#500

Post by tehlike »

fiblye wrote: post #422
hluska wrote: post #70

Earlier quoted context omitted.

I don't know if I agree with you. Personally, I can't imagine the humiliation of carrying this around with me...

She got to live a few years as a billionaire. She could easily get a normal, non-executive job like 99% of Americans after this. I think most people would take a lifetime of "humiliation" if they got to live an unreasonably extravagant life for a while then return to an upper middle class lifestyle, occasionally having news articles written about them until it all fades away completely after 5-10 years. A sentence of…

I assume she took plenty of money from the table, too.
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