Pecunious, Punctilious, and Prosecuted

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Ramesh “Sunny” Balwani was the president and Chief Operating Officer (CEO) of a company named Theranos for seven years. The founder of Theranos was Elizabeth Holmes, whose life goal was to be a Silicon Valley billionaire. The unfolding of the story is rather sad, a story whose path was not unlike the fictional character Gordon Gekko’s “greed is good” theme. Theranos’s business concept was a great idea, and should a company such as one like Theranos actually work, it would change a lot of how we view medicine, but the concept and reality never actualized.

 

Ramesh “Sunny” Balwani was born and raised in India, and came to the U.S. in 1986, and eventually became a software engineer for Lotus and Microsoft. Fortune smiled upon Balwani, and he joined a startup named CommerceBid.com as president and No. 2 executive. The business model of CommerceBid.com was to have suppliers bid against one another live on the internet, in business-to-business auctions. In November 1999, the leading software firm (Commerce One) in that area of internet bidding acquired CommerceBid.com (who had only three clients testing the software) for $232 million. Mr. Balwani received a substantial amount of money, and cashed out his shares of stock for $40 million. Selling out was a wise move, because when the dot.com bubble crashed a mere five months later, Commerce One eventually filed for bankruptcy.

 

After meeting Elizabeth Holmes in 2002, when she was eighteen, the two quickly became an item, and that year Balwani divorced his wife Keiko Fujimoto. Ms. Holmes dropped out of Stanford in 2003, and engaged the services of Mr. Balwani, a relatively recent Silicon Valley millionaire, as her mentor, and perhaps engaged in a few other activities as well. Ms. Holmes incorporated the startup Theranos in 2004, intent on developing a wristband that “would simultaneously detect people’s ailments by drawing their blood with microneedles and cure them by injecting them with the appropriate drug” named the TheraPatch. TheraPatch was a great concept, based on the ability to design and manufacture machines that could detect illness from a single drop of blood rather than the larger samples required of the technology of the time.  Great ideas are one thing, executing them is quite another.

 

TheraPatch proved to be too futuristic, and so Holmes pivoted (love that term) to another concept, portable machines that could process a drop of blood and perform dozens of laboratory tests from that single drop of blood. By 2009, Theranos had burned through $47 million in startup cash, so Mr. Balwani joined the firm as No. 2 and began to illustrate his millionaire chops. Or lack of them. Balwani threw $12 million into the firm, so it wasn’t as if he didn’t have any skin in the game, but it wasn’t going to be his skin that was sacrificed, if he could help it. He was a remarkably skilled millionaire startup guru, according to some people. After all, you can’t call someone like Balwani just a lucky chump who was in the right place at the right time, now can you? Especially when looking at the success of the firm where he gained his wealth going under within a few months. That’s Silicon Valley, eh?

 

Being a millionaire, Mr. Balwani barked out orders to the engineers and scientists, all while wearing acid-washed jeans, designer shirts with the top three buttons open, accompanied by pungent cologne with either his Lamborghini or his Porsche, replete with vanity plates, in the parking lot. Being the hard-charging leader he believed himself to be, Balwani fired people who disagreed or proposed realistic problems which had to be overcome in order to successfully produce the product. By 2013, the Theranos product had evolved, or changed because of practical reasons (unable to take the brilliant machine from a concept to a working model) from a micro-fluid device, to a glue-dispensing robot named Edison, to a machine that could perform a full range of blood tests from a single drop of blood. Employees who raised concerns were fired, or in the parlance developed at Theranos, Balwani “disappeared” them. Balwani earned a reputation as an order-barking, demanding boss who would not tolerate any realistic observations of employees. You cannot force people to do the impossible, but that was not about to stop Balwani. In many corporate meetings, Ms. Holmes would say "Sunny says" and then go on with some unattainable goal.

 

The engineers at Theranos observed that Balwani was out of his depth when in discussions of engineering concepts, endlessly repeating catchy engineering terms, sometimes mispronouncing them. Reports indicate that Balwani confused the chemical symbol for potassium as “P” when it is, as most high-school chemistry students know, the symbol “K.”  But Balwani was, after all, a remarkably skilled millionaire startup guru, according to some people.

 

The remarkably skilled millionaire startup guru told the Partner Fund Management officials in 2014, that Theranos had developed a machine that could perform amazing functions that it, in fact, could not do. Partner Fund eventually filed a lawsuit, settling out at $43 million in the spring of 2017, with Theranos making no admissions of wrongdoing. Balwani claimed that the Theranos machines were being used in the field by the U.S. military, another whopper by the remarkably skilled millionaire startup guru. Balwani’s financial projections were massively deceitful, projecting profits in the billions, when in fact, there were none.

 

In another remarkably honest and admirable move, Balwani had a critique of Theranos that was posted on Glassdoor.com titled “A Pile of PR Lies” removed from the website, and had the Human Resources department write and post glowing reviews of the company on Glassdoor. Balwani interrogated many employees trying to find out who posted the diatribe, without success. The Wall Street Journal began a series of articles on the technology and practices of Theranos, which led to an SEC (Securities and Exchange Commission) investigation. Subsequent to the investigation, charges were filed, and Ms. Holmes reached a settlement in March of 2018. The remarkably skilled millionaire startup guru Mr. Balwani is fighting the charges. He is after all, a remarkably skilled Silicon Valley startup guru millionaire, and not just some lucky chump who was in the right place at the right time. Mr. Balwani’s actions prove his skills, and those are  spouting balloon juice, terrorizing employees, overpromising and not delivering at all, and (if the settlement that Ms. Holmes agreed to is any indication)  committing fraud. In Balwani’s (that remarkably skilled Silicon Valley startup guru) defense, the fraud is yet to be proven, though his “partner” has already settled, if that means anything. Let’s hope these charges don’t go the way of Brian Hunter. To read about Mr. Hunter and his antics, I refer you to: http://www.writerbeat.com/articles/15392-A-Face-and-Name-to-Free-Market-Corruption.  

 

After once being lauded as “the next Steve Jobs” Ms. Holmes was, in 2016, described in Forbes magazine as one of the "World's Most Disappointing Leaders.”  At least Ms. Holmes, after losing more millions that I would care to estimate, had the stones to fire Mr. Balwani, who describes his departure as “voluntary retirement.” Mr. Balwani and Ms. Holmes, while previously an item, are not, as of this writing, on speaking terms. On April 27, 2018, Theranos filed a WARN Act notice, which is legally required notice that it was going to permanently lay off 105 employees. I feel sorry for the employees. I do not feel sorry for greedy people, nor for investors who take high risks knowing that they might not pay off. As for the remarkably skilled millionaire startup guru Mr. Balwani, his luck might just have run out. Being at the right place at the right time might make you a millionaire, but it does not always prove managerial skills. Timing is everything. (The majority of facts were gleaned from The Wall Street Journal May 20, 2018.)

 

Update: On June 15, 2018 Elizabeth Holmes and Ramesh Balwani. From The Wall Street Journal :

Ms. Holmes, 34 years old, and Mr. Balwani, 53, were charged with two counts of conspiracy to commit wire fraud and nine counts of wire fraud in an indictment handed up Thursday and unsealed Friday.

“This indictment alleges a corporate conspiracy to defraud financial investors,” said Special Agent in Charge John F. Bennett of the Federal Bureau of Investigation in San Francisco. “More egregiously, this conspiracy misled doctors and patients about the reliability of medical tests that endangered health and lives.”

Comments

Dave Volek Added Jun 8, 2018 - 12:59pm
Jeff
Your alliteration of the title forced me into the dictionary. Fitting "p" words indeed. Great story.
 
I don't feel sorry for Silicon Valley employees. From my understanding, they are highly paid and are easily recycled (i.e. have skills in demand). They made a choice to work for a tyrant.
Pardero Added Jun 8, 2018 - 1:35pm
Jeff Jackson,
I admit that I am a sucker for a good alliteration, but I am here because this is a wicked sharp cutting narrative, that reads like a bodice-ripper. Well done, sir!
George N Romey Added Jun 8, 2018 - 1:41pm
Jeff from my experience successful people often possess psychopath traits. I think it’s what drives them. Unfortunately they often have no empathy or compassion of others.
Bill H. Added Jun 8, 2018 - 2:59pm
Great article, Jeff-
I saw a special on this some months back. Amazing that the "technology" was initially adapted by both the Military and Wallgreens without performing lab inspections and simply believing forged testing results.
 
George- 
I have seen many move up the ladder quickly simply because of their greed, lack of compassion and empathy, inflated egos, and self-centered attitudes. Most of the time they were promoted by upper management with the same traits that (of course) had no clue. The result over time was usually depleted morale and productivity with the workforce, and finally when the Corporate office figured it out, a housecleaning on the top. This was quite common in my company, and the vendor companies that we constantly dealt with.
Then the cycle would repeat itself about every 5 to 8 years.
 
Dave Volek Added Jun 8, 2018 - 3:29pm
I think the one thing I have gleaned from Writerbeat over the last year is that many seekers of high positions of society have psychopathic tendencies. As I am replaying my life, I can see this pattern emerging more than enough times to be just a coincidence.
 
I remember that I went into business at the age of 24 mostly because I wanted more control. I wanted to the one making the decisions, not obeying them. I have worked out a few issues with myself, and the desire to be in business again is not there anymore.
 
 
Jeff Jackson Added Jun 8, 2018 - 3:55pm
Thanks Dave. I'm always trying to expand people's vocabulary, and indeed those words describe Sunny Balwani. I'm not too worried about the Silicon Valley employees in the long run. They were all probably trying to get on there and get rich like Sunny had done! I think they all are looking for another Google, FaceBook, Netflicks or Amazon, or FANG, as it is called. Thanks for your comments Dave.
Jeff Jackson Added Jun 8, 2018 - 3:57pm
Thanks Pardero. I took two whole pages and condensed them into what I though was a brief narrative. While I don't like to see businesses fail, we had at least two (and probably many more) folks that were trying to get rich quick. Sunny was just, as I describe, a lucky chump in my book, who accidentally got rich, and has not seemed to duplicate his skills anywhere else, probably because he doesn't have any skill except luck. Thanks for your comments.
Jeff Jackson Added Jun 8, 2018 - 4:01pm
Thanks George. I have seen folks like Sunny (you almost always run across one sooner or later) and yes, they have no feelings for anyone else, just narcissistic love for themselves, and screw everyone else that they can. What I love about them is the way they hand out work by the truckload and never give a thought to helping anyone. These are the kind of folks that I don't spend any time sharing anything that I know, because they already know everything, and if their assumption of knowledge (like Sunny) gets them in hot water, all the better. Thanks for your comments George.
Jeff Jackson Added Jun 8, 2018 - 4:12pm
Thanks Bill. I'm amazed that no one gives these psychopaths a psychometric test (the ones that detect lies) and rule them out. Because folks like Sunny (at least temporarily) are successful, they earn praise, until their narcissism finally shows and they are revealed for what they are. In Sunny's case, growing up in India, he was probably accustomed to treating people like dirt, as that is ingrained in Indian society as how to treat Untouchables, like they are not even human. I make this point over and over again. Untouchables do not come to the U.S. because they're lucky if they travel 25 miles from their birthplace in their entire lifetimes. I find the treatment of them as despicable, and none of the Indians here ever want to talk about what goes in in their native country. I see that attitude a lot in the folks that come here, and I was not aware of it until I understood the social class structure, when one of my poli-sci instructors described it. Sunnny was treating the employees of Theranos like they were Untouchables.
Some of them do well in business, because, I suppose, there are some positions where the traits that they have are valuable business skills. I think I have run across a few of them in academia as well, but I won't reveal what they taught. Thanks for your comments Bill.
Leroy Added Jun 8, 2018 - 4:16pm
Interesting article, Jeff.  You could have easily substituted Elon Musk for Mr. Balwani.
 
George, I agree with you.  But, sometimes, a psychopath is what you need.  I detest working with or for one, but they do get results--sometimes.  I've seen psychopaths demand the impossible.  I have seen employees rise to the occasion.  The higher up a manager goes, the more he has to sell his soul to the company store and the more he is willing to tow the company line.  Consequently, those below get screwed. 
Jeff Jackson Added Jun 8, 2018 - 4:20pm
Well Dave, don't feel bad. From your writing, I don't think you come close to being a Sunny. I can't say the same thing for that person who just returned to WB and an absence that I, for one, found refreshing. You just wanted to be in control, and I think we all have that feeling at some point. I too, prefer to be in control, and I have no problem owning up to bad decisions when I am in control and I make one, or two, or a dozen.
I have, in the past few years, given up on volunteering advice to those who in their own mind, know everything. The only problem has been that they didn't understand what I was doing, or the reason why I was doing it. Thanks for your comments Dave.
Ryan Messano Added Jun 8, 2018 - 7:57pm
Great article.  Sad how so many allow money to corrupt them.
 
Power corrupts and absolute power corrupts absolutely.
Lord Acton
Jeff Jackson Added Jun 9, 2018 - 7:20am
Leroy-Yes, I am sure that Sunny Balwani would have been more than happy to have the employees make him even more millions. I will always remember the boss that had the stones to claim my work as his own. I left the company over many things, but that was a big one. Thanks for your comments Leroy.
opher goodwin Added Jun 9, 2018 - 7:41am
Jeff - a great and salutary article Jeff. The poor guy. It looks like they ganged up on him - and him a genius too!
Leroy Added Jun 9, 2018 - 9:55am
"I will always remember the boss that had the stones to claim my work as his own."
 
I will always remember the boss who white-outed a former boss' name on a document and put his own name on the document.  I called him out on it.  He shrugged his shoulders and said, "We are all the same company.  It is not his.  It belongs to the company."
Bill H. Added Jun 9, 2018 - 10:54am
 
My final episode before blowing the whistle on my former arrogant/narcissist boss was when he asked me to falsify network technical performance reports that we performed yearly for the Federal Communications Commission. I gave him copies of the falsified reports and submitted the real reports to the FCC. The company corporate ombudsman was able to trigger an investigation that uncovered quite a few other unrelated offenses that this guy committed (including using company funds for personal purchases), that finally resulted in his being asked to resign. He had been with the company for over 15 years and was despised by everyone except his own boss. After his departure, company morale skyrocketed, as did performance and profits. 
Jeff Jackson Added Jun 9, 2018 - 11:05am
Thanks Opher-yeah, those SEC guys are pretty demanding, insisting that people deliver what they promise! I mean, come on, who does that in this economy?  Thanks for your comments Opher.
Jeff Jackson Added Jun 9, 2018 - 11:08am
Leroy-Nice story. I guess if it belonged to the company, then why did he want to put his name on it? One of the bottom-feeding, untalented managers looking to make a name for themselves any way they can, and rationalizing all the way. I'm sure Mr. Balwani had similar skills. Thanks for your comments Leroy.
Jeff Jackson Added Jun 9, 2018 - 11:15am
Wow Bill, that's a cool story. Maybe a WB essay workplace fraud. I doubt I would ever lie to the federal government, they can be quite nasty and they take things seriously. Look what they did to Martha Stewart for telling a few fibs that she, as she explains, was just confused. Never talk to the feds (or any authorities nowadays) without legal counsel. They act as if it is a friendly conversation, and then tighten the noose. I had a conversation with a uniformed authority once, and into the conversation he said "you just said" and slanted the statement. I told him that if he was going to twist what I said to make me look guilty he could talk to my lawyer and try that little scheme on him. He didn't try that again.
Michael B. Added Jun 9, 2018 - 4:28pm
Interesting post Jeff. I remember having similar reactions to both the Theranos and Volkswagen emission scandals. Data talks, bullshit walks...unless its very cleverly manipulated, lol.
Jeff Jackson Added Jun 9, 2018 - 5:29pm
Thank you Michael. I think Ms. Holmes had the right to engage in whatever off-duty antics she wished to engage in with Sunny. However, she overestimated his abilities by a great margin. Sunny Balwani just wasn't the remarkably skilled Silicon Valley startup guru millionaire that she thought he was. Never mix business and pleasure, never dip your pen in the company ink, all the others, apply here. But his is Silicon Valley, where the morals and standards of yesteryear do not apply, so the Silicon Valley geniuses (expensively, sometimes)  learn them all over again. There are reasons those sayings were devised. Thanks for the comments Michael.
opher goodwin Added Jun 9, 2018 - 7:22pm
Has Riley Brown commandeered the Like button??? Or has he paid people to press it???
Leroy Added Jun 10, 2018 - 9:09am
"Has Riley Brown commandeered the Like button??? Or has he paid people to press it???"
 
No need for jealousy, Opher...lol.
Benjamin Goldstein Added Jun 10, 2018 - 1:26pm
Good title. I like Latin. I think a witch jumped out of a crack under my computer.  ;-).