The 21st Century's third (by our count) Trial of the Century was undoubtedly US v. Elizabeth Holmes. Holmes was the founder and CEO of Theranos, the company that was going to revolutionize blood testing. Holmes claimed to have developed a one-drop system that almost instantaneously provides blood test results.
The Theranos Story
She was the darling of Silicon Valley. Virtually overnight Theranos went from an unknown startup to a market valuation of $17 billion. Holmes became the youngest billionaire in history.
An amazing story that became even more amazing when it was discovered that it was all fake. There was no finger pick test, no cutting-edge technology, no quick results, nothing.
It took years to catch and might still be going if not for the efforts of Wall Street Journal's John Carreyrou’s reporting and subsequent best-seller Bad Blood.
The thing that has always struck me is that over the years dozens of employees – from janitors to tech wizards to engineers and salespeople – quit or were fired over their concerns about Theranos’ business practices and representations.
They all knew the truth about Holmes and Theranos. Yet not one word of the fraud leaked.
NDAs and Non-employment Attorneys
Turns out Theranos tossed a long, nasty non-disclosure agreement at every new employee. No signature, no job. Terminated employees were hounded, sometimes for years, by letters and unexpected visits from Theranos’ attorneys - ‘just to remind them of their duty to the company.’
There was a clear pattern: sign a non-disclosure, get hired, grow concerned over fraud/lying/scam, voice concerns, be fired and escorted out of the building, receive a letter or visit or both about not violating the non-disclosure.
Over the years a few concerned and angered employees went to lawyers about the NDA and the fraud they had observed.
They consulted their parent’s lawyer, the guy who did their closing, the woman who did their mother’s will, the firm that grandma used when she slipped and fell in a grocery store, and, worse, the brother-in-law who just graduated law school.
No one consulted an employment attorney or, for that matter, anyone with knowledge of NDAs. Not one.
The Truth about NDAs and Whistleblower Protection
Had anyone gone to an experienced employment attorney they would have learned that California had strict whistleblower protections and NDAs are not valid where there is criminal conduct or clear public policy concerns.
Had they gone to the SEC or FBI or well, anywhere, their lives would have been a lot less stressful and Theranos would have been found out much earlier.
Ironically, the employees who broke the story to John Carreyrou did not have that whistleblower protection - something else a qualified attorney would have explained.
Look, attorneys aren't doctors. Once we pass the bar, we can take any case we want, from a real estate closing to admiralty law and everything in between. No years of specialized training are required.
Theranos is the perfect illustration of why it is so – so – important to engage attorneys who concentrate in a specific area of the law - the one you need help with.
Hopkins Centrich does business law. If you come to us with a question about family law, we'll send you to a family law firm that knows its stuff. If you come to us with a DUI, we’ll send you to a great criminal attorney. But if you have a business law issue, we are the people you need to talk to.
