Theranos verdict underscores need for media scrutiny

The guilty verdict for Theranos CEO Elizabeth Holmes could be a watershed moment in American business.

It’s a story that’s bigger than any single company or self-styled Silicon Valley dynamo. It’s a cautionary tale about hubris likely to impact business for decades to come. This shot across the bow is a warning about boundaries for exuberant CEOs when it comes to pitching and selling. And it’s a reminder of the incredible power of the press.

Theranos rose to a $10 billion valuation based — at least in part — on mass media outlets all across the United States, and indeed the world, swooning for the brash, articulate, baritone-voiced woman who spoke with great enthusiasm about how the world would be transformed for the better by her company’s innovation.

Former secretaries of state and corporate executives took the bait as Holmes graced the front pages and the covers of magazines and newspapers. But with yesterday’s guilty verdict, it’s a reminder that the press has a vital role to play when it comes to exposing wrongdoing.

The media can build you up, but it can also take you down — and dedicated, skeptical journalists made the difference in this case, shining a light on this company’s shortcomings as far back as 2015.

While the world was suckered by the false promises of Theranos, reporters set in motion a chain of events that led to the catastrophic meltdown of a company that was a house of cards built upon a lie.

The jury on Monday found Holmes guilty of four federal charges of fraud for exaggerating to investors what her blood testing company’s machines could do. Holmes was found not guilty on three additional charges concerning defrauding patients and one charge of conspiracy to defraud patients. The jury returned no verdict on three of the charges concerning defrauding investors. 

This outcome has devastating personal consequences for the business magnate, who will almost certainly be going to prison for years as well as making financial restitution. She forever tarnished her name.

But the implications are more far reaching. Telling and selling are not enough to guarantee success if you are telling and selling lies. 

This verdict should give CEOs pause before they pitch investors and the press with over-the-top optimistic promises of what they can deliver.

Companies and their founders would do well to learn the ultimate lesson of Theranos’s demise.

The company promised investors that its technology could do things that it simply could not. They never halted — even when they knew that what their pitch and the product’s reality did not align.

In the medical space especially, you cannot play fast and loose with facts because lives are at stake. Theranos lost sight of the real-world implications of its lies, and their strategy backfired.

Holmes ultimately failed to be accountable. During the trial, she said she had been abused and was not ultimately responsible for her decisions. She claimed that she truly believed the lies that she was telling the press and to investors in the world.

The jury didn’t buy it.

The verdict is a reminder that we need the press. We need good journalism; we need reporters to ask questions, to dig deep and to hold powerful people and companies to account. How else can we ultimately arrive at fact and truth?

We all love a good story and a fairy tale — but good stories come tumbling down if they’re built on a foundation of lies. 

In this instance, the media’s standout reporting was the catalyst for a remarkable meltdown, the likes of which we’ve rarely seen before — and will hopefully never see again.

This wasn’t the first time investors have been deceived, and it won’t be the last — but truth can still prevail with help from determined journalists who push back when they smell a rat.

Evan Nierman is CEO of crisis PR firm Red Banyan and author of “Crisis Averted.”