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Comment by dmix | Hacker News Reader

I'm happy he got even more than Holmes (11 vs 13). The book made him sound worse than she was and he was the mastermind internally at keeping the staff working and building a culture of misdirection and obedience. He was firing people on an almost daily basis for a while whenever someone questioned their bullshit.

Holmes was the showpiece, who got to play the pretend female Steve Jobs visionary role to the press and investors. And naturally took most of the heat. But the house of cards would probably have fallen apart way sooner if he didn't run the show in the background.

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I disagree. She was the CEO and ultimately had the most control. She also did the most lying to investors.

We don't know what SBF will be charged with yet - but how would we feel if one of the other employees who did more of the actual transfers/faulty accounting got more of a sentence? As long as it clear that the CEO (in this case SBF) knew about the wrongdoing I think it is fair to hold them to the harshest sentence - even if they are not the "mastermind".

It's not like Holmes was a random former actress they found to be a clueless spokesperson. She was a smart person with plenty of resources and education.

> but how would we feel if one of the other employees who did more of the actual transfers/faulty accounting got more of a sentence

Sunny wasn't just one of the employees, he was essentially a cofounder and was Elizabeth's closest advisor. The book made it sound like he ran the actual company while she was distracted with the media and having dinners with politicians.

Re: SBF, he owned 90% of Alameda and was responsible for sending them FTX customer funds to cover their loses, so he will always be more guilty than the girl who ran it and likely made the actual loses. These details matter. CEO's have more control formally but who did the dirty work is most important.

I'm not saying he was a random employee but he was definitely lower on the totem poll. Holmes could have had him removed from the company at any time. The same is not true of Sunny removing Holmes.

I have also read the book and agree Holmes was more into the PR stuff and investor stuff. But again - the crimes had to do with lying to investors.

I feel like the biggest source of truth was inside the company. Controlling the employees is what kept it hidden for so long and an employee was what took it down. But you might be right that most of the fraud was via investors. The companies operations were just a fiction after a certain point.

She was convicted of the investor crimes, and he was convicted of the operations crimes.

>Following a three-month trial and deliberations over five days that ended in July, Balwani's jury returned guilty verdicts on all 12 charges brought by the Justice Department — seven counts of wire fraud for defrauding Theranos investors, two counts of wire fraud for defrauding paying patients, two counts for conspiring to defraud investors and patients, and one count for wire fraud related to Theranos advertisements to patients in Arizona.

I dont know the exact breakdown but seems like most of his crimes still had to do with defrauding investors. What distinction do you mean by "operations crimes"?

All tort cases need someone to be the harmed by the crime. So of course the investors would be the central focus. How they pulled off the crime is how they are prosecuted though.

Running the fake company that investors put money into is as critical (or more so given the due diligence process) as persuasively asking the investors for the money.

This was not a tort case.

Obviously people were harmed but it was a criminal case.

> she was distracted with the media and having dinners with politicians.

She wasn't distracted, she was the distraction, the pretty young pretend-genius (with no college degree), white blonde lady in her Steve Jobs costume.

Do you think Sunny would have gotten all those investments from old military guys?

CEOs are primarily sales people who exist to sell the company to investors, and to a lesser extent to employees.

A talent for strategy and execution is useful but not essential.

If you execute without selling, you don't have a company. If you sell without executing you can always write it off as a super-exciting best-effort failed adventure from which you learned a lot etc.

As long as you avoid fraud, obvs.

So yes - Holmes was the sales person who bought her own hype. Sunny seems to have been the executioner.

Executor?

> Do you think Sunny would have gotten all those investments from old military guys?

You're reading far too much into the wording of my comment.

Yes, being distracted by dinners with politicians and investors was a critical part of the scam. Regardless, having a "real" company is what allowed her have that image. She just wanted to maintain the fantasy lifestyle and didn't care how. The hard day-to-day grunt work was done by Sunny, while she barely talked to employees.

VCs engage in plenty of due diligence into portfolio companies. After 5-6yrs the persuasive pitch deck + founder is no longer good enough to avoid questions. That's where well run company protects the lie long-term, the meat and potatoes.

>She also did the most lying to investors.

The reason Sunny got a longer sentence is that unlike Holmes, he was convicted of lying to patients, not just investors.

I read the book and I disagree.

Ultimately creating a toxic work environment is not why they are going to jail, but for deceiving the public, and investors. Holmes (the person playing Steve Jobs) lead that.

I have little doubt that if the genders were reversed that Holmes sentence could be easily twice Sunny's.

This - I mentioned in another thread when Holmes was sentenced that even if convicted she'll not spend that long in jail (maybe 5 years, most of it on license I would guess?). I suspect Balwani will serve most if not all of the 13 years.

I've no wish to defend either of these people given what they've done, I just think it's worth pointing out that ignoring the disparity doesn't make it go away.

I thought federal sentences did not have parole? So a person has to serve their full term.

You thought right. Parent comment is wrong. Many random “bet she won’t serve half of that” comments were corrected in the original discussion.

I'm not familiar with how this works, and I can't edit my comment now, but I learned something new today.

I'm also really trying not to believe that this will be mitigated in some other way. (Is it possible she could serve some of her sentence at home if a judge rules that way, for example? This is a genuine question btw).

Theranos started in 2003 and had raised $200m+ before sunny joined in 2009. Fraud started before him.

Well, technically early on it was a real business and a genuine attempt to create the blood meter. It was when it became apparent it wasn't going to work but they still maintained that fiction was when it turned into a fraud.

A legitimate startup morphed into a fraud, coincidentally not long after Sunny joined and started secretly dating her.

You are trying way too hard to shift the blame here. I wonder why that is?

When the black natives tell us America is still a very racist country where privilege and punishment is concerned, we should listen. Some Asians stay in denial until blindsided by reality.

Apparently he brainwashed her.

I kid you not. This was an actual defense for Holmes.

Wasn't it always a fiction? Her premise for Theranos was to perform blood tests with minimal amount of blood even though the science wasn't there. I would love see a pitch decks for the raises prior to Sunny. How do you raise $200m when VC money was hard to come by during the recession?

I think Holmes played a bigger role in the fraud than people give her credit for, whether she "meant to" defraud people or not, I don't think she was like "I'm gonna deceive all these people" but rather "I need to keep the money flowing so that I can develop the technology to make this a reality".

That said, of the two of them, Balwani was the true gangsta. He came in seemingly already knowing how to run a criminal enterprise, and applied those principles to Theranos.

Holmes never and inkling of a plan to make the tech a reality. She was just a figurehead for a scam, the ICO of its day.

I read the book and also agree with this. She was the CEO, but he "ran" the company. He also put millions of his own money into it to keep it afloat. He should've been the "adult supervision", so to speak.

I was thinking the same thing. But then it occurred to me that she was behaving like a version of Steve Jobs. How would then the "adult supervision" of Steve Jobs look like? Fired on the spot? I don't think it's easy or even possible to provide adult supervision in that environment.

Seeing Steve Jobs did get fired from Apple his first time around, probably. Corporate governance is a thing, they had a board, and Balwani was on it.

He was also the one doing all the hiring and firing. Holmes was literally a figurehead who are barely in her office, busy keeping the press and investors happy so the money kept coming in.

Presumably the judge had more evidence to consider than just what was in "the book".

It's quite possible that the judge actually had less (for procedural or other evidentiary reasons).

I've seen a lot of excuses from CEO's for why they aren't responsible for their actions but "I didn't have adult supervision" takes the cake.

Eh, Holmes was 19 when she dropped out of colleges. Despite legal adulthood, people are disproportionately stupid and/or naive at that age. It by no means excuses what she did and I think her sentence was at least reasonable and perhaps too lenient. But I think age and the lack of more experienced people with level heads around her is 1) a slight mitigating circumstance and 2) partly her own fault.

In short, adult supervision should at least be a consideration. Had she be 17 at the start, a difference of a mere two years, that might seem more clear (to some). Legal adulthood at 18 doesn’t confer some magical maturity and wisdom so we shouldn’t regard it much differently than 25-27.

To preempt arguments that this went on without Sunny for some years after she turned 19: 1) Plenty of people with some experience and maturity could have been in her circle of influence before then and 2) I did say age was only a slight mitigating circumstance.

I don't disagree with any of what you've said here but then that means the problem is the system itself.

If teenagers aren't responsible enough to run companies, the law shouldn't allow them to run companies. Make the minimum age of running a company 25.

I imagine a lot of YCombinator founders would disagree with this, but I also imagine those same people would agree that they're responsible for their actions.

I also imagine the Carmacks/Zuckerbergs/Jobs/Gates of the world would take umbrage with such a ban.

What shouldn't happen is allowing someone leniency after fraudulently running a health company that has caused harm to innocent people.

That's a deliberate over simplification of what that comment said.

It is and it isn't.

My point was that regardless of anything else going on, when you're the CEO, and your business card says "CEO", then it happened on your watch (the first rule of leadership being everything is your fault etc.)

shocked a brown male got a worse sentence than a white female for the same crime

They were charged for different crimes and had slightly different roles in perpetuating the fraud within & without the company. Whether or not young white females get more leniency isn’t even quite the issue: That assumes they might get less than deserved. That is a separate questions from whether or not a brown male got more than deserved. The questions may even have some overlap in a Venn diagram but they are not correlated 1:1.

Brown male... with 2 more degrees and decades of experience in business, who did the criminal operations.

What if Sheryl Sandberg had convinced Mark Zuckerberg to commit some sort of fraud at Facebook and they both got convicted. Can you possibly imagine Sandberg serving more time than Zuckerberg? The ages and age differences are very similar.

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