In Silicon Valley, Criminal Prosecutors See No Evil


“Silicon Valley is a lot cleaner today than when I started, during the 1990s dot-com bubble,” mentioned Reed Kathrein, a San Francisco lawyer who efficiently sued Ms. Holmes and Theranos in 2016 on behalf of buyers. “Everyone is throwing money at these start-ups. Everyone thinks they’re going to win the lottery. It’s easier to be honest.”

Reforms prompted by the collapse of WorldCom, a long-distance phone firm, and Enron, an power firm, within the early 2000s have additionally had an affect.

“Some of the changes in laws, like the Sarbanes-Oxley Act, put the screws on the accountants,” Mr. Kathrein mentioned. “They have to do their jobs now.”

Thirty years in the past, the tech trade was often known as a lot for bodily merchandise as for software program. Indeed, software program was once a bodily product. If gross sales weren’t going nicely, that provided potentialities for subterfuge.

MiniScribe, a Colorado disk storage firm that had fallen on arduous occasions, was taken over in 1984 by Hambrecht & Quist, distinguished Silicon Valley financiers. The funding agency pumped in cash and put in its personal administration. In 1988, to maintain its numbers up, MiniScribe managers packed 26,000 bricks into MiniScribe bins and shipped them to Singapore. When the scheme was revealed, the corporate went bankrupt and the chief government went to jail.

In this sense, Mr. Kathrein famous, Ms. Holmes’s case was a throwback. She was charged with making false and deceptive statements to buyers that Theranos’s proprietary analyzer, named Edison, was a medical marvel that might carry out a full vary of scientific checks. It couldn’t.

“She was shipping bricks,” he mentioned. A lawyer for Ms. Holmes declined to remark.

Mr. Kathrein’s conclusions usually are not extensively accepted. Asked if tech individuals had turn out to be extra sincere over the a long time, Margaret O’Mara, a historian of Silicon Valley, burst into laughter.

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