The End of Two Errors: Theranos, Shkreli Crises Come to a Close
The past two weeks have seen the resolutions (of sorts) of two high-profile crises that raised the issue of how brash (obstinate?) one should be in one’s communications. We speak of Theranos, whose founder has now given up control of the company, and Martin Shkreli, who will spend seven years in the slammer.
Shkreli became known as “the most hated man in America” when he and his pharma company raised the price of an obscure drug by 5,455 percent. He was unapologetic, yet was prosecuted for unrelated financial shenanigans. His approach to litigation PR was to admit nothing and to let the world know that everyone, excluding himself, was a fool.
During his trial, Shkreli barged into an overflow room set up for reporters and others, and whined to the journalists and bragged about how well the case was going. Alas, the jury found him guilty. Before that, the judge issued a partial gag order preventing him from speaking about the case in or around the courthouse.
And then on March 9, the same judge sentenced him to seven years in prison (the government wanted 15 years; the defendant asked for 18 months). Journalists could barely hide their glee in reporting that the obnoxious Shkreli wept as he begged for mercy from the court.
Justice may be blind, but it’s hard to conclude that Shkreli’s lip and sass helped him with the adjudication of his case — or with his sentence.
On March 14, the U.S. Securities and Exchange Commission announced it had sued for securities fraud — and settled with — Theranos and founder Elizabeth Holmes (pictured). The defendants neither admitted nor denied liability.
In addition to paying a $500,000 fine, Holmes gave up control of Theranos and is barred from becoming an officer or director of a public company for a decade. The Theranos situation may not be completely resolved: Former company president Ramesh Balwani is fighting SEC charges, and a criminal investigation reportedly pends.
Theranos, a Silicon Valley-based blood-testing company that was once valued at $9 billion, came under fire in October 2015, when The Wall Street Journal’s John Carreyrou broke the story that questioned its technology.
The company’s response was to pound relentlessly at Carreyrou and the Journal. Its first response to the newspaper began: “Today’s Wall Street Journal story about Theranos is factually and scientifically erroneous and grounded in baseless assertions by inexperienced and disgruntled former employees and industry incumbents.”
We are disappointed to see that The Wall Street Journal still can’t get its facts right.
In response to a follow-up piece, Theranos wrote, “We are disappointed to see that The Wall Street Journal still can’t get its facts right.”
The problem was, it did have its facts right.
As Financial Times management columnist Andrew Hill recently wrote, “Trouble often hits … when leaders stick to their story after it has diverged from reality, swerving into embellishment, mythmaking and, in Ms. Holmes’s case, apparently fraud.”
Holmes had been a darling of the business press, to the point that some reporters had to yank back the laurels. In December 2015, then Fortune writer Roger Parloff penned an article in which he admitted he had allowed Theranos to hoodwink him in earlier reporting.
Carreyrou and the Journal never backed down. Theranos softened its tone only when the accusations became undeniable. In April 2016, Holmes appeared on the Today show and was a bit more contrite. That July, regulators banned her from owning or operating a lab for two years.
We named Theranos’ crisis-communications effort the third-worst of 2016. Clearly, spewing threats and throwing brickbats didn’t work — especially when you’ve committed, according to the SEC, “massive fraud.”
Photo Credit: Theranos
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