Ramesh Balwani

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Ramesh Balwani
Born Mumbai
Alma mater University of Texas at Austin
University of California, Berkeley
Known for Former president and COO of Theranos
Spouse(s)
Keiko Fujimoto
(div. 2002)

Ramesh "Sunny" Balwani (born March–June 1965[1]) is the former president and chief operating officer of Theranos, which was a privately held health technology company founded by his then-girlfriend Elizabeth Holmes. Theranos is known for its false claims to have devised revolutionary blood tests that used very small amounts of blood.[2] Starting in 2015-2016 Theranos came under criticism in the media due to their questionable claims and practices. In June 2018, Balwani was under indictment by the United States Department of Justice for fraud and conspiracy.[3] The charges in the criminal indictment stem from allegations that Balwani engaged in a multi-million dollar scheme to defraud investors, and a separate scheme to defraud doctors and patients.[4]

Early life and education[edit]

Balwani was born and raised in Mumbai, India, and came to the US in 1986 to pursue his studies.[5] He received an undergraduate degree from the University of Texas at Austin, where he studied information systems and artificial intelligence. He had previously worked for Microsoft and Lotus Software. In 1999 Balwani helped create CommerceBid.com which was later bought by Commerce One, an early online auction network of suppliers, which pitted suppliers against each other, encouraging them to bid for lower prices. He cashed out his shares in Commerce One, pocketing nearly $40 million shortly before the company went out of business, right before the dot com bubble burst.[5] Subsequently, he received a Master of Business Administration from the University of California, Berkeley.

While enrolled at Berkeley, Balwani met Elizabeth Holmes, who was in her senior year of high school. The two were on a summer trip to Beijing, as a part of Stanford's Summer Mandarin Course cohort.[5] Holmes then went on to Stanford University to pursue an undergraduate degree in chemical engineering [5], but later dropped out to focus full-time on Theranos.[6][7]

With Theranos[edit]

Day to day operations of Theranos were run by Balwani as company president.[8] He joined the company in 2009, a few years after Holmes founded Theranos. Balwani had no training in the biological sciences or medical devices.[8], which became an issue due to the company's failure to have medical experts on the board of directors and Balwani's reported behavior. He was described by former Theranos employees as overbearing, uncompromising, demanding and so secretive and worried about industrial espionage that he verged on paranoia.[5]

Balwani at one point claimed: "This invention [the Edison blood testing device] is going to be way up there, um, with-- with the discovery of antibiotics."[8] Within Theranos, Balwani was known for using technical terms he seemingly did not understand in what others believed were attempts to appear more knowledgeable. He once misheard "end effector" (the claw or other device at the end of an automated robot's arm) as "endofactor" (a nonsense word) and repeated the error throughout a meeting, furthermore not noticing when "Endofactor" was subsequently used as a prank in a PowerPoint presentation.[5]

The Wall Street Journal reported in October 2015 that the Edison blood testing device by Theranos produces inaccurate medical diagnoses and results.[9] Edison machines frequently failed quality-control checks and produced widely varying results and this was corroborated in inspection results released in March 2016 by the federal Centers for Medicare and Medicaid Services.[10] In April 2016, Theranos told regulators it had voided all test results from Edison machines for 2014 and 2015, as well as some other tests it ran on conventional machines.[10]

In January 2016, the Centers for Medicare and Medicaid Services (CMS) sent a warning letter to Theranos after inspecting its Newark, California, laboratory.[11] CMS regulators proposed a two-year ban on Balwani from owning or operating a blood lab after the company had not fixed problems within its California lab in March 2016.[12]

The other charges of fraud against Theranos include claiming the company's technology was being used by the U.S. Department of Defense in combat situations despite never having been used.[13] Balwani also was present when Holmes told Safeway's then-CEO that Theranos’ analyzers were being deployed in the battlefield.[14]

Another false claim included claiming a $100 million revenue stream in 2014 that was actually $100,000.[15]

SEC lawsuit[edit]

The SEC has filed four claims against Sunny Balwani for violations of the U.S. Securities Act.[14] The penalties that can be imposed on Balwani include having Balwani pay civil penalties and prohibiting Balwani from serving as an officer or director of any entity having a class of securities under the SEC.[14]

The SEC alleges that Sunny Balwani was "concentrated on developing software for Theranos’ technology and managing personnel and operations...and collaborated closely with [Holmes] and made decisions about the company together."[14] The SEC also alleged that Balwani repeatedly deceived and misled pharmacies, grocery stores, and investors.[14]

By the time of Theranos’ financing round in 2014, FDA representatives told Balwani and Holmes that clearance or approval would be necessary for Theranos’ analyzer and tests. In late 2013 and throughout 2014, FDA representatives met with Balwani and Holmes, and stated that FDA clearance or approval was necessary. Based on these communications, Balwani and Holmes agreed to submit all components of Theranos’ testing technology to the FDA for clearance or approval. However, Balwani and Holmes continued to raise additional funds while telling potential investors Theranos was seeking FDA approval voluntarily.[14]

The SEC alleges that: Balwani’s statements that Theranos did not need FDA approval or clearance were important to investors because approval or clearance would have been an obstacle in the company’s path to realizing full commercialization."[14]

Criminal charges[edit]

On June 15, 2018, following an investigation by the U.S. Attorney's Office in San Francisco that lasted more than two years, a federal grand jury indicted president Ramesh "Sunny" Balwani and Elizabeth Holmes on nine counts of wire fraud and two counts of conspiracy to commit wire fraud.[16] Prosecutors allege that Holmes and Balwani engaged in two criminal schemes, one to defraud investors, the other to defraud doctors and patients.[16] The case is proceeding in the U.S. District Court in San Jose. Balwani and Holmes pleaded not guilty.[16] Balwani's defense is that he never made any money while at Theranos.[17]

Career[edit]

Balwani worked for Lotus Software and Microsoft prior to the founding of CommerceBid. In 1999, right before the dot-com bubble burst, CommerceBid was sold to Commerce One for $4.5 million in cash and 785,000 shares of Commerce One stock.[18]

From 2008 to 2010, he was a member of the board of directors of ZiiOS.[citation needed]

In September 2009, despite having no experience in the field of biotechnology, Balwani joined Theranos, run by his then-girlfriend Elizabeth Holmes. Together, they raised $700 million of investor money.[19]

On March 14, 2018, Balwani and Holmes were charged with "massive fraud" by the U.S. Securities and Exchange Commission.[20]

On June 15, 2018, federal prosecutors criminally charged Balwani and Holmes, alleging that they defrauded investors out of hundreds of millions of dollars and also defrauded doctors and patients.[21]

Personal life[edit]

Balwani was in a romantic relationship with Elizabeth Holmes during his tenure at Theranos.[22] Prior to this, he was married to a Japanese artist named Keiko Fujimoto.[5] The couple lived in San Francisco, before they divorced in 2002.

References[edit]

  1. ^ "Indian-American ex prez, Theranos CEO charged with 'massive fraud'". Times of India. March 15, 2018. Retrieved August 12, 2018. Balwani, 52 ; John Carreyrou (June 15, 2018). "U.S. Files Criminal Charges Against Theranos's Elizabeth Holmes, Ramesh Balwani". WSJ. Retrieved August 12, 2018. Balwani, 53 . The source in March 2018 reports him as age 52. The source in June 2018 reports him as age 53. He was born sometime between March and June 1965.
  2. ^ Levine, Matt (March 14, 2018). "The Blood Unicorn Theranos Was Just a Fairy Tale". Bloomberg L.P. Retrieved June 17, 2018. 
  3. ^ Carreyrou, John (June 15, 2018). "U.S. Files Criminal Charges Against Theranos's Elizabeth Holmes, Ramesh Balwani". The Wall Street Journal. Retrieved June 17, 2018. 
  4. ^ "Theranos Founder Elizabeth Holmes and Former COO Sunny Balwani Charged with Wire Fraud". June 15, 2018. Retrieved June 17, 2018. 
  5. ^ a b c d e f g John Carreyrou (21 May 2018). Bad Blood: Secrets and Lies in a Silicon Valley Startup. Knopf Doubleday Publishing Group. ISBN 978-1-5247-3166-3. 
  6. ^ Kim, Larry (July 1, 2015). "21 Surprising Facts About Billionaire Entrepreneur Elizabeth Holmes". inc. Retrieved June 17, 2018. 
  7. ^ "Sunny Balwani". TechCrunch. Retrieved June 17, 2018. 
  8. ^ a b c "The Theranos deception". CBS News. May 20, 2018. Retrieved June 17, 2018. 
  9. ^ Carreyrou, John (October 16, 2015). "Hot Startup Theranos Has Struggled With Its Blood-Test Technology". Wall Street Journal. Retrieved June 17, 2018. 
  10. ^ a b Carreyrou, John (November 18, 2016). "Theranos Whistleblower Shook the Company—and His Family". Wall Street Journal. Retrieved June 17, 2018. 
  11. ^ Arielle Duhaime-Ross (February 1, 2016). "Here's what Theranos customers need to know". The Verge. Retrieved June 17, 2018. 
  12. ^ Abelson, Reed; Pollack, Andrew (April 13, 2016). "Theranos Under Fire as U.S. Threatens Crippling Sanctions". The New York Times. The New York Times Company. Retrieved June 17, 2018. 
  13. ^ della Cava, Marco (March 14, 2018). "She was 'the next Steve Jobs.' Now, Theranos founder Elizabeth Holmes is charged with fraud". USA Today. Retrieved June 17, 2018. 
  14. ^ a b c d e f g "Case 5:18-cv-01603 Document 1" (PDF). March 14, 2018. pp. 1–23.  This article incorporates text from this source, which is in the public domain.
  15. ^ Robinson, Matt; Spalding, Rebecca (March 14, 2018). "Blood, Fraud and Money Led to Theranos CEO's Fall From Grace". Retrieved June 17, 2018. 
  16. ^ a b c Mole, Beth (June 15, 2018). "Disgraced Theranos founder Elizabeth Holmes indicted on criminal charges". Ars Technica. Retrieved June 17, 2018. 
  17. ^ Kosoff, Maya. "Theranos's Former President Has a Jaw-Dropping Explanation for Why He's Innocent". The Hive. Retrieved 2018-06-21. 
  18. ^ "Commerce One Buys Commercebid for Stock and Cash". The New York Times. The New York Times Company. Bloomberg News. November 6, 1999. 
  19. ^ Leuty, Ron (March 16, 2018). "Why Theranos' former president is fighting the SEC's fraud charges related to its pitches to raise $700 million". American City Business Journals. Retrieved June 17, 2018. 
  20. ^ della Cava, Marco (March 14, 2018). "Theranos founder Elizabeth Holmes charged with 'massive fraud'". USA Today. Retrieved June 17, 2018. 
  21. ^ Carreyrou, John (June 15, 2018). "U.S. Files Criminal Charges Against Theranos's Elizabeth Holmes, Ramesh Balwani". Wall Street Journal. ISSN 0099-9660. 
  22. ^ Carreyrou, John (March 14, 2018). "Theranos, founder Elizabeth Holmes charged with fraud by SEC". Marketwatch. Retrieved June 17, 2018.