For a Few Dollars More…
Bad Blood is a story that has been be told, thanks to the courage, persistence and methods of John Carreyrou, a twice Pulitzer Prize-winning journalist of The Wall Street Journal
 
It took him over three years of intense follow-up, standing up to the pressures from law firms, surveillance and the fact that the owner of the firm was a personal investor in the fraud that he exposed. 
 
The book tells us that money is the greatest invention of man and is beyond the realm of right and wrong, when it comes to lawmakers.
 
John unveils the story of a bio-tech start-up named Theranos headed by a charismatic Ivy League dropout whose ambitions were, perhaps, surpassed only by her deviousness and viciousness in trying to keep the fraud going. 
 
Elizabeth Holmes, charmed potential investors with a story about her technological capabilities that would bring affordable and miniaturised diagnostics in the area of blood testing. Her skill and strategy can be inferred from the fact that she started the story in 2003, at the age of 19, and succeeded in raising nearly a billion dollars from investors and got a ‘valuation’ that was close to 20 billion dollars!
 
The book is a page-turner. With each page, the greed and desperation of Elizabeth Holmes keeps getting firmer and the methods used to suppress staff and disbelievers is nothing short of ‘mafiaesque’. Using the legal system to threaten dissenting employees, using greed to make the partner of a hotshot law firm a director and attorney after giving him stocks, using outright subterfuge and threats to cover her tracks, the story is thriller.
 
The charm and deviousness of the lady is evident from the marquee names that were persuaded to join her board—Henry Kissinger, George Schulz (former US Secretary of State), William Perry (former US Secretary of Defence) as well as a former senator, a retired admiral from the US Navy, a retired general from the US Army, the former CEO of Bechtel, ex-chairman of Wells Fargo and, last but not the least, David Boies, founder and chairman of Boies Schiller & Flexner, a top notch corporate law firm. 
 
Most board members were given stock options and their greed kicked in to ensure that they worked to protect her from attack. The lawyer was used to silence employees who figured out what was happening and left, taking heed of the voice of their conscience.
 
Another important player in the story is her boyfriend, Ramesh Balwani, 20 years her senior, who joins the executive management to help keep mouths shut through terror and threats. 
 
Apart from the story of greed and fear, what is amazing is that the con game went on for nearly 15 years. 
 
The big takeaway, for me, is not in the storyline. This book is calls for serious introspection by venture capitalists (VCs) and private equity investment managers and investors. 
 
In May 2018, John Carreyrou reported that American business and government leaders lost more than $600 million of private investments in Theranos. Major investments had been made by the Walton family ($150 million), Rupert Murdoch ($121 million), Betsy DeVos ($100 million) and the Cox family (of Cox media group - $100 million). The final liquidation of the company in September 2018 rendered these investments completely worthless.
 
Venture capital is essentially an adventure in action. They back an idea that has potential and can be scaled up big time. Often, VCs end up seeing stories where there is none because their focus, often, is on the promoter and his/her passion. A charismatic promoter can sidestep all due diligence, as happened in the case in Theranos. 
 
Law firms drafted reports; accountants must have seen the numbers; and not one of them showed an iota of common sense. Of course, no law touches these intermediary enablers who seem to sign on the dotted line, provided the fee is right. VC investment managers seem to have been overcome by their fear of being ‘left out’ and eschewed asking tough questions. Some of the marquee investors took big calls based on their ‘gut feel’ and were probably swayed by the charisma of Elizabeth Holmes. What is truly surprising is that most of them seem to have just invested on the basis of a storyboard; and, even after putting money in, never bothered to find out what was happening. So long as new money was coming in at higher valuations, the party went on. Human greed has no boundaries. 
 
The term ‘Wild West’ refers to America in the late-19th and early-20th century, a time when rules did not apply and scores were settled with guns. The period from 2000 onwards is a kind of ‘Wild West’ for the financial sector. There is no punishment for the perpetrator. Globally, countries seem to be competing with each other to attract and retain capital, with no questions asked. The punishment that was meted out to Ms Holmes—a two-year ban on participating in the blood-testing business—is absolutely laughable. Clearly, the odds are in favour of Bernie Madoff, Elizabeth Holmes, Enrons, World Coms and the VC industry that rolls the dice with other peoples’ money.  
 
In our childhood, when we played cricket, the boy who owned the bat, ball and stumps made the batting rules. It is the same with capitalism, where the high priests of finance write the rules. I doubt if the Theranos story offers a lesson for anyone. There will be others like it and investors will pile on to them again. We see the foolishness of money managers from the fact that, even after the fraud was discovered, a distressed fund invested in Theranos in the hope of making a killing. The eminent board got away without any prosecution. The two main characters, Elizabeth and Ramesh Balwani, could get 20 years in prison, IF they are convicted. The firm of David Boies continues with its high-profile representation of the rich and the famous (https://en.wikipedia.org/wiki/Boies_Schiller_Flexner_LLP). 
 
The book is being made into a movie and I suspect, rather sadly, that the character of Elizabeth Holmes will be an inspiration for many.  
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COMMENTS

AAR

3 months ago

Jews are an "entrepreneurial" lot. They monopolize the wall street. The Jewish investor group know their clan and how to support them.

All major tech companies had support from their own investor group - Apple, Microsoft, Paypal, Ebay, Facebook, Amazon, Oracle, Google, Whatsapp....

Bernie Madoff another Jew cleaned up Wall Street for decades. So is Elizabeth Holmes. If you see her board of directors most of them are Jews.

My point is its not that nobody other than Madoff/Holmes are not aware of ponzi scheme. Every one knows. They keep supporting their own kind until it becomes so huge that they couldn't handle it anymore.

Aditya G

3 months ago

It's a good book, but it could have been better. The second half felt rushed, IMO.

How Western Institutions Help To Hide Dirty Money
Corruption is everywhere. ‘It a global phenomenon’—the words of former prime minister Indira Gandhi. It could be by corrupting someone to part with an asset below fair price, or to be able to grab an asset in preference to someone else, or to snag some contract to make money. There are two parties in this: One, who gives a bribe to get something which is dispensed by someone who is in a position to do so; two, is the person who receives the bribe. Being in the government is a privileged position to abuse power and it is natural that a lot of corruption flows from the wielder of authority. 
 
Most of us are used to paying ‘speed money’. Whether it is to get a simple birth certificate or a driving licence. This is petty corruption. At the other end are folks who hand out national assets—coal mines, telecom licences or permits like banking licences. Others frame laws and rules designed to favour someone. 
 
And then we have businessmen who siphon off money from companies by billing personal expenses to the company’s account, routing sales proceeds elsewhere, writing off bad debts, etc. And then we have employees who take money because they are in a position to influence a business decision. Every sphere of life in India has the shadow of corruption over it. Then there is the irksome matter of ‘taxes’. Everyone wants to lower this burden as much as possible or totally evade it. There are petty evasions running into a few thousand rupees a year, to larger ones running to a few hundred crore rupees.
 
Corruption on a small scale is not noticeable or traceable. On the other hand, those who skim off crores of rupees need a safe haven as well as safe assets to park the money. If they do it within the home country, there is the risk of getting caught. Of course, India is safer than many other countries, because India itself offers a safe haven for a lot of ill-gotten assets, aided by a legal system that is managed by the ‘rich and powerful’. 
 
When the cop is corrupt, he will deal with corruption offences or complaints with kid gloves. All this helps the corrupt Indian to flaunt wealth within India itself. The legal experts and the accounting wizards help to launder a lot of money very easily. Plus, the well-designed loophole of tax-free agriculture income is another design in the legal architecture to help facilitate parking the dirty money.
 
Apparently, one side of corruption is carefully and deliberately hidden from debate. Moneyland, a delightful book by Oliver Bullough, rips the mask of the Western world which gives illicit money a haven. While they rail against corruption in other nations, their bankers, lawyers and governments are working overtime to ensure that crooks and their money have a safe haven in their own geographies. 
 
This is highly remunerative for their countries. This pool of external money also keeps the asset prices high, creating a sense of well-being among their citizens. Oliver Bullough has meticulously documented the efforts that UK, USA and a few other small and obscure countries like St Kitts, Nevis, Lichtenstein, etc, have done to facilitate global corruption. Cities, like London, are virtually owned by corrupt money from across the world.
 
As he says very tellingly, “Money flows across frontiers, but laws do not. The rich live globally, the rest of us have borders.” If India has to bring Vijay Mallya or Nirav Modi home, the Indian courts cannot do it. The rich and powerful are well protected by these havens which offer a cosy nest for their ill-gotten money and also the freedom to spend and buy assets in those nations.
 
So, who is more corrupt: The US, which now has the most liberal of laws to hide money from across the globe, or Ukraine or Nigeria? Ukraine cannot be corrupt without ample help from USA, UK and the Swiss. The US has played a clever game. It has unseated the holy Swiss bankers from their perch for being a haven for crooked money. And the legal framework it has thrust upon the Swiss is wonderful.  
 
The Swiss, and a few other countries, are signatory to a delightfully one-sided agreement that makes it compulsory for the Swiss and others to disclose full details of bank accounts, if the US asks. However, if you ask the same thing from a US banker, he is not obliged to do disclose the details. Each state in USA has its own additional attractions too. Nevada has ‘asset protection’ ordinances that give a law of limitation of two years to claw back any ill-gotten money. 
 
The author has also talked about ‘structures’ used to mask the ownership of assets; these structures are actively encouraged by the UK and the USA. Of course, the Swiss were the pioneers in the field; these two nations have taken it to a different league. The enablers (lawyers, accountants and bankers) are never harmed by these Western nations and have created an industry where they are ready to sell citizenships and passports at a price. Of course, no questions asked about the source of money. You read about how banks, like Citibank, have actively canvassed for such money without bothering about morals or legalities. And how the legal system lets them off with a token fee. 
 
So, how come on the Corruption Perception Index, the USA is 16th and India is 81st in the corruption ranking? Or how is Switzerland ranked 3rd and UK is ranked 8th? Clearly, the Westerners have manipulated perceptions of corruption and are past masters at making themselves look holy, argues the author. They have no morals but have given themselves the exclusive rights to preach to others. The author lays bare the double standards of the US and the UK in trying to tell the world to be honest. 
 
The book is fast-paced. There are a lot of examples from Ukraine, Russia and a few other countries. Some of them would probably make our politicians look like beggars. This book will make you angry. Of course, given the nature of humans, it may also be ‘inspirational’ for some.
 
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COMMENTS

Nasir Ahmed Rayadurg

3 months ago

The masters are now the manipulators and that too they perfected this art and makes them look saint in the eyes of other nations. Sophisticated hypocrisy

Nikhil Vadia

3 months ago

Wonderful review. Always felt that US and UK are not so honest as made out to be. Heard lot of stories from friends there. Though petty corruption is less there, high level (business and politicians) much more.

Anil Nagesh

3 months ago

Nice article sir! i ordered the book.

A Higher Loyalty: Decision-making in Trumpland
On 9 May 2017, James Comey, director of the powerful US Federal Bureau of Investigation (FBI) was addressing his colleagues at Los Angeles bureau. He explained that FBI had rewritten its mission statement in 2015 to make it shorter and to better express the importance of its responsibility. Its newly defined mission was to “protect the American people and uphold the Constitution of the United States.” Comey said: “I wanted it shorter so everyone would know it, connect to it, and share it with neighbors and especially young people. And then he stopped in mid-sentence. On the TV screens along the back wall he could see COMEY RESIGNS in large letters. The screens were behind his audience, but they noticed his distraction and started turning in their seats. I laughed and said, “That’s pretty funny. Somebody put a lot of work into that one.”
 
While he continued to speak, the message on the screens now changed. Across three screens, displaying three different news stations, flashed the same words: COMEY FIRED. He wasn’t laughing any longer. He told the audience, “Look, I’m going to go figure out what’s happening, but whether that’s true or not, my message won’t change, so let me finish it and then shake your hands.” I said, “Every one of you is personally responsible for protecting the American people… We all have different roles, but the same mission. Thank you for doing it well.” Comey shook hands with everyone and walked to a private office to find out what was happening.
 
The FBI director travels with a communications team so he can be reached in a second. “But nobody called,” writes Comey in his tell-all book A Higher Loyalty. “Not the attorney general. Not the deputy attorney general. Nobody. I actually had seen the attorney general the day before. Days earlier, I had met alone with the newly confirmed deputy attorney general at his request so he could ask my advice on how to do his job-which I held from 2003 to 2005. In late October, shortly before the election, the now-DAG had been serving as the United States Attorney in Baltimore, and he invited me to speak to his entire stall about leadership… He praised me then as an inspirational leader. Now, he not only didn’t call me, he had authored a memo to justify my firing, describing my conduct during 2016 as awful and unacceptable. That made absolutely no sense to me in light of our recent contacts.”
 
Comey learnt that a White House employee was down on Pennsylvania Avenue in Washington (his office) trying to deliver a letter to him from the president. General John Kelly, then the secretary of Homeland Security called. He said he was sick about my firing and that he intended to quit in protest. He said he didn’t want to work for dishonourable people who would treat someone like me in such a manner. “I urged Kelly not to do that, arguing that the country needed principled people around this president. Especially this president,” writes Comey.
 

Meanwhile, his assistant, Althea James, got the letter from the White House guy at the front door, down on Pennsylvania Avenue. She scanned it and emailed it to Comey which showed Comey was fired, effective immediately, by the president “who had repeatedly praised me and asked me to stay, based on a recommendation from the deputy attorney general, who had praised me as a great leader, a recommendation accepted by the attorney general… The reasons for the firing were lies but the letter was real. I felt sick to my stomach and slightly dazed.”
 
As Comey decided to head back to his home Washington, amazingly he had to deal with the question: “How would I get home?” He was no longer and FBI director and wasn’t entitled to the jet that had brought him to Los Angeles. The acting FBI director was now Comey’s deputy, Andrew McCabe. “He and his team had to figure out what was lawful and appropriate. In the shock of the moment, I gave some thought to renting a convertible and driving the twenty-seven hundred miles back alone. But then I realized I was neither single nor crazy. McCabe decided that given the FBI’s continuing responsibility for Comey’s safety, the best course was to take me back on the plane I came on, with a security detail and a flight crew who had to return to Washington anyway. We got in the vehicle to head for the airport.”
 
This was a media circus. News helicopters tracked Comey’s journey from the LA, FBI office to the airport. As Comey rolled slowly in LA traffic he looked to his right. In the car next to his, a man was driving while watching an aerial news feed of us on his mobile device. He turned, smiled at me through his open window, and gave Comey a thumbs-up. 
 
The car pulled onto the airport tarmac with a police escort and stopped at the stairs of the FBI plane. “The helicopters then broadcast our plane’s taxi and takeoff. Those images were all over the news. President Trump, who apparently watches quite a bit of TV at the White House, saw those images of me thanking the cops and flying away. They infuriated him. Early the next morning, he called McCabe and told him he wanted an investigation into how I had been allowed to use the FBI plane to return from California,” writes Comey. McCabe replied that the plane had to come back, the security detail had to come back, and the FBI was obligated to return me safely.
 
Apparently, Trump exploded with anger. “He ordered that I was not to be allowed back on FBI property again, ever. My former staff boxed up my belongings as if I had died and delivered them to my home. The order kept me from seeing and offering some measure of closure to the people of the FBI, with whom I had become very close,” writes Comey.
 

This episode is the most exciting section of the 277-page book that is supposed to have exposed the chaotic and crazy Trump administration. Comey shows that Trump is behaving more or less like a Mafia boss, demanding complete loyalty from law enforcement and that he just does not believe in democratic norms or the independence of the judiciary. But Trump makes his entry only on page 210. That is because this book is an autobiography of Comey starting from his traumatic experience of Comey and his sister being held hostage by an armed burglar at home, getting bullied in school and losing a newborn son to an illness that could have been prevented. 
 
Comey worked with the New York attorney general’s office as a rookie under former New York mayor, Rudi Guiliani, making his name prosecuting terrorism cases in the eastern district of Virginia, and then as the US attorney for the southern district of New York. He worked in three administrations, as president George W Bush’s deputy attorney general, during the 9/11 attack, as FBI director under the Obama administration which continued for a few months under Trump. 
 
Comey was known for his fierce, go-it-alone, independent approach. He admits that he has a streak of righteousness about his job and that he can be “stubborn, prideful, overconfident and driven by ego.” But there is a strange episode of the past few years that has baffled many. And this is his handling of the Hillary Clinton’s email investigation. Strangely, quite contrary to longstanding custom of FBI, he decided to hold a press conference in July 2016, where he charged Hillary with ‘extremely careless’ handling of ‘very sensitive, highly classified information’, even though he went on to conclude that the FBI recommend no charges be filed against her. This was not even his domain. Bringing charges is the domain of the US department of justice, in consultation with FBI.
 
Then, suddenly on 28 October 2016, 11 days before the election, he announced that FBI was reviewing more Clinton emails that might be pertinent to its earlier investigation. Nothing came of this too. But it is now widely believed that this announcement cost Clinton the election, which she seemed sure to win. Comey provides detailed explanations of why he made those very public announcements about Clinton, but skirts several of the key questions his critics have regarding the need to make announcements about unfinished investigations. 
 
This is an interesting book; it gives insights into how decisions are taken at the highest levels of the world’s most powerful State and how those who seem driven by the deepest sense of loyalty to fairness and justice can be fallible. And, of course, what kind of a human species America has elected as its president.
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