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Elizabeth Holmes. Elizabeth Holmes, CEO of Theranos, speaking at Fortune's Most Powerful Women Conference. Neither Holmes nor Theranos have admitted wrongdoing. Krista Kennell/Shutterstock The problem was, the company's revolutionary blood testing technology didn't actually exist. Theranos was founded- and funded-on the basis of an utter fabrication. Throughout the company's life, Holmes neither presented any data, nor revealed any information about the effectiveness of the technology, to her investors and partners. The explanation? She was merely protecting the company's trade secrets. 199 In reality there were no such data, because most of the blood tests were run on Siemens equipment rather than on the company's own Edison technology, and the small number of tests Theranos devices were able to handle produced inconsistent, inaccurate results. 200 Holmes and former COO and president Ramesh "Sunny" Balwani were indicted for federal wire fraud in June 2018 and were awaiting trial as of this writing. The pair were accused of, among other things, scheming to defraud investors, medical professionals, and patients in an "elaborate, years-long fraud. Where Was the Board? How were Holmes and Balwani able to get away with a lie for such a long time? Why did no one take them to task? Investigative reporter John Carreyrou-credited with uncovering the massive fraud-described the saga as "one of the most epic failures in corporate governance in the annals of American capitalism."202 Here are a few of the ways that corporate governance failed miserably in the case of Theranos:

Little experience, big connections. The Theranos board was a veritable who's who of American political and corporate influence, including former Secretary of State Henry Kissinger, former Marine Corps General James Mattis, and former Wells Fargo CEO Dick Kovacevich. There were also two former senators, and a grand total of one licensed medical professional. None of the board members had any formal auditing, accounting, or legal expertise, and they certainly were unfit to evaluate laboratory testing innovations. Journalist Jennifer Reingold described the board as being "assembled for its regulatory and governmental connections, not for its understanding of the company or its technology."203

2. Exploitation. Holmes proved skilled at exploiting both regulations and her board members' trust. The company was in the business of "laboratory-developed tests" which were, conveniently, not subject to strict FDA regulation. Holmes knew that Theranos did not legally have to prove that its bloodwork results were accurate, and she used this to her advantage as she continued to mislead her board. Further, when two whistle-blowers revealed to the board that Holmes had been dishonest with them, she convinced them to keen her on, then immediately multiplied the voting rights of her stock shares, giving herself 99% of the company's total voting rights.

3. A culture of secrecy. Effective boards are those that are able to speak openly and honestly with one another, ask questions, and stand up to leaders with too much power. 205 But Holmes created a culture of secrecy and paranoia that permeated every corner of Theranos. Workers were instructed to stay in their own silos and were not allowed to communicate with one another about what they were working on. Further, Holmes quickly fired any employee who disagreed with or questioned her or the company's technology 206 The board may have failed to do the job holding Homes accountable in part because of this culture.