Home TECHNOLOGY In Silicon Valley, Criminal Prosecutors See No Evil

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,” said Reed Kathrein, a San Francisco lawyer who successfully sued Ms. Holmes and Theranos in 2016 on behalf of investors. “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 telephone company, and Enron, an energy company, in the early 2000s have also had an impact.

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

Thirty years ago, the tech industry was known as much for physical products as for software. Indeed, software used to be a physical product. If sales were not going well, that offered possibilities for subterfuge.

MiniScribe, a Colorado disk storage company that had fallen on hard times, was taken over in 1984 by Hambrecht & Quist, prominent Silicon Valley financiers. The investment firm pumped in money and installed its own management. In 1988, to keep its numbers up, MiniScribe managers packed 26,000 bricks into MiniScribe boxes and shipped them to Singapore. When the scheme was revealed, the company went bankrupt and the chief executive went to jail.

In this sense, Mr. Kathrein noted, Ms. Holmes’s case was a throwback. She was charged with making false and misleading statements to investors that Theranos’s proprietary analyzer, named Edison, was a medical marvel that could perform a full range of clinical tests. It could not.

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

Mr. Kathrein’s conclusions are not widely accepted. Asked if tech people had become more honest over the decades, Margaret O’Mara, a historian of Silicon Valley, burst into laughter.

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