More Trouble for Theranos: Feds Start Criminal Probe

Blood-testing company might have misled investors

Federal prosecutors have launched a criminal investigation into whether the blood-testing company Theranos Inc. misled investors about the state of its technology and operations, according to a report in the Wall Street Journal.

Walgreens and the New York State Department of Health have received subpoenas seeking documents and testimony about representations made to them by Theranos. Walgreens was the company’s main interface with consumers since the two formed a partnership in 2013, which now includes 40 Theranos “wellness centers” in Arizona. As part of the deal, Walgreens invested at least $50 million in Theranos.

Federal investigators are also looking into whether Theranos misled government officials, which can be a crime under federal law. In addition, the Securities and Exchange Commission is examining whether the company made deceptive statements to investors when it solicited funding.

In October 2015, the Journal reported that Theranos did the vast majority of more than 200 tests it offered to consumers on traditional lab machines purchased from other companies. The Journal also reported that former employees doubted the accuracy of tests run on the devices that Theranos invented, code-named Edison.

Theranos’ laboratory license application in New York said the company planned to test patients’ blood on traditional lab machines and didn’t mention any proprietary testing devices, according to the Journal. The application was shelved when the company’s lab director resigned and requested that his name be taken off the request.

Last month, federal health regulators proposed banning Theranos founder Elizabeth Holmes from the blood-testing business for at least two years after concluding that the company failed to resolve major problems found during a lab inspection.

Source: Wall Street Journal; April 18, 2016.