My wife and I went for a run together last week, and, on our walk home, we started talking about Elizabeth Holmes. The new docudrama about her and Theranos, “Dropout”, just dropped on Showtime, so it was on the top of our minds.
“I think we should watch it (Dropout),” Blossom said to me. “What do you think?”
“Yeah, but what do you think we’ll learn? We’ve already read “Bad Blood”, and we’ve watched the documentary (“The Inventor”), so maybe we’ll learn something, but not much,” I said.
Blossom said, “Have you ever wondered how she thought she’d get away with it?”
Eventually, you’re gonna get found out if you commit fraud.
“You know, it still blows me away how often you see stuff like what Holmes was doing,” I said. “And, each and every time, the CEO thinks they’ll be able to hide it from the investors, or their customers, or their employees.
“And yet, each and every time, they get found out,” I said. “Look at what just happened with ‘Tom’. There’s no way he’s going to get away with it.”
Tom was a CEO I’d just stopped working with because I believed he was committing fraud. He needed a part time CFO to help him, so I recommended he work with Tina, who had been my Controller.
Tina called me about one week after she started working with Tom, and said, “I can’t close the books on January. Here’s what I found...”
Tina then went through the issues she had uncovered, and none of them were good. Tom had recently moved to Florida, and he was working out of a home office, so he was charging the company rent. He had also charged the company for re-roofing his house. There was a laundry list of expenses charged to the company credit card with no sign off from another executive.
When Tina asked Tom where was the board’s approval for his rent and re-roofing expenses, he literally had no answer. When Tina asked where the sign off for his credit card expenses were, he said there wasn’t any.
Tom’s customer base is the US government. The contracts he is bidding on are huge. He is going to get audited, and he is going to get found out.