Whistleblower News: Deloitte to Pay $11M Settlement in False Claims Act Case & Theranos Valuation Reconsidered

Have a claim? Click Here for a Confidential Consultation »

WHISTLEBLOWER NEWS QUOTE OF THE DAY:

"Contractors are expected to deal fairly with federal agencies when receiving taxpayer funds. As this settlement demonstrates, we will take action against those who knowingly fail to live up to the terms of their government contracts."

— Benjamin C. Mizer, head of the Justice Department’s Civil Division

DAILY WHISTLEBLOWER HEADLINES:

From $4.5 Billion To Nothing: Forbes Revises Estimated Net Worth Of Theranos Founder

Last year, Elizabeth Holmes topped the FORBES list of America’s Richest Self-Made Women with a net worth of $4.5 billion. Today, FORBES is lowering our estimate of her net worth to nothing. Theranos had no comment.

Our estimate of Holmes’ wealth is based entirely on her 50% stake in Theranos, the blood-testing company she founded in 2003 with plans of revolutionizing the diagnostic test market. Theranos shares are not traded on any stock market; private investors purchased stakes in 2014 at a price that implied a $9 billion valuation for the company.

Since then, Theranos has been hit with allegations that its tests are inaccurate and is being investigated by an alphabet soup of federal agencies. That, plus new information indicating Theranos’ annual revenues are less than $100 million, has led FORBES to come up with a new, lower estimate of Theranos’ value.

FORBES spoke to a dozen venture capitalists, analysts and industry experts and concluded that a more realistic value for Theranos is $800 million, rather than $9 billion. That gives the company credit for its intellectual property and the $724 million that it has raised, according to VC Experts, a venture capital research firm. It also represents a generous multiple of the company’s sales, which FORBES learned about from a person familiar with Theranos’ finances.

At such a low valuation, Holmes’ stake is essentially worth nothing. Theranos investors own preferred shares, which means they get paid back before Holmes, who owns common stock. According to VC Experts, investors in Theranos own a particular kind of preferred equity, called participating preferred shares, which take precedence to common stock in the event of a liquidation. FORBES is not aware of any plans to liquidate. If that were to happen, participating preferred investors would get their money back and more before Holmes gets a cent.

It is possible that at some point, Holmes may be able to raise money at a higher valuation than $800 million from her existing investors, but we are not betting on it. read more »

WHISTLEBLOWER SETTLMENT NEWS:

Deloitte Consulting to Pay $11 Million to Settle False Claims Act Case

Deloitte Consulting will pay $11.38 million to resolve allegations under the False Claims Act that it submitted false claims under a General Services Administration (GSA) contract.

Deloitte is a nationwide consulting company headquartered in New York City.

Deloitte was represented by Jonathan Aronie of Sheppard Mullin in Washington, D.C.

“Contractors are expected to deal fairly with federal agencies when receiving taxpayer funds,” Benjamin C. Mizer, head of the Justice Department’s Civil Division. “As this settlement demonstrates, we will take action against those who knowingly fail to live up to the terms of their government contracts.”

In 2000, GSA awarded Deloitte a contract for the provision of information technology services.

The contract required Deloitte to reduce the prices it charged the government if it offered lower prices to specific commercial customers during the course of the contract.

The settlement resolves allegations that between 2006 and 2012, Deloitte failed to comply with the price reductions clause in its contract, resulting in government customers paying more for Deloitte’s services than comparable commercial customers. read more »Settlement AgreementDOJ Press Release