Walgreens is ordered to pay $44 MILLION to settle Theranos fraud claims after customers accused company of being 'willfully blind' to Elizabeth Holmes' fraud

Walgreens' holding company Walgreens Boots Alliance Inc. has agreed to pay $44million in settlement money to quash a class action lawsuit filed by those who purchased faulty Theranos blood tests from its pharmacies.

The proposed settlement still needs court approval, but was aired in a memorandum left with an Arizona federal judge on Wednesday.

News of the settlement comes days after the chain abruptly parted ways with its CEO after less than three years, and a full seven years after the class action was filed by seven lead plaintiffs in 2016.

It also comes less than a year removed from the day the woman behind the phony tests, 39-year-old Elizabeth Holmes, was sentenced to 11 years and 3 months in federal prison for defrauding investors.

The biggest of those investors, by far, was Walgreens - which entered an agreement with Holmes' Theranos in 2013 to conduct pilot testing in stores in Arizona and California. That partnership came apart when the Steve Jobs wannabe's fraud surfaced in 2015, and her products were found to be inaccurate and unreliable.

Walgreens' holding company Walgreens Boots Alliance Inc. has agreed to pay $44million in settlement money to quash a class action lawsuit filed by those who purchased faulty Theranos blood tests from its pharmacies 

It also comes less than a year removed from the sentencing of the woman behind the phony tests, 39-year-old Elizabeth Holmes. She is seen here being led into a federal prison in Bryan, Texas, to begin her 11-year sentence back in May. It has since been shortened to nine years

The years-old suit in turn accused Walgreens of willingly falling under the spell of the blonde businesswoman, and being 'willfully blind' to fraud at her company upon entering the partnership.  

The basis behind those claims, lawyers wrote, were that board members at the then $70billion company had good reason to suspect its finger-prick testing technology did not really work.

Less than eight years later, Walgreens Boots Alliance is valued at just over $19billion - following a years-long nosedive in share price, and a series of failed leadership shuffles likely made to alleviate the drug chain's monetary woes.

That began in 2015, when long-time president and chief executive officer Greg Wasson went into a sudden retirement at age 56, following Walgreens' $10.7 billion purchase of Alliance Boots, a pharmacy-led health and beauty group in Switzerland.

Three years later, The Securities and Exchange Commission (SEC) charged Wasson, now 65, with misleading investors about the increased risk the firm would miss a key financial goal after entering a smaller merger with the Swiss company in 2012.

Both men served in their positions when they entered a partnership with Holmes and her also incarcerated lieutenant, Ramesh Balwani, in November 2013. Walgreens eventually agreed to pay a $34.5million penalty to settle the SEC’s case.

In the span since, the store has failed to fill the hole left by Wasson - who started at the company as an intern in the 80s and climbed the ranks over the course of 30 years - and has suffered financially as a result.

Wasson was replaced on an interim basis by Italian billionaire Stefano Pessina, 'pending [a] board search' for a successor, brass at the chain said the time. 

News of the settlement comes days after the chain abruptly parted ways with its CEO Rosalind Brewer after less than three years, and seven years after the class action was filed. No explanation was provided for her departure

It also comes in the wake of a series of failed leadership shuffles likely made to alleviate the drug chain's monetary woes, starting around the time the scandal surfaced

Holmes grabbed headlines with her vision of a small machine that could draw a drop of blood from a finger prick could run a range of tests more quickly and accurately than those in conventional laboratories - a pitch that seemingly swayed brass at the drug store chain

Despite that, Pessina - currently Walgreens largest individual shareholder and a member of its board - went on to serve as the company's top executive for six years, until making way for the firm's most recent failed experiment, Rosalind Brewer.

Previously the COO and group president at Starbucks, Brewer, 61, joined Walgreens in March 2021, becoming the only black female to lead a Fortune 500 company at the time in the process.

Prior to her stint at Starbucks, which also lasted three years, she served as president and CEO of Walmart's Sam's Club for five years, and was one of the most respected women in all of business.

That reputation earned Brewer a nearly $25 million signing bonus when she joined the company - which came in addition to her already eyewatering $1.5 million annual salary.

Brewer unexpectedly stepped down on August 31 without explanation, weeks after  the company's chief financial officer and vice president, James Kehoe, also departed in mid-August to pursue other opportunities, the company said at the time.

Those announcements came just weeks after it was revealed that Homes had already shed two years after her 11-year federal prison sentence, which began in May after she was found guilty of four counts of wires fraud early last year.

That began in 2015, when long-time president and chief executive officer Greg Wasson went into a sudden retirement at age 56, following Walgreens' $10.7 billion purchase of Alliance Boots, a pharmacy-led health and beauty group in Switzerland

Wasson was replaced on an interim basis by Italian billionaire Stefano Pessina, 'pending [a] board search' for a successor, brass at the chain said the time. Despite that, Pessina went on to serve as the company's top executive for six years, until making way for the just nixed Brewer

In the span since, the store has failed to fill the hole left by Wasson, and has suffered financially as a result. Its parent company was worth some $70billion before the scandal surfaced, and is now valued at less than $20billion just eight years later

At the time, a jury in San Jose found that she deceived investors into sinking more than $945million into her faulty blood testing machines, though her profile on the Bureau of Prisons website states she now has nine years, six months and 29 days left on her sentence. 

Her projected release day is now December 19, 2032.

During proceeding in the San Jose federal court , former lab associate Erika Cheung said that as well as alerting several managers, she also she warned several senior officials, Balwani and late board member George Shultz, a former Secretary of State, of the inaccurate results' Holmes tech was yielding

Cheung proceeded to provided six hours of scientific testimony bashing the bloodtests, stating the company's technology should never have bee used on patients, and the results it produced were about as reliable as 'flipping a coin.'

'You’d have about the same luck flipping a coin as to whether your results were right or wrong,' Cheung remarked concerning the blood-testing technology that Theranos employed. 

'It was concerning to see this degree of failure - this was not typical for a normal lab.' 

She also alleged that the company often cut corners to give the false impression that its products were ready for widespread use on patients.

Holmes faced accusations that she defrauded patients and investors with promises that her supposedly revolutionary blood-testing technology could diagnose more than 200 conditions with a few drops of blood from a finger prick. The tests proved to be completely inaccurate

Former lab associate Erika Cheung attested in 2022 that she warned several senior officials at the startup that the company's proprietary technology wasn't reliable enough to use on patients, and that the produced results were about as reliable as 'flipping a coin'

Theranos second-in-command Ramesh 'Sunny' Balwani - also Holmes' ex-boyfriend -is serving his own 13-year sentence for his part in the fraud. According to the settlement, a separate deal with Balwani will allow another $1.3 million to be paid to the defendants' settlement fund

Still pending approval, it added that 'an agreement with Ms. Holmes, unfortunately, could not be reached'

She told the court she was 'really stressed and uncomfortable with what was going on' in her waning months at the company, and did not feel comfortable using Theranos' blood-testing technology to administer samples on patients.

She resigned in April 2014, after repeatedly stating the tests would regularly fail, and that Homes would then 'cherry pick' the best data points to gain certification. 

She added that lab employees often manipulated data in an attempt to keep the devices operating, all while Holmes attempted to maintain the appearance of a successful businesswoman.

During her trial, she sought to deflect blame toward 58-year-old Balwani, who was also found guilty by a jury and is now serving a 13-year sentence. 

According to the yet-to-be-approved settlement, a separate deal with Balwani will allow another $1.3 million to be paid to the settlement fund.

It added that 'an agreement with Ms. Holmes, unfortunately, could not be reached.'

Shares for Walgreens Boots Alliance slipped about 1 percent at the opening bell Friday.

If the defendants are found liable, plaintiffs, who could number in the hundreds of thousands, could receive money or benefits apart from the seven plaintiffs.

Arizona’s attorney general had identified 175,000 consumers who purchased tests from Walgreens - at an average cost of $60 per test. If the settlement is approved, those who come forward with proof they paid for the tests will be entitled to a piece.