by Brayden Yee
Elizabeth Holmes, founder and former CEO of the failed blood-testing company Theranos, has been found guilty on four out of eleven counts of fraud.
The jury of eight men and four women deliberated for 50 hours before they found Elizabeth guilty of four counts of wire fraud, and not guilty of three counts of defrauding patients and on one charge of conspiracy to defraud patients. They could not reach a verdict on three other charges and believed that further deliberation would not result in a unanimous verdict.
Judge Edward Davila then allowed the jury to go back to the deliberations room to complete the verdict form. Elizabeth could face up to 20 years in prison for each guilty charge, a fine of $250k, as well as restitution for the wire fraud and conspiracy counts.
Holmes started Theranos in 2003 and dropped out of Stanford the following year to pursue her work at her new startup full-time. The goal was to revolutionize blood testing by creating a machine called the “Edison” that could perform numerous diagnostic tests with a single finger prick of blood. She touted that the Theranos machine could test for over 200 health conditions with a mere blood sample from a finger prick, even though the company operated in secrecy and didn’t publish data until a decade later.
At its peak, Theranos raised over $700 million from investors, which valued the company at around $9 billion in 2014. Elizabeth charismatically won over the media and was featured in many articles including the cover of Fortune magazine. Soon the company would partner with other healthcare companies and also Walgreens, where they opened Theranos wellness centers.
The dominoes began to fall in 2015, when John Carreyrou, a reporter from the Wall Street Journal, exposed in an article that only a few tests were being performed on the Edison, with the majority of tests being run on third-party machines and that even the few tests that had run on Theranos’s devices produced inaccurate results.
Prosecutors in the case called up 29 witnesses, alleging that Holmes lied about the abilities of Theranos’s technology, the company working with the military, and its business performance. Former employees of Theranos testified that the machine could only perform a dozen tests, producing inaccurate results, far from the hundreds claimed by Holmes. Both doctors and patients also stated that some medical decisions were based on the results of Theranos, which turned out to be wrong. The prosecution also laid out Theranos validation reports having the logos of pharmaceutical companies that had not signed off the conclusions of the report.
They also showed letters to investors in which Holmes lied about Theranos having military contracts, and emails employees sent stating that the company covered up device failure, and voided false test results. Investors and pharmaceutical executives said that Holmes’s falsehoods led them to invest millions into Theranos and sign contracts with the company.
The defense called up only three witnesses and relied on Holmes’s testimony to carry the bulk of their case. Holmes painted herself as a well-intentioned entrepreneur who was simply too naive. She stated that she was both emotionally and physically abused by her former boyfriend and COO of Theranos, Ramesh ‘Sunny’ Balwani.
Holmes’s claims implied that she was less in control of decisions than the prosecution had claimed. The prosecution attempted to refute her claims by asking her to read loving text messages between her and Sunny.
The defense closed their arguments by stating that the full story of Theranos and pharmaceutical companies was not told. They argued that Holmes never intended to deceive investors about the relationships between Theranos and pharmaceutical companies. They also argued that the positive feedback that she received on the tests led her to believe her claims about the machine. They added that the willingness to allow the FDA to examine was proof that she was not trying to hide how the technology functioned, despite the mountain of evidence that shows otherwise.
The trial of Elizabeth Holmes was a rare occurrence of a white-collar crime to come out of Silicon Valley. While there are varying reasons for this, it may indicate a higher priority to prosecute those of the area and the government ready to take on wealthier perpetrators. The Holmes trial has taken its place in history, and the verdict is just one example of the consequence of Silicon Valley’s culture of “fake it until you make it”.
edited by William Cao and Vishal Krishnaiah
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