A jury finds Elizabeth Holmes guilty of fraud

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January 4, 2022

AFTER SEVEN days of deliberation and a flurry of notes to the judge about deadlock, a 12-member jury in Silicon Valley found Elizabeth Holmes, the entrepreneur behind a once promising phlebotomy startup, guilty of four counts of fraudulently deceiving investors. Each count carries a prison term of up to 20 years. She was acquitted of four charges of deceiving patients and doctors; on three others the jury were deadlocked leading to a potential re-trial. The verdict, against which Ms Holmes’s lawyers are expected to appeal, marks the fall of a career that beguiled the media, politicians and many in business.

After dropping out of Stanford in 2003 at the age of 19, Ms Holmes had founded Theranos to develop a radical advance in blood-testing technology that she hoped would allow hundreds of tests to be performed using a tiny drop of blood rather than a vial. It was a tantalising vision that promised to make health care more effective and efficient. Unfortunately, Ms Holmes could not bring it to fruition. In voting to convict on four counts, the jury concluded that, aware of her company’s failures, Ms Holmes intentionally lied about its prospects and capabilities, and so crossed the fine line from simple promotion to deliberate fraud—a step she explicitly denied in her public testimony.

The verdict will hardly be the end of Ms Holmes. There is sentencing to come, and possibly insights from jurors who sat through more than three months of testimony. And then there will be a tsunami of media, including a planned Hollywood blockbuster. A sentencing date has not yet been set.

In a lot of ways Theranos differed little from many startups. It raised upwards of $1bn, reached a high theoretical valuation (in its case $9bn) before crashing without ever going public, disintegrating into a vast graveyard of unfeasible ideas. Usually, executives in these ventures are quickly forgotten but Ms Holmes’s path differed at least in part because even if her company’s products failed, her presence and broader story proved unusually compelling.

In building Theranos, Ms Holmes assembled a remarkable collection of acolytes. Her board was filled with several former secretaries of state and defence. Joe Biden, while vice-president, called Theranos “the laboratory of the future” and Ms Holmes “an inspiration”. The company’s shocking failure suggested her famous followers had fed merely on hype. The fashion press was besotted by Ms Holmes’s ability to present herself. The Steve Jobs-inspired black turtlenecks worn while running Theranos were seen as reflecting authority. The open-necked shirts and blouses she wore during the trial were a sign of appealing vulnerability, augmented by the nappy bag she carried to court, which signalled to the jury the cost to a young mother (her child was born last July), were they to convict her and send her away. Reporters and others waited for hours to gain a rare sought-after seat at her trial.

Ms Holmes’s defence followed two distinct lines. The most obvious hinged on naivety. She may have been wrong about Theranos’s prospects, the argument went, but that is not a crime. Start-up investors are supposed to be a sophisticated lot, willing to wager based on deep insights in the hope of a big return, while understanding that longshots fail. Surely the doctrine of caveat emptor still exists?

Key to the prosecution were the presentations Ms Holmes made to investors, which appeared to exaggerate potential sales and trumpet non-existent endorsements from the armed forces and big pharmaceutical companies. The single substantive request made by the jurors during their deliberation was to rehear a presentation that had been recorded, suggesting they were focused on precisely what she said.

Ms Holmes’s second line of argument, the so-called Svengali defence, was particularly appealing to Hollywood, but its impact on the jury was unclear. She claimed at the trial to have been sexually and emotionally abused and manipulated by Ramesh “Sunny” Balwani, her partner and Theranos’s former chief operating officer. If true, was she then even responsible for her actions? And if true, what sort of inspiration was she really?

Mr Balwani has strongly denied all allegations. His own trial for fraud charges will begin next month, ensuring the overall case will not end soon. And even after the last gavel is pounded, there will be more to come. In the lead-up to the verdict Hulu, a cable network, released photos from an upcoming mini-series on Ms Holmes’s story, starring Amanda Seyfried. Ms Holmes may be going to jail, but she will not be going away.

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A jury finds Elizabeth Holmes guilty of fraud

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