Elizabeth Holmes was found guilty Monday of defrauding investors into believing her business Theranos had invented a breakthrough medical gadget that could identify a variety of illnesses and disorders from a few drops of blood, in a case that highlighted Silicon Valley’s culture of hubris and exaggeration.
After seven days of deliberation, a jury found Holmes guilty of two charges of wire fraud and two counts of conspiracy to conduct fraud. Holmes was the company’s CEO throughout its troubled 15-year history. The 37-year-old was was found not guilty on four other charges of fraud and conspiracy, alleging that she defrauded patients who paid for Theranos blood testing.
The decision came after the jury of eight men and four women sat through a three-month trial that included reams of evidence and 32 witnesses, including Holmes herself. She now faces a maximum term of 20 years in jail for each offense, however legal experts believe she will not receive the full penalty.
The jury was deadlocked on the final three charges, which a federal judge is expected to dismiss as part of a mistrial judgment as soon as next week. According to David Ring, a lawyer who has carefully watched the case, the split convictions are “a mixed bag for the prosecution, but it’s a defeat for Elizabeth Holmes since she is going away to jail for at least a few years.”
Holmes was portrayed by federal prosecutors as a charlatan preoccupied with fame and wealth. She painted herself as a creative leader in male-dominated Silicon Valley who was emotionally and sexually assaulted by her former lover and business partner, Sunny Balwani, in just seven days on the witness stand.
The trial also exposed the flaws in a swaggering tactic favored by many Silicon Valley entrepreneurs, known as “fake it ’til you make it,” which involves projecting an unwavering optimism regardless of whether it’s merited. This mindset aided in the formation of ground-breaking firms like Google, Netflix, Facebook, and Apple, the latter of which was co-founded by one of Holmes’ idols, Steve Jobs.
Her conviction may reduce the wattage of the loud promises and bold exaggerations that have become a common element of the internet industry’s innovation hustle, at least briefly.
The verdict “will send a message to CEOs that overstepping the rules has repercussions,” said Ellen Kreitzberg, a Santa Clara University law professor who attended the trial. However, she believes that in Silicon Valley, greed will keep exaggeration alive.
“Investors will still want to make more money on a promising project,” said Kreitzberg. “They’ll always opt for the golden ring,” says the narrator.
As the verdicts were read, Holmes remained sat and showed no outward reaction. Before U.S. District Judge Edward Davila polled the jury, she bent her head multiple times. Holmes stood up to embrace her partner, Billy Evans, and her parents before departing with her attorneys as the judge left the courtroom to confer with jurors individually.
During a brief break after the verdict was read, an obviously distraught Evans walked into the courtroom corridor to get a drink from a water fountain, ostensibly to regain his composure.
For a three-block stroll from the courtroom to the neighboring hotel where she has remained during jury deliberations, Holmes did not reply to queries about the results.
She was to be released on bail while awaiting the judge’s decision on her sentence. The court suggested that he will likely defer sentencing until a second trial involving identical fraud allegations against Balwani, who served as Theranos’ chief operations officer from 2009 to 2016, is completed. Balwani’s trial will begin next month in the same San Jose courtroom where Holmes’ legal drama played out.
U.S. Attorney Stephanie Hinds praised the jury for guiding the case through the crisis in a written statement, saying Holmes must now be held “culpable” for her crimes.
Despite being found guilty of defrauding investors, Holmes was spared from charges of fraud involving patients who were subjected to erroneous blood tests that may have jeopardized their health.
The claims against the patients appeared to be more difficult to establish from the start, according to Ring, because Holmes never directly spoke with them like she did with investors.
By the time Holmes was charged on criminal charges in 2018, the ambitious ambition she pursued when she created Theranos in 2003 at the age of 19 had turned into a nightmare.
During that time, Holmes went from being an unknown to a Silicon Valley sensation with a $4.5 billion paper fortune to a reviled failure. Her demise has been chronicled in films, novels, and podcasts, and it will soon be retold in a Hulu TV series titled “The Dropout,” starring Amanda Seyfried.
By drawing a few drops of blood with a finger prick instead than placing a needle into a vein, Holmes set out to build a less painful, more convenient, and less expensive approach to scan for hundreds of illnesses and other health concerns. She set out to disrupt an industry controlled by major testing firms like Quest Diagnostics and Labcorp by establishing “mini-labs” in Walgreens and Safeway shops across the United States that would utilize a small Theranos gadget called the Edison to do faster, less invasive blood tests.
The notion — and Holmes’ presentation of it — attracted affluent investors looking to get in on the ground floor of a game-changing firm. It aided Theranos in raising more than $900 million from well-heeled families like the Waltons of Walmart and the DeVos dynasty behind Amway, as well as shrewd billionaires like media tycoon Rupert Murdoch and software magnate Larry Ellison.
Holmes also wooed a well-connected board, which comprised two former US secretary of state, Henry Kissinger and the late George Shultz; two former defense secretaries, Gen. James Mattis and William Perry; former Sen. Sam Nunn; and former Wells Fargo CEO Richard Kovacevich. During a 2015 tour of a Theranos facility, she captivated former President Bill Clinton on stage and wowed then-Vice President Joe Biden, who lavished praise on her.
Most individuals were unaware at the time that Theranos’ blood-testing equipment was consistently giving false results. As a result, instead of the promised finger sticks, patients were compelled to endure frequent blood draws, which prompted Theranos to surreptitiously examine those samples using conventional technology in a typical laboratory environment. Holmes allegedly lied about claimed arrangements that Theranos had made with significant drug corporations like Pfizer and the US military, according to evidence produced during the trial.
After a series of bombshell stories in The Wall Street Journal and a regulatory examination of Theranos found potentially deadly weaknesses in the company’s technology, the deceit was exposed in 2015, leading to the company’s final collapse.
During her evidence, Holmes showed regret for her treatment of a number of situations, but she frequently claimed that she had forgotten the circumstances surrounding several of the prosecution’s significant incidents. She stated that she never lost faith in Theranos’ ability to refine their technology.
Holmes stated that Balwani let her down by failing to correct laboratory issues and, in the most dramatic testimony of the trial, claimed that he had turned her into his pawn by abusing her and controlling her nutrition, sleeping patterns, and friendships over a lengthy period of time. This all happened after she was assaulted by an unidentified assailant while still enrolled at Stanford, she claimed.