Elizabeth Holmes, the founder of the unsuccessful blood-testing start-up Theranos, was found guilty of four among 11 charges of fraud on Monday, January 3, in a case that came to represent the pitfalls of Silicon Valley’s culture of hustle, hype, and greed.
Holmes, who had once committed to transforming health care, was the most remarkable executive to field fraud allegations in an era of high-flying, money-losing start-ups.
A jury of eight men and four women took 50 hours over seven days of deliberations to reach a verdict, convicting her of three counts of wire fraud and one count of conspiracy to commit wire fraud by lying to investors to raise money for her company.
Holmes was found not guilty on four other counts linked to cheating patients who had utilized Theranos’s blood tests.
The jury was not able to come to a judgment on three counts of defrauding investors, for which Judge Edward J. Davila of California’s Northern District said he intended to announce a mistrial.
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Each Count Carried Maximum Imprisonment of 20 Years
Every count holds maximum imprisonment of 20 years, terms that can be served continuously. It is expected that Ms. Holmes will appeal. The sentencing date is supposed to be scheduled at a hearing on the three hung charges next week.
While the verdict was read, she collected her belongings and whispered to her attorney. She stepped down the row of family and friends in the court gallery behind her, hugging each one before exiting through a side door.
Judge Davila told the jury “It’s been a long case,” adding “We collectively have been through many things.”
In a statement Stephanie Hinds, a U.S. attorney stated that the guilty verdicts showed Holmes’s “culpability in this large-scale investor fraud.”
The verdict flashes its rarity. Few technology executives are accused of deceiving and even fewer are sentenced. Ms. Holmes would be the most popular female executive to spend time if sent to prison after Martha Stewart did in 2004 after defrauding investigators regarding a stock sale.
In the last few years, matters of start-up cheating, from the muffed initial public offering of WeWork to the intense boundary-forcing approaches of Uber, have not curbed the money flow toward founders reeling stories of business success.
Those downfalls caught the public’s attention but didn’t lead to criminal charges.
Recently, Lisa O. Monaco, the deputy attorney general said “We will urge prosecutors to be bold,” adding “The fear of losing should not deter them.”
Jessica Roth, a law professor at Cardozo School of Law and former federal prosecutor in the Southern District of New York, said Ms. Holmes’s sentence is a lesson to other founders and executives, warning about their statements to investors and the public.
She added, it “shines a light on the importance of distinguishing truth and optimistic projections — and keeping that clear in one’s mind.”
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Homes Was the World’s Youngest Self-made Female Billionaire
Holmes was praised as the world’s youngest self-made female billionaire. But she passed into fraud when she misrepresented the accuracy, types, and several tests Theranos’s machines could perform to raise funding and close business deals.
In opening statements at the trial’s beginning, Robert Leach, an assistant U.S. attorney, said “That’s a crime on Main Street and it’s a crime in Silicon Valley.”
Jurors heard from numbers of witnesses and presented hundreds of pieces of evidence utilized in support of prosecutors’ claim that Ms. Holmes intentionally cheated on investors and patients.
Witnesses involved James Mattis, the former defense secretary who sat on Theranos’s board, and Lisa Peterson, who used to manage money for the richest family of a former education secretary, Betsy DeVos, and invested $100 million in Theranos.
Prime investors that include Rupert Murdoch and Larry Ellison, and two former secretaries of state, George Shultz and Henry Kissinger, who sat on its board, were reached out but never called to the stand.
The case’s evidence pointed to Holmes’s contribution in misleading demonstrations, doctored validation reports, false claims regarding contracts, and inflated financials at Theranos.
Jurors heard recordings and saw videos of Ms. Holmes making overstated or false claims regarding Theranos.
Before it shut down in 2018, Theranos cleared two years’ worth of its blood tests. It paid to resolve multiple investor lawsuits and fraud charges by the Securities and Exchange Commission.
But prosecutors claimed that Ms. Holmes’s moves went beyond those punishments, they were criminal. She cheated investors to lose hundreds of millions of dollars and patients to get manipulated test results, they claimed.
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Holmes’s Attorneys Tried to Discredit Testimonies
In closing arguments, John Bostic, an assistant U.S. attorney, said “At so many of the forks in the road, she chose the dishonest path.”
Holmes’s attorneys attempted to defame testimony from whistle-blowers, swamped investors for not performing more research into Theranos, and stated Holmes’s failures were not an offense.
Holmes said “I wanted to talk about what this company could do a year from now, five years from now, 10 years from now,” adding “I wanted to talk about what was possible.”
Homes Accused Balwani of Sexual Assault
Holmes’s claim that her promising anticipations were no different as compared to the other Silicon Valley companies disputed the government’s evidence, which was similar to traditional deception cases, Roth said.
She said, “If other founders and executives are engaged in the kinds of deceit that was alleged and proven by considerable evidence in this case, then they should be concerned.”
Most significantly, Holmes alleged Balwani of emotional and sexual harassment. The couple dated secretly for over a decade, even owning an estate in Atherton, Calif, together.
Holmes said Balwani, who is nearly 20 years older, regulated every aspect of her life, along with her schedule, self-presentation, and time spent with her family. She also alleged he of pushing her to have sex with him. All the accusations were denied by Balwani.
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