Elizabeth Holmes Found Guilty On Four Charges
Elizabeth Holmes was found guilty of four charges, not guilty on four more, and three other charges hung the jury.
CNBC:
Theranos founder Elizabeth Holmes, the one-time billionaire and darling of Silicon Valley who promised a revolutionary blood testing technology, has been found guilty of four charges in her criminal fraud trial.
The jury of eight men and four women were handed the case in mid-December after three months of proceedings and testimony from 32 witnesses. Deliberations lasted more than 50 hours over seven days.
U.S. District Court Judge Edward Davila will sentence Holmes at a later date. Holmes was found not guilty on four charges and there was no verdict on the other three. Jurors told Davila earlier on Monday that they were deadlocked on three of the 11 charges.
Once heralded as the next Steve Jobs, Holmes raised $945 million from high-profile investors including the family of Betsy DeVos, Rupert Murdoch and the Walmart-founding Walton family. Theranos, at its peak, was valued at $9 billion.
Since it started on Sept.8, the Holmes trial has attracted worldwide media attention. In the final weeks of proceedings, journalists and spectators began lining up at 2 a.m. to obtain one of the 34 tickets for the main courtroom or 45 tickets for the overflow room.
Jurors heard impassioned pleas in closing arguments from the government and Holmes’ defense.
Assistant U.S. Attorney Jeffrey Schenk told the jury that Holmes “chose fraud over business failure. She chose to be dishonest with her investors and patients. That choice was not only callous, it was criminal.”
Schenk reminded the jury that time and time again Holmes’ own employees were telling her the technology simply didn’t work yet she kept raising money on false claims.
Prosecutors also tried to convince the jury to disregard Holmes’ claims that her top executive and then-boyfriend Ramesh “Sunny” Balwani abused her. Blaming Balwani was central to Holmes’ defense strategy.
However, thousands of private text messages between Holmes and Balwani, obtained by CNBC, undercut some of Holmes’ claims. The messages, which span from June 2011 to July 2016, revealed romantic musings between the two. They show a high-flying lifestyle while their start-up was bleeding hundreds of millions of dollars.
“You do not need to decide whether that abuse happened to reach your verdict,” Schenk said. “The case is about false statements made to investors, false statements made to patients.”
In his closing argument an attorney for Holmes, Kevin Downey, told the jury that Holmes acted in good faith and “believed that she built a technology that could change the world.”
Heh, I was just making one of these.
Back in 2016, RTod had a real barn-burner of an article talking about the whole Theranos thing.Report
She was found guilty of defrauding investors but not consumers. I guess because most consumers did get accurate results, just not with Theranos tech.Report
I don’t know much about the case, but the Wikipedia says that when testing samples with non-Theranos tech, they would dilute the blood with water, resulting in inaccurate results. One of the selling points was that they could run many tests with far less blood than would normally be required, so the tech to get accurate results with the samples they collected didn’t exist at all, at Theranos or anywhere else.Report
No Saul – because consumers aren’t supposed to have rights, much less to compensation in an oligarchy. The property of the investor class has to be protected at all costs.Report
Big triple-parentheses energy in this comment.
I’m not saying you’re an antisemite, but you’re filling out the same Mad Libs sheet. There’s that same desperate need to believe that you’re being screwed over by a sinister cabal of malevolent others. Throw some echo marks around “oligarchs” and “investor class,” and nobody would notice anything amiss. It would change only the object of the unhinged resentment being expressed, not its fundamental nature.Report
IIRC, the tech was never fielded much beyond a few test markets, because they couldn’t get it to work. So while some consumers may have been defrauded, as a class, it never got that far, and, as you note, the places that were acting as test markets did make the effort to get the consumers accurate results.
Legally, that may not make much of a difference (IANAL, so I don’t know), but I can see how a jury might decide that it’s a stretch.Report
A juror has comments on this here:
That doesn’t sound quite right to me, but I don’t know the law and I didn’t hear the jury instructions.Report
It’s horse trading. Don’t bother putting a microscope on it.
We had jury members who don’t want to convict on anything because she’s young, pretty, and pregnant. We had others wanting to convict on everything.
So she gets off on “defrauding” consumers who were promised accurate tests and given accurate tests. She gets convicted on lying to investors.
Not a bad compromise.Report
It could be something as simple as “the gummint proved its case for this and failed to prove its case for that.”Report
Apparently her dad was an executive at Enron, the writers are such hacksReport
A) this was definitely “girl who’s spent her entire life being told that she wasn’t wrong falls for the Dark Triad and can’t figure out what to do”
B) she still committed crimes, she knowingly made false statements to investors. That her boyfriend was telling her to do it and she couldn’t work out how to tell him “no” doesn’t mean she didn’t do it.Report
I watched one of the documentaries and IIRC there were professors at Stanford who specifically told her the concept would not work. She just believed she knew better.Report
America, where my ignorance is just as good as your knowledge.Report
My ignorance is funded. Your knowledge is unfashionable.
Why are you opposed to people getting fast results from a minor blood test?Report
To be fair: The founder of FedEx proposed his company idea in one of his business classes at Yale and it was graded a “C” for being unrealistic.
https://en.wikipedia.org/wiki/FedEx#HistoryReport
I’d like to see the differences between the arguments for why FedEx wouldn’t work versus the arguments for why you can’t get good ppb numbers from a drop of fingertip blood and see if we could throw them past the engineers here.Report
Not sure about FedEx, perhaps the cold reception had to do with airline regulations at the time? I’m not sure how those impacted cargo flights.
As for blood, it’s all about sensitivity and concentrations. As Michael said elsewhere, current tech just isn’t quite there yet to allow us to detect a given marker with any kind of certainty (too many false + or -). It’s coming, just not in time for Theranos.Report
The argument against FedEx was (I assume) that if you’re trying to ship everything anywhere then you need a vast infrastructure that’s unrealistic for a startup.Report
My guess was last mile stuff.
Anybody can get stuff from San Francisco to Detroit overnight.
The problem is getting it from Detroit to Chelsea the next morning.Report
well
there’s the fact that without the Mafia, FedEx would have gone out of business in 1976
(Fred Smith, founder of FedEx, was on a fundraising trip in California. He failed to raise any funds, and the company needed $24,000 to cover its fuel costs for the next week of operations. He stopped in Vegas for a day, and came back with $32,000, which he described as “blackjack winnings”.)Report
He needed a lot more money than that… although he really did take the last $5k and turn it into something like that.
https://www.foxbusiness.com/money/fred-smith-fedex-blackjack-winning-formulaReport
I think it’s fine to challenge scientific consensus. That’s part of how breakthroughs are made. It’s the lying about the results so people will keep giving you fortune and fame that is the problem.Report
Eh.
I remember how there was an xkcd comic about how difficult it would be for a computer program to determine whether there was a bird in a picture and what kind of bird it was. The punchline was “that’ll take about five years”, and the comic noted that AI researchers had spent fifty years on such a task.
A month later, Flickr added that feature (which didn’t work especially well, but it didn’t *not* work.) Three years later there were full-feature standalone applications doing it, and now it’s something so cheap to make that you can get it for free.
You don’t really know what’s possible until you do it.
If you want to say “yeah but doing what she wanted required major advances in the state-of-the-art for physical testing and she clearly did not understand that, and she didn’t have a backup plan for when it turned out her idea would take a lot longer than she’d said,” you’re not wrong, but it is wrong to say “it was totally impossible and the silly girl should’ve known better.”
Like, the failure here was not in vision, the failure was in management; management of technical execution and schedule estimating, and management of investor relations.
****
Holmes really wanted to be Steve Jobs, but he had two things that she didn’t: Steve Wozniak and iTunes.Report
Well, as I said to Philip above, I don’t begrudge the attempt at all, it’s the lying about the results.
It’s also a bit different from a purely technical problem. Obviously I am not a doctor or biologists but my understanding of what she was advised at Stanford is that there are certain properties of human blood that make a minimal volume of it necessary to conduct reliable tests. Maybe they will find a way to do what she was attempting eventually but their position was that it will take more than better machines/better analytics.Report
Right, it’s a stats/probability problem. In order for a test to have a good result, you need to verify that you have a given ppm or ppb value, which requires having millions or billions of parts to measure against. The smaller the total volume, the harder it is to statistically prove you have the required concentration of whatever you are testing for.Report
This is a reasonable issue with computers, where improve the software and you have near-magic upgrades in performance and function.
Theranos was a chemistry company. Massive improvements in the basic functionality of chemistry is harder.
Worse, getting large amounts of blood is (literally) painful and problematic with babies. The test industry has been under pressure to reduce the amount of blood needed since day one.
The root problem is we insist on having accurate medical tests; As the amount of blood tested is lowered, the margin of error goes up.
The problems are well understood, the trade offs are well understood, this isn’t an issue that no one has ever thought of where a bold player can just step in and do things.Report
They were 30 years too soon. Researchers are now finding ways to use nanostructures to identify the presence of specific molecules in very small blood samples. In another decade, it’s likely that the kinds of claims the company that would become Theranos was making in 2003 will be in use.Report
A simple pinprick is not going to provide a clean sample. If a new version of Theranos doesn’t start by scrubbing the finger, it’s a fake.Report
Thank you. That.
Pin prick tests which I’ve taken (early COVID) start with taking a pin prick and discarding the first drop(s) so they can take another.Report
I’ve said this before, I’m practically obsessed with the notion of what could have been done with that seed money in medical diagnostic equipment a few years before covid. She’s a candidate for Person of the Year, in terms of opportunity cost. If she’d listened to others, aimed for reasonable goals, et cetera, would we have had finger-prick 5-minute covid testers in every pharmacy in the world?Report
Probably not. She’d have been better off at some vaporware company. She may have still gotten sued eventually by the shareholders or the board but I think prosecution would have been much less likely. Her biggest error was attempting this in a regulated industry.Report
I’m thinking less about what she could have done, and more about that money and clout.Report
Gotcha.Report
She was clearly trying “fake it until you make it”.
What she was trying to do was somewhere between very hard and impossible. She didn’t know that.
Her High School background was in computer science, her college freshman background was… Chemical engineering? I’m not sure what a Freshman in Chem Eng can reasonably be expected to know. Worse, a lot of Chem Engs change out of that field because it’s really hard.
Far as I can tell, there’s a ton of what we should view as propaganda on her background. She was a kid with an idea and the willingness to take chances, the idea didn’t work.
The basic problem is it’s really hard to measure stuff off a drop of blood. Your margin of error becomes breathtakingly large.Report
Color me stupid but what does one have to do to be guilty of defrauding investors? Where is the line between sales pitch and fraud?Report
My technology works and is currently being used in Walgreens.
My technology will work and major corporations have expressed interest in using it.
2nd one is a start up, 1st isn’t.Report
So she did the first one?Report
Yes. She told everyone it was working (as opposed to under development) and had already been rolled out.
That’s just the bare bones. She had nothing but lies in a $10B company. She lied to her investors, to WalGreens, to her employees, and so on and so on.
She did a ton of work to maintain this house of cards. Everything from the black sweaters (making her look like Steve Jobs), to deliberately maintaining stares to make herself look intense, to lowering her tone of voice.
We’re DEEP into manipulation with no engineering backing it up.
With that as the kind of person she is, I expect (with zero evidence) she got pregnant when she did to play the sympathy card on the jury.Report
“ Yes. She told everyone it was working (as opposed to under development) and had already been rolled out.
That’s just the bare bones. She had nothing but lies in a $10B company. She lied to her investors, to WalGreens, to her employees, and so on and so on.”
This seems rightly actionable.
“ She did a ton of work to maintain this house of cards. Everything from the black sweaters (making her look like Steve Jobs), to deliberately maintaining stares to make herself look intense, to lowering her tone of voice.”
This… not so much. Unless of course we pursue charges against every black sweater wearing, intense staring CEO.Report