US prosecutors are out for blood — or, more accurately, 20 years in prison and a nearly $3 million fine — for Elizabeth Holmes, the disgraced former CEO of Theranos, a once glitzy $9 billion tech startup that alleged that it’s the world of healthcare drop by drop.
In her heyday, the turtleneck, raspy Holmes was hailed as a disruptive genius and an investor darling who claimed that Theranos had created proprietary technology — a machine called the Edison — that used a tiny drop of blood to screen for a variety of medical conditions, calling it the future of lab testing technology.
Theranos claimed that Edison could perform life-saving tests virtually anywhere with just a finger prick of blood rather than a full vial from a vein.
The machine would save money for patients and doctors and potentially provide early diagnosis for more than 200 conditions in locations as convenient as supermarkets and pharmacies.
That is, if it actually worked. In 2015, the Wall Street Journal broke the story based on whistleblower reports and deep dives into the data showing that Theranos’ proprietary technology worked inconsistently or not at all and that tests were conducted on traditional lab equipment behind closed doors.
The company closed its doors in 2018. Holmes and former president and chief operating officer of Theranos, Ramesh “Sunny” Balwani, are both now facing criminal charges.
Jury selection in the Holmes trial begins on Tuesday, years after the scandal broke. Here’s what you need to know.
Wait, wasn’t she once called the female Steve Jobs?
Yes. Holmes was known for her fascination with the founder of Apple and imitated him in many ways, including wearing the same signature turtleneck sweater and referring to her Edison machine as “the iPod of healthcare”.
Theranos also used slick marketing materials designed by the same company that Apple used for its iconic ads.
Holmes was also influenced by other Silicon Valley icons. According to John Carreyrou’s coverage in The Wall Street Journal, one of Holmes’ early mentors was Oracle co-founder Larry Ellison, who reportedly told Holmes to push her team even when the team told her that the expectations were unfeasible.
Investors were also drawn to Holmes’s wondrous backstory: She dropped out of Stanford University at age 19. Many also wanted to get on the ground floor of what they thought could be a multi-billion dollar company with a woman at the helm who worked to help people.
So what is Holmes accused of?
Holmes and Balwani become charged with two counts of conspiracy to commit wire fraud and nine counts of wire fraud for allegedly being “involved in a multimillion-dollar scheme to defraud investors, and a separate scheme to defraud doctors and patients,” the indictment said.
The two will be tried separately, with Balwani’s day in court in January 2022.
Holmes’ trial was previously postponed due to her pregnancy. In July she gave birth to a son.
What was the alleged fraud?
Holmes and Balwani are accused of using “a combination of direct communications, marketing materials, statements to the media, financial statements, models and other information to defraud potential investors.”
And they were pretty heavy investors. Theranos had a staggering number of A-list supporters, including Oracle co-founder Ellison, Walmart founders of the Walton family, media mogul Rupert Murdoch and former United States Secretary of Education Betsy DeVos. Theranos board members included former United States Secretary of State Henry Kissinger.
At the time, many smart people thought that Holmes’ machine would change the world. But that wasn’t the case.
How did the world find out that the machine wasn’t working?
As Theranos attracted media attention during its meteoric rise, it also attracted media attention.
Carreyrou broke the story for The Wall Street Journal with the help of certain whistleblowers within Theranos, including Tyler Shultz.
Shultz, the grandson of former United States Secretary of State George Shultz, a board member of the company, had a job as a research engineer. He began talking confidentially with Carreyou when he noticed “quality control failures” with the Edison machine.
Initial attempts to resolve internal issues were ignored, leading Shultz to leave Theranos and become public about the disturbing things he had seen at work.
Was anyone injured by the machine?
In 2018, nine people who had used Theranos’ blood testing technology came forward as part of a class action lawsuit against the company and drugstore Walgreens, which had offered testing in partnership with Theranos.
One patient claimed she tested positive on the Theranos equipment for an autoimmune disease, prompting a battery of tests by her doctor, who ultimately determined she did not have the disease.
Another woman who used Theranos equipment said the tests showed she was positive for Hashimoto’s disease, a thyroid condition that caused her to change her lifestyle, take medications and make medical appointments while seeking additional treatment. that she didn’t need.
What kind of defense is Holmes expected to put up?
That remains to be seen, as her legal team has not commented on it in the press.
A common defense strategy used in telefraud cases may be what’s known as “a defense in good faith” — which the company’s founders did not knowingly intend to mislead investors. But that may be difficult to realize, given the depth and breadth of information Carreyrou and others have uncovered about the company.
There has also been speculation as to whether Holmes’ mental health could be up for discussion.
How long is the process expected to take?
The jury selection starts on August 31.
However, eliminating would-be jurors who claim to have read, watched or listened to the numerous books, series and podcasts about Theranos has already become a matter of contention between Holmes’ attorney Kevin Downey and U.S. District Judge Edward Davila.
Has Silicon Valley Changed in the Aftermath of the Theranos Scandal?
Yes – just ask female entrepreneurs, who say they are consistently questioned about Holmes and faced with too much scrutiny from investors.
But the long-term benefit to investors, as well as startup founders, could be more regulation and checks and balances in the formerly Wild West-esque world of Silicon Valley.
With so much at stake, new start-ups may choose to create workplaces that are more open to listening to employees’ concerns, and foster more transparent communication with their investors and board members.