On January 3, after seven days of deliberation, a 12-member Silicon Valley jury found Elizabeth Holmes, the businesswoman behind the blood-testing startup, guilty of four counts of fraudulently deceiving investors. Each charge carries a term of up to twenty years in prison; No date has been set for the judge to pronounce his sentence. She was acquitted of four counts of deceiving patients and doctors; on three other counts the jury was deadlocked. The verdict, against which Holmes’ lawyers are expected to appeal, marks the collapse of a career that has cast a spell on the media, politicians and investors.
After dropping out of Stanford University in 2003 at the age of 19, Holmes founded Theranos to develop a radical advance in blood-testing technology that he hoped would allow hundreds of tests to be performed using a tiny drop of blood. instead of a full test tube. The tantalizing vision promised to make health care more effective and efficient.
Unfortunately Holmes could not achieve it. Voting to convict her on four counts, the jury concluded that, aware of her company’s failure, Holmes intentionally lied about her prospects and abilities and thereby crossed the line between promotion and deliberate fraud, which she explicitly denied in her own testimony. .
In many ways Theranos differed little from many rising startups. It raised more than $1 billion, reached an outlandish theoretical valuation (in its case $9 billion) before collapsing without ever going public and disintegrating into a vast graveyard of unworkable ideas.
What is common is that the executives behind such ventures are quickly forgotten. Holmes’ path differed at least in part because although his company’s products failed, his presence and story were unusually compelling.
In building Theranos, Holmes amassed a striking collection of acolytes. In its directory there were several former Secretaries of State and Defense. When he was vice president, Joe Biden called Theranos “the laboratory of the future” and that Holmes was “an inspiration.” The company’s shocking failure suggests that its famous servers had been merely fooled by the noise.
The fashion press was shocked by Holmes’s ability to present himself. The long-sleeved, high-neck Steve Jobs-style black T-shirts he wore to work were said to reflect authority. The open-necked shirts and blouses even during the trial were a sign of seeking to appear vulnerable, which was heightened by the bag of baby items carried by the court, which indicated to the jury the costs of a potential prison sentence for a young mother and her baby (who was born in July). Reporters and onlookers waited hours for a seat in the packed courtroom.
Holmes’s defense followed two clear directions. The most obvious was based on the argument from naivety. He may have been wrong about Theranos’ prospects, so the argument goes, but that’s not a crime. Startup investors are supposed to be sophisticated people, willing to bet based on deep understanding with the expectation of a big payoff, understanding that such long-term bets may fail.
The prosecutors’ argument was based primarily on presentations Holmes made to investors. In his meetings with hedge funds, Holmes seemed to exaggerate potential sales and advertise non-existent support for Theranos from the military and big pharmaceutical companies.
The only substantive request jurors made during their deliberation was to replay a presentation that had been recorded, which suggested they were looking at precisely what she had told her supporters.
personal mitigating factors
Holmes’s second line of argument, called the Svengali defense, was particularly attractive to Hollywood, but its impact on the jury was unclear. At trial, she claimed she was sexually and emotionally abused and manipulated by Ramesh “Sunny” Balwani, her former partner and former Theranos chief operating officer. Her lawyers argued that for this reason she could not be held responsible for her actions.
Balwani has strongly denied all of these claims. His own trial on fraud allegations will begin next month, ensuring that the Theranos saga will not end anytime soon. And even when the last sentence is passed, there will be more to come.
Prior to the verdict, the chain of streaming Hulu released photos of an upcoming Holmes story miniseries, starring Amanda Seyfried. Holmes may end up going to prison, but he will not disappear from the limelight.