By Miranda Martinez.
Elizabeth Holmes dropped out of Stanford at the age of 19 to start Theranos, a startup that promised to revolutionize blood testing forever. Theranos sought to reinvent the blood-testing industry by creating a technology that could test for dozens of health conditions with the mere prick of a finger. At one point, Theranos was valued at more than $9 billion. Subsequently, however, Theranos endured a very bumpy road and was ultimately dissolved after it was discovered that the company’s technology didn’t work. Elizabeth Holmes is now charged with defrauding patients and investors by lying about the accuracy of Theranos’ blood-testing technology.
What is Theranos?
Theranos was expected to be the next big Silicon Valley startup, touting fast and accurate blood tests for a variety of health conditions. Doubts were raised regarding the efficacy of the technology, but Theranos continued to distribute tests to customers, even striking deals with Walgreens and Safeway. It was, however, eventually discovered that the tests were not accurate, and that they even required the same amount of blood as traditional tests.
Theranos was guided by a star-studded board of directors, including former Secretaries of State George Schultz and Henry Kissinger. Despite an abundance of knowledge from well-respected politicians and government officials, the healthcare startup lacked healthcare expertise among its board members. Nevertheless, the board members and the tech community were captivated by Holmes and her vision. Holmes’ confidence and signature black turtlenecks even led to frequent conjecture that she would become the next Steve Jobs.
In 2015, the Wall Street Journal exposed that the Theranos technology did not work, and that Holmes knowingly sought to cover up the massive failure. Court documents reveal that Theranos patients received inaccurate test results for health conditions ranging from pregnancy tests to cancer screenings. Theranos denied all wrongdoing and aimed to cover up the failed technology, but the company was formally dissolved in 2018.
What about Arizona?
Many Arizonans have a strong interest in the outcome of this case given that “Arizonans were essentially used in a big, unauthorized medical experiment conducted by Theranos.” Reporters claim that Theranos “duped” Arizona government officials and patients by selling flawed blood-tests. Holmes chose Phoenix as Theranos’ primary market for launching its products given the state’s “pro-business reputation and its large number of uninsured patients.” In 2013, Theranos set up testing sites at 40 stores throughout the Valley, and at one point, even ran television advertisements in Arizona. In all, nearly 1 million test results across Arizona and California were voided or corrected, causing direct harm to many patients whose tests resulted in misdiagnoses and improper medical treatments.
Beyond distributing tests, Theranos lobbied for a bill in Arizona that allowed people to purchase lab tests directly. This was a change from previous Arizona statutes, which only permitted people to access select tests without a doctor’s order. In 2015, however, state lawmakers passed the bill, allowing customers to purchase any test that a lab sells. The law was described at one point as “a bill Theranos had practically written itself and heavily lobbied for.” Arizona lawmakers denied such claims, explaining that the bill wasn’t specific to Theranos, but also sought to encompass other companies.
What are the Charges?
Elizabeth Holmes now faces criminal charges in federal court in San Jose, California. The trial, which has been postponed several times due to Covid-19 and Holmes’ pregnancy, is expected to last three months. Holmes is charged with10 counts of wire fraud and two counts of conspiracy to commit wire fraud, crimes for which she could serve up to 20 years in prison, if convicted. Holmes has pleaded not guilty to these charges. Former Theranos President and Chief Operating Officer, Ramesh “Sunny” Balwani, faces the same charges and will be tried separately in January.
Prosecutors allege that Holmes defrauded patients and investors by claiming that Theranos technology could perform accurate tests with only a small sample of blood. The U.S. Attorney’s Office claims that Holmes knew the technology was unreliable and inaccurate, despite her public confidence in the technology.
What are the Arguments?
Holmes’ experienced defense team is expected to make several arguments to defend against the charges of conspiracy and fraud. Court filings reveal that Holmes will likely argue that her abusive romantic and professional relationship with Sunny Balwani caused her to lack the intent to deceive. Holmes’ lawyers are expected to claim that a “mental disease” resulting from this trauma ultimately impaired Holmes’ judgment. Experts explain, however, that this would not be an insanity defense, but rather “an argument to jurors that Holmes was unable to form the intent to commit fraud because she was traumatized by a relationship.” Holmes will also likely assert that she believed representations made to her by Balwani were true because of the psychological, emotional, and sexual abuse that she endured. Balwani has denied that he engaged in any abuse.
Holmes is also expected to argue that “the only thing she was guilty of was optimism.” Experts believe Holmes will assert that she did not mislead any patients or investors because she truly believed in the blood-testing technology. Experts also opine that Holmes will claim she “simply got caught up in the Silicon Valley culture of fake it till you make it.” In light of this, the defense is expected to raise reasonable doubt regarding Holmes’ intentions, since it is impossible to truly read someone else’s mind.
Others predict that Holmes may look to strike a plea agreement, or that she may not put up any defense if trial proceeds. If the defense decides not to present testimony or evidence, jurors will have to decide for themselves whether the prosecutors proved their case beyond a reasonable doubt. If Holmes and her lawyers decide not to put up a defense, experts state that “a hung jury would be a win for Holmes.” Moreover, the location of the case in Silicon Valley may result in a pool of jurors favorable to Holmes, given their familiarity with the frequent rise and fall of startups.
Despite potential difficulty proving that Holmes intentionally defrauded patients and investors, legal experts state that the prosecution nevertheless has a strong case. Because of the extensive evidence against Holmes, “it seems that her lies can be objectively proven through witnesses and documents.” Prosecutors are believed to have a “gold mine” of evidence in the form of communications, emails, and other texts that can be used to prove Holmes’ mental state. This evidence is expected to help demonstrate that Holmes knowingly made fraudulent statements and therefore intentionally defrauded investors and patients.
Conclusion
All in all, Holmes could potentially face up to 20 years in prison if convicted. And while experts predict that prosecutors may struggle to convince jurors that Holmes intentionally aimed to defraud patients and investors, the prosecution is still expected to present strong testimony and evidence. One thing is certain: as the highly anticipated trial pans out, the journey of Elizabeth Holmes and Theranos will undoubtedly remain one of the most notorious flameouts in tech history.
