Elizabeth Holmes Convicted: Live Updates

Credit…Jim Wilson / The New York Times

SAN JOSE, Calif .– Elizabeth Holmes, the founder of failed blood testing startup Theranos, was convicted on Monday on four of 11 counts of fraud, in a case that has come to symbolize the pitfalls of the culture of the hustle and bustle of Silicon Valley, hype and greed.

Ms Holmes was the most high-profile tech executive to lay charges of fraud in a generation of high-profile, money-losing start-ups. A jury of eight men and four women took 50 hours to reach a verdict, convicting her of three counts of wire fraud and one count of conspiracy to commit wire fraud. She was found not guilty on four other counts. The jury was unable to reach a verdict on three counts, which were set aside for later.

Each count carries a maximum penalty of 20 years in prison, which may be served concurrently. Mrs Holmes should appeal.

The verdict stands out for its rarity. Few tech executives are accused of fraud and even fewer are convicted. If sentenced to jail, Ms Holmes would be the most notable female executive to serve a sentence since Martha Stewart in 2004 after lying to investigators about a stock sale. And Theranos, which disbanded in 2018, is likely to serve as a warning to other Silicon Valley startups twisting the truth to score financings and trade deals.

The mixed verdict suggested jurors believed evidence presented by prosecutors that showed Ms Holmes lied to investors about Theranos technology in the pursuit of money and fame. They were not swayed by her defense of blaming others for Theranos’ troubles and accusing her co-conspirator, Ramesh Balwani, the company’s CEO and her ex-boyfriend, of abusing her.

They were also not swayed by the prosecutor’s case that she defrauded patients. Ms Holmes was acquitted of four counts relating to patients who had Theranos’ blood tests and one relating to advertisements that patients saw.

The guilty verdict came in a frenzied time for the tech industry, with investors scrambling to close hot deals and often ignoring potential red flags regarding companies they were investing money in. Some have warned that more Theranos-type disasters are looming.

In recent years, stories of start-up bickering, from WeWork’s failed initial public offering to aggressive tactics of pushing Uber’s limits, haven’t slowed the flow of capital to charismatic founders telling stories of business success. These falls have attracted public attention, but have not resulted in criminal charges.

Yet President Biden’s Justice Department has renewed its focus on white-collar crimes. “We will urge prosecutors to be bold,” Lisa O. Monaco, the deputy attorney general, said recently in a speech. “The fear of losing should not discourage them. “

Ms. Holmes’ conviction sends a message to other founders and leaders to be careful with their statements to investors and the public, said Jessica Roth, a law professor at the Cardozo School of Law and former federal prosecutor for the Southern District of New York.

This “highlights the importance of distinguishing between truth and optimistic projections – and of keeping that clear in mind,” she said.

Ms Holmes rose to prominence by emulating the world-changing disruptive chutzpah of Silicon Valley heroes like Steve Jobs – a playbook that has made companies like Apple, Tesla, Google and Facebook some of the most valuable in the world. world.

In the process, she caught the attention of heads of state, great business leaders and wealthy families with idealistic plans to revolutionize the healthcare industry. She has traveled the world on private jets, won accolades and glowing magazine covers, and has been hailed as the world’s youngest self-made billionaire woman.

But she fell into fraud when she lied about the accuracy, types, and number of tests Theranos’ machines could perform to raise funds and close trade deals.

“It’s a crime on Main Street and it’s a crime in Silicon Valley,” said Robert Leach, a deputy US prosecutor, in opening statements at the start of the trial.

The verdict puts an end to nearly four months of proceedings which have alternated between elation and laboriousness. There have been delays due to a coronavirus alert, a burst water line, technology issues in the courtroom and jury duty travel. One juror was fired for playing Sudoku and another for his Buddhist faith. Crowds of onlookers, many of whom followed the Theranos saga via podcasts, documentaries, books and news articles, waited for hours for a seat in the limited courtroom seating.

Inside, jurors heard from dozens of witnesses and viewed hundreds of pieces of evidence used to support prosecutors’ argument that Ms Holmes knowingly misled investors and patients during her rise to the fame and fortune.

Witnesses included James Mattis, the former Secretary of Defense who sat on Theranos’ board of directors, as well as Lisa Peterson, who managed the money of the wealthy family of a former Secretary of Education, Betsy DeVos. , and invested $ 100 million in Theranos. Leading investors including Rupert Murdoch and Larry Ellison, as well as two former secretaries of state, George Shultz and Henry Kissinger, who sat on its board of directors, were mentioned but were never called to the bar .

Evidence from the case described Ms Holmes’ role in rigged protests, falsified validation reports, misleading contract claims and overstated financial data at Theranos. Jurors have heard tapes and watched videos of Ms Holmes making exaggerated or misleading statements about Theranos.

Before its closure in 2018, Theranos canceled two years of its blood tests. He paid to settle several investor lawsuits, as well as fraud charges by the Securities and Exchange Commission.

But prosecutors argued that Ms Holmes’ actions went beyond those punishments – they were criminal. It has led investors to lose hundreds of millions of dollars and patients to obtain unreliable test results, they said.

“At so many branches in the road, she chose the dishonest route,” John Bostic, a deputy US attorney, said in oral argument.

In her defense, Ms Holmes ‘attorneys attempted to discredit whistleblower testimony, attacked investors for not doing more research on Theranos and said Ms Holmes’ failures were not a crime.

Mrs Holmes closed the proceedings by speaking. During seven days of testimony, she alternated between accepting responsibility for certain missteps and blaming other problems on her colleagues.

She said she believed Theranos’ tests were working and that she had relied on the expertise of more qualified people who ran the company’s lab. And she used her charisma to sell jurors the same vision for the future that, years earlier, had helped her win over investors, world leaders and the press.

“I wanted to talk about what this company could do in a year, in five years, in 10 years,” Ms. Holmes said. “I wanted to talk about what was possible.

Ms Holmes’ argument that her optimistic projections were no different from those of other Silicon Valley companies contradicted government evidence, which was consistent with traditional fraud cases, Ms Roth said.

“If other founders and leaders are involved in the types of deception that have been alleged and proven by considerable evidence in this case, then they should be concerned,” she said.

Even more strikingly, Ms Holmes accused Mr Balwani of emotional and sexual abuse. The couple dated in secret for over a decade, even jointly owning an estate in Atherton, California. Ms Holmes said Mr Balwani, who is around 20 years older than her, controls all aspects of her life, including her schedule, presentation and time spent with family. She also accused him of forcing her to have sex with him. Mr. Balwani has denied the allegations.

This testimony, delivered through tears, threatened to turn the tide on the prosecutor’s case by appealing to the jury’s emotions and portraying Ms Holmes as a victim. But it was a risky strategy, experts said, especially since Ms Holmes did not provide an expert witness to set her charges in the context of the wire fraud charges.

Mr Balwani, known as Sunny, will be tried next year. He also pleaded not guilty.

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