(This article was originally published on 30 September 2021 with the headline "The Theranos & Elizabeth Holmes Saga: Where Has the Fraud Trial Reached Now?"
It has now been updated after a jury found Elizabeth Holmes guilty of four charges on 4 January 2022.)
Elizabeth Holmes, the founder of now dissolved health technology company called Theranos, has been found guilty of four out of 11 charges of fraud, including conspiracy to defraud investor, The Guardian reported on Tuesday, 4 January.
She was also acquitted on three charges, such as conspiracy to defraud patients, and two charges that were regarding patients who had received inaccurate test results.
On 31 August 2021, a federal criminal case had commenced against Elizabeth Holmes, and against Ramesh 'Sunny' Balwani, who used to be the company's president and chief operations officer, the BBC reported.
In what is officially called United States v Elizabeth A Holmes, et al, Holmes, along with Balwani and other associates, has been accused of perpetrating “massive fraud” for cheating investors of $700 million by swindling them regarding a blood-testing technology that the company claimed to be a huge breakthrough in the medical world.
At its peak, Theranos was valued at $9 billion, and Holmes' personal net worth at $4.5 billion.
This technology supposedly made blood tests cheaper and easier compared to the conventional ones, because its tests required tiny amounts of blood that could be extracted from the patient with the help of a fingerstick.
Fingersticks are devices that are used for pricking the patient's skin, usually on a finger, to obtain blood drops for testing.
Nevertheless, these claims were proven to be completely false and on 15 June 2018, after an investigation by the US Attorney for the Northern District of California, Holmes was charged with nine counts of wire fraud and two counts of conspiracy to commit wire fraud, according to the official website of the US Department of Justice.
So, what is the case all about, how did the truth come out? We break it down for you.
Jury Finds Theranos Founder Elizabeth Holmes Guilty of 4 Charges Including Fraud
1. Theranos' Rise and Elizabeth Holmes' Stardom
Elizabeth Holmes went to Stanford University to study chemical engineering. During her second year in college, she discussed the idea of starting a health technology company with Channing Robertson, Emeritus Professor of Chemical Engineering at the same university and eventually the first board member of Theranos.
It is worth mentioning that before asking Robertson, Holmes had pitched her idea about obtaining extensive data from only a few blood drops extracted from a patient's fingertips to numerous professors at Stanford, including her own professor, Phyllis Gardner, who told her that her idea was not going to work, Vanity Fair reported.
But Robertson agreed to help her and under his guidance, Holmes founded Real Time Cures, whose name was later changed to Theranos. She dropped out of Stanford and began to raise venture capital funds for her company.
Theranos attracted some high profile investors like the firm Draper Fisher Jurvetson, media tycoon Rupert Murdoch, former US Defence Secretary Jim Mattis, and even the family members of Betsy Davos, who was the US secretary of Education in the Donald Trump administration, according to Moneycontrol.
Until the day of its shutdown, Theranos raised more than $700 million.
In addition to the simplicity and low cost of the test, Holmes claimed that her technology could detect a variety of conditions like high cholesterol levels and cancer, according to a report by Business Insider.
The company's 'innovation' made Holmes a superstar. In 2015, Holmes appeared in Forbes Magazine as the world's "youngest and wealthiest self-made female billionaire." She also made it to the covers of Inc., T: The New York Times Style Magazine, and Fortune.
All of that was to change from 16 October 2015, when a journalist named John Carreyrou began publishing a series of articles in The Wall Street Journal that conveyed to the world that Theranos' technology was not what the world thought it was.
Expand2. WSJ Expose, Dissolution, and Indictment
In 2015, the tide began to turn. Biochemist Ian Gibbons, who was the chief scientist of Theranos tried warning Holmes that the tests were not accurate enough for public use. The bigger problem was that medical experts outside of Theranos began scrutinising its technology.
John Ioannidis and Eleftherios Diamandis, both experts in clinical medicine at Stanford and the University of Toronto respectively, investigated the technology that Theranos claimed to be using, with Diamandis arguing that "most of the company's claims are exaggerated."
He also questioned four factors of the test – speed, cost, pain, and results – while advancing his own claim that Theranos' "claims of superiority over current systems and practices are speculative, at best," according to another report by Business Insider.
Then in October 2015, based on his own investigation of what he thought were Theranos' extremely secretive methods of operating, journalist John Carreyrou published a shocking article in The Wall Street Journal.
In the article titled "Hot Startup Theranos Has Struggled With Its Blood-Test Technology", Carreyrou wrote that Edison, the device that Theranos used to conduct blood tests, provided inaccurate results, which is why the company was actually testing its blood samples using the same conventional devices that all other blood-testing companies were using at the time.
One of Carreryrou's sources was whistleblower Erika Cheung, a former Theranos employee who recently gave her testimony in Elizabeth Holmes’ trial, The New York Times reported.
A few months after the article was published, organisations like the Food and Drug Administration, Centres for Medicare & Medicaid Services, and the Securities and Exchange Commission, started investigating the activities of Holmes' company.
Finally, in June 2018, Holmes was indicted by a federal grand jury and her criminal trial started more than three years later, on 31 August 2021.
Expand3. Who is Ramesh 'Sunny' Balwani and Where Does He Fit In?
Balwani is a Pakistan-born American businessman who used to be the President and the COO of Theranos. There are two controversies surrounding him.
The first one is his role in the same fraudulent activities of Theranos that Holmes has been charged with. Balwani faces the same charges, although his trial will be separate from that of Holmes', as ordered by a district court judge, CNBC reported.
The other controversy is his relationship with Holmes herself. The two had been in a secret relationship until 2016, but it was reported recently that Holmes has accused Balwani of sexually abusing and dominating her to the extent that it affected her mental state and thus her capability to make sound decisions, according to the BBC.
Balwani has categorically denied the allegations.
Expand4. The Trial
The indictment quotes in various news reports said that Holmes and Balwani are charged with engaging “in a multi-million-dollar scheme to defraud investors, and a separate scheme to defraud doctors and patients”, Moneycontrol reported.
In 2019, a district court judge dismissed the charges about the patients being victims because the costs of the blood tests were covered by medical insurance companies.
The judge argued that patients did not lose any money while using the services and tests that Theranos provided, Reuters reported.
The charges of fraud however, remained.
In the past few months, former lab workers at Theranos have testified about the inaccuracies in the testing devices and how they were forced by higher authorities to manipulate data by publishing only those results that made the tests seem functional, according to The Guardian.
Other former workers also testified about the degree of emotional discomfort that they had had to endure while advancing the authenticity of tests that they knew were nowhere close to authentic.
Based on all this, Holmes has now been found guilty of at least four charges, which means that she will face some prison time.
"She chose fraud over business failure,” prosecutor Jeff Schenk remarked during the closing arguments, as quoted in The Guardian.
"She choose to be dishonest with investors and patients. That choice was not only callous, it was criminal."
(With inputs from The Guardian, Reuters, the New York Times, CNBC, Moneycontrol, Business Insider, and Vanity Fair.)
(At The Quint, we question everything. Play an active role in shaping our journalism by becoming a member today.)
Expand
Theranos' Rise and Elizabeth Holmes' Stardom
Elizabeth Holmes went to Stanford University to study chemical engineering. During her second year in college, she discussed the idea of starting a health technology company with Channing Robertson, Emeritus Professor of Chemical Engineering at the same university and eventually the first board member of Theranos.
It is worth mentioning that before asking Robertson, Holmes had pitched her idea about obtaining extensive data from only a few blood drops extracted from a patient's fingertips to numerous professors at Stanford, including her own professor, Phyllis Gardner, who told her that her idea was not going to work, Vanity Fair reported.
But Robertson agreed to help her and under his guidance, Holmes founded Real Time Cures, whose name was later changed to Theranos. She dropped out of Stanford and began to raise venture capital funds for her company.
Theranos attracted some high profile investors like the firm Draper Fisher Jurvetson, media tycoon Rupert Murdoch, former US Defence Secretary Jim Mattis, and even the family members of Betsy Davos, who was the US secretary of Education in the Donald Trump administration, according to Moneycontrol.
Until the day of its shutdown, Theranos raised more than $700 million.
In addition to the simplicity and low cost of the test, Holmes claimed that her technology could detect a variety of conditions like high cholesterol levels and cancer, according to a report by Business Insider.
The company's 'innovation' made Holmes a superstar. In 2015, Holmes appeared in Forbes Magazine as the world's "youngest and wealthiest self-made female billionaire." She also made it to the covers of Inc., T: The New York Times Style Magazine, and Fortune.
All of that was to change from 16 October 2015, when a journalist named John Carreyrou began publishing a series of articles in The Wall Street Journal that conveyed to the world that Theranos' technology was not what the world thought it was.
WSJ Expose, Dissolution, and Indictment
In 2015, the tide began to turn. Biochemist Ian Gibbons, who was the chief scientist of Theranos tried warning Holmes that the tests were not accurate enough for public use. The bigger problem was that medical experts outside of Theranos began scrutinising its technology.
John Ioannidis and Eleftherios Diamandis, both experts in clinical medicine at Stanford and the University of Toronto respectively, investigated the technology that Theranos claimed to be using, with Diamandis arguing that "most of the company's claims are exaggerated."
He also questioned four factors of the test – speed, cost, pain, and results – while advancing his own claim that Theranos' "claims of superiority over current systems and practices are speculative, at best," according to another report by Business Insider.
Then in October 2015, based on his own investigation of what he thought were Theranos' extremely secretive methods of operating, journalist John Carreyrou published a shocking article in The Wall Street Journal.
In the article titled "Hot Startup Theranos Has Struggled With Its Blood-Test Technology", Carreyrou wrote that Edison, the device that Theranos used to conduct blood tests, provided inaccurate results, which is why the company was actually testing its blood samples using the same conventional devices that all other blood-testing companies were using at the time.
One of Carreryrou's sources was whistleblower Erika Cheung, a former Theranos employee who recently gave her testimony in Elizabeth Holmes’ trial, The New York Times reported.
A few months after the article was published, organisations like the Food and Drug Administration, Centres for Medicare & Medicaid Services, and the Securities and Exchange Commission, started investigating the activities of Holmes' company.
Finally, in June 2018, Holmes was indicted by a federal grand jury and her criminal trial started more than three years later, on 31 August 2021.
Who is Ramesh 'Sunny' Balwani and Where Does He Fit In?
Balwani is a Pakistan-born American businessman who used to be the President and the COO of Theranos. There are two controversies surrounding him.
The first one is his role in the same fraudulent activities of Theranos that Holmes has been charged with. Balwani faces the same charges, although his trial will be separate from that of Holmes', as ordered by a district court judge, CNBC reported.
The other controversy is his relationship with Holmes herself. The two had been in a secret relationship until 2016, but it was reported recently that Holmes has accused Balwani of sexually abusing and dominating her to the extent that it affected her mental state and thus her capability to make sound decisions, according to the BBC.
Balwani has categorically denied the allegations.
The Trial
The indictment quotes in various news reports said that Holmes and Balwani are charged with engaging “in a multi-million-dollar scheme to defraud investors, and a separate scheme to defraud doctors and patients”, Moneycontrol reported.
In 2019, a district court judge dismissed the charges about the patients being victims because the costs of the blood tests were covered by medical insurance companies.
The judge argued that patients did not lose any money while using the services and tests that Theranos provided, Reuters reported.
The charges of fraud however, remained.
In the past few months, former lab workers at Theranos have testified about the inaccuracies in the testing devices and how they were forced by higher authorities to manipulate data by publishing only those results that made the tests seem functional, according to The Guardian.
Other former workers also testified about the degree of emotional discomfort that they had had to endure while advancing the authenticity of tests that they knew were nowhere close to authentic.
Based on all this, Holmes has now been found guilty of at least four charges, which means that she will face some prison time.
"She chose fraud over business failure,” prosecutor Jeff Schenk remarked during the closing arguments, as quoted in The Guardian.
"She choose to be dishonest with investors and patients. That choice was not only callous, it was criminal."
(With inputs from The Guardian, Reuters, the New York Times, CNBC, Moneycontrol, Business Insider, and Vanity Fair.)
(At The Quint, we question everything. Play an active role in shaping our journalism by becoming a member today.)