In a case that exposed Silicon Valley’s culture of hubris and hype, Elizabeth Holmes was convicted Monday of duping investors into believing her startup Theranos had developed a revolutionary medical device that could detect a multitude of diseases and conditions from a few drops of blood.
A jury convicted the 37-year-old company founder on two counts of wire fraud and two counts of conspiracy to commit fraud after seven days of deliberation. The verdict followed a three-month trial featuring dozens of witnesses – including Holmes herself. She now faces up to 20 years in prison for each count, although legal experts say she is unlikely to receive the maximum sentence.
The jury deadlocked on three remaining charges. The split verdicts are "a mixed bag for the prosecution, but it’s a loss for Elizabeth Holmes because she is going away to prison for at least a few years," said David Ring, a lawyer who has followed the case closely.
Federal prosecutors depicted Holmes as a charlatan obsessed with fame and fortune. In seven days on the witness stand, she cast herself as a visionary trailblazer in male-dominated Silicon Valley who was emotionally and sexually abused by her former lover and business partner, Sunny Balwani.
The trial also laid bare the pitfalls of one of the go-to moves of Silicon Valley entrepreneurs – conveying a boundless optimism regardless of whether it’s warranted, known as "fake it ‘til you make it." That ethos helped hatch groundbreaking companies such as Google, Netflix, Facebook and Apple – the latter co-founded by one of Holmes’ heroes, Steve Jobs.
Her conviction might lower the wattage – at least temporarily – on the brash promises and bold exaggerations that have become a routine part of the tech industry’s innovation hustle.
Holmes remained seated and expressed no visible emotion as the verdicts were read. She bowed her head several times before the jury was polled by U.S. District Judge Edward Davila. After the judge left the courtroom to meet with jurors individually, Holmes got up to hug her partner, Billy Evans, and her parents before leaving with her lawyers.
Holmes did not respond to questions about the verdicts lobbed at her during a walk from the courthouse to the nearby hotel where she has stayed during jury deliberations.
She was to remain free on bond while awaiting sentencing, which will be determined by the judge.
In a written statement, U.S. Attorney Stephanie Hinds thanked the jury for navigating the case through the pandemic and said Holmes must now be held "culpable" for her crimes. Hinds did not mention the jury’s decision to acquit Holmes on the four counts involving patient fraud.
The bold dream Holmes pursued when she founded Theranos in 2003 at the age of 19 had become a nightmare by the time she was indicted on felony charges in 2018.
During that span, Holmes went from an unknown to a Silicon Valley sensation who had amassed a $4.5 billion fortune on paper to a vilified failure. Her downfall was dissected in documentaries, books, podcasts and will soon be rehashed in a Hulu TV series called "The Dropout" starring Amanda Seyfried in the lead role.
Holmes set out to create a less painful, more convenient and cheaper way to scan for hundreds of diseases and other health problems by taking just a few drops of blood with a finger prick instead of inserting a needle in a vein. She aimed to upend an industry dominated by giant testing companies such as Quest Diagnostics and Labcorp, starting with setting up "mini-labs" in Walgreens and Safeway stores across the U.S. that would use a small Theranos device called the Edison to run faster, less intrusive blood tests.
The concept – and the way Holmes presented it – enthralled wealthy investors eager to buy an early stake in a game-changing company. It helped Theranos raise more than $900 million from savvy billionaires such as media mogul Rupert Murdoch and software magnate Larry Ellison, as well as well-to-do families such as the Waltons of Walmart and the DeVos clan behind Amway.
Holmes also wooed a well-connected board that included two former U.S. secretaries of state, Henry Kissinger and the late George Shultz: two former secretaries of defense, Gen. James Mattis and William Perry; former Sen. Sam Nunn; and former Wells Fargo CEO Richard Kovacevich. She charmed former President Bill Clinton in an on-stage presentation and impressed then-Vice President Joe Biden, who effusively praised her during a 2015 tour of a Theranos lab.
What most people did not know at the time was that Theranos’ blood-testing technology kept producing misleading results. That forced patients to undergo regular blood draws instead of the promised finger sticks and led Theranos to secretly test those samples using conventional machines in a traditional laboratory setting. Evidence presented at the trial also showed that Holmes lied about purported deals that Theranos had reached with big drug companies such as Pfizer and the U.S. military.
The deception backfired in 2015 after a series of explosive articles in The Wall Street Journal and a regulatory audit of Theranos uncovered potentially dangerous flaws in the company’s technology, leading to its eventual collapse.
During her testimony, Holmes occasionally expressed contrition for her handling of a variety of issues, but she often contended that she had forgotten the circumstance surrounding some of the key events spotlighted by the prosecution. She insisted she never stopped believing that Theranos was on the verge of refining its technology.
Instead, she heaped blame on Balwani, who she secretly lived with while he was Theranos’ chief operating officer from 2009 to 2016.
Holmes testified that Balwani let her down by failing to address the laboratory problems that he had promised to fix and, in the most dramatic testimony of the trial, alleged he had turned her into his pawn through a long-running pattern of abuse while exerting control over her diet, sleeping habits and friendships. This all occurred, she said, after being raped by an unnamed assailant while she was still enrolled at Stanford.