Elizabeth Holmes – Theranos

Elizabeth Holmes is accused of running a massive fraud on the rubes of Silicon Valley. © REUTERS

Elizabeth Holmes founded Real-Time Cures, which later changed its name to Theranos, at 19 years before dropping out of school to run the company. Holme’s idea was to use technology to perform tests using a small blood sample from a finger prick to detect different health conditions, such as cancer, blood pressure, and cholesterol.

The funder managed to raise venture capital from renowned investors, such as Larry Ellison, Rupert Murdoch, and Tim Draper, with the condition that the company’s operations would be kept secret and that she would have total control over everything. The board once tried to remove Holmes as the CEO because she was inexperienced, but the attempt failed. Holmes managed to convince them that she was competent to run the company.

Afterward, Theranos received millions of funding and formed partnerships with other firms, such as Safeway, worth $350 million, making the CEO feature in different talks with famous investors, such as the founder of Alibaba, Jack Ma.

At one point, Holmes graced the covers of Forbes because of her invention that earned her a net worth of about $4.5 billion, making her the youngest female billionaire.

Holmes lived a lavish lifestyle and copied everything that Steve Jobs did, from furniture in her office to maintaining secrecy. The security procedures at Theranos headquarters were unmatchable to any other firm operating in the same sector. Visitors and employees were required to sign non-disclosure agreements.

Moreover, it was a requirement for security guards to accompany guests when in the building, even when visiting the restrooms. Besides, Holmes instigated the prosecution of three former employees claiming that they had infringed its business secrets. However, despite Holmes’s vow to secrecy, Erik Cheung decided to expose Theranos malpractices to the federal agents in 2015. The first published report by The Wallstreet Journal indicates how the company used competitor equipment to examine blood samples, resulting in erroneous results.

The article raised various questions necessitating an investigation by the FDA in August 2015. The investigation findings indicated that Theranos laboratories had significantly inaccurate results from the patient tests done. As a result, Theranos had to forego all its lab activities and wellness centers, and in March 2018, Balwani, Theranos, and Holmes were charged by the Securities and Exchange Commission (SEC) for massive fraud. The disclosures and repercussions destroyed the company’s and Holmes’s reputation.

Theranos collapsed in 2018. Holmes, now 37 years, faces up to 20 years imprisonment for wire fraud and conspiracy to commit wire fraud if found guilty. Holmes pleaded not guilty of all charges even though testimonies from witnesses, patients, and employees indicate that the company’s blood test technology was a sham and often produced misleading results.

The opening statements from the prosecution side maintain that Holmes lied and cheated to get money, which constitutes fraud. On the other hand, the defense states that Holmes was motivated by providing cheap and accessible lab testing, which would only take 20 to 30 minutes.

However, although the assessment was inexpensive, a court examination of a former Theranos scientist affirms that the Edison machines failed to pass quality control, meaning they were not ready for patient use. Besides, another scientist that worked with Theranos under a contract told Victoria Sung, the prosecutor, that the company’s results were biased since they had significant variabilities, making them unusable.

In addition, a patient’s statement indicates that a Theranos test suggested that she would have a miscarriage, which was false. Upon seeing her doctor with the results, Audra Zachman advised on the options for pregnancy termination. According to the patient, Brittany Gould, providing proper patient care commences with an accurate diagnosis. 

The prosecution has a strong case against Holmes based on the testimonies, investigations, and conversations recovered between her and the COO. However, the question is whether Holmes will be called on the stand for cross-examination by the prosecution.

Her lawyers intend to argue that she ran a legitimate business and that Balwani’s controlling behavior affected her capabilities to make informed decisions. The main task for the prosecution is to show that Holmes intended to defraud for the charges to stick. 

Theranos founder, chairwoman, and C.E.O. Elizabeth Holmes, in Palo Alto, California, September 2014.BY ETHAN PINES/THE FORBES COLLECTION.
Theranos founder, chairwoman, and C.E.O. Elizabeth Holmes, in Palo Alto, California, September 2014.BY ETHAN PINES/THE FORBES COLLECTION.

Kelvin Mwenda,

A freelancer with a passion for writing stories on different genres and occurrences across the globe. Holder of a Master’s degree in Business Administration and a Bachelor’s in Economics and Statistics.  

“Research is what I’m doing when I don’t know what I’m doing.”

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