Elizabeth Holmes Found Guilty of Fraud in Theranos Case

Theranos founder Elizabeth Holmes has been found guilty of three counts of wire fraud, as well as one count of conspiracy to commit wire fraud against Theranos investors. The jury at federal court in San Jose, California, returned a not-guilty verdict on three charges of wire fraud, as well as conspiracy to commit wire fraud against Theranos patients. The jury could not come to a consensus on three of the counts of wire fraud, resulting in a mistrial for those charges. The prosecutor may choose to pursue a retrial on those charges in the future.

Earlier today, the seventh day of deliberation, jurors told the judge they were not able to reach a verdict on three of the 11 counts against Theranos founder Elizabeth Holmes, who was on trial for misleading investors about the capabilities of the technology of the blood-testing start-up. The judge asked them to continue deliberation; several hours later, just after 3 p.m. PT, the jury sent the judge an additional note, saying they still could not reach a unanimous decision. U.S. District Court Judge Edward Davila then began questioning the jury, to see if there was any way to get around this impasse. They could not, and about an hour later, the jury returned the full verdict.

The speed with which the jury has gone mirrors the slow pace of the case against Holmes and her company. The rare federal prosecution of a tech startup began in 2018, when Holmes was indicted for bilking investors out of hundreds of millions of dollars and claims that she deceived hundreds of patients and doctors. Holmes was indicted alongside her former business partner and ex-boyfriend, Ramesh “Sunny” Balwani, but the court severed their cases once Holmes indicated she would testify that she’d been a victim of abuse and coercive control during their decade-long relationship. Both pleaded not guilty. Balwani, who has also denied the abuse allegations, faces trial in 2022.

Delayed by the start of the Covid-19 pandemic and the birth of Holmes’ first child, the trial began in September in the Northern District of California and lasted more than three months. Jurors saw 32 witnesses (29 of them for the prosecution) including scientists, former Theranos executives and former defense secretary James Mattis, who had served on the company’s board before becoming disillusioned with its practices.

The trial drew long lines of spectators to the courthouse, including so-called “fans” of Holmes’ who dressed up like her. This was especially true when Holmes herself took the stand, testifying for seven days on her own behalf. Through tears, Holmes said Balwani had manipulated her and forced her to have sex with him. She claimed that despite having the power to fire him, she was under his influence, and her judgment was so clouded by the abuse that she was unable to think rationally. 

The jury also saw text messages between Balwani and Holmes, where she referred to him as “my nirvana,” and they called each other mushy pet names like “tiger” and “tigress.” Balwani wrote to Holmes at one point, “I worship you.”

Founded in 2003, Theranos promised hundreds of health diagnoses from just a drop of blood taken by a finger prick. Holmes, who said she came up with the idea because she is terrified of needles, raised $945 million from investors including Rupert Murdoch, helping the company reach a $9 billion valuation. Theranos conducted more than 8 million blood tests on patients before a 2015 Wall Street Journal investigation revealed major issues with the company’s technology and federal regulators began investigating. In addition to investors losing millions, many patients received error-ridden results for serious conditions: the first patient to testify in this trial described receiving false results that she’d had a miscarriage, although the defense successfully blocked her from sharing the emotional impact of receiving that misinformation during what turned out to be a healthy pregnancy.

In order to convict Holmes, the state needed to convince the jury that she’d intentionally deceived people about Theranos. Throughout the trial, the prosecution has maintained that Holmes was motivated by greed. She built her company on a series of lies, they claimed, in pursuit of a major payday and her dream of becoming the next Steve Jobs. “The scheme brought her fame, it brought her honor, and it brought her adoration,” Assistant U.S. Attorney Robert Leach said during opening statements Sept. 8. They called former Theranos employees, whistleblowers, patients, and investors to testify.

In closing statements, Assistant U.S. Attorney Jeffrey Schenk, said evidence showed Holmes knew Theranos’ tests were inaccurate but that she opted to lie rather than admit defeat.​​ “She chose fraud over business failure,” he said. 

In her defense, Holmes has admitted to making mistakes, saying on the witness stand that looking back, she would have changed a few things — like her choice to add Pfizer’s logo to a report praising Theranos’ product. “I wish I had done it differently,” Holmes said. But she maintained the same stance as her lawyers, who said in their opening statement “Failure is not a crime.” Holmes also pointed the finger at Theranos’ lab directors, claiming that they were closest to the technology and trying to argue that if anyone was responsible for issues with the testing equipment, it was them. 

Holmes’ lawyers have portrayed her as a well-intentioned entrepreneur who worked hard to build revolutionary technology. “She believed she was building a technology that would change the world,” Holmes’ lawyer Kevin Downey said in his closing statement. She stuck with the company and when it failed, he said, she “went down with that ship.”

The three wire fraud counts of which she was found guilty represent investments made by individuals, totaling over $144 million, according to the indictment. The conspiracy to defraud investors charge stemmed from the allegation that she “deviz[ed] a scheme” to defraud potential investors. Each charge carries a possibility of 20 years in prison, a $250,000 fine, and restitution of what was defrauded. A sentencing hearing will be scheduled for a later date.