Elizabeth Holmes verdict: Guilty of four counts of defrauding investors through failed blood-testing company | January 7, 2022 | Palo Alto Weekly | Palo Alto Online |

Palo Alto Weekly

News - January 7, 2022

Elizabeth Holmes verdict: Guilty of four counts of defrauding investors through failed blood-testing company

Decision comes after a 14-week trial that captivated nation, put Silicon Valley's no-holds-barred entrepreneurial culture on trial

by Lloyd Lee, Jocelyn Dong and Jamey Padojino

After more than four months on trial, former Silicon Valley CEO Elizabeth Holmes has been found guilty of four counts of defrauding investors of nearly $145 million through her failed Palo Alto blood-testing startup, Theranos.

The verdict in the federal case was reached by jurors who had deliberated since Dec. 20 and who had announced Monday morning that they were deadlocked on three of the 11 charges of wire fraud and conspiracy to commit wire fraud that had been brought against Holmes by the U.S. Attorney's Office.

Though U.S. District Judge Edward Davila sent the jurors back to try to reach unanimous agreement on those three counts, which turned out to be related to three transfers of millions of investors' dollars, they again notified Davila in the afternoon that they were hopelessly deadlocked. Davila then allowed the jury to cease deliberations and to return its verdict.

The jury also found Holmes, 37, not guilty of four charges, three of which related to fraud committed against patients whose blood had been submitted for testing by Theranos.

As the verdicts were read in the U.S. District Courthouse in San Jose, Holmes, her family and partner displayed no reactions. Holmes sat still as she had prior to the reading of the verdict.

The jury reached the verdict after a 14-week trial that captivated the nation's attention and in some ways put Silicon Valley's famed entrepreneurial culture, full of hubris and moral vagaries, on trial as well. Opening arguments in the case drew crowds of journalists from around the world as well as Holmes' groupies in black turtleneck sweaters, who lined up for hours for the chance to get inside the courthouse.

The intense interest in the case stemmed from the high profile that Theranos — and its young, female CEO — had garnered during the company's ascent. Feature stories by national media outlets focused on the support the company gained from American political and business luminaries, who'd been captivated by the pie-in-the-sky vision of diagnostic lab tests done with a single drop of blood.

Holmes was indicted in June 2018 for the alleged multimillion dollar scheme surrounding the blood-testing technology of the company that she'd founded. She ultimately stood trial on 11 fraud charges: Seven counts pertained to investor-related wire fraud and the remaining four counts were tied to wire fraud against patients.

During the trial, federal prosecutors questioned numerous witnesses, most notably former U.S. Secretary of Defense James Mattis, who served on Theranos' board of directors, and journalist Roger Parloff, whose June 2014 cover story in Fortune magazine propelled Holmes and Theranos to fame.

Past employees called to the stand described quality control problems and complaints surrounding the blood test results from the company's Edison devices, among other issues. Those offering testimony included former lab directors Adam Rosendorff and Kingshuk Das and former lab associate Erika Cheung.

Investors testified to the millions of dollars they put into Theranos with the understanding that the fingerstick blood-testing technology worked, and patients and doctors spoke to inconsistent results, including one case involving a pregnant woman.

A crucial point of the trial came in late November, when Holmes took the witness stand. Over the course of seven days, her testimony touched on whether the Edison machines provided accurate results and statements she had made about Theranos' blood-testing technology. Holmes also claimed she was abused by Ramesh "Sunny" Balwani, her ex-boyfriend and alleged co-conspirator who was Theranos' former chief operating officer, and spoke to their frustration over the company's problems. Balwani is set to stand trial this month.

In the end, the jury was convinced that Holmes had defrauded Theranos' investors, finding her guilty of conspiracy to commit wire fraud against investors and of three counts of wire fraud through the transfers of three investors' funds, to the tune of $38 million, $100 million and $6 million.

Jurors, however, were not convinced that the prosecution had met the burden of proof on charges that Holmes conspired to commit wire fraud against patients and that she was culpable in sending two patients their blood-test results. A fourth charge of which the jurors found her not guilty concerned the transfer of money from a Theranos account to pay for advertising and marketing.

Davila on Monday declared a mistrial on the three charges over which the jury deadlocked. Each pertained to the wire transfers of another $10 million from three investors.

David Alan Sklansky, faculty co-director at Stanford Criminal Justice Center, said on Monday before the reading of the verdict that the deadlocked charges can be retried.

"Then the government will be free, if it wants to, to retry Holmes on the other three counts, whatever the results are on the eight charges," he said.

However, Sklansky noted that, in his view, it's unlikely that the government will retry Holmes for the three charges.

The trial didn't come without roadblocks. Three jurors were dismissed and a water main break shut down the federal courthouse for a few days. By the end of October, Davila updated the trial schedule to make up for lost time.

Holmes was not remanded into custody Monday, though prosecutors asked the judge to set a secured bail bond. She faces a maximum sentence of 20 years in prison, a fine of $250,000 and restitution for each count of wire fraud and for each conspiracy count, the U.S. Attorney's Office stated in a press release.

The average sentence in California for federal fraud in 2019, however, was 25 months, according to 2019 data from the United States Sentencing Commission.

Bay City News Service contributed to this report. Email Editorial Assistant Lloyd Lee at [email protected]


Posted by Heckity
a resident of Barron Park
on Jan 4, 2022 at 3:29 pm

Heckity is a registered user.

Couldn't be happier, unless she was convicted of more of the counts against her. Any person who uses another person as the reason they defrauded investors, and falsified medical results, deserves serious jail time. I don't know Sunny Balwani or Elizabeth Holmes, but I think both of them need a good number of years in the slammer. Bye Felicia!

Posted by Mama
a resident of Crescent Park
on Jan 4, 2022 at 4:20 pm

Mama is a registered user.

Fantastic story…if you’re interested, be sure to read Bad Blood by terrific WSJ writer John Carreyrou.

Posted by JR
a resident of Palo Verde
on Jan 4, 2022 at 4:44 pm

JR is a registered user.

This verdict was not justified and will be overturned on appeal. Elizabeth is an amazing person and will have more success in her life than 100x muckraking journalists out to destroy startup companies like Theranos. You could easily write a hit piece on any startup and point out some flaws. The original Apple I didn't always work, the original Google sometimes crashed, etc. That doesn't mean they are terrible companies that deserve to be destroyed.

All this will result in is more startups staying in stealth mode and not talking to ANYONE. All it takes is one journalist with an agenda and your startup is toast. This is about old money Wall Street Journal coming to trash, destroy, and imprison those that actually build things in America.

Posted by Lynne Henderson
a resident of Mountain View
on Jan 4, 2022 at 5:47 pm

Lynne Henderson is a registered user.

I just wanted to thank the Palo Alto Weekly for having a better account about the substance of charges where the jury was unable to reach a verdict than the NYT, SF Chron, or AP. Without having the charges in front of me, it was difficult to know where the jury "hung" . . . not sure who the victims were or why they didn't find intent commit mail fraud, but at least I understand the prosecution's case may have been weaker for some charges and that the jury tried very hard to untangle months of knots.
Thank you again.

Posted by Menlo Mom
a resident of Menlo Park
on Jan 4, 2022 at 5:52 pm

Menlo Mom is a registered user.

JR: Muckraking journalists pursued the Epstein case until convictions were brought against Epstein and now Ghislane. It was journalist Julie K. Brown who stayed with that story until it was reopened (she also reported on horrific conditions for mentally ill prisoners in FL).

Also: if my phone glitches or my Google search turns up imperfect results, that doesn't affect my life. If a blood test causes me to make medical decisions based on the results, that's a different level of seriousness - and that's why Holmes and Balwani need to be help accountable.

Posted by Online Name
a resident of Embarcadero Oaks/Leland
on Jan 4, 2022 at 6:28 pm

Online Name is a registered user.

@Menlo Mom, I totally agree with you. The fact that she wasn't found guilty of consumer fraud makes me wonder if the people who were told they had cancer, HIV, had a dangerous pregnancy etc. could sue for damages for emotional distress, trauma etc.

They had to have been traumatized by the wrong diagnoses and deserve something.

Posted by It.is.what.it.is
a resident of Another Palo Alto neighborhood
on Jan 5, 2022 at 12:36 am

It.is.what.it.is is a registered user.

My goodness, if she gets only 25 months, it's going to be a result of her white privilege. She was affecting peoples lives. Watch HBO's documentary: "The Inventor: Out for Blood in Silicon Valley" Web Link It's very well done, is not boring, and shows that there were mobsters harassing and threatening the employees who wanted to blow the whistle on the company. She is an evil woman and should not be allowed to serve the three 20 year terms concurrently. 60 years would be perfect.

Sure, Bernie Madoff stole people's money, but she stole people's health. Unforgivable.

Posted by jhskrh
a resident of Community Center
on Jan 5, 2022 at 7:07 am

jhskrh is a registered user.

Disgusted to think Holmes will get off with a slap on the wrist. She is a manipulative con artist. No bail, just her signature? I guess judge fell under her spell too. One bright spot. Betsy DeVos must be furious, scammed out of $100 million LOL. And what s legacy for Schultz.

Posted by Bystander
a resident of Another Palo Alto neighborhood
on Jan 5, 2022 at 10:27 am

Bystander is a registered user.

Without commenting particularly on this case, the news must send a chill to anyone starting up in Silicon Valley.

I wonder how many unethical practices have become standard when looking for funding and such funding is competitive. Cut throat business practices have often resulted in successful enterprises that quite often tidy up their act as they understand their responsibilities as role models. Facebook started as a means to rate women on college campus. Virgin started as an impetuous means to get stranded passengers to their Virgin Islands vacation destination. Fun to look back on, but none of these big names will be squeaky clean when looked at through a microscope.

Posted by Peter
a resident of Charleston Gardens
on Jan 5, 2022 at 3:25 pm

Peter is a registered user.

The whole "fake it 'til you make it" approach might work for vaperware, but not Healthcare.

Posted by TimR
a resident of Downtown North
on Jan 6, 2022 at 2:56 pm

TimR is a registered user.

I am a little surprised that the jury cared enough about rich people problems to convict her. But I believe there were two unique factors. One, this was a medical device, and the public, as well as the government, hold those to a much higher standard than some app that nobody actually cares about. And two, she abused the her heralded status of a young female entrepreneur. People gave her money because they wanted to help a woman, regardless of the project. And it seems she knew that, and used it as part of the scam. But absent those two factors, I don't think we'd even be reading about this case.

Posted by All Along the Watchtower
a resident of Old Palo Alto
on Jan 8, 2022 at 11:42 am

All Along the Watchtower is a registered user.

Regardless of what transpires following sentencing, Elizabeth Holmes' credibility as a scientist devoted to humanity is gone for good.

She will still be viewed by some as an intrepid entrepreneur as dollar signs speak volumes for those who lack a soul.

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