Elizabeth Holmes started as a charismatic Stanford dropout at the age of 19, claiming she had found her calling in life through the identification of a technological gap in our healthcare system. In 2003, Holmes founded a private healthcare company she named Theranos, a conjunction of Therapy and Diagnose, becoming the youngest CEO in the Silicon Valley. Her dream was to create a machine that could detect hundreds of medical conditions and diseases with just one drop of blood from the fingertip. This machine was to be implemented in stores across America to provide citizens with the ability to test at a lower cost and higher frequency. Holmes was eager to flip the healthcare system on its head, revolutionizing medical laboratory testing, and she was out for blood.
To fund Theranos, Holmes had charmed many powerful men into believing in her dream. One investor was former U.S. Secretary of Defense James “Mad Dawg” Mattis, investing $85,000 of his own money into Theranos, placing its net worth over $9 billion. On September 22, 2021, Mattis stated in his testimony that Holmes initially struck him as “sharp, articulate, committed”, but concluded by saying “looking back, I am disappointed at the level of transparency from Ms. Holmes”[1]. Mattis is the seventh witness to give testimony against Holmes in a criminal case of two counts of conspiracy to commit wire fraud and nine counts of wire fraud [2] as defined by 18 U.S.C.A. § 371[3], alleging clear intent to defraud someone under false representations or promises.
Holmes also had disarmed national pharmacy and retail chain Walgreen through publicity and mainstream attention, raising over $50 million from the pharmacy giant by stating they had been FDA approved-which they never had- and that their technology had been comprehensively validated, which they could never prove[4].
Additionally, Holmes had solicited doctors and patients into using Theranos’s blood testing laboratory services, even though, allegedly, she knew Theranos was not capable of producing reliable and accurate results for most blood tests[5]. The means of alleged deception was done through a combination of direct communications, marketing materials, media statements, and financial statements. Holmes is being criminally investigated under the allegation of defrauding investors by lying about the accuracy of her tests as well as defrauding patients and doctors by producing inaccurate tests, going against what she had advertised. Trial for Holmes began 08/31/2021 where she may face 20 years of prison and a $500,000 fine. She intends to plead not guilty of wire fraud under the defense of naivety, that she was a hard-working, young businesswoman who simply failed in the industry[6].
My questions to you are:
(1) Do you believe naivety is reason enough to be found not guilty?
(2) Can "conspiracy to commit fraud" be proven beyond reasonable doubt in a criminal case?
(3) Should some of the fault of Holmes’ actions fall
on those blindly investing?
(4) Based on the fact pattern above, would you
consider her innocent, not guilty, or guilty?
[1] The Associated Press, “What a Trump
Defense Secretary Said at the Elizabeth Holmes Trial,” NPR, September 23,
2021, https://www.npr.org/2021/09/23/1040033127/mattis-elizabeth-holmes-theranos-trial
[2] U.S. v. Holmes, et al. (2021)
Northern District of California
[3] 18
U.S.C.A. § 371 (1994)
[4] Sophia Kunthara “A Closer Look At
Theranos’ Big-Name Investors, Partners And Board As Elizabeth Holmes’ Criminal
Trial Begins “, September 14, 2021, https://news.crunchbase.com/news/theranos-elizabeth-holmes-trial-investors-board/
[5] U.S. v. Holmes, et al. (2021)
Northern District of California
[6] Jody Godoy, “Failure is not a crime,' defense says in trial of Theranos founder Holmes”, September 9,2021 https://www.reuters.com/business/healthcare-pharmaceuticals/fraud-trial-theranos-founder-elizabeth-holmes-set-begin-2021-09-08/
I think naivety is not an excuse for committing a crime. If someone asks me to carry a mystery suitcase across the border and it turns out to be full of cocaine, its no less of a crime than if I had known.
ReplyDeleteIf evidence shows that she knew her devices didn't work, and she doctored lab results and other documents, that is beyond a reasonable doubt!!
If investments were made in good faith, based on the evidence they were given, then I don't think the investors themselves bear responsibility.
She sounds pretty guilty to me--the book Bad Blood, plus other works of investigative journalism that I've read lay out a pretty compelling argument that she knew exactly what she was doing.
Megan, I also read Bad Blood and it's really hard to look past everything that was uncovered. It's been a few years so I don't remember all the details but I do recall multiple employees being scared to come forward because of the "whistleblower" retaliation/threats they were receiving
Delete(1) Do you believe naivety is reason enough to be found not guilty?
ReplyDeletea. No, not for a case like this. Running a stop sign or crossing where I am not supposed to may be used as a defense, but in this case, I find it implausible.
(2) Can "conspiracy to commit fraud" be proven beyond reasonable doubt in a criminal case?
a. This will be hard to prove, but I think it is possible with the right evidence showing the planning.
(3) Should some of the fault of Holmes’ actions fall on those blindly investing?
a. No, this seems like blaming the victim. I’m sure we have all been suckered into buying something we didn’t need or paying more than we wanted for something. Their bad decision making on who to invest in does not constitute fault, just bad judgment. If there is proof of knowingly participating in the scheme, I reverse and say they should share fault.
(4) Based on the fact pattern above, would you consider her innocent, not guilty, or guilty?
a. I would find her guilty. Based on what I understood, I feel she knowingly defrauded the investors, doctors, and patients with a faulty product and there were likely dire consequences for the vulnerable patients who were relying on correct information. The doctors would have made faulty recommendations for care based on it as well and the patients suffered for it, and may have even died.
I am a bit bias to this case as I have been following it since I read the book “Bad Blood” when it was released in 2018. I do not think naivety is reason enough to be found not guilty, Holmes was leading the conversations with investors and was aware the device did not produce the results it was intended to. Holmes knew her device did not work as she was strategic with who she let “research” the product and even only allowed certain people in the working labs. Pfizer was one of the Pharma companies Holmes was trying to recruit and based on their investigation, they deemed they would not move forward with the product, yet that did not stop Holmes from distributing results with the Pfizer logo – to me, this shows she was being deceitful in her actions. Based on the evidence against Holmes, I believe she should be found guilty. She knew her product did not produce the results she marketed but she continued to approach investors and provide faulty results.
ReplyDeleteInteresting post and questions. Sadly, I have not followed this case. I am constantly amazed at the 'defraud' elements in these cases. I have sat through a few trials where evidence is presented and the amounts of money are staggering. In the Holmes matter, 'conspiracy to commit fraud' is a statutory charge used to prove intent. It is not the prevailing element in the Indictment, but used more for strategy in charging and Indicting the case. To prove the charge of conspiracy, the prosecution must demonstrate the elements of 'conspiracy' were proven. It is a challenge to do that. The evidence has to be spot on to convict but I view this as someone who had an idea, became greedy - again at first glance - and was consumed with that greed.
ReplyDeleteGreat post! I do believe Holmes was naïve. Does that make her not guilty? No. However, what really blows me away is her list of investors and the amount of cash they trustingly put in the hands of Holmes and Theranos. The idea is not original to Holmes. It has been at the forefront of scientific research for years. A simple search for "lab on a chip" produces a host of scientific research publications suggesting that this could have been a race to see who would develop and patent a product first. That speaks to Pfizer's interest in testing the product, however that testing would have been vetted before the product was ever manufactured and marketed. Fraud seems evident here.
ReplyDeleteI don't believe the investors can be held responsible, but I would suggest it was a bit of group think--investing because of other big names who had invested without doing due diligence and researching Theranos first.
As we are aware, "beyond a reasonable doubt" is a high bar of proof. I would defer to Glen's experience and expertise in this area.
Yes, I believe Holmes should be found guilty, along with her former boyfriend who is being tried separately. I also don't believe her claim of abuse by her former boyfriend will buy her any points for innocence. However, I am also surprised that there aren't more defendants than two. Where are the parties who actually developed and manufactured the faulty machine Theranos sold? There should be some accountability in that arena. Many of you who read Bad Blood suggested that there were threats against whistle-blowers, but wouldn't one's moral compass weigh more heavily than the threat?
Though we are all crazy busy, it's very interesting to read the bizarre and nearly unbelievable situations brought on by human nature. Thanks Amber! Obviously Holmes, no relation, has a right to a fair and accurate trial. I know conspiracy is a difficult charge to prove. But I also believe there was no naivety or misunderstanding on the part of Holmes, specifically during the latter part of her endeavor. At this point I would deem her guilty of fraud and find her investing associates victims, (even a giant company such a Pfizer). There may another criminal element if, as Trina stated, cause of death or injury is related. And as Glen mentioned, I believe greed was a huge factor for many involved. Back to the human nature thing, for many it seems, dollar signs became much more tempting than fact or caution.
ReplyDeleteI believe it comes down to her intent. Given the fact pattern, she is clearly guilty of intending to defraud her investors. She knew the equipment did not work, and she represented that it did work. I believe this is enough to find her guilty of conspiracy to commit fraud. With that said, given the significance of the value of investment, her investors should have followed the guidelines set forth for sophisticated investors. These people win big and sometimes lose big. Although, if she is found guilty of defrauding the investors, I believe the investors should be entitled to some sort of recovery.
ReplyDeleteApologies that I am arriving late to this conversation.
ReplyDeleteAfter reading all the above comments, the consensus is that Ms. Holmes has a lot to counter since there is so much evidence and testimony alleging fraud. Although naivete may seem like a last-ditch effort to dodge the bullet, Ms. Holmes is doing what many powerful men do-- utilize any preconception to thwart, dodge, minimize, and abate allegations. Honestly, if Ms. Holmes is imprisoned it tells me more about the slant of the judicial system because from the 2008 financial crisis, many more billions of dollars were taken out of the hands of average residents and citizens and yet, no one ever went to prison.
My questions to you are:
(1) Do you believe naivety is reason enough to be found not guilty? I do not believe naivete is a good enough reason to be found guilty.
(2) Can "conspiracy to commit fraud" be proven beyond reasonable doubt in a criminal case? I'm not sure I follow this question, would a civil case be any different?
(3) Should some of the fault of Holmes’ actions fall on those blindly investing? Yes, of course. Many average Americans are duped by bad actors and yet, they rarely see their money back. I would say to these investor, tough luck. go write a book and see if you can make money off this costly lesson.
(4) Based on the fact pattern above, would you consider her innocent, not guilty, or guilty? I would consider her guilty.