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Elizabeth Holmes, the founder of health technology company Theranos, was found guilty on four counts of fraud for allegedly defrauding investors, doctors and patients. The high-profile U.S. v. Holmes, et al. trial began on August 31, 2021, and concluded on January 3, 2022.
On Monday, a jury consisting of eight men and four women declared the verdict following three months of proceedings, a week of deliberations and testimony from over 30 witnesses.
Holmes was initially convicted of 11 fraud-related charges for making false claims about her company’s technologies and hiding its shortcomings.
However, she was later found not guilty on four charges related to patients and guilty of four charges involving investors. The jury was reportedly deadlocked on the remaining three charges, leading to Judge Edward Davila declaring a mistrial on the three counts.
Former Theranos president and chief operating officer Ramesh "Sunny" Balwani has also been convicted of charges similar to Elizabeth Holmes.
The U.S. Department of Justice alleged that Balwani and Holmes were involved in a "multi-million-dollar scheme" to defraud investors, doctors and patients through Theranos and its advanced technology claims.
Legal charges against Elizabeth Holmes explored
In June 2018, a grand federal jury convicted Elizabeth Holmes and Ramesh "Sunny" Balwani of nine counts of wire fraud and two counts of conspiracy to commit wire fraud following a two-year-long investigation by the U.S. Attorney's Office for the Northern District of California.
Prosecutors alleged that the corporate moguls were involved in two separate criminal schemes, one to defraud investors, and another to defraud doctors and patients. The U.S. v. Holmes, et al. trial faced several delays due to the COVID-19 pandemic and Holmes’ pregnancy and ultimately began on August 2021.
On January 3, 2021, Elizabeth Holmes was found guilty on three counts of wire fraud and one count of conspiracy to commit wire fraud involving investments made in Theranos by healthcare hedge fund investor Brian Grossman, the Betsy DeVos family, and Daniel Mosley’s Mosley Family Holdings.
Meanwhile, the jury was deadlocked on three counts of wire fraud related to investments made by Black Diamond Ventures founder Chris Lucas, Hall Group vice president of finance Bryan Tolbert and former money manager and financial planner Alan Eisenman.
Holmes was acquitted of three additional counts of wire fraud and one of conspiracy to commit wire fraud involving patients who underwent testing at Theranos. The former billionaire pled not guilty to the other four charges and will likely appeal.
A retrial for the three counts with no verdict will also be held in a new case with a status meeting scheduled for next Monday. Elizabeth Holmes is currently free on bail but can face up to a maximum sentence of twenty years in prison, a fine of $250,000 and restitution following her sentencing.
Wall Street Journal highlighted cracks in Theranos' technology
Elizabeth Holmes was once helmed as the next Steve Jobs and declared the youngest female billionaire in the world. She dropped out of Stanford University and established Theranos when she was just 19 years old.
The California-based company claimed that its portable blood analyzer device could run comprehensive blood tests with just a few drops of blood pinpricked from the tip of fingers. Holmes alleged that the tests were even capable of detecting conditions like diabetes, high cholesterol and cancer.
The idea behind Theranos was considered to be revolutionary and the company reached its peak during 2014. It successfully racked up millions in funding and investments from investors like Draper Fisher Jurvetson and Larry Ellison, among others.
However, by 2015 the FDA started questioning Theranos’ facilities after finding “major inaccuracies” in its testing. The company faced its first major blow after an investigation by the Wall Street Journal highlighted the cracks in its technology.
Journalist John Carreyrou’s report stated that Theranos secretly used general blood-testing technology by other companies as its own signature machine, Edison, failed to deliver accurate results.
Following the investigation, Elizabeth Holmes was banned from the lab-testing industry for two years in 2016. The claims were further confirmed by the U.S. Security and Exchange Commission (SEC) leading to the shutdown of all Theranos labs and wellness centers in 2018.
That same year, the SEC charged Elizabeth Holmes and Ramesh "Sunny" Balwani for “massive fraud” as investors of the company reportedly lost nearly $700 million.
The U.S. Department of Justice alleged that the defendants consciously lied about the company’s operations, finances and future prospects. Holmes was asked to pay a $500,000 fine, return $18.9 million shares of Theranos stock and ordered to give up financial and voting control of the company.
During the latest trial, the entrepreneur accused her then-boyfriend and business partner Ramesh Balwani of abusing and misusing her power. However, prosecutor Jeff Schenk refuted Holmes’ claims and deemed her a criminal:
“She [Elizabeth Holmes] chose fraud over business failure. She chose to be dishonest with investors and patients. That choice was not only callous, it was criminal.”
Balwani has also denied the claims made by Holmes’ team and is set to enter trial this year. Meanwhile, Elizabeth Holmes is awaiting sentencing after being found guilty on four counts of fraud charges.
