Elizabeth Holmes goes down, but not as hard as she deserves


Huh. The jury actually found Elizabeth Holmes guilty on some of the counts.

A federal jury found Theranos founder Elizabeth Holmes guilty on four of the 11 charges for a fraud scheme, delivering a verdict on the long-running controversy over her role in the now defunct blood-testing technology start-up and marking a big win for the government in its years-long probe into the entrepreneur.

The jury of eight men and four women returned their verdict on the seventh full day of deliberations. They found her not guilty on four counts and deadlocked on three counts. Holmes was acquitted on all counts involving patients. Holmes faces the possibility of jail time over the convictions, although a sentencing hearing has not been set at the time of the verdict.

That’s what I find interesting: she was found guilty of crimes against investors, but not crimes against all the people who were misled by Theranos’s claims. It was all those gullible Silicon Valley venture capitalists who were hurt, not all the people who went into Walgreen’s and got misleading, false test results. I guess that sort of makes sense, since Walgreen’s doesn’t care about their customers all that much — they sell homeopathic remedies, after all, and didn’t question the likelihood that a company with Henry Kissinger and George Shultz on the board might not have any medical competence.

I’m not surprised. It’s clear that the US government (even the judicial branch!) is in the pocket of the corporations, given their current policies which are all about putting the peasantry back to work no matter how sick they are. Even the Democratic party cares more about the health of Wall Street and Silicon Valley than of the citizenry.

Man, Holmes was such an obvious, unqualified phony from the get-go, yet she was briefly a billionaire. I am persuaded that Silicon Valley is mainly a pool of stupid people.

Comments

  1. whywhywhy says

    Another example of the two tiered justice system in the US.
    Rip off regular folks and one is likely to get a slap on the wrist if any punishment. However, if you rip off rich folks there will be real punishment.

  2. Akira MacKenzie says

    Even the Democratic party cares more about the health of Wall Street and Silicon Valley than of the citizenry.

    “But… if we don’t do what they want, the billionaires won’t make the economy go.”

  3. Jake Wildstrom says

    Eh, the way the patient-related counts went down isn’t a surprise, and not for the cynical reasons you give. When it came to getting Holmes for injustices against patients, the question was never “did she cause this wrong?” so much as “through what actual criminal act did she cause this wrong?”

    More to the point, what the patients suffered was medical neglect and malpractice, both of which are actionable. The problem is that neither of them are actionable against Holmes individually. She didn’t perform any of the medical or technical actions which led to bad test results! Individual personnel within Theranos or Theranos as a corporate entity (which, uh, no longer exists, so that’d be a waste of energy) could be held criminally liable for that, but it’s honestly an uphill climb to argue that charge against Holmes, which is why they didn’t bring it.

    So what was left was prosecuting Holmes for what she did do, which was a lot of misrepresentation which collectively would be called “fraud”. And the best way to prove fraud is with specific communications by the accused to the victims which were untrue and which they knew to be untrue. There were lots of those to investors and that’s why they could nail her to the wall on those. With patients it’s a lot less clear: the cases in which a specific statement made by Holmes could be linked to a patient’s bad outcome mostly didn’t exist. Yes, there’s an argument that her misrepresentations, taken as a whole, led to the adoption of Theranos methods by retail outlets which directly caused the bad test results, but that’s a pretty tenuous chain of cause-and-effect to hang a criminal prosecution on.

    The short and long of it is that corporations do make a hash of individual responsibility to the extent that it’s often hard to point a finger at an individual and say “this person’s act X caused bad outcome Y” and then prosecute them for it. That’s probably a bad thing but actually pretty complicated to work out in practice, because for every way a corporation fucks up and causes harm, there are typically tens or hundreds of people with their hands in it, and presumably they’re not all guilty, or at least not all equally guilty.

  4. chrislawson says

    @3–

    The causal link between patient harm and investor fraud is not tenuous at all in this case. The criminal proof that Holmes defrauded investors is exactly the same as the criminal proof that she harmed patients. Theranos’s tests did not work as promised.

  5. Jake Wildstrom says

    The causal link between patient harm and investor fraud is not tenuous at all in this case.

    Consider a specific case, then. Count 9 asserts wire fraud against Erin Tompkins, a patient at an Arizona Walgreens patient who received an erroneous result on an HIV test processed by Theranos. Wire fraud is defined in 18 USC 1343 as “devis[ing] any scheme… for obtaining money or property by means of false or fraudulent pretenses, representations, or promises, [and] transmit[ting]… communication in interstate or foreign commerce… for the purpose of executing such scheme or artifice”. This covers a lot (pretty much every case where you deceive someone in a different state and take their money), but it doesn’t cover what Holmes specifically did to Tompkins specifically, and you would be very hard pressed to find a specific misrepresentation by Holmes herself which can be directly causally linked to Tompkins’s loss. Tompkins would have a better case against Walgreens for their misrepresentation and negligence, because they’re the entity she interacted with and who clearly did not do proper diligence in investigating and accurately representing the services they were contracting out.

    Again, the question isn’t “did Holmes cause harm to patients?” but “what specific crime committed by Holmes caused harm to patients?”. And wire fraud ain’t it—it’s not clear that there is a solid criminal case against Holmes for the wrong done to patients.

  6. raven says

    … because for every way a corporation fucks up and causes harm, there are typically tens or hundreds of people with their hands in it, and presumably they’re not all guilty, or at least not all equally guilty.

    While true, this seems to be completely irrelevant.

    IANAL but under US laws, corporations are people. The legal entity responsible for harm to patients, is Theranos itself. It doesn’t matter how many people within Theranos did what to who.
    And the harm to patients is undeniable. If nothing else, they spent money on tests that were useless.

  7. says

    The core of Silicon Valley is made up of people who are hypercompetent in a very narrow field. The kind of people who think that that competence qualifies them to make definitive statements on things they know nothing about. The kind of people, in short, who are most vulnerable to the swarm of skilled con artists who coexist with them in that hot house of an economic bubble. It’s an object lesson in the stupidity of very smart people.

  8. PaulBC says

    I am persuaded that Silicon Valley is mainly a pool of stupid people.

    It’s not. It’s not even a pool of greedy people. There are definitely ignorant people with a lot of money to throw around, some of them in Silicon Valley, and some elsewhere. Theranos was not a conventionally funded company. Also, not everyone was fooled. Google Ventures steered clear. Holmes carried out affinity fraud by going through all the motions of a Steve Jobs-like figure. She found some gullible backers at the beginning, and leveraged it into herd mentality after Theranos appeared to be very successful. This kind of fraud is not unique to Silicon Valley. It is also avoidable by any investor who insists on due diligence.

    Most people in Silicon Valley work very hard and indeed may be narrowly focused, but they’re not looking for easy money. There are frauds and assholes, but this is small fraction of people who work in tech or biotech. And needless to say, there are people here who are not rich and not associated with any form of tech at all. Sadly, fewer every year because they are priced out (many public school teachers commute long distances).

  9. raven says

    Also, not everyone was fooled. Google Ventures steered clear.

    Good point.

    A lot of people in the biotech area also stayed away from Theranos even if they kept a wary eye on it. One of their problems was a lack of peer reviewed publications documenting their claims. Claims without proof or data don’t have a lot of credibility. They are also common in biotech startups.

    That was sort of my attitude. I didn’t pay much attention to Theranos but was waiting to see if they were ever going to prove their claims and technology. The company never did.

  10. PaulBC says

    raven@10 From NYT article: ​

    Not everyone who heard Ms. Holmes’s pitch was wowed. Bijan Salehizadeh, an investor at Highland Capital Partners, said he did not invest in Theranos in 2006 because Ms. Holmes was unwilling or unable to answer most of his questions.

    But as Theranos’s fund-raising made headlines, Mr. Salehizadeh questioned his judgment. Venture capitalists who hung out at the Rosewood Hotel on Sand Hill Road, one of Silicon Valley’s main arteries, in Menlo Park, Calif., began buzzing about the company, he said.

    “They were like: ‘This hot Theranos thing — you as a health care guy saw it and didn’t do it? How could you have possibly passed on a unicorn if it was sitting in your office at the earliest stages?’” he said.

    This is where herd mentality can take over. Not to mention the dreaded FOMO.

    It’s also possible to stick to your guns and say “I don’t care if it’s a ‘unicorn’. I don’t see how it could possibly work.” A competent investor should understand that a fraud does not graduate into a legitimate business by virtue of size. But obviously greed may kick in eventually. I concede that this a black eye for Silicon Valley, but it’s neither representative of nor exclusive to Silicon Valley.

    Silicon Valley does have its problems, but I’m forever frustrated, and sometimes amused (as with Zoey’s Extraordinary Playlist) by the misconceptions of what people do around here. Most of it is work, and a lot of it is quite routine, and not flashy at all. It’s also hard not to care about money when a 50s era starter home costs $2 million. But in my experience, the culture is not one of cheating. There are plenty of assholes, yes, and maybe I’m just not working at a high enough level to have to deal with them. My impression of a typical Silicon Valley resident is a workaholic with an obsessive interest in their kids’ education and college prospects.

  11. wzrd1 says

    As I recall, Theranos’s big trick was sending out the lab test samples for analysis by a real lab, then sending the client the results from the real lab, packaged in a way that appeared as if their vaporware actually existed and worked.
    Indeed, Theranos’s earliest sin that I can recall was a laser stylet glucometer, billed as needleless and bloodless and in actuality, also matterless, as when the FDA raided, no such prototype device even existed.

    The initial defense was interesting as well, apparently, the defense would have the court believe that the CEO and COO couldn’t possibly be reasonably expected to know that their primary products did not even frigging exist.
    Which held as much air as my hot air collender, which I take my wife out in during the spring (largely, due to her severe fear of heights). Hey, can’t use the proverbial lead balloon, I seem to recall seeing one at the Franklin Institute many years ago…

  12. PaulBC says

    raven@10

    I didn’t pay much attention to Theranos but was waiting to see if they were ever going to prove their claims and technology.

    Theranos was never on my radar, though I have worked in and out of biotech as a software developer. I don’t even recall it coming up in conversation with coworkers with more experience in biotech, maybe since Theranos’ claim was medical testing rather than genomics or knowledge systems.

    Hypothetically, if someone had told me what they claimed to do: run blood tests with a pinprick sample, I would have thought that’s really cool. I am at core a techno-optimist and it doesn’t sound impossible, just very difficult. (I remember seeing a presentation at Google of some kind of glucose monitoring wearable, and I bought it though I think I would be more skeptical from now on.)

    I’d like to think that if I had a large amount of money to invest that I would want to see their claims backed up. But I can only speculate. My commute never took me past their headquarters. Their name sounds like Thanatos (death) or Thanos (Marvel villain) and I suspect I did hear the name once or twice and wondered why they’d choose something that creepy for healthcare.

  13. PaulBC says

    wzrd1@12

    As I recall, Theranos’s big trick was sending out the lab test samples for analysis by a real lab, then sending the client the results from the real lab, packaged in a way that appeared as if their vaporware actually existed and worked.

    Which of course isn’t a new trick at all. It’s just a rigged demo on a larger scale. Anyone remember the 1997 comedy Shooting Fish? (now dated by the fact the voice recognition works reliably) They would still need a larger sample than a drop to perform many tests. And they would not have been able to produce the results as fast as a machine on site. A great deal of wishful thinking must have gone into this.

    Investors took the shortcut of mistaking the behavior of other investors for someone actually looking into the claims directly (herd mentality). How about this strategy for remarkable technology claims: The claim would be very lucrative if true. Hence, there’s incentive to cheat. Hence, the default assumption is that it’s a cheat. At that point, not only do you consult scientists to scrutinize the claimed process, but you also consult with stage magicians (along the lines of James Randi’s gig) to answer the question of how you would fake it if it didn’t really work. At this point, the rigged demo should be trivial to uncover.

    It’s also true that you might not want to uncover the fraud if you think you can get your own money out before the fraud is uncovered.

  14. jack lecou says

    Jake Wildstrom @8

    Tompkins would have a better case against Walgreens for their misrepresentation and negligence, because they’re the entity she interacted with and who clearly did not do proper diligence in investigating and accurately representing the services they were contracting out.

    She might have a case against Walgreens as well, but her testimony seems to contradict your assertion that they were the only (or even primary) entity she was interacting with.

    Like, she specifically got the test there because it was from cool startup Theranos:

    Tompkins said she chose to get her blood tested at a Walgreens store in Phoenix, Ariz. in May 2015 after seeing a profile of the company [Theranos] in a magazine and later hearing about its services from a friend on Facebook.

    And later she interacted — directly — with Theranos customer service:

    “I was quite emotional at the time,” Tomkins testified, describing trying in vain to get answers from a customer services representative at Theranos.

    I don’t know if that’s enough to link Holmes criminally, but it’s certainly a much stronger link than you’re representing. Theranos was hardly acting as just a nameless sub-contractor behind a Walgreens branded facade. People buying tests at Walgreen’s were Theranos customers, and knew it.

    That Walgreens chose to put the product on their shelves is their bad, but this is much the same situation as it they’d stocked a contaminated bottle of aspirin or a bad home pregnancy test. That wouldn’t absolves the OEM (Theranos) of the responsibility of selling a defective product to a Walgreens customer.

  15. Bad Bart says

    @15 What you are describing is more civil liability than criminal–specific relief to the individual for a specific harm. Even in that situation, the case would be against Theranos the corporation, not Holmes the individual.

  16. Bad Bart says

    @7

    The core of Silicon Valley is made up of people who are hypercompetent in a very narrow field. The kind of people who think that that competence qualifies them to make definitive statements on things they know nothing about.

    The same can be said about the practice of science in general–I know many PhDs who feel like their expertise is far wider and more transferable than it actually is. (I’m acknowledge I’m a member of that class. Hopefully not too often.)

  17. PaulBC says

    Bad Bart@17 The people with technical background are also not the same as those choosing where to invest. There’s some overlap, people who started out as engineers, moved to executive track, got on company boards, and from there moved into VC. But I am pretty sure there are also more standard MBA types. Heck, didn’t JD Vance do a stint as “Bay Area venture capitalist”? WTF is that about. From “hillbilly” to US Marine to Ivy League lawyer to venture capitalist to (in my nightmares) junior senator from Ohio. That trajectory makes zero sense (not saying I sense the hand of “Tiger mom” Amy Chua and her cabal, but anyone got a better explanation?).

    I mean, honestly I don’t know who these people are, but I can tell you who they are not, which is most of the fine colleagues I’ve worked with for more than 20 years living here. Also, it’s still true that a lot of the Theranos investment came from gullible non-techies: George Schultz, Henry Kissinger, the Walmart family, etc.

    I do know people who have moved between founding startups and senior positions at bigger companies. Some are wealthy enough to have done a small amount of angel investing, and yeah, probably some of them have an unrealistic belief in their area of competence. Though actually, my experience is that Silicon Valley tech culture is one of collaboration: find the other person who’s good at this and prosper by working with them, and not cutthroat competition. Sorry, I admit I get a little pissed off by the impression I see in the media. With notable exceptions, I find myself surrounded by hardworking and sincere people. (I’m also a little bit of weirdo. I have still never used Uber or Airbnb and I don’t consider “disruptive” a good thing when there are human lives at stake, so I haven’t exactly drunk the koolaid.)

  18. weylguy says

    A diamond-studded Tiffany ankle collar will look great on her as she awaits the sentencing phase. In my opinion, all of her assets should be turned over to the judicial branch, which may induce them to prosecute more phonies like Holmes, including Trump and his entire family.

  19. Pierce R. Butler says

    Jake Wildstrom @ # 3: … Theranos as a corporate entity (which, uh, no longer exists…) …<//i>

    Well, since corporations-are-people-my-friend, shouldn’t the Missing Persons crew or maybe somebody from Homicide be out there looking for Theranos?

  20. jack lecou says

    Bad Bart @16:

    What you are describing is more civil liability than criminal–specific relief to the individual for a specific harm. Even in that situation, the case would be against Theranos the corporation, not Holmes the individual.

    Sort of depends on how bad it is, no? If I started a “pharmaceutical company” and then knowingly bottled cyanide (or even sugar pills) while labeling it “ibuprofen”, that might well rise to the level of criminal in one way or another. Nor are civil and criminal mutually exclusive — I suspect there’s a lot of commercial activity that is technically criminal, even if it is not typically prosecuted prosecuted as such.knowingly

    But that’s really besides the point, which is that Jake was inaccurately minimizing the relationship people who bought tests at Walgreen had to Theranos and Holmes, making out as if they were just a generic lab subcontractor used by Walgreens. The real situation is one where, e.g., Tompkins specifically sought out and bought a Theranos test, in large part due to the (mis)representations she read in a magazine (some of which were almost certainly crafted, if not voiced, by Holmes herself).

    Now, like I said, I don’t know if the criminal case could be made or not there. Obviously the jury didn’t think it was. But let’s not rewrite the facts.

  21. Deepak Shetty says

    @Ian King

    The core of Silicon Valley is made up of people who are hypercompetent in a very narrow field. The kind of people who think that that competence qualifies them to make definitive statements on things they know nothing about

    This statement could be true of any set of people . For e.g. Scientists are hypercompetent in a narrow field ==> That kind of competence qualifies them to make definitive statements on things they know nothing about like politics or economics or the levels of stupidity in large groups of people.

  22. unclefrogy says

    as was noted there may be yet civil actions to come for the fraud and the harm caused by the corporation.
    That this highlights one of the problems with the law and the economy. the ability to set up a corporation and declare it to be a legal “person” is the ability to shield the people who make up the corporation from all responsibility from all the negative outcomes while at the same time insuring them of all the benefits. It is a fiction an illusion sanctioned by the courts an abstraction made up by people for their own private gain and does not exist outside of the people who make it up and determine its actions, until that is changed this kind of thing will continue

  23. James Fehlinger says

    WE should change our system so that it does not reward sociopathy.

    [stuttered tight point, M32, tra. @n?…]
    x Different Tan (GCU, Mountain Class)
    o Not Invented Here (MSV, Desert Class)

    So what are we going to do about the third planet of this
    so-called “Sol” system, anyway? They’ve got a social structure
    that lets the worst of them rise to the top of their power
    hierarchies, and they’re on a technological trajectory that’s
    clearly leading within the next few standard centuries to widespread
    genocide, ecocide, and possible total destruction of the
    planetary biosphere.

    [stuttered tight point, M32, tra. @n?…]
    xMSV Not Invented Here
    oGCU Different Tan

    Not a damn thing! Meat, don’t you think we’ve already got
    our fields full with the Affront? And it’s not like they’re
    ever likely to be as much of a bother as the Idirans;
    simulations show they’re likely to have snuffed themselves
    before they’ve even gotten beyond their own stellar
    neighborhood.

    [stuttered tight point, M32, tra. @n?…]
    xGCU Different Tan
    oMSV Not Invented Here

    You’re right, of course. I guess I’m just too much of
    a sentimentalist about these things. Now about the
    Affront. . .

  24. evolutionaryautistic says

    Holmes was amazing at grifting. She even fooled William Foege, who did revolutionary work in eradicating smallpox (he was on the board as a Medical Advisor), and created an entire fake lab for Biden’s visit.
    But grifters usually just get fined, and as many people said, the only reason she’s getting charged is because she defrauded rich people. (It was Tyler Schultz, the grandson of one of said people, who was a key source for the news story, and reported the company to the new york dept. of health. George Schultz, his grandfather, actually pressured him to sign a document by Theranos lawyers. Awful, but I digress). We also have to look at what she did to women in STEM. Women already have a hard enough time in those fields as it is, but she basically just made it way worse.
    I wonder what the sentencing will be?

  25. evolutionaryautistic says

    Holmes was amazing at grifting. She even fooled William Foege, who did revolutionary work in eradicating smallpox (he was on the board as a Medical Advisor), and created an entire fake lab for Biden’s visit.
    But grifters usually just get fined, and as many people said, the only reason she’s getting charged is because she defrauded rich people. (It was Tyler Schultz, the grandson of one of said people, who was a key source for the news story, and reported the company to the new york dept. of health. George Schultz, his grandfather, actually pressured him to sign a document by Theranos lawyers. Awful, but I digress). We also have to look at what she did to women in STEM. Women already have a hard enough time in those fields as it is, but she basically just made it way worse.
    I wonder what the sentencing will be?

  26. PaulBC says

    @27 I scrolled too fast and read “amazingly gifted” though I guess you could say that too. Holmes’s “School for the Grifted” came at a high price. Maybe some of them learned a lesson (but probably not).

    We also have to look at what she did to women in STEM. Women already have a hard enough time in those fields as it is, but she basically just made it way worse.

    I hadn’t even thought of that. The fact that she’s a woman is completely irrelevant. She carried out a fraud. Maybe she naively believed “fake it till you make” would magically result in a working technology if she hired the right people, but at some point she had to know it was just a self-perpetuating Ponzi scheme.

    A man could have done exactly the same, but I agree that many people will take the wrong lesson from this.

  27. James Fehlinger says

    A man could have done exactly the same. . .

    Yes, well, that was apparently one of the defense strategies
    (as reported in the newspaper). “My abusive boyfriend made
    me do it.”

    I.e., Ramesh “Sunny” Balwani was the, uh, Cloudy Svengali
    who was actually pulling the strings.

    Well, his day in court is coming up, too.

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