Elizabeth Holmes, the young woman who dazzled Silicon Valley with her blood-testing system capable of detecting disease with just a finger prick, faces a dozen counts of fraud and conspiracy. The selection of the jury that will define the future of the creator of the startup Theranos begins this Tuesday, in the Federal Court of San Jose (California), which is at risk of being sentenced to 20 years in prison. The Justice Department accuses the businesswoman and her former partner and ex-boyfriend Ramesh Balwani of deceiving investors, doctors and patients. Both pleaded not guilty. Holmes’ lawyers plan to argue at the trial that the fraud was not deliberate and that Balwani manipulated and abused his partner in the years he carried out the coup.
Holmes founded Theranos in 2003, when he was 19 years old. She left Stanford University with the idea of reinventing the clinical laboratory infrastructure. In her story, she told how an uncle’s fear of needles and cancer led her to invent a system to detect diseases like HIV or diabetes in a matter of minutes with the prick of her index finger. Investors the stature of media mogul Rupert Murdoch put their money into the company, which in 2009 was already valued at $9 billion. She was part of the select club of unicorns, as companies that exceed $1 billion before going public are known. The media talked about the birth of the new Steve Jobs.
At just 30 years old, Holmes —blonde, thin, wide-eyed, and always in black— became the youngest woman to make Forbes’ list of the 400 richest people in the United States in 2015. The businesswoman’s fortune was estimated to be more 4.5 billion dollars (about 20 billion reais), half the value of Theranos at the time. By the following year, the new myth of the technology mecca had disappeared from the list and faced scrutiny from authorities, scientists, and investors.
An investigation of the The Wall Street Journal revealed that the diagnostic tests did not come from the system created by Holmes: 99 out of 100 blood tests were performed by machines they bought from Siemens, a company with which the startup intended to compete. In addition, tests done with the new system yielded erroneous results on several occasions, according to the publication. The Justice Department accused Holmes and Balwani of misleading investors, saying that express blood testing machines could perform a wide range of clinical tests using a drop of blood, when they both knew the effectiveness was limited, unreliable and slow.
The charge was a scandal of proportions. Not just because Holmes became the face of biotech innovation, but because his product was offered at Walgreens, the leading US drugstore chain, and at Safeway stores in some cities. It was a startup in which former President Bill Clinton and tycoon Carlos Slim, among other millionaires, had invested. The company’s own board included senators, generals, high-ranking businessmen, and even former Secretary of State Henry A. Kissinger. None of them questioned enough about the product. The story of the young woman who dropped out of school to realize her big idea, her vision, was enough.
The US Securities and Exchange Commission (SEC) concluded that Holmes created a fraudulent scheme through his company that allowed him to raise $750 million. The SEC also singled out Balwani, who chaired Theranos and served as chief operating officer when the coup took place. Both convinced investors with false information that they had a unique blood test system in their hands. “They exaggerated and lied about the company’s technology, business and financial performance,” said the regulator. Suspected fraud will be tried separately.
In court documents against the businesswoman, federal prosecutors note that “tens of thousands of patients may have been affected” by the fraud or may have received “unnecessary or harmful” treatments and diagnoses. Witnesses who will testify at the trial include a woman who was pregnant and who had an abortion misdiagnosed by the test result and people who were misdiagnosed with HIV. Prosecutors requested the patient database in 2018 to establish a possible pattern of incorrect results, but Theranos officials destroyed it.
Holmes’ lawyers are expected to defend the idea that she did not deliberately mislead her investors and patients, and that if she exaggerated the product’s capabilities and results, it was because she was blinded by ambition. The phrase fake it until you make it (fake it until you get your goal) will likely play an important role in the court process. Court documents filed last week by Holmes’ defense reveal that they plan to charge their former partner with psychological, emotional and sexual abuse, “essentially dominating her and erasing her ability to make decisions,” according to local media. Balwani denies everything.
Holmes, now married to Billy Evans, heir to a California hotel chain, has just become a mother. Her personal situation and the pandemic forced her to repeatedly postpone the trial. Opening discussions will start next week and the process is scheduled to take four months.
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