2/14/2022 0 Comments The theranos trialBy Lorraine Tan, 14 Feb 2022 1. Introduction Elizabeth Holmes was the CEO of Theranos, which was valued at $9bn and was considered Silicon Valley’s most promising healthcare startup in the 2010s. However, in 2015, it was found that Theranos’ technology was unreliable and fake. The company’s involvement in multiple scandals led to its eventual bankruptcy and Holmes’ criminal convictions. 2. Background In 2004, Elizabeth Holmes, an engineering student, dropped out of Stanford to start her own healthcare company, Theranos. Citing her childhood fear of needles, she wanted to revolutionise the medical testing industry. She and her business partner, Mr Balwani, aimed to develop a patch that could test for the presence of multiple diseases, including different cancers and diabetes, with just a few drops of blood. Although her Stanford professors told her that her goal was scientifically impossible to achieve, she continued to engage in research, clinical testing and advertising for the patch. Holmes and Balwani soon realised that inventing the testing patch was unfeasible, so they attempted to develop other blood testing methods that did not require large needles and tubes, unfortunately without success. However, despite knowing about these problems, they refused to admit the failures of their product. Using false clinical data, Holmes boasted her “successes” externally in TedTalks, and to potential investors. She managed to attract high profile investors, such as Larry Ellison, Rupert Murdoch, Tim Draper and George Schultz, raising a total of $945 million on the promise of huge returns in the near future. 3. Development Holmes never resolved the technical issues in her products, but continued to falsify trial results. She claimed her tests were 95% accurate when they were only 65-80% accurate. In her presentations to potential investors, she explicitly announced that Theranos had formed partnerships with various big-name healthcare companies including Pfizer, which was untrue. She said Theranos “did not buy any analyzers from third parties”, which was also untrue. Theranos also signed deals with North America’s largest chain stores (Safeway and Walgreens), agreeing to provide cheap, quick and convenient blood testing at a medical space in each of their branches. The blood testing services Theranos offered were conducted using commercially available and unreliable machines that Holmes called “the Edison”. Eventually, in 2015, the Wall Street Journal, ex-employees of Theranos, doctors and patients who were mystified by the odd health data produced, uncovered the company’s lies and gave way to further investigation. 4. Charges In 2018, Theranos was dissolved, and Holmes was arrested on 11 criminal charges of wire fraud and conspiracy to commit wire fraud. 5. Requirements for wire fraud in the US (a) The defendant participated in a plan to defraud or obtain money by fraudulent pretences (b) The statements made were material (c) The defendant acted with the intent to defraud (d) The defendant used wire communication (electronic transmission e.g. emailing, calling) to carry out the scheme 6. Outcome In January 2022, Holmes was convicted on 3 counts of wire fraud and 1 count of conspiracy to commit wire fraud. The jury did not question her belief that her technology and business would eventually succeed, but the good faith defence did not apply in this case, hence she was deemed guilty of defrauding investors. However, the jury found her not guilty of defrauding patients because they claimed there were too many intermediaries between Theranos and patients in order to link the fraudulent events beyond reasonable doubt. Holmes will remain free on bail until September this year. At the time of writing (January 2022), it is unclear how long her prison sentence will be. 7. References https://youtu.be/Wsd6WoKWW2g https://youtu.be/7SPY9098mQs https://www.bbc.co.uk/news/business-58336998 https://www.natlawreview.com/article/trial-recap-us-v-elizabeth-holmes-podcast Elizabeth Holmes pictured above.
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