Elizabeth Holmes will go on trial today facing multiple charges of conspiracy and fraud for her lead role in the Theranos scandal.
As the founder and former chief executive officer of the disgraced blood-testing start-up that wowed the tech investment world before collapsing in a storm over the efficacy of the technology supposedly at its core, Ms Holmes faces up to 20 years in prison if convicted.
Theranos was at one point valued at approximately $9bn, but is now a byword for corporate misconduct, with Ms Holmes accused of lying to patients about testing, and investors about projected revenues.
The trial will get underway in federal court in San Jose, California, after a string of delays due to the coronavirus pandemic, and the defendant’s surprise pregnancy.
Anticipated to last approximately three months, the final chapter in the spectacular rise and fall of Ms Holmes is expected to see defence lawyers get creative when faced with a strong case from the prosecution. It is the most-anticipated trial of the year.
So how did Ms Holmes get into this position?
Having dropped out of Stanford’s School of Engineering in 2003, Ms Holmes used her tuition money as seed funding for a consumer healthcare technology company based on the idea of performing blood tests using only a small amount of blood – such as a finger prick – rather than drawing blood for testing into vials with needles. She cited her own fear of needles as her inspiration for the technology, which she called Edison.
Taking her idea to her medicine professor at Stanford, Ms Holmes was told that it would not work. Several other experts repeated this warning, but she convinced her dean at the School of Engineering to back the concept and he became the first board member of Theranos (a combination of the words “therapy” and “diagnosis”).
Ms Holmes began raising money for the firm with tech investors and adopted Steve Jobs’ look, frequently appearing in black turtleneck sweaters and speaking in a baritone voice. By the end of 2010 she had raised $92m in capital and was becoming well-known across Silicon Valley.
By 2014 she was on the covers of Fortune, Forbes, Inc, and The New York Times’ Style Magazine. When Theranos was valued at $9bn in 2014, Ms Holmes was placed at number 100 on the Forbes 400 list of the wealthiest people in the US and named as the youngest self-made billionaire.
At this point, she had raised more than $400m in venture capital, had her name on 18 US patents and 66 foreign patents, and established business relationships with the Cleveland Clinic, Capital BlueCross, and AmeriHealth Caritas to use the company’s technology for blood testing. Among her investors were Rupert Murdoch, Carlos Slim, Larry Ellison, Henry Kissinger, and George Schultz.
In 2015, then-Vice President Joe Biden visited one of the company’s facilities in Newark, California, and declared it “the laboratory of the future”. Some 800 people were employed by Theranos at its peak.
The company’s fortunes began to turn in October of that year when John Carryrou of The Wall Street Journal wrote an article claiming Theranos had been forced to use conventional blood testing methods in its research because its own Edison technology was providing erratic and inconsistent results. He was tipped off by a medical expert who was suspicious of the technology.
Pursuing the story further, Mr Carryrou discovered that the company’s apparently innovative tech was nowhere near ready for use and had been rushed into development to meet the expectations of its influential investors. The equipment Joe Biden had been shown was allegedly not actually operational.
Ms Holmes denied all claims and strenuously defended herself and the company in media appearances. However, problems with lab facilities, staffing, and procedures saw her banned from owning, operating, or directing a blood-testing service for two years. Pharmacy chain Walgreens ended a relationship with the company at this point.
Problems continued to mount when Mr Carryrou published an interview with whistleblower Tyler Schultz, grandson of board member George Schultz, who alleged that the company cast aside inconvenient Edison test results thereby falsifying the accuracy of the process.
Other revelations came to light including the storage of samples at incorrect temperatures and patients being placed in jeopardy because of false readings from the flawed tests.
As federal investigations into allegations about testing proceeded in 2016, Forbes announced that Ms Holmes’ fortune, which was based on her 50 per cent share in the company had dropped to zero.
In March 2018, the US Securities and Exchange Commission charged Ms Holmes and Ramesh Balwani, former president of Theranos and chief operating officer, with fraud for taking more than $700m from investors while advertising a false product.
Ms Holmes settled the SEC lawsuit, surrendering voting control of Theranos, a ban on holding an officer position in a public company for a decade, and a $500,000 fine.
On 15 June 2018, following an investigation by the US Attorney’s Office for the Northern District of California in San Francisco that lasted more than two years, a federal grand jury indicted Ms Holmes and Mr Balwani, on nine counts of wire fraud and two counts of conspiracy to commit wire fraud.
Prosecutors allege that the pair engaged in two criminal schemes, one to defraud investors, the other to defraud doctors and patients. Both have pleaded not guilty.
Mr Balwani and Ms Holmes have a long relationship having met when she was still a teenager and at school. He is nineteen years older than her and they were romantically involved from 2003 until the collapse of the company, though the relationship was kept a secret.
They have differing accounts of his exit from Theranos with Ms Holmes saying that she fired him, and Mr Balwani claiming he left of his own accord.
In early 2019, Ms Holmes became engaged to William Evans, the heir to the Evans Hotel Group. They married in a private ceremony later that year and now live in San Francisco.
As prosecutors and the defence team prepared for her trial, the Covid-19 pandemic delayed proceedings as the court system shut down.
In September 2020, a federal judge ordered that Ms Holmes be examined by government experts after her lawyers said they may offer evidence she suffered from a mental disease or defect.
US District Judge Edward Davila overruled defense objections to letting a psychologist and psychiatrist chosen by the government examine her for 14 hours over two days. The examinations were recorded on video.
In March of 2021, the trial was delayed by a further six weeks to the end of August after Ms Holmes blindsided prosecutors by announcing that she was pregnant and due in July.
When the trial begins on Tuesday, her son will be just weeks old.
Bloomberg Businessweek reports that the defence team has a number of options including pursuing the aforementioned “mental disease” argument, or even claiming that she is only guilty of optimism and truly believed in Theranos and therefore did not mislead anyone.
It is unknown if she will testify, but she would need to persuade just one juror of her version of events for the trial to end with a hung jury.
Any late-in-the-day plea deal would likely involve cooperating with prosecutors in their case against Mr Balwani, whose trial is set for early next year. It would also still likely involve a lengthy prison sentence.
Ms Holmes and the Theranos scandal were the subjects of the HBO documentary The Inventor: Out for Blood in Silicon Valley.
A dramatisation of Ms Holmes’ life is being turned into a television miniseries by Hulu called The Dropout. It is based on the podcast of the same name by Rebecca Jarvis and ABC Radio and will star Amanda Seyfried.
