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Where does Elizabeth Holmes’ Fraud Trial Stand at the Halfway Point?

On 31 August 2021, Elizabeth Holmes’ fraud trial began in California. The former Chief Executive Officer and Founder of Theranos, along with her former Chief Operating Officer Ramesh “Sunny” Balwani are charged with two counts of conspiracy to commit wire fraud and nine counts of wire fraud.

Theranos aimed to revolutionise blood testing by only using a couple of drops of blood from a finger prick to run multiple blood tests that would normally require large needles and multiple tubes of blood and leave patients with large lab bills. Theranos’ mission was to make healthcare accessible and affordable in addition to encouraging people to seek out cheap tests as preventative measure sto catch diseases in their early onset. At its peak, Theranos was valued at almost US$ 9 billion (approximately GBP 6.6. billion) and Holmes was labeled the youngest female self-made billionaire.

Holmes, now aged 37, initially began her company in 2003 under the name Real-Time Cures but eventually changed it to Theranos. Despite heavy pushback from some of her professors, she was encouraged by peers and dropped out of Stanford University’s engineering program in 2004 to pursue her entrepreneurial ambitions. Her idea to revolutionse healthcare drew support from a variety of people. Many supporters also did not want to miss out on investing in the next Apple or Facebook as Holmes’ drop-out status and personal presentation came off strikingly similar to Steve Jobs, Mark Zuckerburg and Bill Gates. Enamored by Holmes’ idea, celebrities issued their endorsements and her Board filled with several former Presidential Cabinet members, including George Shultz and Henry Kissinger. Magazine spreads in Fortune and Forbes, as well as her 2013 deal with Walgreens to install blood testing machines in stores, convinced almost everybody that her dream for healthcare had come to fruition.

However, in 2015, John Carreyrou from the Wall Street Journal published a series of articles shedding light on a number of issues with Theranos. Several former employees of Theranos, people with engineering and scientific qualifications, conversed with Carreyrou and blew the whistle on the toxic work environment, the inaccuracy of tests and the serious consequences for people's health should they receive inaccurate results. While plenty of start-ups go through periods where the product fails or is inconsistent, the problem with Theranos was that there appeared to be no plan to improve the machines. The former employees also revealed that at times they were instructed to get rid of inaccurate tests and they often performed blood tests on third-party machinery purchased from companies like Siemens instead of using Theranos’ machines. They claim that although Holmes knew of this information, she continued to show off the laboratory and maintain strong public relations with outside investors.

In response to these allegations, the Centers for Medicaid and Medicare Services (CMS) conducted an inspection of the Theranos laboratory in Newark, California where they discovered a number of inconsistencies in staff ability, equipment and accuracy of the tests. This resulted in the CMS issuing a warning letter to Holmes. In March of the same year, after the issues laid out in the letter went unaddressed, they banned Holmes from owning and operating a certified clinical laboratory for two years. Although Holmes appealed this decision with the United States Department of Health and Human Services Board, Walgreens terminated its in-store policy with Theranos and the company went into downfall.

By 2018, Holmes and Theranos had settled a number of personal and company-wide lawsuits with investors and patients. The US Securities and Exchange Commission (SEC) charged Holmes with fraud, including a claim that Theranos machines were being used by the Department of Defense in combat medevac situations. Although the suit was eventually settled, Theranos was dissolved in September of that year. In 2019, following an investigation from the US Attorney’s Office for the Northern California District, a federal grand jury indicted both Holmes and her former COO and President Balwani on fraud charges.

The trial for US v Elizabeth Holmes et al. now stands at its halfway point and is expected to last until December 2021. During its course, the trial has faced a series of delays due to the pandemic, the birth of Holmes’ first child and the complicated process of jury selection. Both Holmes and Balwani have pleaded not guilty to the charges and face millions of dollars in fines and up to 20 years in prison if found guilty. The prosecution believes there were two segments to the alleged fraudulent scheme: misleading doctors and patients and stringing along and fooling investors out of hundreds of millions of dollars. The prosecution intends to rely on text messages between Balwani and Holmes to demonstrate how the pair knew the machines and technology were not up to task but misled investors and the general public to obtain more funds and publicity.

While Balwani’s defense has yet to be fully developed in court, Holmes’ lawyers have constructed a series of arguments. One main element of her defense is that her company was a start-up and, just like many companies, it failed. Many new businesses embellish figures to investors, especially in Silicon Valley - the home to tech giants - which is an industry that requires more money than others to get moving. Additionally, Holmes revealed in her 2018 deposition with the SEC that she and Balwani were involved in an intimate relationship. Her defense went on to claim in court that he “mentally dominated” her to a point where she was unable to think for herself and properly address the problems within her company. Defense lawyers have also tried to push the blame onto former employees who were heads of laboratories as they had oversight of the most important parts of the operation.

As her trial continues to unfold, Elizabeth Holmes’ future hangs in the balance. Whether or not she is found guilty of her alleged crimes, Theranos exemplifies idealism gone too far. With so many people eager for the ideal of affordable and accessible healthcare to come to fruition, many turned a blind eye to the lack of medical evidence and expertise backing the company. While praised as a business, such accolades never came from prominent medical journals. Theranos’ Board was not composed of pathologists or people with extensive knowledge of complex medical procedures. In all the interviews, showcases and demonstrations, an explanation of how such technology could work was never provided. Lastly, yet most importantly, the business and economic fallout for Holmes and Balwani pale in comparison to the serious health ramifications for individuals who received false or inaccurate tests from Theranos. It remains unclear whether any of them will take the stand, divulging the emotional turmoil such inaccuracies may have put individuals and their families through.


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