Some Quick Thoughts About the Conviction of Elizabeth Holmes on Four Counts of Fraud

While many observers seem not entirely satisfied that blood test scamster Elizabeth Holmes, briefly a paper billionaire, got what is called a mixed verdict yesterday (guilty on four of eleven counts, with three hung and therefore fair game for a second trial), this is a far better result than one of the best informed observers expected. Wall Street Journal reporter Jon Carryou, who brought Theranos down through his relentless reporting, stated he was concerned the jury would acquit Holmes because she was such a charismatic self-justifier.

A few comments: so far, there’s not a lot of great commentary, perhaps because the punditocracy needs to ponder a bit more. Or perhaps Holmes’ downfall has been so well covered that it’s taking a bit of work to come up with a new spin. But for some great one-stop shopping in the meantime, go straight to the Daily Mail: Inside the world of Elizabeth Holmes: How the disgraced Theranos founder styled herself on Steve Jobs, spoke in a fake baritone, told people her husky was a WOLF and captivated old, powerful men who invested millions before her empire collapsed.

She faces up to twenty years in jail on each count but is expected to have her sentences run concurrently.

It is disappointing that Holmes was found guilty only of financial frauds and not of harming patients (two of the eleven charges).

The reason Holmes got off on damage done by bad test results, despite Theranos delivering markedly inaccurate results to thousands of patients and the Center for Medicare Services shutting down its Newark lab over its inability to test warfarin (a blood thinner) levels accurately, is that apparently not enough suffered real harm to their health, as opposed to their nerves and their wallets. It’s not hard to imagine that patients suddenly getting test results markedly out of line with their histories would have their doctor run a new test. But it’s still disturbing that she was not punished for the risks she took with patients’ health in light of stories like these:

Before and during the trial, there were bleats about why was Holmes singled out, prosecuting a woman was clearly a sign of bias. Of course that argument ignores that the Theranos president and Holmes’ former lover Ramesh “Sunny” Balwani will soon be in the dock.

It’s hard to feel sorry when rich people and businesses that ought to be capable of doing due diligence like Walgrens get fleeced. But the prosecutors did a good job of presenting how Holmes misrepresented Theranos’ capabilities, way beyond the forgiving standards of Silicon Valley. One compelling bit of evidence from the trial, recapped in ars technica in November:

As Theranos burned through cash, founder Elizabeth Holmes was apparently desperate to land a large investment from Walgreens—so desperate that she sent the drugstore’s executives two fake pharma reports, the jury in Holmes’ criminal trial learned yesterday.

A few weeks ago, the court heard how Holmes had sent Walgreens executives a report that featured a prominently placed Pfizer logo. But Pfizer hadn’t authorized its use. Yesterday, the court heard that Holmes did it once more, sending reports that prominently featured the logo of Schering-Plough…

Constance Cullen was director of Schering-Plough’s bioanalytical lab in 2009 when her company tasked her with helping to evaluate medical diagnostic tests being developed by Theranos…Cullen and other Schering-Plough scientists evaluated three different tests…

As part of the evaluation, Cullen and her colleagues met with Holmes and other Theranos employees at the company’s Palo Alto headquarters. The Schering-Plough scientists came prepared with technical questions but did not receive technical answers. “I was dissatisfied, quite honestly,” Cullen said…

“There were what I’d describe as cagey responses or attempts to redirect to other topics of discussion…Almost exclusively Ms. Holmes was the one answering the questions irrespective of to whom the questions were being asked,” she said.

Theranos later sent Cullen a report that said Theranos’ technology “has been shown to give accurate and precise results.” Cullen told the court that she had not discussed that statement with Theranos, nor did she agree with it.

In the spring of 2010, though, Holmes sent that report to Walgreens executives with some small but significant changes. The report now had the Schering-Plough logo at the top, and a key line had been tweaked. Now it said that Theranos’ diagnostic technology “has been shown to give more accurate and precise results”—note the addition of the word “more.” Cullen confirmed for the court that no one at her company approved that statement.

This clip was another bit of evidence that observers believe helped sway the jury:

The key informational part was the $7 billion valuation claim, which at the time was bogus. But I’m struck by the ritual invocation of management buzz words, as if Holmes knows exactly how to meter them out so as to lull listeners into stupefaction.

Even though it was not a focus of the trial, it’s important to understand another reason Holmes got as far as she did, despite every biosciences-competent venture capital firm refusing to fund her over her refusal to turn over data, and the general impossibility of her technology and her making any sort of big biosciences leap with no meaningful history of bench research or even serious training. ‘Innovators” in the life sciences are never self taught.

Theranos, like Madoff, was an affinity scam. Holmes was very close to George Schultz, who joined the Theranos board, and regularly dined with his family. Schultz was instrumental in bringing in other super blue chip names like Henry Kissinger as investors. The company’s backers had a heavy representation of the military-industrial complex figures….who also would conveniently be at sea in trying to assess the technology. But they had plenty of company:

This vignette is priceless:

And I am glad I am not the only person to be thinking along these lines:

I can only surmise that she did got pregnant calculatedly, as she did pretty much everything else (read the Daily Mail story about the extent of her Steve Jobs act), to win sympathy from the jury and make sure her new hubby didn’t dump her if she were sent to prison. Of course, there’s no assurance he won’t be as dishonest in his relationship with her as she was with her investors and employees.

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84 comments

  1. James Simpson

    This appears to be one more example of how simple it can be to fool well-educated, wealthy professionals. Bernie Madoff used similar techniques for a very long time. It gives the lie to the standard capitalist claim that wealthy people got their wealth because of their intelligence and hard work, not from an economic system rigged for their benefit.

    Reply
    1. YankeeFrank

      How about this piece from the NYTimes a few days ago:

      https://www.nytimes.com/2022/01/01/upshot/pregnancy-birth-genetic-testing.html

      Turns out many tests for rare genetic defects used in roughly a third of US pregnancies are over 80% and with some, over 90% inaccurate. Makes Theranos’ damage seem paltry. And these are also Silicon Valley companies.

      I’m beginning to think Silicon Valley software/product development practices bleeding out into the rest of society is very, very dangerous.

      Reply
      1. Synoia

        The key questions for any complex system are:

        1. How do you test it?
        2. How do you calibrate it?

        And to remember, you can bs management, you can bs investors but at the end of the day you cannot bs the electrons.

        Which means one has to have independent testing..

        Reply
        1. JeffK

          Synoia, add one more to the list…you can bs yourself. How many grant writers have projected aspirational goals and ideas as a sure bet, or hypotheses (even weak hypotheses) as well supported by their carefully selected evidence in the research literature? How many grant recipients have padded their quarterly reports with just the positive results, ignored the statistical uncertainty, passed over the glaring caveats, or trivialized the risk of failure so as secure funding extension. There is pressure among all grant recipients (and investment recipients) to project success, and therefore there is a potential for aspirations to become transformed into (unsupported) “facts”. Miss Holmes believed, and still may believe her own BS.

          Reply
    2. jim truti

      If the same standards of justice would be applied as to pharma bro Martin Shkreli, she would get about 300 years of jail time and $20 million in fines.

      Reply
      1. Yves Smith Post author

        Pharma bro Shkreli was incredibly obnoxious in court. That sort of thing should not matter but it does. He pissed off everyone. From Wikipedia:

        Due to Shkreli’s notoriety and overwhelmingly negative public opinion, it was difficult to select an unbiased jury, with potential jurors stating “I’m aware of the defendant and I hate him”, “he kind of looks like a dick”, and “he disrespected the Wu-Tang Clan”.[111] At his 2017 trial, Shkreli said that none of his investors actually lost money (some actually turned a profit) and thus his actions did not constitute a crime.[112] Shkreli’s frequent criticisms of the federal prosecutors in New York’s Eastern District, whom he called “junior varsity” compared to their counterparts in the Southern District across the East River, both on his Facebook streaming video feed and in the hallways of the courthouse, led those prosecutors to request that judge Kiyo A. Matsumoto issue a gag order to prevent what they called a “campaign of disruption”. And the securities

        https://en.wikipedia.org/wiki/Martin_Shkreli

        He also ran what was established to be a clear-cut Ponzi scheme.

        Reply
        1. jim truti

          There is an outstanding piece on bloomberg by Matt Levine on the “ponzi” that Shkreli ran.
          You are right, he ran a ponzi but contrary to what people think none of his investors lost a penny, actually they made out like bandits. He was extraordinarily lucky with his ponzi.
          There was no harm done, all his investors made tons of money.
          Shkreli was convicted on accounting technicalities that if applied in a rigorous manner will sent 95% of Wall St to jail.
          On the other hand he was or “played” a total jerk on the public space, attacking Clinton when she was a rising star.
          He was a total arrogant jerk when he testified before congress, but his case was a revealing to the public how pharma companies exploit the system. Instead of just vilifying Shkreli for the price increase, congress should have taken this opportunity to look into the abuse of big pharma players who do much worse than Shkreli with their price gouging.
          I agree with you that his attitude played a big role in his sentencing which reveals another aspect of our justice system; its not blind.
          What Holmes did is degrees of magnitude worse than Shkreli as she severely harmed investors and patients.
          And she seems to have been found guilty only for harming the rich investors to boot not the patients.

          https://www.bloomberg.com/opinion/articles/2015-12-17/martin-shkreli-accused-of-being-surprisingly-good-at-fraud

          Reply
          1. Yves Smith Post author

            “Ponzi” and “no one loses money” are contradictions in terms. The fact that some investors got paid out more than they put in did not mean that the ones who got in later would not be toast.

            And the judge didn’t buy that argument:

            Former U.S. drug company executive Martin Shkreli will be held responsible for $10.4 million in financial losses when he is sentenced for defrauding investors, a federal judge ruled on Monday, rejecting his argument that he did not cause any losses…

            Matsumoto said in Monday’s order that under federal law, all of the money that investors put in Shkreli’s funds as a result of his fraud, about $6.4 million, must be considered loss. She also said he should get no credit for paying investors back because he only did so after they became suspicious.

            https://www.reuters.com/article/us-usa-crime-shkreli/pharma-bro-shkreli-to-be-held-responsible-for-10-4-million-in-losses-u-s-judge-idUSKCN1GA2DB

            Reply
      2. larry

        Shkrelli only got about 7 years, some of that time in ‘nice’ jails, and and is still worth millions. One rule for them, it seems, &c.

        Reply
  2. Tom Stone

    I have encountered a true Charismatic, Carreyou’s concerns were legitimate.
    A Russian and an Austrian are among the best known charismatics and the old word for this phenomonon was “Glamour”.,
    Not nice people,generally speaking.
    .

    Reply
    1. Questa Nota

      “There were what I’d describe as cagey responses or attempts to redirect to other topics of discussion…Almost exclusively Ms. Holmes was the one answering the questions irrespective of to whom the questions were being asked,”

      She could’ve been a contender in DC. She could’ve been somebody.

      Reply
      1. Fritzi

        I think he might mean Lenin.

        Stalin alone probably wouldn’t have amounted to all that much, if there hasn’t been Lenin’s status and legacy to build on (or parasitize).

        Reply
  3. vlade

    I hope she gets a good (10+ years) sentence, but we’ll see.

    I’m not hugely surprised she got off on the charges on patient harm, there was no real “my daughter died because you misdiagnosed cancer” moment. Yes, a lot of stress, but stress is hard to sell to a jury. Now, if the poor lady whose pregnancy got misdiagnosed terminated it (luckily she didn’t), that would have been a really bad moment for Holmes.

    Agree that the Pfizer moment was what sunk her, especially once she admitted she did it herself.

    I haven’t heard the recording, but giving a false information in an investor call is woohoo, bring on the lawyers type stuff. Even if you do it in a good faith (in the information) and there’s zero way that someone would believe she used the 7 billion number unknowingly. These things get prepared up-front, and viewed and reviewed number of times, it wasn’t like she was asked an off-the-cuff question where more leeway might be given.

    I’d modify the closing sentence though – there was no major innovator in the life science who would be self-taught for at least 100 (probably more, but 100 years I’m pretty confident on. There was quite a few in 17th century) years now. The closest I can think was Walter Pitts, in neuroscience.

    Reply
    1. Michaelmas

      The closest I can think was Walter Pitts, in neuroscience.

      And that’s a reach. Pitts was a prodigy and we remember him for his foundational insights into computational neuroscience as they led to neural networks, and rather less for biological neuroscience i.e actual life science. Mathematicians like Norbert Wiener (founder of cybernetics) and Bertrand Russell were his real affinity group.

      Reply
      1. vlade

        Yep, that’s the reason I said at least 100 years – because even Pitts doesn’t count, and he comes the closest I can think of.

        Reply
    2. Yves Smith Post author

      Haha, I beg to differ.

      “Innovator” is a horrible ugly modern term, up there with “job creator”. It also smacks of “not necessarily significant.”

      In the past, they would have been called inventors or scientists.

      Reply
      1. vlade

        I guess it’s semantics (I did notice you put it into “”). I tend to class inventions, discoveries and improvements (which I believe are most common, where you don’t get a massive brand new invention or a discovery, but a gradual improvements – which may be small, but end up being significant) all as (real) innovations.

        Reply
        1. TimH

          As an engineer, I don’t care for the use of ‘invention’ in patents to describe a construct or technique that has always existed as a possibility, but presumably had not been used yet. ‘Discovery’ is better.

          Reply
          1. vlade

            For me it’s always about what exists and what doesn’t. You can’t invent America (the continent), or DNA, law of gravity or photosynthesis.

            But then I’d argue you can’t “discover” a quick sort (as the algorithm), or a transistor (at least to my knowledge there’s no “natural” transistor that would be readily available).

            Reply
      2. Librarian Guy

        To me it’s up there with the neologism “incentivize” as a verb, just stupid, grating and silly. What does “incentivize” say that “motivate” didn’t, apart from gesturing toward $$$, perhaps?

        Reply
    3. Larry

      It’s interesting that this is seen so out of line, perhaps because it was not out in public? Elon Musk once weaved a tale of taking a fully public company private with money from the Saudis on Twitter and he has never once faced more than a singular fine. I’d say it hasn’t even changed his behavior on Twitter where he is supposed to have some approval mechanism for his Tweets.

      Reply
      1. vlade

        I’m not sure whether anyone actually sued Musk for that. SEC didn’t sue IIRC.

        TBH, Mush (intentional) should have been in jail quite some time back IMO.

        Reply
        1. Sausage factory

          starlink is primarily a military project funded by the pentagon so he won’t be going to jail until it has been finished/failed. The Russians can already shoot it down before it is even completed so I guess we can say it is already obsolete/a sitting duck/not fit for purpose. but then we all know the pentagon by now, hope and taxpayers cash springs eternal!

          Reply
  4. The Rev Kev

    I’m still convinced that she made the same error that Bernie Madoff did. He was thrown in the slammer for not so much preying on poorer people but wealthy, well-off people and the speed that he ended up in jail was pretty rapid. If Holmes had only preyed on the little people, then her sins may have been – mostly – forgiven but she made some pretty powerful people look pretty stupid for falling for her spiel without doing due diligence. You think that the spooky eyes alone might have been a warning. Myself, I would be asking that how was it that she was able to found Therenos at the age of 19 years old after dropping out of Stanford. Now that is an odd data point that.

    Reply
    1. t

      Do you think we will ever know if she dropped out because Stanford made it clear she needed to go? (Or was suggesting switch majors, which is obviously the same as flanking out.)

      Reply
    2. Randy

      I am guessing that, like literally every single one of these “self made” types, she had significant help from the Daddy Fund.

      I then did five seconds of research and found: “Holmes dropped out of Stanford in 2003 and used the education trust from her parents to found the company that would later be called Theranos….”

      I am also guessing that an education trust to go to Stanford was probably in the six figures, even if she had already used up some of it while actually attending the place. So there you go.

      Reply
      1. Fazal Majid

        Her father was a VP at Enron (the jokes just write themselves) and her great-great-grandfather founded Fleischman’s Yeast, so yes, she comes from money and knew how to con members of the same social circle.

        Reply
        1. Michael McK

          The New Yorker article about her I read years ago seemed to imply her father had a spook background and that is why she had a pool of war criminal contacts to appoint to her board.

          Reply
    3. The Rev Kev

      When I said that she made some pretty powerful people look pretty stupid, here is a partial list-

      George P. Shultz, former US Secretary of State, Secretary of the Treasury, and Secretary of Labor; Gary Roughead, retired US Navy admiral; William J. Perry, former US secretary of defense; Sam Nunn, former US senator who served as chairman of the Senate Armed Services Committee and the Permanent Subcommittee on Investigations; Gen. James Mattis, retired US Marine Corps General who later became Secretary of Defense at the start of the Donald Trump administration; Richard Kovacevich, former CEO of Wells Fargo Bank; Henry A. Kissinger, former US Secretary of State; William H. Frist, a surgeon and a former US senator; William H. Foege, former director of the Centers for Disease Control and Prevention; and Riley P. Bechtel, Chairman of the Board of the Bechtel Group Inc., a construction company once headed by George Shultz.

      Reply
      1. EB

        Impressive list of people. I’m surprised that William H. Foege is on the list. You would expect that as a director of the Centers for Disease Control and prevention, he would have a good knowledge of Medical and life Sciences. On top of that, he also should have access to experts that have a good knowledge of the Medical and Life Sciences. What does that tell us about the Centers for disease Control and prevention? The other board members were easily swayed by a compelling story.

        Reply
  5. QuarterBack

    Even now, Elizabeth Holmes is riding the kind of privilege that comes with her mix of white collar crime, deep levels of family power connections, and white shoe law firms. Despite being convicted by a jury of four felonies with potential twenty year sentences for each count, she was able to walk out of the courtroom and return to her home pending appeal, which could take many years.

    Now that the trial is over, her lawyers can focus on fighting and delaying the appeal process. She will undoubtedly dive head first into another PR image campaign. I expect her to soon be on the cover of some well read magazine with her infant child suckling her breast.

    Reply
    1. griffen

      You make a good point about her camp’s reaction to the convictions. My question, what PR manager or PR firm wants to touch that with a 10 foot pole? She could do a photo op in a green meadow surrounded by puppies, rainbows, and tiny horses. Will not change hearts or win minds.

      By the bye, I’m sure she is not walking too far even if she was sent home. She makes the Grinch seem lovable. Her choice of black attire matches to her soul, and quite possibly her dark heart.

      Reply
      1. QuarterBack

        There are PR firms that specialize in redemption of outcasts. Her PR focus will not be on some Martha Stewart style comeback. It will focus on providing cover for anyone involved the sentencing process to lean towards a minimal sentence, or even home detention “in the best interest of her child”.

        Her story will be of how the jaded cruel process and politics of healthcare and the glass ceiling have inspired her to wake up and focus on her true calling to change the world by dedicating her life to be the best mother she can.

        Reply
        1. Michaelmas

          Yup. It’ll be a redemption-type story — “I once was blind, but now can see” — she’ll be singing, possibly including how her time behind bars has made her realize the harsh inequities of America’s prison/justice system for people who can’t afford the best legal help.

          Reply
      1. Robert Gray

        Randy (8:58):

        > “Holmes dropped out of Stanford … and used the education trust from her parents ….”
        > I am also guessing that an education trust to go to Stanford was probably in the six figures …

        and see

        meadows (8:36):

        > … her Pops was an executive at Enron …

        So, I suppose in regard to ‘family connections’ ‘modest’ is … relative. :-)

        Reply
        1. Joe We;;

          Trusts for young people are common among the upper middle class. Her family wealth put her possibly on the borderline of the 1%.

          That is nowhere near enough to pay for a legal effort like this.

          Reply
      2. David in Santa Cruz

        As I recall, Holmes’ SEC settlement allowed her to hang-on to her substantial CEO E&O insurance coverage. This has essentially given her a blank check for legal representation.

        I disagree with assertions that she wasn’t disrespectful of the court, the prosecutor, and the jury. On direct examination she tried to demonstrate an omniscient and omnipotent ability to recall the nuance of every meeting or utterance. When confronted with her past lies on cross examination she played at childlike naivety and bouts of amnesia.

        Not a good look if she continues down that path with federal probation. Sentencing should be interesting; the judge is an ex-public defender and former small-time San Jose criminal defense attorney with a ruthlessly political wife (a state appellate justice). Holmes may have difficulty playing her privilege card…

        Reply
  6. MP

    It really fits with the whole ethos that she only got pegged for financial fraud, because at the end of the day she had good reason, based on Carreyou’s book, to believe that she would get away with it. She correctly understood that Silicon Valley types basically bullshit on every promise until the very last moment, either abandoning it/modifying it/getting it in at the last minute; we all know the story about Steve Jobs and some of his demos that were carefully choreographed and barely worked. So in her mind she was just another Jobs, faking it until she made it, and that the technology would “come along.” The only issue is that she was actually deluded enough to believe it would come along and didn’t full grasp that it was a fantasy, even as she’s re-routing Edison tests to a real blood lab and constructing Potemkin laboratories. The thing the legal system couldn’t abide was the one actually funny thing she did, which was scam elites who also believe the same things about Silicon Valley and ‘progress’ as she did.

    Reply
    1. Michael Fiorillo

      Speaking of Potemkin labs at Theranos, I’ll never forget the background in a photo of Holmes at her facility in a typically fawning article, before Carreyrou’s reporting took the shine off the turd: it showed the “machine shop” for the company, which was literally a bench and pegboard on the wall holding hand tools, such as you’d find in Dad’s garage.

      Her con would never have been possible without the complicity of an obsequious financial press and the bogus memes they churn out…

      Reply
      1. IMOR

        …and the nearly complete ignorance (at least two generations’ worth, because if your dad or great uncle knew it/ worked it, you know) of the most general notion of the scale, tools, and environments of manufacturing or skilled labor, scientific or otherwise, among those fundind and ‘covering’ Theranos.
        Great contribution, Michael.

        Reply
      2. cnchal

        > . . . obsequious financial press . . .

        I would say ignorant instead of obsequious. I mean even if the scale of the fraud extended to shiny cabinets with plexiglass windows and impressive looking graphics like VG-S 1000 on the side, would any journalist know what the machine is for?

        It reminds me of UN weapons inspector Hans Blix when he had a gaggle of journalists with him and they were breathlessly saying they were opening the doors to Sadam’s weapons of mass destruction hide away and when the lights were flicked on all that was there were old rusty dusty radial drill presses, milling machines and lathes. The journalists had no clue as to what they were looking at.

        That Powell would stand up later at the UN and tell the world that fer sure Saddam had weapons of mass destruction is one of the great crimes this millenium, and that a bunch of politicians went along with it is a demonstration at how phucking demented they are.

        You can’t cheat an honest man or woman. That Holmes cheated the queen of Scam Way and the likes of Kissinger warms my heart. At least she didn’t start a war.

        Reply
    2. Ashburn

      “She correctly understood that Silicon Valley types basically bullshit on every promise until the very last moment, either abandoning it/modifying it/getting it in at the last minute;…”

      Sounds exactly like our military-indistrial-complex pitches to Pentagon types and their cost-plus contracts. No wonder General Mattis bought into it.

      Reply
      1. Gavin

        Yikes: if she’d have just pitched it to someone at the .gov she’d likely have gotten away with it bc they could just spin it as DARPA something something futuristic real-time results on the battlefield, oh well, solid effort good chap.

        Reply
  7. DJG, Reality Czar

    Why does this all smack of Jeffrey Epstein, too? Lots of money chasing all kinds of strange and impossible deals, weird desires, warped personalities, and “free money” for our betters?

    And if it’s true that she bilked Henry Kissinger, well, groundlings, I’m not here to shed real tears over him.

    Yet:
    “It’s hard to feel sorry when rich people and businesses that ought to be capable of doing due diligence like Walgreens get fleeced.”

    I owned Walgreens stock for a number of years. I lived in the neighborhood in Chicago where the first Walgreens store opened. Yet over time it became obvious that Walgreens isn’t notably well run–and it became more obvious during the merger with Alliance Boots and its aftermath.

    Besides the board with the usual poltroons, poltroonesses, and people who bankrupted their companies (there’s always at least one on a U.S. corporate board…), the back pages of the proxy and the annual report had plenty of dubious information. I enjoyed the corporate jets. And after the merger, there were some obligatory statements about the nepotism that Stefano Pessina brought with him from Alliance Boots–disclosures of highly paid domestic partners and kids and such.

    Also buried in the back pages were the costs and liabilities from a settlement against Walgreens in the opioid litigation.

    It’s like Peyton Place, but without the moral compass. So how would any of these geniuses spot the problems that Theranos had?

    Reply
    1. Questa Nota

      There could be some interesting interviews with those board members, as many were professional talkers with many, er, affinities.
      Professional listeners, not so much.

      Reply
    2. Librarian Guy

      The Schultz grandson who had an internship (or maybe even job) at Theranos did blow the whistle to granddaddy, and she sent some kind of lawyer thug squad to their house to try to intimidate the kid or push back . . . well, granddad obviously had more than adequate security so only “discussion” followed. (I know this only from the NetFlix doc I saw a couple years back, this is pretty surface but well established.) Anyway, nice that the youngster wasn’t quite as credulous and naive as his elders, but I’m sure over time in that family he’ll probably end up a bad, exploiter type himself. As a saying from my childhood goes, “Lie down with dogs, wake up with fleas.”

      Reply
      1. griffen

        He’s still pretty young. I caught a brief interview earlier for the grandson. He was 20 maybe when he indeed was the whistleblower, and is now 31. That’s a significant chunk of time.

        Maybe instead, he’s actually been grounded in real life from the experience and will be something different than the future you’re suggesting.

        Reply
    1. QuarterBack

      I’m sure there is least one or more Theranos-by-another-name companies riding COVID right now. It will be another 5-10 years before we learn about their innovations in skullduggery.

      Reply
  8. KD

    She doesn’t have much of a criminal history, wire fraud is the least serious of the crimes, and now she has a baby so a mean judge won’t want to send her to prison. She probably be at home on an ankle monitor for a while, then off to probation while she works on her book. Maybe MSNBC can bring her in as a commentator.

    Reply
    1. Henry Moon Pie

      Just remember who her “victims” are. Henry will drone her if she’s not in prison. Devos will fill her garage with AmWay crap.

      Reply
      1. MichaelSF

        DeVos doesn’t need to send Holmes cleaning products, she’s got a brother with his own mercenary army to take care of “problems”. Maybe Henry familyblogging Kissinger can contract with Prince for the hit. She’s probably counting her lucky stars that she didn’t take any money off of Hillary Clinton, there’s someone who’d cause some scary nightmares.

        Reply
      2. Michael Fiorillo

        Or else De Vos will have her locked in a room and compelled to listen to a tape loop of Teach For America recruits stating that privatizing public education equals “Social Justice” …

        Reply
  9. jo6pac

    No matter what time she gets she’ll be at club fed in Pleasanton, Calif. then be quietly released after 2yrs. She also made a lot of people rich.

    Reply
  10. Michael Ismoe

    Will the former board members be held accountable for the actions of the person they supposedly supervised? Why not?

    Reply
  11. michael hudson

    I see her future as a televangelist, inspired by finding Jesus in prison with other federal (not state) inmates for similar frauds.
    When Lyndon Larouche was in jail in Minnesota, I’m told that his cellmate was Bobby Baker.I’m sure they compared notes.
    Holmes can see that the way out is to find Jesus. She’ll announce that she’s converted, and just as Jesus helped her get out of mail and become a fine role model again, he can help all her followers in her new Billy Sunday style megachurch she partners up with.
    religion always helps with fraud; at least as a role model.

    Reply
    1. griffen

      It has certainly been done in the past, and not incidentally it was the former CEO of HealthSouth Corporation. Have to go into the memory bank for that one, which doesn’t really stand out other than an ability to replace the CFO every 12 to 15 months.

      Richard Scrushy. In the halcyon days when white collar crime and legitimate fraud in accounting practices could get you in the slammer. Details follow below.

      https://archives.fbi.gov/archives/news/stories/2003/november

      Reply
    2. Henry Moon Pie

      And she can be a faith healer.

      Of electronic devices.

      “Boot! In the name of Jesus, I command you! Boot!”

      Reply
  12. meadows

    Yves mentions “affinity boosters”. Hadn’t heard that term, makes sense. Madoff, Epstein, Holmes… the uber-rich club that we aren’t in, they seem to all know one another and have a herd mentality. They can’t seem to sniff out the wolf in sheep’s clothing within their club… is it possible that sociopaths cannot recognize grifters because they all are grifters?

    I’ve read re differences between pychopaths and sociopaths and my takeaway is that a sociopath is a pychopath but with lotsa charm, social skills… and in our culture, good looks don’t hurt.

    Reply
    1. Mildred Montana

      “…differences between psychopaths and sociopaths…”

      There are not many, according to the DSM-5. It now applies its latest buzzword “Anti-Social Personality Disorder” to them both. So Elizabeth Holmes is not a psychopath or sociopath, she has ASPD.

      Reply
  13. Alice X

    Abdul El-Sayed (Michigan progressive politician, gubernatorial candidate and former Detroit public health director): If Elizabeth Holmes did any good thing, bilking Betsy DeVos out of $100 million must be one.

    Or something like that. Rim-shot!

    Reply
  14. Matthew G. Saroff

    Christy Lynn gets it wrong: Elizabeth homes is not being negligent, as she implies, though I will grant the narcissism, she is being EVIL.

    She is engaging in a tactic called, “Pleading the belly,” wherein a a woman gets pregnant to avoid the consequences of her actions.

    It is a capstone to Holmes’ career as a sociopath entrepreneur. (Not a doctor, I am using this in a colloquial sense)

    Reply
  15. GREGG BARAK

    I would not get too caught up with analogies between Madoff and Holmes; these perpetrators, their methods, and the investors/victims are not really parallel. i certainly would not generalize from these two very different worlds of allegedly investing in a portfolio of things and being scammed about an innovative breakthrough product.

    Reply
  16. Kevin Carhart

    At what point does early Theranos investor Tim Draper face consequences?
    He raised the $230m fund Draper Associates VI a year ago, and at the end of 2021 poured his idea of due diligence and judgment into Colossal Biosciences, Near Space Labs, Ripio, PalletPal, LeadIQ, Zopa, Vivoo, Aanika Biosciences, ICEYE and Verge Genomics.

    CNBC Closing Bell, May 10, 2018

    Kelly Evans: Tim, the last time we spoke with you a couple of years ago you roundly defended Elizabeth Holmes, the founder of Theranos. The SEC has now accused that company of massive fraud. You said people were just going after her because she was a woman, she was the victim of a witch hunt, you suggested the Wall Street Journal guy who uncovered all this was incompetent, are you willing to admit that you were wrong about this one?

    Draper: Absolutely not. I feel that we have taken down another great icon.

    Evans: Icon of what?

    Draper: This woman came to me when she was 19 years old and she said I’m going to transform healthcare as we know it, and she got bullied into submission. And this is–

    Evans: Tim, investors have lost $900 million dollars–

    Draper: Do extraordinary things, are you talking at the same time I am talking?

    Evans: $900 million dollars went into Theranos–

    Draper: Right, and look what she did, she created an amazing opportunity

    Evans: Investors believed people like you, who said you’d known her her whole life, and it’s worthless–

    Draper: Well it is *now*, well wait why is it worthless? It’s worthless because this writer was like a badger going after her, like a hyena going after her and then it became a bigger and bigger thing. I mean this was a startup and it was a great vision, it was a great technology–

    Evans [to “amazing opportunity”]: Amazing opportunity? The technology she claimed to have invented didn’t exist … Tim, the SEC charged this as a massive fraud–

    Draper: Yeah, I think you missed the entire point. All she had to do was say this was a beta or whatever and all of us would be using it, we’d be loving it–

    Evans: Sure, but she didn’t, that’s her fault.

    Draper: She’s going up against some very powerful people in the drug companies, the AMA, the FDA, all these people, she’s transforming healthcare. Somebody goes in and tries to transform healthcare, they’re going to get attacked in a lot of different directions and she was. And this is one of the cases where the entrepreneur was defeated. I mean, in general the entrepreneurs do extraordinary things. I mean, the press, you guys, the press went after Uber. For all the horrible things, whatever. But that’s an incredible service.

    Evans: Right, but Tim, on this specific issue of Theranos, you’re not willing to admit that she lied to investors and misled them about the technology that she claims she pioneered?

    Draper: That’s not proven. That’s not proven.

    Evans: This is important stuff, they voided thousands of individuals’ blood tests that were taken at Walgreens because the tests were not performed up to standards.

    Draper: Hey, I took that test. I took the test … I did the whole thing and I compared the test to my test at the doctor’s office. They were identical. The outcomes were identical.

    Evans: It’s not clear that she actually used fingerprick technology to get those outcomes.

    Draper: There are plenty of people who are kinda going, ‘this is a problem and this is a problem,’ I mean you try to start a company and see what happens. It’s a very difficult thing to do.

    Evans: No, look and people celebrated her because it is hard to do. That’s why she was on the cover of magazines. It was like, you know what, this young woman is coming out and trying to change healthcare and improve it for all of us. That’s why we were all so excited about the story but it turned out there was no there there.

    Draper: Oh that’s not true. There is a great technology and it’s gonna happen. I mean for all of those people who went after her and destroyed Theranos, there are ten more entrepreneurs that are all getting funded now. They’re going to do the same thing and we’re going to eventually change healthcare as we know it and she will have had a huge hand in making that happen. And I’m thrilled with what she’s done.

    Wilfred Frost: Tim, you were one of quite an impressive list of high-profile investors in Theranos initially, the likes of Carlos Slim, Betsy Devos, Rupert Murdoch, Robert Kraft to name but a few. How do you personally feel now given the money that you’ve lost and what do you feel for those other fellow investors that perhaps never knew Elizabeth Holmes as well as you did?

    Draper: Look, when I’m an investor in a startup, I assume that 60% of them are going to go out of business. I make my money on a few really extraordinary companies. Theranos was one of those extraordinary companies that could have been one of these big huge winners. And that’s what I do. I back, for every ten companies I back six of them are going to eventually go out of business and four of them are gonna rock and roll and maybe one or two become household names, extraordinary companies. Theranos had a great shot and I backed her, and I feel great about backing her and I thought it was extraordinarily, it was a great mission and she did a great job.

    Evans: Have you spoken with her recently, Tim?

    Draper: I now look and I say okay, well that ended up being in the loser column whereas other companies that I’ve backed went into the winner column. And I think most investors who are investing in private companies look at it that way. They say, oh, well that one didn’t work but this other one did and I’m making money for my investors overall. And I think that is what it’s really all about.

    Evans: Last question on this. Do you know what her future plans are? Have you been in touch with her lately?

    Draper: No, you can ask *her*

    Reply
    1. Turing Test

      I think the technical term for what Draper is doing here is white knighting.

      Which points to another reason she got away with this for as long as she did: she was an attractive, well spoken white woman.

      Kudos to Kelly Evans for actually practising journalism. This has become so exceptional it needs to be recognized when it happens.

      Reply
  17. Watt4Bob

    Draper: I now look and I say okay, well that ended up being in the loser column whereas other companies that I’ve backed went into the winner column. And I think most investors who are investing in private companies look at it that way. They say, oh, well that one didn’t work but this other one did and I’m making money for my investors overall. And I think that is what it’s really all about.

    This a classic dodge, the exact sort of rationalization that allows for escaping responsibilities of all sorts.

    Act as if investing is simply choosing 1 for column A and one from column B, and if it doesn’t work out, make another choice.

    When one of your ‘loser‘ customer complains, you just shrug and tell them ” I’m not perfect, nobody’s perfect” and then tell them to make another choice from column A, maybe this one will work out.

    Reply
  18. Sam

    You know what’s missing, over and over and over again?

    The tech press being taken to task at all. Instead of actually investigating bullshit claims the tech press never asked a single probing question, never did their damn job of asking anything at all to look behind the spurious claims. When ONE journalist DID ask questions he was first dismissed and then harassed as the rest of the press continued to publish unverified press releases DIRECTLY FROM THE COMPANY.

    Tech press needs to hire and fact check articles not just copy/paste press releases.

    Until the tech press is held to ANY standard, this kind of shit is going to continue to happen.

    Reply
  19. BadRobot

    Gosh, I really do feel sorry for Ms Holmes…she will struggle to get her ‘vegan green juice’ whilst banged up in some US prison

    Reply

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