To Fraud or Not To Fraud: Elizabeth Holmes
Some may remember the name Elizabeth Holmes from her founding a start-up called Theranos. Some may recognize her deep voice and style--imitating Steve Jobs. In America, there is a problem with healthcare in terms of access and cost due to privatized insurance and inaction of the divided congress.
Theranos promised to fix all that; clarification: Elizabeth Holmes promised to fix everything with her new company Theranos. She came up with the idea to have blood taken from a finger prick and have all the different tests done on that small drop of blood. Theranos was supposed to build a portable machine, called the Edison, that would complete all the tests accurately. It was a crazy idea, but from the outside, it seemed great.
Many people bought the idea, including recognizable investors like Rupert Murdoch, Larry Ellison, multiple different venture capitalists, and Walgreens. Not only did Theranos gain millions in funding easily, but the company had a star-studded list of board members. They included Henry Kissinger and George Shultz, who were both former US Secretary of State; Jim Mattis, a retired Marine Corps four-star general; Richard Kovacevich, the former CEO of Wells Fargo; William Perry, the former United States Secretary of Defense; and William Foege, the former director of the Centers for Disease Control and Prevention (CDC). It was no surprise that the public would also buy into the stories and hope that Theranos was producing.
Holmes and Theranos did well for themselves and reached billions of dollars in value until the Wall Street Journal started to report stories about how the promised Edison machine did not actually work, Theranos was actually testing blood from a third party vendor’s machines, and many people were given false test results. For example, Theranos might tell a cancer patient that they are now cancer free and no longer need treatment; imagine the consequences that may follow if that patient still had cancer. Theranos settled with investors and other involved parties while Holmes denied any wrongdoing.
“fake it ‘til you make it”
Keep in mind that Theranos was started in Palo Alto, part of California’s famous Silicon Valley. There, over the course of many years, a “fake it ‘til you make it” environment has been curated. In many start ups, the founder will go around selling their vision and idea to investors, even if the product hasn’t been produced yet, for the sake of funding. Most of the time, once enough funding is allocated, the product is made quickly. In Silicon Valley there is also pressure to make sure products can be produced in a timely manner; investors and the board of directors may give a deadline for the release date to help ensure that their investment was worth it.
However, in Theranos’s case, the situation was different. When public health is on the line and false test results are given, the stakes are much higher than with comparative tech startups that claim that their software program for a social media platform works when it doesn’t. The consequences of Theranos affect real lives and their health. It was a matter of life and death.
Many partnerships and investor relationships ended thereafter with the news of the disaster. In 2015, Safeway terminated its relationship with the company. In 2016, Walgreens terminated its relationship with the company and in 2018, the company formally dissolved.
The Department of Justice is taking action on this large case that has gathered much attention over the past years. Holmes faces 12 fraud charges due to her role as founder and CEO of Theranos, which was worth $9 billion at its peak. Holmes pleaded not guilty against the charges. The news of her pregnancy delayed her trial, and in July 2021, Holmes gave birth to her first child with Billy Evans. Juror selection started in late August 2021 and every week, people are called to testify against and for Holmes.
In regards to the Safeway partnership with Theranos, Former Safeway CEO Steve Burd testified in Holmes’ trial, saying repeated delays with Theranos’ blood-testing machine raised red flags about his company’s failed multimillion-dollar partnership with the health-care start-up. Safeway spent more than $300 million to build out clinics in hundreds of its grocery stores in anticipation of the blood-testing technology, but in the end, Safeway waited for the Theranos tests that never came.
So far, many people have testified against Holmes, including Theranos’ previous employees and those affected by the false blood tests. We will simply have to wait until the jury renders a decision in order to see what, if any, punishment Holmes will face.