The Theranos case: from model entrepreneur to con artist

Elizabeth Holmes Theranos

A life-saving puncture: This is how compelling the promise of Elizabeth Anne Holmes, founder of the American startup Theranos, was that it emerged as a model entrepreneur, and was also the reason for her disastrous fall. A few drops of blood are enough, as he announced, with the help of a device specially developed for that, to determine the level of hormones and viruses, as well as discover abnormalities and even detect dangerous diseases. The problem is that the device, which carried the bombastic name Edison, never worked.

Despite that, Holmes had his way for years. For more than 12 years, he convinced companies, executives, and billionaires that Edison’s possibilities were so great, so efficient, and profitable, that they would not only ease blood draw but would replace complicated and expensive lab tests forever. The Walgreen pharmacy chain offered this service, a supposed revolution in medicine, to 40 stores in the states of Arizona and California. Hundreds of thousands of clients reportedly obtained inaccurate blood test results, even putting their lives in danger.

Accusations: fraud against investors, doctors and patients

The trap set by Elizabeth Holmes has discovered thanks to John Carreyrou, an investigative journalist for the Wall Street Journal. About six years ago, Carreyrou received a call from a former employee who pointed out some irregularities in his company. His investigations, interviews and publications were essential in exposing Holmes.

With the election of the members of the jury, the trial against Holmes begins this Tuesday (31.08.201). Lawyers accuse the 37-year-old woman of fraud against investors, doctors and patients. Also the former president and chief operating officer of the company, Ramesh Balwani, who was his partner for a time, is in the dock. If the court finds them guilty, both await up to 20 years in prison and fines, for each of them, of more than two million dollars.

The change to a life of luxury and a distorted voice

A central question in the process will be to verify whether the company acted with premeditation to obtain investments through deception and fraudulent information in order to gain the trust of doctors and patients. But also the change to a life of luxury, which supposedly increased their greed more and more, is in the crosshairs. That is why prosecutors are demanding specific and intimate details of Holmes’s life. Especially with regard to private trips by jets, shopping tours and frequent visits to luxury hotels.

But it cannot be denied that Holmes knew very well how to attract investors. At large crowds, conferences, and meetings, he purposely warped his voice to make it sound deeper. His appearance was reminiscent of his great example, Apple founder Steve Jobs, who also influenced the choice of his clothing. In his wardrobe there were only black clothes and high-necked pullovers.

“She sounded like a Chemistry student.”

With his studied role, he managed to deceive wealthy men. On Theron’s board were names like former US Foreign Minister George Shultz, former Defense Minister James Mattis and even Henry Kissinger. Investors included media mogul Rupert Murdoch, Silicon Valley investor Tim Draper, and the Walton family, founder of the Walmart supermarket chain. All of them were fascinated with the charisma of the former Stanford student.

Blinded by the vision of a big business and without checking the books, they invested more than $700 million in the startup. At the peak of its success, in 2014, Theranos was valued at $9 million. A year later, Time magazine established Holmes as one of the 100 most influential people in the world. It could be seen on the cover of the most popular economic publications.

What many did not see – or did not want to see – was for critics like the journalist John Carreyrou, however, evident from a certain moment. For example, that Edison, presumably a magical device for blood tests, was extremely simply constructed. It practically consisted of just a robotic arm and numerous pipettes, all housed inside a casing the size of a beer crate. Taking more than 200 different blood tests there was simply impossible, so Theranos secretly went on to use competing devices.

But Holmes did not let that show and claimed all the time that he was behind a great discovery and therefore could not give more details. When she spoke of the technical aspect of the apparatus “she sounded like a Chemistry student, and not like an academic who really made a great scientific discovery,” Carreyrou wrote in her book “Bad Blood”, in which she addresses the case.

A trial that will have to talk

Furthermore, Holmes does not seem to see reason. Until the last moment, he pressured, with the help of the best lawyers in the country, all those who testified against him. She described many as “envious”, while she “believed in a vision.” “That’s what happens when you work to change things: first they think you’re crazy, then they fight you, and then all of a sudden you change the world,” Holmes told CNBC in 2018.

The trial against Elizabeth Holmes will not be easy. This weekend it was announced that the woman will appear in court as a victim of abuse for decades by the former president of the company and his ex-partner, Ramesh Balwani. According to published documents, Holmes plans to have an expert testify about the psychological, emotional and sexual abuse to which she was subjected by Balwani. According to Holmes, Ramesh Balwani controlled and manipulated her.

But whether those tactic works remains to be seen. Holmes had to assume his responsibility several times already and admit some fault, for example, in 2018, when, to avoid a lawsuit against him for false information about his product, he had to pay $500,000 and agree not to run any company on the stock market. for the next 10 years. What could now, perhaps, be in her favor is that she has just given birth to her first child. Many, however, think it’s a smart move: “Being a new mom can help you win the sympathy of the jurors,” said Danny Cevallos, legal analyst at NBC News. “In the event of a verdict, your lawyers will put her motherhood in the foreground before the judges, even though the norms provide for a prison sentence according to the accusations,” said the jurist.