It was the stuff of Silicon Valley dreams. Elizabeth Holmes dropped out of Stanford University to launch the blood testing disruptor Theranos and built it to a $9 billion valuation. But the tech adage “fake it until you make it” didn’t quite work for this medical startup, and charges that the devices didn’t work mounted. Holmes and Ramesh Balwani, her onetime business and romantic partner, were indicted with 11 counts of wire fraud and conspiracy to commit wire fraud. Here, Stanford Law School Professor Robert Weisberg, a criminal law expert, discusses the verdict.
Elizabeth Holmes was found guilty of four of the 11 charges against her. Can you explain the verdict? And why do you think the prosecution was persuasive on these charges?
She was convicted of the umbrella conspiracy to defraud investors and of a few specific acts of defrauding investors. The evidence was powerful from the start. She flat-out lied to investors about what her product could do and about what data there was to prove what it could do. The crime of scheming to defraud in order to obtain the property of another is not legally complex. Particularly because she often received and blatantly ignored warnings by employees that her bragging about the device was unfounded and had been disproved by the company’s own data, the intent to deceive was clear. And as for another key element—that the deceived parties relied on these lies to their detriment—that was easily established by investor witnesses to whom she directly made her false pitches.
How much time might she spend in prison?
A 20-year max per count with a near certainty of concurrent sentences would mean 20 years in theory. Not a chance of that. The federal guidelines are a complex mix of formulas and residual judicial discretion. Yes, a vast amount of money (in effect) was stolen, but she has no priors and some sympathy-compelling personal circumstances. So, the safest (hence very vague) guess is that she’ll serve a few years. Maybe very few. The judge might decide that the deterrent signal sent by the public seeing her go off to prison is much more important than the length of the sentence.
Any thoughts on why the jury did not find her guilty on all 11 charges?
The main point is that the jury wasn’t convinced of the fraud against physicians and patients. This was only a small portion of the government’s case, in part because Judge Davila wanted to restrict the time spent on it. But jurors were probably skeptical because unlike the major investors, doctors and patients were mostly relying on general advertising by Theranos or by secondarily learning of Holmes’s claims. Plus, for the patients who testified, the facts were muddy as to how much of the financial or medical detriment they suffered could be directly traced to hearing her claims. Of course, their testimony might still have indirectly helped the government win the major investor counts by reminding the jury of the potential public health harm of the fraud.
Also, on a few investor counts, jurors may have thought that some investors had either knowingly gambled on the chance that the device would work or that their claim of reliance was unreasonable because they had ignored ways of doing their own checking.
The jury deliberated for 50 hours over seven days, and seemed to struggle to reach the verdict. Is that unusual? Is it significant for an appeal?
It’s not really disproportionate to the amount and complexity of the evidence and the number of counts. By itself, the length of the deliberations in no way signals an appellate issue. If anything, it suggests that this was a fair and methodical jury.
Holmes is likely to appeal. What do you think of her chances on an appeal?
Nothing jumps out right now as a very controversial legal decision made by the judge. I’m sure the defense will look back to some evidentiary rulings the judge made and say they were wrong and material. If the sentence is long they will appeal that.
How rare is it that a tech executive faces the kind of charges Holmes faced? Why do you think charges against her were pursued?
It’s very rare for fraud cases in the wild west of Silicon Valley. It’s hard to separate lies from aspirations, or for investors who are part of the start-up frenzy to credibly claim they were deceived. In the end, this case was just an outlier.
Any other thoughts on this verdict?
Two things. First, the jury did not have to question Holmes’s claims of having suffered serious abuse at stages of her life. It could have found them very convincing—but just not relevant to her very clear-headed state of mind when she committed the fraud. And second, there’s legal irony that she has been convicted of conspiring with Balwani but that in his upcoming separate trial he could argue that he never conspired with her.