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Elizabeth Holmes: The rise and fall of a Silicon Valley icon

Elizabeth Holmes
Image: Elizabeth Holmes in 2013 | Public Domain

At the age of 30, Elizabeth Holmes garnered recognition from Forbes as the world's youngest self-made female billionaire, amassing a staggering net worth of $4.5 billion. Having abandoned her studies at Stanford University during her sophomore year, she proceeded to establish Theranos in 2003. Theranos, a healthcare technology startup, purported to revolutionise blood-testing procedures. Through extensive funding, the company secured over $700 million from investors, eventually achieving a valuation of $10 billion.

Holmes stated that her fear of needles served as the impetus behind the creation of Theranos. The company proposed blood tests that purportedly necessitated just a finger prick, boasting the capability to provide results for up to 30 tests within a matter of hours. This feat was made possible through their proprietary laboratory device named Edison machines, paying homage to the renowned inventor Thomas Edison. Ordinarily, blood samples collected at a medical facility required shipment to an external laboratory, with the results often taking weeks to be processed and returned to the individual.

Guided by a vision of ‘democratizing healthcare’, Holmes propelled Theranos to extraordinary success. The company's meteoric rise led to the establishment of partnerships with numerous healthcare entities such as Capital Blue Cross and Cleveland Clinic. Notably, a partnership with Walgreens materialised, resulting in the opening of 40 Theranos wellness centres within Walgreens stores across Arizona in 2013. Furthermore, by the conclusion of 2014, Holmes had secured patents in her name, both domestically and internationally, solidifying her influence in the industry.

In October 2015, the Wall Street Journal released an article authored by John Carreyrou, which brought to light Theranos' controversial practices. Carreyrou revealed that Theranos did not utilise its own technology to conduct tests on the blood samples it collected. Additionally, he disclosed the alarming inaccuracies associated with the Edison machine, which had produced unreliable results. Carreyrou's exposé stemmed from a clandestine, months-long investigation prompted by a tip from a medical expert who harboured doubts regarding the validity of the Edison machine's capabilities.

Throughout his investigation, Carreyrou unearthed that Theranos was covertly using conventional testing machines while concealing this fact from both customers and investors. Despite offering a roster of 240 distinct tests to consumers, only 15 of these tests were actually performed using the Edison machine. The Wall Street Journal reported instances of results being egregiously inaccurate, to the extent that ‘patients would have to be dead for the results to be correct’. He accused Theranos of using nothing more revolutionary than widely available commercial equipment.

Carreyrou had spoken with two whistleblowers, Erika Cheung and Tyler Schultz, who divulged that Theranos had been disingenuous regarding the capabilities of its equipment. They painted a picture of a clandestine work environment within Theranos, where malfunctioning tests were disposed of, and employees were actively discouraged from voicing apprehensions about the technology.

Upon the publication of the exposé, Holmes reached out to Rupert Murdoch, the Executive Chairman of News Corp and a notable investor in Theranos, in an attempt to dissuade him from allowing further coverage by Carreyrou. Murdoch's response was, ‘I’ll leave it to my editors’.

In a bid to contain the fallout, Holmes enlisted the services of her attorney, David Boies, who asserted that Theranos had not yet fully integrated its technology for all blood tests, referring to the ongoing process as ‘a journey’. Meanwhile, Theranos refuted the exposé, denouncing it as ‘factually and scientifically erroneous’ and ‘grounded in baseless assertations by inexperienced and disgruntled former employees’.

In January 2016, the U.S. pathology regulator, the Center for Medicare and Medicaid Services, conducted inspections of Theranos laboratories, uncovering practices and procedures that posed an ‘immediate jeopardy to patient health and safety’. As a result, Theranos was compelled to close down its wellness centres, leading to substantial losses for investors, estimated at approximately $600 million.

By April of that year, Theranos found itself embroiled in a criminal investigation. Federal prosecutors were scrutinising the veracity of the company's claims regarding its technology, specifically the assertion that Theranos could conduct complex blood tests at a cost-effective price point using just a single finger prick. The investigation centred on whether Holmes had provided false information to investors in order to secure their investments, as well as whether the company had inflated and misrepresented the capabilities of its blood testing technology.

In July, the Center for Medicare and Medicaid Services imposed a ban on Holmes, prohibiting her from owning, operating, or managing a blood testing service for a period of two years. Shortly thereafter, Walgreens terminated its affiliation with Theranos. By October, Theranos had ceased its laboratory operations and faced a barrage of lawsuits.

The state of Arizona filed a lawsuit against the company, contending that Theranos had sold 1.5 million blood tests to Arizonians while distorting crucial facts about the tests. In an attempt at resolution, Theranos agreed to issue refunds as part of a $4.65 million settlement. The full extent of the number of patients who received false negatives for serious illnesses remains unknown.

In 2018, the Securities and Exchange Commission filed civil securities fraud charges against Holmes, along with the former company president, Ramesh ‘Sunny’ Balwani. The allegations suggested that Theranos had deceived investors for an extended period, leading to the fraudulent acquisition of over $700 million in funding. Holmes and Balwani agreed to a settlement that stripped her of voting control of Theranos, banned her from being an officer or director of any public company for 10 years and required her to pay a $634,000 penalty.

After an extensive investigation by the U.S. Attorney's Office for the Northern District of California, Holmes and Balwani faced a legal indictment comprising nine counts of wire fraud and two counts of conspiracy to commit wire fraud. The charges outlined that the duo, who were romantically involved during a portion of the company's existence, had allegedly engaged in fraudulent activities, deceiving not only investors but also medical professionals and patients alike.

After being delayed due to the COVID-19 pandemic and Holmes’s pregnancy, her trial began on 31st August 2021. During opening statements, the prosecution said that Holmes’s rise and fall was a story about ‘lying and cheating’. They accused her of making ‘grandiose claims’ about how the Edison machines would be on helicopters in various locations around the world and that the company would receive revenue of hundreds of millions of dollars. Prosecutor Bob Leach stated: ‘This is a case about fraud, about lying and cheating to get money.’

During defence attorney Lance Wade’s opening statements, he said that Holmes ‘did not go to work every day intending to lie, cheat and steal’. He said that the government wanted the world to believe her company and her entire life was a fraud. He added: ‘That is wrong. That is not true. Elizabeth Holmes worked herself to the bone for 15 years trying to make lab testing cheaper and more successful.’ He continued, telling the jury: ‘In the end, Theranos failed and Elizabeth Holmes walked away with nothing. But failure is not a crime. Trying your hardest and coming up short is not a crime.’

During the trial, the jury was presented with testimony from several witnesses, among them James Mattis, who disclosed his personal investment of $85,000 in Theranos. Former employees also took the stand, including former laboratory director Kingshuk Das, who recounted Holmes's apparent aversion to acknowledging any critique of Theranos technology. Das's testimony regarding the Edison machines was stark: ‘I found these instruments to be unsuitable for clinical use.’

At the trial, Elizabeth Holmes offered her own testimony, asserting that she placed her trust in the representations provided by her team of scientists, maintaining that she never deliberately misled anyone. Furthermore, she alleged that Balwani had exerted abusive influence over her, compelling her to engage in fraudulent activities. However, evidence was presented during the trial, demonstrating that Holmes had manipulated documents and distributed them to prospective investors, falsely asserting that pharmaceutical companies had endorsed the efficacy of Theranos' technology.

Ultimately, Elizabeth Holmes was convicted on four counts of defrauding investors, resulting in a sentence of approximately 11-and-a-half years in prison. Sunny Balwani, similarly, was found guilty on all counts and received a prison sentence of 12 years and 11 months.

6 facts about Elizabeth Holmes

Once the toast of the tech world, Elizabeth Holmes now has the dubious distinction of being arguably the most notorious fraudster in the history of Silicon Valley. Here are six facts about the founder who fell so spectacularly from grace.

1. Her dad was a vice president at Enron

In a remarkable coincidence, the woman who perpetrated one of the biggest and costliest corporate scams in living memory hails from a family which was once intimately connected with Enron, the energy and commodities company which… perpetrated one of the biggest and costliest corporate scams in living memory.

Once a colossal presence in the American corporate landscape, Enron underwent an earth-shaking collapse in 2001 after it was revealed that executives had flagrantly exploited accounting loopholes and other tactics to falsely inflate profits and hide losses and debts. It resulted in the biggest bankruptcy America had ever seen, with a seismic effect on both the world of business and pop culture in general.

Elizabeth Holmes’ father was a vice president at Enron, and while there’s no reason to think he was in any way connected with the malfeasance there, the fact that he was once so high up in the company is darkly ironic, given that Theranos now ranks with Enron as a by-word for corporate corruption.

2. She swindled Henry Kissinger

In what must have felt like a major coup for the ambitious young entrepreneur, Elizabeth Holmes managed to bag Henry Kissinger as an investor in Theranos. The former US Secretary of State, whose policies made him one of the most eminent and controversial figures of the Cold War, ploughed $3 million of his own money into Holmes’ company, where he was also a board member.

Kissinger effusively praised Holmes, describing her as ‘iron-willed’ and ‘somewhat ethereal’. His involvement also helped persuade other wealthy and influential figures from politics and finance to invest in Theranos (and inadvertently add to Elizabeth’s coffers).

3. She also swindled Rupert Murdoch

Another incredibly powerful and savvy figure who believed in Elizabeth Holmes was none other than Rupert Murdoch. The media mogul personally invested a whopping $125 million into Theranos, so Holmes would have been forgiven for thinking she could count on him to back her when she started feeling the heat from journalists.

On hearing that John Carreyrou of The Wall Street Journal was preparing an exposé of Theranos, she asked Murdoch, the newspaper’s owner, to kill the story. Despite his stake in Theranos, Murdoch refused to do so, saying that he trusted the staff of the Journal to publish what they thought was in the public interest.

Carreyrou’s work struck the first blow against the false façade of Theranos and helped bring the tech company down.

4. She fashioned herself after Steve Jobs

Elizabeth Holmes was well known for wearing a black turtleneck – she referred to it as her ‘uniform’ and once said she had 150 identical turtlenecks in her wardrobe. She also claimed she started wearing black turtlenecks as a child, although this story was contradicted by one of her employees, Ana Arriola, who was the chief design architect at Theranos.

In an interview for the podcast about Elizabeth Holmes, The Dropout, Arriola said that Holmes ‘would wear these frumpy Christmas sweaters, things you would only see during the holiday season’, but then developed an interest in the iconically simple attire of Apple founder Steve Jobs.

Her devotion to the aesthetics of her idol was embellished by the addition of a black puffy vest, and this toasty attire meant that she always had the temperature at the Theranos offices kept at a slight chill.

5. She travelled like a world leader

Elizabeth Holmes embraced the lifestyle of a major corporate leader...and then some. According to John Carreyrou’s book on Holmes, Bad Blood, when the Theranos founder met with Rupert Murdoch at his ranch to pitch for investment, even the all-powerful media magnate was ‘surprised by the size of the security detail Holmes arrived with’, which numbered several more than his own.

It was reported by Vanity Fair that Holmes was generally surrounded by as many as four bodyguards, who drove her around in a black sedan and referred to her using a presidential-style codename: Eagle One. Eagle Two was the company’s COO and Holmes’ former lover Sunny Balwani, who was also jailed for fraud.

6. She faked her voice

One of the most striking strategies employed by Elizabeth Holmes was to intentionally lower her voice until it was deep and resonant, presumably to exude power. The authenticity of the voice was the source of much gossip in Silicon Valley, especially as she sometimes forgot to keep it up.

According to her former colleague Ana Arriola, ‘It was maybe at one of the company parties, and maybe she had too much to drink or what not, but she fell out of character and exposed that that was not necessarily her true voice.’

Holmes has reportedly embraced her natural voice since her downfall, and she and her partner Billy Evans even joked about it when profiled by The New York Times. That profile confirmed that ‘Ms. Holmes speaks in a soft, slightly low, but totally unremarkable voice, no hint of the throaty contralto she used while running her defunct blood-testing start-up.’