Elizabeth Holmes: guilty

[Bluedog]

^Kinda like Fyre Festival...

Perhaps started with a vision that the person believed was attainable, but then was nowhere close to actually delivering what was promised... And when that was clearly the case, still trudged forward while misleading people about the actual status of things.

[MartyClark]

Had an interesting exchange of messages with my non-lawyer sister-in-law about the sentence Holmes will receive. She thinks she won’t get much jail time, because she’s white, educated, and has a young kid. I think she’s going down hard, because the counts on which she was found guilty involved hundreds of millions of dollars, and she’s going to get no credit under the guidelines for acceptance of responsibility, cuz she hasn’t. There’s also the small matter of forfeiture, which will likely send her into poverty unless she has funds stashed where the marshals can’t find them (IIRC, forfeiture amounts aren’t dischargeable in bankruptcy).

Anybody else have thoughts on the subject?

Agree that “Bad Blood” is a fabulous read, right up there with “The Smartest Guys in the Room” as best-of-genre.

I think she will go down hard. Being white and educated may well work against her. I think Judges are looking to show that they dispense justice regardless of a person's race, education or privilege.

Elizabeth Holmes may be the poster child for privilege and the Judge may hammer her. Fine with me. We'll see

[Bostondevil]

Warning: braggy post. I am going to brag on myself. I can't help it.

Way back in the before times, my husband and I were having a conversation on the cult of celebrity. He said that moving forward, business was going to be yet another domain where celebrity would hold sway. He claimed that successful businesses, especially successful start-ups, were going to need to have a celebrity front person. I argued that some measure of success would need to come first. He argued that credentials and presentation were going to be enough. He then, I kid you not, brought up Elizabeth Holmes as an example of what he was talking about. This was before fraud was being suspected, right around the time she appeared on the cover of Forbes. I had never heard of Elizabeth Holmes before that (I am not a regular reader of business news.) I set about to learn what I could about Elizabeth Holmes. I read the Forbes article and a few more. I went back to my husband and said, "You remember when we were talking about Elizabeth Holmes? As far as I can tell, there is no "there" there." I then explained that I could not figure out what all the fuss was about, that until I saw a product, I didn't think what she was proposing to do was possible. To further the argument with my husband, I told him that if Elizabeth Holmes was all he had to prove his point, his point was not proven. I just looked up when she was on the cover of Forbes, it was in 2014. I didn't yet think she was a complete fraud, but I did think what was promised was way out of line with what was real.

That said, if you look at the history of We Work, my husband may be right. But I kinda think even the venture capitalists will wise up after a couple more high profile sick burns.

All this makes me think of Mark Rylance's Oscar worthy performance in Don't Look Up, btw. I'm not sure if that movie will be Oscar eligible, but the performance is Oscar worthy.

[duke79]

You and Duke79 are far nicer (or more generous and less jaded) than I am. I don’t think she ever had a legitimate concept (let alone a legitimate product or technology). While she may have hoped it could be created, she was smart enough to know the technology did not exist and that she was not capable of developing it. I don’t think it was a question of a failure….it was a fantasy from the start.

You certainly may be right and I'm not trying to be "nice". As I said, I haven't read the book about Theranos and haven't followed it that closely in the news and I can't speak personally about Ms. Holmes intentions or knowledge when she started the company. But I do think many of these well-known frauds - Bernie Madoff, Enron, Ivan Boesky, etc. - started out as legitimate enterprises and then slipped into illegitimate activities (usually small at first and then growing larger) that people engaged in to cover up their failures or to make more money or enhance their prestige. I'm guessing Elizabeth Holmes did not drop out of Stanford at 19 because she was thinking..."I can now go out and defraud and steal money from all these rich, prominent people and become rich and famous myself". Maybe I'm wrong but I'd be surprised if this were the case.

[CrazyNotCrazie]

You certainly may be right and I'm not trying to be "nice". As I said, I haven't read the book about Theranos and haven't followed it that closely in the news and I can't speak personally about Ms. Holmes intentions or knowledge when she started the company. But I do think many of these well-known frauds - Bernie Madoff, Enron, Ivan Boesky, etc. - started out as legitimate enterprises and then slipped into illegitimate activities (usually small at first and then growing larger) that people engaged in to cover up their failures or to make more money or enhance their prestige. I'm guessing Elizabeth Holmes did not drop out of Stanford at 19 because she was thinking..."I can now go out and defraud and steal money from all these rich, prominent people and become rich and famous myself". Maybe I'm wrong but I'd be surprised if this were the case.

I have not followed this situation closely at all. I just googled Holmes and saw that ironically her father worked for many years at Enron. I don't think he was involved in their issues (I'm guessing that 99% of the people there had no idea what was happening). It sounds like she came from plenty of money, though not necessarily of the magnitude that she thought she would end up with if she had gotten away with this.

[Tooold]

You certainly may be right and I'm not trying to be "nice". As I said, I haven't read the book about Theranos and haven't followed it that closely in the news and I can't speak personally about Ms. Holmes intentions or knowledge when she started the company. But I do think many of these well-known frauds - Bernie Madoff, Enron, Ivan Boesky, etc. - started out as legitimate enterprises and then slipped into illegitimate activities (usually small at first and then growing larger) that people engaged in to cover up their failures or to make more money or enhance their prestige. I'm guessing Elizabeth Holmes did not drop out of Stanford at 19 because she was thinking..."I can now go out and defraud and steal money from all these rich, prominent people and become rich and famous myself". Maybe I'm wrong but I'd be surprised if this were the case.

It’s been a while since I read the book, but I think I remember something about her upbringing and that she was brought up to believe she could accomplish anything. Which, in general, is a good attitude to instill in one’s child. But maybe she just had too much self-confidence, or an unjustified level of confidence. I am sure you are correct that she did not start out intending to defraud, but I think she should have known (and likely did know) that she had no expertise in this area, and that there is a difference between a goal which can be attained through hard work and a pipe dream. To think that you can just tell people to develop a machine that will analyze blood more efficiently than has ever been done before and it will happen….well, to paraphrase JJRedick, “I don’t believe that she believed what she was saying.”

[mpj96]

Were the prosecutors required to try Holmes & Balwani separately? Or was this a strategic decision? I did not follow the trial closely, but it seems like it opens up the empty chair defense.

The length of trial was also an interesting decision. 4 months is a lot of time to take to make a case the prosecution believes beyond a reasonable doubt.

[kshepinthehouse]

Am I the only one that didn’t realize she just had a baby? I can’t help but wonder if the baby was a ploy to get a lesser sentence. It was it her last chance to have one so she thought she better do it now? Anyway, it’s sad all around. I can’t imagine having to spend 10+ years away from my child. On the other side, she hurt a lot of people.

[aimo]

It’s been a while since I read the book, but I think I remember something about her upbringing and that she was brought up to believe she could accomplish anything. Which, in general, is a good attitude to instill in one’s child. But maybe she just had too much self-confidence, or an unjustified level of confidence. I am sure you are correct that she did not start out intending to defraud, but I think she should have known (and likely did know) that she had no expertise in this area, and that there is a difference between a goal which can be attained through hard work and a pipe dream. To think that you can just tell people to develop a machine that will analyze blood more efficiently than has ever been done before and it will happen….well, to paraphrase JJRedick, “I don’t believe that she believed what she was saying.”

I remember it described some instances in her childhood where she was over-the-top obsessive about things, too. About accomplishing something no matter what. Yeah, there were probably signs back then.

[duke79]

It’s been a while since I read the book, but I think I remember something about her upbringing and that she was brought up to believe she could accomplish anything. Which, in general, is a good attitude to instill in one’s child. But maybe she just had too much self-confidence, or an unjustified level of confidence. I am sure you are correct that she did not start out intending to defraud, but I think she should have known (and likely did know) that she had no expertise in this area, and that there is a difference between a goal which can be attained through hard work and a pipe dream. To think that you can just tell people to develop a machine that will analyze blood more efficiently than has ever been done before and it will happen….well, to paraphrase JJRedick, “I don’t believe that she believed what she was saying.”

Not too sure I agree with your premise here. The history of the United States (especially the history of "innovation" in this country) is replete with individuals and entrepreneurs who had a "dream" that almost everyone else thought was unattainable or would never be realized BUT they succeeded. You could write scores of books about these people. In more recent times, we have Elon Musk, as one example. When he started Tesla, almost everyone (in the car business and elsewhere in the business world) thought he was a total fraud and completely nuts. He had no background in electrical engineering or car design (he was an Econ major at UPenn) and that he would never succeed in creating an electric car company. Heck, I advised everyone I knew to sell Tesla shares when it was in the 30's (on a pre-split basis) because I was convinced the company (and Musk) were a joke that would never survive. It is now, by far, the most valuable car company in the world and Musk is worth hundreds of billions of dollars.
I'm not here to defend what Elizabeth Holmes did (it was outright fraud and she should go to jail for that) but I'm also not here to denigrate anyone who might have a "dream" about a new product or innovation that can improve our lives.

[budwom]

There were employees questioning the issues and they were promptly fired and threatened with lawsuits if they talked to anyone about it. And some were physically intimidated/followed. She is a nutjob and her practices were carefully planned until the info DID get out and she could no longer keep people quiet. Several of the bigwigs had the true info thrown in their faces and she managed to continue to con them. You should read the book - it is mind-blowing. As someone who has worked in research-related fields all of my adult life, I was floored at what she got away with.

yeah, there has always been "vaporware" in high tech, I've seen my share, but this was at another level. She essentially had no technology, but tortured those who questioned her. (David Boies does not come out of this looking very good...he took "vigorous defense" of his boss to a horrific level.

The fact that Holmes then chose to defend herself as a woman who was under the influence of Bawani (sp?) just makes her that much more odious. The book has to be read in order to understand how bad this woman truly is.

[bundabergdevil]

yeah, there has always been "vaporware" in high tech, I've seen my share, but this was at another level. She essentially had no technology, but tortured those who questioned her. (David Boies does not come out of this looking very good...he took "vigorous defense" of his boss to a horrific level.

The fact that Holmes then chose to defend herself as a woman who was under the influence of Bawani (sp?) just makes her that much more odious. The book has to be read in order to understand how bad this woman truly is.

So, again I haven’t read the book, but did NO ONE whistle blow or see through this?. It seems preposterous that she could establish that size company on literally nothing.

[Bluedog]

So, again I haven’t read the book, but did NO ONE whistle blow or see through this?. It seems preposterous that she could establish that size company on literally nothing.

"Tyler Shultz, a Theranos employee from 2013 to 2014 and the grandson of then-Theranos director, former U.S. Secretary of State George P. Shultz, was a key source for the WSJ story. Shultz had attempted to bring his concerns to company management, and when that had failed, he had spoken to Carreyrou and also, under an alias, reported the company to the New York State Department of Health." - Wikipedia

Still, seems hard to believe as you said that it took as long as it did. The company was founded in 2003!

Here's a recent article on Shultz and his reaction to the verdict:
https://www.npr.org/2022/01/05/10704...dict-champagne

"It was clear that there was an open secret within Theranos that this technology simply didn't exist," Shultz said.

It does seem pretty striking that there weren't even MORE whistleblowing and earlier, but I guess many just are blissfully ignorant and don't want to "rock the boat."

I haven't read the book either, so am not as knowledgable about the happenings as other posters...

[LasVegas]

So, again I haven’t read the book, but did NO ONE whistle blow or see through this?. It seems preposterous that she could establish that size company on literally nothing.

I'm with you on this. People invested in a technology that was said existed yet never demonstrated/tested? Or did they just lie through all that as well? Peer review?

[duke74]

"Tyler Shultz, a Theranos employee from 2013 to 2014 and the grandson of then-Theranos director, former U.S. Secretary of State George P. Shultz, was a key source for the WSJ story. Shultz had attempted to bring his concerns to company management, and when that had failed, he had spoken to Carreyrou and also, under an alias, reported the company to the New York State Department of Health." - Wikipedia

Still, seems hard to believe as you said that it took as long as it did. The company was founded in 2003!

Here's a recent article on Shultz and his reaction to the verdict:
https://www.npr.org/2022/01/05/10704...dict-champagne

"It was clear that there was an open secret within Theranos that this technology simply didn't exist," Shultz said.

It does seem pretty striking that there weren't even MORE whistleblowing and earlier, but I guess many just are blissfully ignorant and don't want to "rock the boat."

I haven't read the book either, so am not as knowledgable about the happenings as other posters...

From the same link,

"I'm under pressure to exaggerate technology claims, exaggerate revenue projection claims. Sometimes investors will straight-up tell you, you need to double, quadruple, or 10x any revenue projection you think is realistic," he said.

In a weird twist, the experience has him comparing himself to his now-notorious former boss.

"I could see how this environment could create a Elizabeth Holmes," Shultz said.

This is an important quote (to me) about the environment we have been discussing here.

Also, as a member of three public company boards (audit committee chair on two), I think more needs to be discussed about the role of a board in these circumstances. I am sure this will become a major topic in board organizations and circles.

[kshepinthehouse]

From the same link,

"I'm under pressure to exaggerate technology claims, exaggerate revenue projection claims. Sometimes investors will straight-up tell you, you need to double, quadruple, or 10x any revenue projection you think is realistic," he said.

In a weird twist, the experience has him comparing himself to his now-notorious former boss.

"I could see how this environment could create a Elizabeth Holmes," Shultz said.

This is an important quote (to me) about the environment we have been discussing here.

Also, as a member of three public company boards (audit committee chair on two), I think more needs to be discussed about the role of a board in these circumstances. I am sure this will become a major topic in board organizations and circles.

Yea I thought about this. Imagine if members of the board were prosecuted.

[mkirsh]

I'm with you on this. People invested in a technology that was said existed yet never demonstrated/tested? Or did they just lie through all that as well? Peer review?

Theranos demoed the tech to investors, but they allegedly faked the results.

Also, for those of us who don’t read good, the HBO doc called “The Inventor: Out for Blood” is a good watch

[Bostondevil]

A big difference between Tesla and Theranos besides the fraud, of course, is that when Tesla was started, electric cars already existed. Musk wasn't inventing a technology or cutting one out of whole cloth, he was trying to make a profitable company (has he done that?) by working on and perhaps perfecting an existing technology.

What Theranos should be compared to is Hyperfine Research which went public last week. When the Hyperfine Research technology was first thought of, the people who eventually made it work had no idea if such a thing was even possible. 26 years later, we have portable MRIs. The people on the ground floor had no idea if what the basic science research would produce results and it was a good 10+ years before any venture capitalists took any notice of what they were doing. They had decent results by that time, but still not enough to know that they would eventually have a product. They do now and what these portable machines can do, for much less cost than traditional MRIs, is astonishing.

[luvdahops]

So, again I haven’t read the book, but did NO ONE whistle blow or see through this?. It seems preposterous that she could establish that size company on literally nothing.

This excerpt from a Fortune story on the Holmes trial pretty much nails it for me:

“While venture capitalists have been quick to absolve their industry from any stink-by-association with l’affaire Holmes, the fact is Theranos checked every box of the symptoms that broadly characterize the current VC blitzscale bubble,” Len Sherman, a Columbia Business School professor, wrote to me in an email. “I for one do not believe Holmes is alone either in CEO behavior, venture board governance breakdowns or in inadequate investor due diligence.”

The whole premise of venture capital is to search for the occasional home runs (and grand slams) that will more than cover the majority of their investments, which either fail or have much more modest returns. VCs are willing to overlook a lot in search of those big winners, and there is a tremendous amount of hype and groupthink throughout Silicon Valley as a result.

[Rich]

From the same link,

"I'm under pressure to exaggerate technology claims, exaggerate revenue projection claims. Sometimes investors will straight-up tell you, you need to double, quadruple, or 10x any revenue projection you think is realistic," he said.

In a weird twist, the experience has him comparing himself to his now-notorious former boss.

"I could see how this environment could create a Elizabeth Holmes," Shultz said.

This is an important quote (to me) about the environment we have been discussing here.

Also, as a member of three public company boards (audit committee chair on two), I think more needs to be discussed about the role of a board in these circumstances. I am sure this will become a major topic in board organizations and circles.

Theranos demoed the tech to investors, but they https://www.vanityfair.com/news/2017/04/theranos-accused-of-running-fake-tests/amp]allegedly faked the results. [/url]

Also, for those of us who don’t read good, the HBO doc called “The Inventor: Out for Blood” is a good watch

Different industry and perhaps somewhat different circumstances since it was a family business, but I recommend the Hulu series Dopesick for another example of corporate fraud/lack of responsibility.