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Theranos Founder and Former CEO Elizabeth Holmes’ Federal Criminal Fraud Trial Finally Is Under Way in California

Court documents show Holmes’ defense strategy includes accusing ex-boyfriend and former COO Balwani of ‘intimate partner abuse’ that impacted her ‘state of mind’

It has started! The long-awaited criminal trial of former Theranos CEO Elizabeth Holmes is underway in a federal courthouse in Silicon Valley. Across the profession of medical laboratory medicine, there is keen interest in the story of Holmes and her now-defunct clinical laboratory company Theranos.

This next chapter in the drama began on September 8 with opening arguments. Federal prosecutors came out strong, claiming Holmes was “a manipulative fraudster who duped investors and patients alike and knew the whole time that she was hoodwinking them,” according to NPR.

“This is a case about fraud, about lying, and cheating to get money,” said Assistant US Attorney Robert Leach, NPR reported. “It’s a crime on Main Street, and it’s a crime in Silicon Valley,” he added.

Not surprisingly, Holmes’ defense team had a different take, claiming Holmes was simply “a hardworking, young startup executive who believed in the mission of the company, only to see it buckle in the face of business obstacles,” NPR reported. “They argued that she placed blind faith in the No. 2 executive at the company [Balwani] and overly trusted lab directors, who the defense team says were legally responsible for how the labs were run.”

Holmes Claims Abuse at the Hands of Former Theranos COO Balwani

Many pathologists and clinical laboratory managers are ready to watch and learn what unfolds in the opening stages of Holmes’ long-delayed federal criminal fraud trial. During the jury selection process, recently unsealed court documents showed that Holmes’ defense planned to include claims she was abused by her then boyfriend, Theranos Chief Operating Officer Ramesh Balwani.

This surprising development adds yet another twist to the tale of the disgraced Silicon Valley executive and her defunct clinical laboratory testing company.

The hype surrounding the once-high flying startup, which in 2015 reached a peak valuation of $9 billion, began unraveling that same year when a Wall Street Journal (WSJ) investigation exposed the company’s alleged deceptions and questionable practices related to its finger-prick blood-testing technology.

Fast-forward six years—Theranos is now gone but its top executive continues to make headlines, not as a laboratory science wunderkind, but as a criminal defendant.

Holmes, 37, has pleaded not guilty to all charges. Her former consort and ex-Theranos COO Ramesh Balwani also pleaded not guilty to all charges. He will be tried separately from Holmes.

Elizabeth Holmes and her husband William Evans

Elizabeth Holmes, founder and former CEO of defunct clinical laboratory testing company Theranos, is seen leaving the Robert F. Peckham US Courthouse with husband William Evans following opening arguments in her federal trial on September 8. (Photo copyright: Reuters/Peter DaSilva.)

Dozens of Potential Jurors Removed for Alleged Bias

On August 31, in-person questioning of prospective jurors began in Holmes’ federal fraud trial in San Jose, California. The process did not go well. As CNBC reported, dozens of potential jurors were removed from the jury pool due to potential bias in the case.

“Thirty to forty of the remaining jurors have consumed substantial, and I mean lengthy extrajudicial material, about the case and about the defendant,” defense attorney Kevin Downey, JD of Washington, D.C.-based Williams and Connolly, LLP, told Judge Edward Davila, CNBC reported. “We’re very vulnerable to any of the jurors commenting in some ways as either the court or lawyers conduct voir dire about the content of the media they’ve seen.”

Voir dire is the legal term for preliminary examinations of jurors, which in this initial screening was done by reviewing potential juror questionnaires.

Holmes’ defense attorneys, according to CNBC, previously expressed concerns about “inflammatory” media coverage of the case. However, Assistant US Attorney Jeffrey Schenk maintained, “Less than half of the individuals that filled out the questionnaire had prior exposure to Holmes and Balwani. One juror saying something during the voir dire process that could be overheard is a risk in every court case,” CNBC reported.

Holmes Claims ‘Mental Condition Bearing on Guilt’

A report by the Independent notes that newly unsealed court documents which were first reported by NPR reveal that Holmes will mount a defense that includes claims of “intimate partner abuse” by Balwani, 56, during their past relationship.

 “The documents show that Ms. Holmes will describe how Mr. Balwani controlled what she ate and drank, how she dressed, and who she spoke to, while also alleging he threw ‘sharp’ objects at her,” the Independent reported.

NPR reported that court documents indicate Holmes is likely to take the stand and testify at her trial. She will not be presenting an insanity defense but will put forth a “defense of a mental condition bearing on guilt” that was the result of partner abuse and that impacted her “state of mind” at the time of the alleged crimes.

Court documents filed by Balwani’s defense attorneys label Holmes’ allegations as “salacious and inflammatory.”

“In truth, Ms. Holmes’ allegations are deeply offensive to Mr. Balwani, devastating personally to him and highly and unfairly prejudicial to his defense of this case,” defense attorney Jeffrey Coopersmith, JD, Principle and founder of Coopersmith Law and Strategy, wrote in the filing.

The Theranos Saga Continues …

In “Former Theranos CEO Elizabeth Holmes Is Pregnant, Causing a Further Delay in Her Trial Date,” Dark Daily reported that Holmes’ trial had been delayed multiple times since she was first was indicted on 11 counts of wire fraud and conspiracy to commit wire fraud in 2018. The COVID-19 pandemic, and more recently Holmes’ pregnancy, delayed the start of her trial until August.

CNBC reported that Holmes gave birth on July 10, 2021, in Redwood, California. The baby’s father is William Evans, heir to the Evans Hotels chain in California, The Sun reported.

Balwani’s criminal fraud trial is scheduled to begin with jury selection on January 11, 2022. Both Holmes and Balwani face maximum penalties of 20 years in jail and a nearly $3 million fine, plus possible restitution if found guilty on all counts.

It is a rare thing for owners of a clinical laboratory company accused of fraud to come to trial and receive so much media attention. In the weeks leading up to the trial, medical laboratory managers and pathologists could read a wide variety of news stories about the impending trial and the legal strategies expected by the attorneys for both the plaintiffs and the defendants.

Thus, everyone interested in this trial and its outcome will likely have the equivalent of a front row seat because so many journalists are covering this trial.

Andrea Downing Peck

Related Information

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On-demand Video Service Hulu Gets Underway on TV Miniseries Documenting Rise and Fall of Former Theranos CEO Elizabeth Holmes

Six-episode show is based on popular ABC Radio podcast “The Dropout,” which focused on the three-year investigation that brought down clinical laboratory test developer Theranos

While former Theranos CEO Elizabeth Holmes awaits the start of her August 31 criminal fraud trial in a federal court in Northern California, one streaming video service is lining up a star-studded cast to tell the story of the Silicon Valley executive’s fall from grace and the demise of her clinical laboratory blood-testing company.

This six-part series is being produced by Hulu, an on-demand video streaming service offering live and on-demand content. Back in 2019, it announced that it would produce the “The Dropout,” a limited series chronicling Holmes’ rise and fall from Founder and CEO of $9 billion tech company Theranos to criminal defendant.

Hulu says the series will launch this fall, so pathologists and medical laboratory managers have time to set their recorders to capture what may be a compelling story of hubris that took investors and the news media on a wild ride. The Theranos publicity machine was so effective that many hospital CEOs went to their clinical laboratory administrators and told them to delay equipment purchases because Theranos would be able to do the same medical laboratory tests at just pennies on the existing lab-cost dollar.

Holmes’ carefully-crafted public image as Theranos’ CEO drew comparisons to the late Apple CEO Steve Jobs, Business Insider noted. This has made her a popular topic not only among clinical laboratory scientists but also Hollywood moviemakers.

“The Dropout” took its inspiration from the ABC Audio podcast of the same name, hosted by ABC Chief Business, Technology and Economics correspondent Rebecca Jarvis. The ABC Audio podcast’s description provides a glimpse into the direction the miniseries will take.

“Money. Romance. Tragedy. Deception. The story of Elizabeth Holmes and Theranos is an unbelievable tale of ambition and fame gone terribly wrong. How did the world’s youngest self-made female billionaire lose it all in the blink of an eye? How did the woman once heralded as ‘the next Steve Jobs’ find herself facing criminal charges—to which she pleaded not guilty—and up to 20 years in jail? How did her technology, meant to revolutionize healthcare, potentially put millions of patients at risk? And how did so many smart people get it so wrong along the way?” the ABC Audio website states.

The Hulu series originally was to star “Saturday Night Live” cast member Kate McKinnon as Holmes but was recast with Amanda Seyfried in the starring role. According to Variety, the series will include a notable lineup of guest stars including:

Naveen Andrews will play former Theranos President and COO Ramesh Balwani, whose own criminal fraud trial is expected to begin early next year.

A release date for the limited series has not yet been announced, Town and Country reported.

Elizabeth Holmes

Elizabeth Holmes (above), former CEO of now defunct company Theranos, faces 11 counts of fraud for alleged false claims that the clinical laboratory testing company had created a revolutionary finger-prick technology capable of performing a wide range of clinical laboratory tests. Among the charges are two counts of conspiracy to commit wire fraud and nine counts of wire fraud, for which Holmes could serve up to 20 years in jail if found guilty of all charges, according to court documents. She has pleaded not guilty. (Photo copyright: The Wall Street Journal.)

The ‘Real World’ Wall Street Journal Investigation of Theranos and Holmes

Dark Daily has reported extensively on the Holmes/Theranos saga, including the recent development that Holmes’ repeatedly-delayed trial would be pushed back from mid-July to August 31 because Holmes is due to give birth in July.

Theranos’ alleged deceptions first were brought to light in a series of 2015 investigative reports in The Wall Street Journal (WSJ). Then-WSJ investigative reporter John Carreyrou alleged Theranos had not disclosed publicly that the vast majority of its tests were not being done with proprietary technology, but instead with traditional machines purchased from Siemens AG and other companies.

Carreyrou’s reporting became the basis for his bestselling book, “Bad Blood: Secrets and Lies in a Silicon Valley Startup,” which led to “The Inventor: Out for Blood in Silicon Valley,” a 2019 HBO documentary film.

And for those looking for even more drama centered around the Theranos saga, a feature film starring Jennifer Lawrence as Elizabeth Holmes, titled, “Bad Blood,” remains “in development” according to People magazine. Though the project was announced in 2016, filming has yet to begin.

Meanwhile, clinical laboratory scientists will soon get to watch the next “real world” chapter in the Holmes’ saga play out in federal court later this summer. They will also have multiple opportunities in the coming years to be “entertained” by the Theranos scandal on big and small screens.

—Andrea Downing Peck

Related Information

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Federal Prosecutors Signal That Accuracy of Theranos’ Blood Tests Will Be Centerstage in August Fraud Trial

Pregnant former Theranos CEO Elizabeth Holmes makes her first court appearance in 15 months as pre-trial maneuvering continues in court case involving clinical laboratory tests

During pre-trial hearings for the August fraud trial of former Theranos CEO, Elizabeth Holmes, federal prosecutors signaled that the accuracy of Theranos’ blood tests will be center stage in their arguments. This latest installment in the continuing saga of defunct medical laboratory testing company Theranos took place when a now-pregnant Holmes made her first in-person court appearance in 15 months.

Clinical laboratory scientists have watched with interest as the often-delayed fraud trial inched closer to its new August 31 start date. After being delayed multiple times by the COVID-19 pandemic, United States District Court Judge Edward Davila ruled in March that the trial would be postponed from mid-July to late August due to Holmes’ pregnancy. She is due to give birth in July.

Do Prosecutors Lack Proof Theranos’ Blood Testing Technology Is Inaccurate?

As Dark Daily previously reported, Holmes faces 12 counts of wire fraud charges for alleged false claims that Theranos created a revolutionary technology for performing a wide range of clinical laboratory tests using a tiny amount of blood.

In its 2015 investigative report, The Wall Street Journal (WSJ) alleged Theranos had not disclosed publicly that the vast majority of its tests were performed with traditional machines purchased from Siemens AG and other companies, not its so-called breakthrough proprietary technology.

The recent three-day hearing provided Holmes’ attorneys and federal prosecutors with an opportunity to present arguments regarding what evidence can be presented at the upcoming trial.

In a recent article, the WSJ reported that Holmes’ attorneys argued the US Attorney’s Office for the Northern District of California built its case on anecdotal evidence.

According to the WSJ article, Holmes’ defense team is trying to block the government from calling patients and medical professionals to testify about the accuracy of Theranos’ blood test results. At the hearing, attorney Amy Saharia, a Williams and Connolly LLP partner, maintained prosecutors lack scientific proof Theranos tests were inaccurate. She called this lack of scientific evidence a “gigantic hole” in the government’s case.

“This trial is going to be a sprawling mess of irrelevant, prejudicial evidence,” she told the court, the WSJ reported.

Saharia added, “We have all become very familiar with testing this year. Testing involves many different variables,” CNBC reported. “What the government offers is without scientific basis, they have to establish Theranos technology was responsible for erroneous results. Just because it happened doesn’t mean it was because of Theranos technology.”

pregnant-elizabeth-holmes-leaving-courthouse
Pregnant Elizabeth Holmes (above), who is due to give birth in July, is seen entering the courtroom for a pretrial hearing in San Jose, Calif., in the US government’s fraud case against the former Theranos CEO. In the hearing, federal prosecutors indicated the accuracy of Theranos’ clinical laboratory tests will be at the center of their arguments. (Photo copyright: Mercury News.)

Defense Tries to Block Pathologists’ Testimony

During the second day of hearings, federal prosecutors responded to defense attorneys’ efforts to block clinical pathologist Stephen Master, MD, PhD, from testifying. Defense attorneys argued the government is using Master as a “parrot” and argue his views on Theranos’ blood tests are “based on emails and customer complaints” not personal familiarity with the tests, CNBC reported. Master is Division Chief and Director, Metabolic and Advanced Diagnostics at Children’s Hospital of Philadelphia, and an Associate Professor of Pathology and Laboratory at University of Pennsylvania’s Perelman School of Medicine.

Assistant US Attorney Robert Leach, however, said, “Miss Holmes went out, told the world and told investors: we have tests with the highest accuracy rate,” adding that testimony from their expert witness “puts the lie to that,” CNBC reported.

Before Theranos was dissolved in 2018, Holmes rose to rock star status in Silicon Valley. She graced magazine covers, rubbed elbows with VIPs, and became known for her Steve Jobs-like signature black turtleneck.

In his summary of Holmes’ 2016 presentation at the annual meeting of the American Association of Clinical Chemistry (AACC), titled, “After AACC Presentation, Elizabeth Holmes and Theranos Failed to Convince Clinical Laboratory Scientists and the News Media about Quality of Its Technology,” Robert Michel, Editor-in-Chief of Dark Daily and its sister publication The Dark Report, wrote, “It would be safe to summarize most reactions as skeptical.”

Holmes’ presentation, Michel noted, was met with suspicion as her credibility with the media and clinical laboratory scientists eroded. “Holmes did not fool many in the audience.”

One clinical chemist who attended the AACC meeting said, “I came to see scientific data about this remarkable technology that could do up to 70 medical laboratory tests on a single drop of capillary blood. Instead, I heard her talk about the new corporate strategy at Theranos, including the details as to how their analyzer works. The data that followed had nothing to do with anything but their new analyzer.”

Prosecutors Claim Fraud Paid for Holmes’ Extravagant Lifestyle

Holmes’ celebrity status helped fuel Theranos’ rapid valuation growth, which reached a high of $10 billion in 2015. But her gold-plated lifestyle became a point of contention during the recent pre-trial hearing. Prosecutors maintained that Theranos’ fraud propelled Holmes’ extravagant spending.

“In addition to her salary, the company provided for her luxurious travel on private jets and expensive lodging,” Assistant US Attorney John Bostic told CNBC. “The point here is the so-called success of Theranos was entirely the product of fraud.”

But according to CNBC, the judge “pushed back” on the government’s argument, stating Holmes’ benefits likely were on par with other CEOs. “What’s the value that she’s at the Four Seasons or a Motel 6?” the judge asked the prosecutors.

CNBC reported the two sides also sparred over whether jurors will learn about Holmes’ private text messages and regulatory reports.

Holmes and former Theranos President and Chief Operating Officer Ramesh Balwani have both pleaded not guilty. Balwani will face a separate trial after Holmes’ court case concludes.

Clinical laboratory scientists will watch with interest as the Holmes and Balwani trials finally get under way, since the accuracy of Theranos’ blood tests will be under the microscope along with Holmes’ participation in the alleged fraud.

Andrea Downing Peck

Related Information:

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After AACC Presentation, Elizabeth Holmes and Theranos Failed to Convince Clinical Laboratory Scientists and the News Media about Quality of its TechnologyFederal Prosecutors Add a 12th Felony Fraud Charge in Latest Criminal Indictment Against Theranos Founder Elizabeth Holmes

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Government prosecutors allege destruction of LIS database and point to Holmes’ extravagant lifestyle as evidence of fraud motive

There is a new twist in the federal criminal fraud trial of Elizabeth Holmes, co-founder and former CEO of now defunct clinical laboratory testing company Theranos. Once again, the trial has been delayed. In the meantime, however, dueling court filings between prosecutors and defense lawyers have shed additional light on the allegations against Holmes and co-defendant Ramesh Balwani, the company’s chief operating officer. The revelations will be of interest to medical laboratory leaders.

According to The Mercury News, United States District Judge Edward J. Davila cited the ongoing COVID-19 pandemic in his December 18 ruling that postponed the start of Holmes’ trial to July 13, 2021.

In his ruling, Judge Davila wrote, “The court notes sadly, the impact on our lives is grim. California is in the midst of an unprecedented surge in cases and hospitalizations.”

The judge also noted the prospects for widespread public vaccination in the coming months. “All of this supports continuing the trial [of Holmes] to a time when our community is safer,” he added. “The court recognizes that a continuance of the trial will cause great inconvenience to victims who would like their day in court, as well as Defendant, who wishes a speedy opportunity to defend against the charges. All of these rights are important, but paramount to the court is the safety and health of the community.”

On February 9, Law360 reported that Balwani’s trial was delayed even further, with jury selection now set to begin on January 11, 2022.

Wall Street Journal Exposé of Theranos and its Flawed Clinical Lab Testing

As Dark Daily reported in “For Embattled Medical Laboratory Company Theranos, Bad News Keeps on Coming After Two Federal Inspections Show Problems in Certain Lab Practices,” back in the fall of 2013 Holmes became a star of the business world with claims that Theranos had developed ground-breaking blood-testing technology.

In “Elizabeth Holmes: The Breakthrough of Instant Diagnosis,” the Wall Street Journal (WSJ) put Holmes squarely in the public eye. It could be credibly asserted that the paper’s fawning coverage helped boost her credibility when no one knew who she was. Thus, it is ironic that just two years later it was the WSJ that, in a series of articles, exposed the alleged misrepresentation and fraud committed by Holmes, Balwani, and Theranos.

By 2015, the company had a stock valuation of $9 billion, but it all came crashing down after WSJ investigative journalist John Carreyrou revealed serious problems with the company’s management and technology.

In a public notification from the US Attorney’s Office Northern District of California, the government alleged that Holmes and former Theranos president Balwani promoted the company’s blood-testing technology despite knowing that it was likely to produce unreliable results.

The defendants now face 12 federal felony counts related to wire fraud. They have pleaded not guilty. According to The Mercury News, if found guilty of all charges, “Holmes faces a potential 20-year prison sentence, up to $2.75 million in fines, and possible restitution to investors the government alleges lost more than $700 million.”

Elizabeth Holmes walking outside with her lawyers.
Elizabeth Holmes (above), former CEO of now defunct clinical laboratory testing company Theranos, will now stand trial starting in July. Due to risk of infection from the SARS-CoV-2 coronavirus, jurors will be required to wear masks and to socially distance during the trial, CNBC reported. What will be of great interest to clinical laboratories are statements by federal prosecutors that testing data stored on the company’s laboratory information system was destroyed before it could be accessed by investigators, even though it had been subpoenaed months earlier by a federal grand jury. (Photo copyright: Forbes/Yichuan Cao/NurPhoto via Getty Images.)

Missing Clinical Laboratory Data

Though the trial has been delayed, attorneys on both sides have been busy. Last November, after failing to have the charges dismissed, defense attorneys filed a flurry of motions seeking to exclude much of the government’s evidence, The Mercury News reported. This included expert witnesses, testimony about inaccurate test results, and numerous news articles about the company and its tests.

Prosecutors responded to the motions in January, further illuminating their case while providing more fodder for media coverage.

In a January 11 filing [doc-682], the government alleged that a Theranos laboratory information system (LIS) containing patient test results and quality control data was destroyed “on or about August 31, 2018—three months after a federal grand jury issued a subpoena requesting a working copy of this database.” News of the allegation was first reported by The Register, a UK-based IT publication.

Previously, the prosecutors alleged, Theranos, with assistance from an IT contractor, had provided a backup copy of the database to the government but without a password needed for decryption. “All subsequent efforts by the government to access the data on this hard drive have failed,” even with assistance from a computer forensics expert, they wrote.

Then, the original database was permanently destroyed in August when Theranos moved out of its facility in Newark, Calif., the government alleged in its filing. “On or about August 31, 2018—three months after a federal grand jury issued a subpoena requesting a working copy of this database—the LIS was destroyed. The government has never been provided with the complete records contained in the LIS, nor been given the tools, which were available within the database, to search for such critical evidence as all Theranos blood tests with validation errors,” the filing read.

The January 11 filing was in response to a Theranos motion [doc-563] seeking to exclude evidence of “anecdotal test results.”

“The data disappeared. Defendant should be barred from arguing the government’s case is anecdotal when Theranos (and others) destroyed this data,” the prosecutors argued.

Furthermore, prosecutors wrote, “the government’s case is hardly ‘anecdotal.’ The reliability and accuracy problems in Theranos’ clinical lab were well-documented when the Centers for Medicare and Medicaid Services (CMS) investigated the lab, discovered the accuracy and reliability problems, and determined Theranos could not safely administer its tests on patients. Whistleblowers will also testify about Theranos’ accuracy and reliability problems. And patients themselves experienced these problems, receiving incorrect results that affected their treatment and deprived them of the benefit of the purportedly reliable blood tests for which they had paid.”

And Then There’s Her Lifestyle

Prosecutors also claimed in their filing that Holmes’ activities—which included “travel on private jets, stays in luxury hotels, and access to multiple assistants … [who] handled a range of non-business tasks for Defendant, including personal clothes and jewelry shopping, home decorating, food and grocery buying, and other items”—shows that Holmes was “funding an extravagant lifestyle … through company money,” CNBC reported.

And so, the saga of Theranos continues. Will Elizabeth Holmes succeed in her defense? Could a clinical laboratory phoenix bird rise from the ashes of this failed lab test company? Who knows? Probably not. But until there is a resolution, we will keep reporting on the case.

—Stephen Beale

Related Information:

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Former CEO Elizabeth Holmes now awaits March 9 court date on federal fraud charges that include reporting false medical laboratory test results on some patients

Clinical laboratory leaders have watched with keen interest the federal criminal proceedings against disgraced Theranos founder and former CEO Elizabeth Holmes, whose blood-testing company lost nearly $1 billion of investors’ money before dissolving in 2018.

In a recent CNBC interview, John Carreyrou, the Wall Street Journal (WSJ) investigative journalist who first broke the Theranos story in 2015, contended that the once-high-flying Silicon Valley startup could have paid back investors on a pro-rata basis, but that the company opted to use its dwindling cash to challenge lawsuits.

“If you rewind to October 2015, when I finished, when I published my first investigative story on Theranos, the company still had $400 million in the bank and it could have called it quits then,” Carreyrou said in the interview. “And Elizabeth Holmes could have apologized to investors, to patients, to everyone she had misled and returned that money to shareholders on a pro-rata basis.”

Theranos Scandal Breaks Wide Open

Carreyrou’s nearly year-long Wall Street Journal investigation into Theranos helped bring down the venture capital darling that had achieved a $9 billion private valuation before crumbling under the weight of fraud allegations. Dark Daily and our sister publication The Dark Report (TDR) covered in detail the allegations against and investigation into the embattled blood test company in dozens of e-briefings and TDR articles starting in 2015.

In fact, The Dark Report was first to publish the news that Theranos had ceased using its finger-stick collection method in Phoenix as early as April 2015. (See TDR, “Theranos: Many Questions, But Very Few Answers,” April 20, 2015.) At that time, Theranos declined to respond to The Dark Report’s requests for comments.

Theranos had built its superstar reputation on the backs of a revolutionary finger-prick blood testing system, which Holmes promised could diagnosis diseases ranging from diabetes to cancer with just a few drops of blood. But an in-depth investigation into hoopla surrounding the company’s breakthrough technology by Carreyrou and other reporters at the Wall Street Journal revealed it was based on false test results and phony claims to investors and companies, such as Walgreens, which had planned to feature the technology in their retail clinics. 

Elizabeth Holmes former CEO of Theranos
Elizabeth Holmes (above), founder and former CEO of now defunct Theranos, was considered a wunderkind when, as a 19-year-old Stanford University dropout, she founded Theranos in 2003. Early on, she attracted high-profile members to the Theranos board, including former US Secretary of State George Schultz, and cultivated comparisons to legendary Apple CEO Steve Jobs. But once the accuracy of Theranos’ capillary blood-test device fell under suspicion, Holmes’ fall from grace was swift, as clinical laboratories learned from multiple Dark Daily e-briefings and articles in The Dark Report going back to 2015. (Photo copyright: The New York Times.)

In 2016, Theranos received sanctions from the Centers for Medicare and Medicaid Services (CMS), which included revocation of the company’s CLIA certificate and sanctions against Holmes and other company officials that prohibited them from owning or operating a medical laboratory for two years. Soon afterward, Theranos laid off 340 workers, closed its laboratory operations, and shuttered its wellness centers to “focus on an initiative to create miniature medical testing machines,” the New York Times reported.

When Theranos was finally dissolved in September 2018, Carreyrou reported that the company had an estimated $5 million in cash to distribute to unsecured creditors. All told, Carreyrou estimates Theranos’ investors, which included such big names as News Corp Executive Chairman Rupert Murdoch, Bechtel Group Chairman Riley Bechtel, and US Education Secretary Betsy DeVos, lost nearly $1 billion.

While Holmes’ star was fading, Carreyrou’s fame was rising with the 2018 publication of his best-selling book on Theranos’ downfall, titled, “Bad Blood: Secrets and Lies in a Silicon Valley Startup.”

Theranos’ Final Chapter

Today, Holmes is preparing to stand trial on a dozen federal wire fraud and conspiracy to commit wire fraud charges at the US District Court in San Jose, Calif., where jury selection is slated to start on March 9, 2021, amid COVID-19 pandemic safety precautions.

According to the Mercury News, Holmes faces maximum penalties of 20 years in prison and a $2.75 million fine, plus possible restitution. Carreyrou does not expect Holmes to seek a plea deal.

“I think that the chances of that are pretty unlikely. From what I hear, she’s telling her friends and her entourage that she’s actually looking forward to her day in court and she thinks that the real story—her version of the story—will come out at trial,” he told CNBC. “And so, she’s actually putting on a cheerful face with people she knows, and people have seen her recently and are saying that she’s looking forward to see this go to a jury.”

While the final chapter of this story will be written by a federal court jury, clinical laboratory leaders likely will want Holmes to face maximum penalties if found guilty of all charges. The deceptive scientific and business practices Theranos allegedly engaged in caused many headaches for the clinical lab directors of hospitals and health networks as their CEOs asked why the “cheap and fast” Theranos testing system could not be used instead of traditional, more expensive testing methods.

Theranos also financially damaged investors who might otherwise have gained capital and continued to invest in more credible startups of diagnostic companies and clinical laboratories.

—Andrea Downing Peck

Related Information:

Theranos Could Have Paid Back Investors Years Ago, But Used Money to Ward Off Lawsuits: Experts

Theranos Founder Elizabeth Holmes May Seek ‘Mental Disease’ Defense in Trial, Document Shows

Theranos to Close Labs and Lay Off 340 Workers

Blood-Testing Firm Theranos to Dissolve

Theranos Founder Holmes’ Trial to Go Ahead with Socially Distanced Jury: Judge

Elizabeth Holmes Wants to Block Jurors from Hearing About Her Luxurious Lifestyle as Theranos CEO

Internationally-respected Experts in Clinical Pathology and Laboratory Medicine Ask: Why Don’t We Know More about Theranos’ Technology?

WSJ ‘Sticks’ Theranos, Raises Serious Questions: Two Front-Page Stories Describe Problems with Lab Test Technology and Issues with the FDA

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