Would you rather be a failure or a fraud? Judging by the opening statements of the Elizabeth Holmes wire fraud trial, these appear to be Holmes’ options.
Here is Robert Leach, Assistant United States Attorney, pursuing the case against Holmes: “This is a case of fraud, lying and cheating to get money,” Leach says. “It’s a crime on Main Street and a crime in Silicon Valley.” But according to Lance Wade, Holmes’ attorney, Holmes is just another failed startup leader: “In the end, Theranos failed. And Mrs. Holmes left with nothing. But failure is not a crime.
Now, at the end of the first day of the trial, the first witness had barely been introduced. There are a lot more witnesses and apparently just a bunch of documents in front of us. But I feel like the prosecution’s gonna have an uphill battle to show Holmes intention to deceive, a crucial part of the case.
According to the government, Theranos didn’t start life as a fraud, so that’s fine. Instead, by 2009 Holmes was quickly strapped for cash. Worse yet, things with his pharmaceutical partners weren’t going so well – Pfizer and Schering-Plow, two huge pharmaceutical companies, had let him down. Theranos was struggling to make his payroll.
“For lack of time and money, Elizabeth Holmes decided to lie,” Leach said.
So Holmes started looking for investments, making the kind of grandiose startup statements we all know in the tech industry. (Theranos was a medical company, but whatever.) Holmes gave Safeway revenue projections that overestimated what Theranos could achieve, and gave Walgreens a report suggesting Pfizer had approved their technology. Leach’s claims about a Pfizer memo that had been shown to investors were astonishing. See, according to him, it was a forgery. Pfizer’s letterhead may have been on the memo, but Pfizer didn’t put it there. I expect we will hear from Pfizer on this.
Other claims by Leach included that Holmes misled investors about Theranos’ relationship with the military – claiming the company’s mini-analyzer was deployed in military helicopters and saved lives, while his Only relationship with the military was a small 2010 study at the Army Burning Center. in Texas. According to Leach, Holmes also misled investors about the readiness of the analyzer. And! Although he had no income in 2012 and 2013, Holmes told investors that income would be $ 140 million in 2014. (It was actually $ 150,000.)
We’re going to hear from former Theranos employees who tried to tell Holmes and Balwani that the analyzers were not working as promised. One of them was fired. The other was ignored. And when Holmes ‘own brother, whom she had hired, told her that Theranos’ pregnancy tests were having problems, she ignored him. Leach promised the jury would see “email after email” showing Holmes was aware of the issues – but contrary to Pfizer’s note, we didn’t see any specific emails.
And media character Elizabeth Holmes also made an appearance. According to Leach, favorable media coverage was a major fundraising vehicle for Holmes – claiming she “endorsed” this brilliant WSJ piece and timed a press release with it meant to attract investors. He also said that this Fortune the article contained lies.
But these pieces contain truths, Leach said. Holmes was in complete control of Theranos. “She owned it, she controlled it, the male stopped with her,” Leach said. “She’s sweating the details. She was in charge.
While the accusation was specific, the defense was playing for sympathy. Wade began by telling us that Holmes packed his things in his car after Theranos fell. Then he took us back in time to Holmes leaving college at 19, having patented a miniaturized system that would perform tests and give a result. According to Wade, Holmes’ co-defendant who is being tried separately, Sunny Balwani, encouraged her to drop out. “Trusting and relying on Balwani as his primary advisor was one of his mistakes,” said Wade.
In Wade’s account, Holmes was a wide-eyed naive – and nothing was really his fault. You see, Balwani was in charge of the clinical labs where things went wrong for the patients, and financial modeling was his job as well. Walgreens and Safeway pressured Holmes to market itself. So, at the suggestion of a board member, she hired the marketing company Chiat Day. (Little mention was made of Elizabeth Holmes, Girl Genius, thought we had seen an ad about Theranos’ inexpensive testing.) Additionally, Walgreens pushed Holmes to accept a phased approach to testing – Theranos did not. hadn’t fooled into thinking it was using his own machines.
Oh, and the inaccurate results? Of course, this can happen in any lab, Wade said. Holmes believed the tests were accurate and reliable and used them herself, while recommending them to her family. Struggle had oversight of the labs, and furthermore, lab directors are legally responsible for safe and accurate testing, not Holmes. Some of these lab directors will testify and I am very interested to hear what they have to say!
And although two years of Theranos testing was rejected, Wade argued that we will only hear 20 patients and doctors who performed poorly – when 8 million tests were performed. (Wade did not discuss the tests that had been canceled.) Just 20 out of 8 million is a terribly small number of inaccurate tests, Wade said. He even did some flashy calculations for the jury: that’s 0.00025% of all tests. This suggests that Theranos’ tests were actually very accurate and that the prosecution is sorting out – but that leaves out those canceled tests. It’s a huge omission!
As further proof that Holmes believed in Theranos, Wade announced that Holmes did not sell any of his shares. “She let go of every opportunity to sell,” he said. She could have made hundreds of millions of dollars, but she was there for the mission, not for the money, he said. Now, it is a little difficult to sell shares of a private company, it is not impossible! – but I don’t know what kind of agreements could have been in place regarding his participation. After the omission on the two years of pissing testing, I don’t buy much of what Wade sells. What else does he leave out?
If Wade is to be believed, Holmes is responsible for next to nothing. She was young, after all, and had dropped out of college. She worked seven days a week at Theranos but could only be responsible for her dream of success. And while Wade alluded to the abuse allegations Holmes made about Balwani – he “sometimes had a temper, could lash out, didn’t always treat people kindly” and in Holmes’ relationship with him. him, “there was another side to it that most people never saw” – he never directly argued that abuse was a factor in Holmes’ actions. I guess that’s because Holmes to speak up is a risky decision, and if the case hinges on the abuse allegations, she will have to testify to the abuse.After all, most people didn’t even know they were both in. couple.
This trial is only just beginning, and a lot depends on the testimony we haven’t heard yet and the emails we haven’t yet seen. But the contours of the story each side tells are clear. For the prosecution, proving that Holmes isn’t a stupid figurehead might be difficult – the standard, after all, is “beyond a reasonable doubt,” and Wade insisted on the presumption of innocence. OK. But with so many criticisms leveled at Balwani, the question arises: if the defense really wants to argue that this is simply a story of failure due to naivety, then what is it? exactly ? was Elizabeth Holmes at Theranos? She was apparently breaking it over there everyday for fifteen years ! Wade suggested that she mostly worked on tests and made bad decisions, but if that was all she did, she probably could have taken a few weekends off.
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