A federal judge on Friday set disgraced Theranos’ founder Elizabeth Holmes’ fraud trial to start in July 2020. If convicted, she faces up to 20 years in prison and millions of dollars in fines.
Holmes has been charged with felony conspiracy and fraud for allegedly misleading investors, corporate partners and patients with claims about her allegedly revolutionary blood testing equipment, CBS San Francisco reports.
She and Sunny Balwani, her former boyfriend and Theranos president, were indicted by a grand jury on 11 criminal counts of wire fraud and conspiracy to commit wire fraud. The pair also could face fines totaling $2.75 million each.
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Holmes was 19 years old when she dropped out of Stanford University to start Theranos with the aim to revolutionize blood testing. She claimed her technology could take a pin-prick of blood from the finger and perform hundreds of laboratory tests. At its height, Theranos was worth nearly $10 billion. Investors included power brokers such as Henry Kissinger, former Secretary of State George P. Shultz and President Trump’s first defense secretary, James Mattis.
Holmes was considered a visionary along the lines of Steve Jobs and she emulated his style, wearing only a black turtleneck and black pants in public. She was the youngest, self-made female billionaire in the world, according to “60 Minutes.”
But it was all a fraud. A former Theranos employee told Norah O’Donnell on “60 Minutes” that the “revolutionary technology,” named Edison, never really worked. Other former employees alleged that some blood samples returned contradictory and inconclusive results when retested and that Holmes lied to Walgreens when she told them Edison was ready to use on patients, leading to a partnership that planned to put the device in every store.
Holmes and Balwani signed up both Safeway and Walgreens into agreements to use Theranos testing equipment inside clinics within their stores.
Balwani, 53, of Atherton, was employed at Theranos from September of 2009 through 2016. At times during that period, Balwani worked in several capacities, including as a member of the company’s board of directors, as its president and as its chief operating officer.
According to the indictment, Holmes and Balwani used advertisements and solicitations to encourage and induce doctors and patients to use Theranos’s blood testing laboratory services, even though the defendants allegedly knew Theranos was not capable of consistently producing accurate and reliable results for certain blood tests.
The tests performed on Theranos technology, in addition, were likely to contain inaccurate and unreliable results.
The indictment alleges that the defendants used a combination of direct communications, marketing materials, statements to the media, financial statements, models and other information to defraud potential investors.
Specifically, the defendants claimed that Theranos said it developed a revolutionary and proprietary analyzer known by various names, including as the TSPU, Edison or minilab.
The defendants claimed the analyzer was able to perform a full range of clinical tests using small blood samples drawn from a finger stick and that the analyzer could produce results that were more accurate and reliable than those yielded by conventional methods — all at a faster speed than previously possible.
The indictment further alleges that Holmes and Balwani knew that many of their representations about the analyzer were false.
The defendants allegedly represented to investors that Theranos had a profitable and revenue-generating business relationship with the United States Department of Defense and that Theranos’s technology had deployed to the battlefield — a claim that was false.
“She deceived everyone. Everyone,” O’Donnell told “60 Minutes Overtime.” “She had hundreds of employees from MIT, from Harvard, from Apple. The smartest people in Silicon Valley went to work for her. They believed in her. It was not just the media. It was the people who gave her $900 million dollars. I mean, there were a lot of prominent, very smart people who bought into the myth of Elizabeth Holmes.”
As O’Donnell reported on “60 Minutes,” nearly every media outlet, including CBS News, bought into the Theranos myth.
The Securities and Exchange Commission brought civil fraud charges against Holmes and Balwani. Holmes settled with the SEC, agreeing to pay $500,000 in fines and penalties. Balwani is fighting the charges.
