Along the way, with an evangelical zeal that traded on an ethos of patient self-empowerment, she managed to recruit as investors and/or Theranos board members conservative luminaries like Rupert Murdoch, George Shultz and Henry Kissinger, while also ingratiating herself with big-name Democrats. Holmes also successfully lobbied the state of Arizona to relax legal contraints on consumers ordering their own blood tests. And -- most crucially -- she convinced the pharmacy chain Walgreen's to house Theranos "wellness centers" in dozens of its stores in the state. At one point, Forbes estimated her net worth at $4.5 billion.
But an investigation (and later a book) by Wall Street Journal reporter John Carreyrou exposed Theranos' claims as bogus, and its testing results as wildly inaccurate. The company was subsequently forced to invalidate hundreds of thousands of blood tests performed on patients, and it eventually exited the consumer blood-testing business after the Centers for Medicare & Medicaid Services found deficiencies at the company's laboratory that the agency deemed life-threatening.
The Securities and Exchange Commission later accused Holmes and Balwani of "massive fraud" for raising more than $700 million from investors based on what the SEC called "exaggerated" or "false statements about the company’s technology, business, and financial performance." Holmes settled the civil case with the agency by agreeing to pay a $500,000 fine and giving up control of Theranos. Balwani is still fighting the case.
Discredited, investigated and serially sued, Theranos then went through multiple rounds of layoffs before closing its doors for good in September 2018.
Slam Dunk for the Government? Not So Fast
While Holmes has become something of a national pariah who appears to be taking public relations advice from Elon Musk, her legal fate and that of Balwani could be far from certain.
KQED's Molly Peterson spoke about the case today with Peter Johnson, a lecturer at UCLA who defends federal criminal charges in private practice. While wire fraud is a go-to allegation in most white collar indictments, Johnson said, it’s not just the transmission of a lie or misrepresentation that will secure a conviction. The government also needs to prove intent, a harder lift.
“An indictment is not evidence,” Johnson said. “I think sometimes we lose that; the evidence comes out at trial.”
Thomas Joo, a UC Davis School of Law professor, told Peterson that the question of whether Balwani and Holmes meant to lie, mislead or defraud offers them plenty of potential defenses.
“She could argue that she never misrepresented any facts, she was just talking about possibilities,” Joo said. While experts may have no differences on the science involved in the case, he said, they may disagree on scientific process and theory.
“This is about what could have happened," he said.
Both experts said discovery and pretrial efforts around expert testimony will shed more light on legal strategy down the line.
Here's a Bloomberg analysis that asserts a motion filed by Holmes' lawyers last week indicates they will try to make reporter Carreyrou part of their defense, by claiming he influenced government regulators "in a way that appears to have warped the agencies’ focus on the company and possibly biased the agencies’ findings against it," in the words of the filing.
And On It Goes
In the meantime, while Elizabeth Holmes may be out of business, business related to Elizabeth Holmes continues apace.
“This case is just so extreme in the extent of pretrial publicity,” Joo said.
He wasn't kidding. In fact, one can just imagine a young Elizabeth Holmes mulling over one of those sweet deals typically offered by genies, demons and the like.
“Elizabeth, sign here and one day you’ll be the subject of an HBO documentary, an ABC podcast, a best-selling book, a TV show and a movie with a glamorous Hollywood star in the role of you.”
As in all dealings surrounding Theranos, it's best to read the fine print.
Molly Peterson contributed to this story.