The trial of Elizabeth Holmes, the founder and former CEO of the blood-testing start-up Theranos, opened on Wednesday, Sept. 8. Holmes faces 12 counts of fraud and sentence up to 20 years if indicted.
The name Elizabeth Holmes began to attract publicity in 2003 when she, then 19 years old, dropped out of Stanford University to start her own company, Theranos. The name is a combination of the word “therapy” and “diagnosis”, and the idea is to provide cheaper, faster, and more convenient blood tests. The company advertised testing machines that can run multiple tests with a single drop of blood to detect a wide range of diseases. Holmes promised the concept behind Theranos has the potential to revolutionize the health care industry, and many bought into her promise. The company raised $700 million from venture capital and investors, and its evaluation peaked in 2013 at $10 billion.
However, the gilded facade Elizabeth Holmes built for Theranos collapsed in 2015, following a failed partnership with Walgreen, growing suspicion from the scientific community, and most importantly, a series of articles by John Carreyrou of The Wall Street Journal. Carreyrou’s articles exposed failures and misconducts within Theranos, such as using conventional testing machines, instead of the company’s products, to run tests, as well as manipulating results. Further regulatory investigations revealed that Holmes had misled investors into investing in the company and government officials into granting approval for public use of Theranos’ products.
In 2018, the federal Securities and Exchange Commission sued Theranos, Holmes, and Ramesh Balwani, the company’s former president. Bloomberg reported that Holmes reached a settlement with SEC, in which she agreed to pay a $500,000 fine, surrender virtually all her share in Theranos, and be barred from heading any public company for ten years. At around the same time, an investigation undertaken by the U.S. Attorney’s Office for the Northern District of California led to the indictment of Holmes and Balwani. The trial was scheduled to begin in August 2020, but because of the COVID pandemic, it was pushed back for over a year.
On Tuesday, Sept. 14, former employee of Theranos Erika Cheung testified before the jury. In 2015, Cheung reported testing problems within the company’s lab to Centers for Medicare & Medicaid Services. In response to Cheung’s testimony and internal communications submitted as evidence, Holmes’s lawyers attempted to underplay her involvement in Theranos, especially on the technology development side of the company, by saying that as CEO, Holmes was not responsible for all the communication within the company.
A motion submitted to the court also shows that Holmes’s attorneys intend to introduce evidence of domestic abuses from Balwani toward Holmes during their time as partners. According to the motion, Balwani’s abusive actions had a profound influence on Holmes’s decision at Theranos. Nonetheless, legal experts suggest that such a connection would be difficult to prove in court.
For Holmes’s fellow female entrepreneurs in the technology industry, the Theranos saga had turned from a source of inspiration to a shameful scandal that is destined to cast doubt on their career and achievements. The trial is expected to last for more than 13 weeks, and a number of other key figures involved in Theranos are scheduled to testify, including John Carreyrou, the WSJ reporter, and Henry Kissinger and James Mattis, who both sat on the Theranos board. The issue at stake, however, is not the validity of the world-changing invention Holmes claimed to have created, but whether her fraudulent activities during her time running Theranos can be considered criminal.