He wanted to revolutionize the world of medicine, more specifically diagnostics. As? With a blood test device named Edison, designed and developed by its startup, called Theranos.
He would have had to run quick tests for more than 200 parameters and factors, including HIV and marker positivity for some cancers, starting from a single drop of blood: a fast, minimally invasive practice, to be carried out in places other than the usual clinical centers or even at home. A real revolution. But that was a scam.
For years Elizabeth Holmes, Class 1984 and barely 19 at the time of his company’s inception, he sold his empty box to hefty investors, supermarket chains and trial patients until it reached a glittering $ 9 billion valuation. Then, on October 15, 2015, also thanks to a beefy Wall Street Journal investigation signed by reporter John Carreyrou (who would write a book on the incredible story, titled A single drop of blood), the house of cards began to collapse. Up to sentence handed down by Judge Edward Davila: Holmes was convicted on 4 of 11 counts she was facing in federal court in San Jose, California. He risks twenty years in prison.
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Who is Elizabeth Holmes and when did the history of Theranos begin
It is worth starting from the beginning of this incredible and bloodthirsty story followed in the United States. Perhaps because, with a good number of years later, it symbolically appears as a trial not so much and not only for Holmes (who during the almost 4 months of hearings did everything to defend himself properly, in part by convincing many of the 12 jurors, including 8 men), but the startup hangover that, especially in those early 2000s, managed to place imaginative promises without concrete products and services following them. Nonetheless, it often reaches billionaire valuations, creating damage of various kinds, fueling dangerous speculative bubbles and undermining the confidence of citizens and investors. In short, a kind of reckoning.
Daughter of a former vice president of the energy giant Enron, Holmes created Theranos in 2004, after leaving his studies at Stanford. The first token of the capital of his creation were even the loans for school fees. It was a very different phase from the current one: the iPhone would arrive only 3 years later and the drunkenness from Silicon Valley, despite the hit of dot coms a few years earlier, had entered a new phase. It was no coincidence that the charisma of that very young businesswoman was enough who in style took up the black turtleneck sweaters of one of his myths (Steve Jobs, of course) and some very important connections to support the company, which in fact was never able to give birth to a truly functional and certified device. If not (first and only authorization obtained by the US FDA) for the diagnosis of the Hsv-1 virus, herpes simplex. A truly unexpected green light, seen with the eyes of today surprising and arrived even in March 2015, a few months after the collapse.
What was Edison supposed to be for
The so-called “Machine of miracles” Edison could and should have been used outside clinical contexts, for example in supermarkets. Over the years, Holmes managed to convince major chains, such as Safeway or Walgreens, to make deals and set up spaces for Theranos withdrawals. Too bad that in those places, in the short periods in which the experiments took place, the group never used their own machinery: to honor those same agreements, they placed traditional machinery for blood tests, made to work on inadequate samples composed of a few drops of blood. and providing completely unreliable results, in some cases endangering patients’ lives and providing incorrect outcomes. The central point of the indictment was this: Holmes would always know that the device didn’t work, that it was an empty box, but he would still proceed with the fundraising and business proposal. By putting at risk the money of those who have bet on it over the years and also the health of the patients involved in the tests. A part of the accusatory system, the one on financing, held up leading to the conviction on 4 of the 11 counts. The other, relating to patient safety, no. And we will also try to understand why.
The luxury lenders
Over the years, Theranos managed to convince not only the editors of numerous lifestyle and business magazines to the 4 corners of the globe, guaranteeing Holmes covers that called her “The new Steve Jobs”, but also a series of unthinkable names and completely dry of in-depth medical knowledge: among the lenders of the former startup, finally liquidated in 2018, the names of Henry Kissinger and John Schultz, two former US secretaries of state, Betsy DeVos, a businesswoman and former secretary of education under Donald Trump, and General James Mattis, former commander of US forces in Afghanistan and Iraq and former defense minister. Not only that: they also trusted Holmes’ words and charisma Australian tycoon Rupert Murdoch, who staked around 125 million on it dollars, and former Senators Sam Nunn and Bill Frist.
The commercial and health chains and the role of Sunny Balwani
As mentioned, some large chains also ended up in the machine designed by Holmes and the former president of Theranos, the 56-year-old of Pakistani origins Ramesh Sunny Balwani, with whom the woman had an affair. Balwani will shortly go to trial separately for similar charges, but has been repeatedly involved in the defense of the former CEO in different phases of the investigation and the proceedings: according to Lance Wade, Holmes’ defender, the latter allegedly suffered sexual abuse by the man and psychological that would have led her to take choices and actions, even at a corporate level, against her will.
Returning to the commercial acronyms involved, in 2012 Safeway invested $ 350 million to refurbish 800 warehouses with dedicated picking areas, only to cancel the agreement. The following year it was the turn of Walgreens. The final year before the fall, 2015, saw the arrival of the Cleveland Clinic and private insurance companies AmeriHealth Caritas and Capital BlueCross. However, others have never fallen into the trap big names in pharmaceuticals such as Pfizer and Novartis, brought up by Holmes during the trial: as it turns out, they would have been victims of scams and cheating, given that to convince reluctant investors, the former startup circulated bogus documents containing the counterfeit Pfizer logo.
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The mess of the Theranos database
One of the latest controversial elements of the investigation, which probably resulted in the acquittal for the charges related to the health of the patients, concerns the database containing test data and results of patients undergoing analysis by Theranos. The group, without evading the procedures, in 2018 delivered a copy to the Prosecutor’s Office before permanently deleting it from the company’s servers. At the time, Theranos was overwhelmed by judicial, administrative (such as that of the Security and Exchange Commission, the American Consob) and journalistic investigations, financially deceased and looking for agreements with old partners, with a valuation collapsed to zero dollars and close to bankruptcy, declared in effect in September 2018. However, it was an encrypted archive that the Prosecutor, also due to the time elapsed between the delivery and the access attempts (according to the defense) or due to the bad faith of the former employees of Theranos (for the ‘accusation), has never been able to decrypt and consult. According to the Prosecutor’s Office, it would have allowed to prove how the error rate of the blood test systems exceeded 50% and ultimately to produce the key proof of the Holmes’ awareness of Edison’s failure and of the entire enterprise started many years earlier. In the end, some of the patients, albeit with limitations on their statements, were nevertheless heard by the jury.
A blockbuster ending
“He chose fraud over economic failure. She has chosen to be dishonest with investors and with patients, ”Attorney Jeff Schenk said in his closing speech. “A blockbuster end to a blockbuster trial,” he commented in the Washington Post the historian of the university of the federal capital, Margaret O’Mara, author of the book The Code: Silicon Valley and the remaking of America. Again: “Elizabeth Holmes went down in history as a rare CEO of Silicon Valley and the youngest self-made billionaire, at least on paper. Now it makes history again like the first Silicon Valley CEO to be sentenced for a white-collar crime. ”The former founder of Theranos will now be able to challenge the sentence or the sentence, or both.