Former Theranos CEO Elizabeth Holmes was convicted in a California federal court Monday on four counts after a jury found her guilty of conspiracy and three counts of wire fraud for intentionally defrauding investors.
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Holmes was however cleared of seven other charges she defrauded patients with sham blood-testing technology she knew didn’t work and misled individual investors.
The trial started Sept. 8 in San Jose over the government’s 2018 charges that Holmes and former Theranos COO Ramesh “Sunny” Balwani, her onetime romantic partner, defrauded investors and patients with fallacious promises about Theranos’ technological capabilities related to blood tests.
The prosecution alleges the couple tricked investors into siphoning hundreds of millions of dollars into the startup over a five year span from 2010 to 2015. They did this by skewing financial projections, projecting more than $100 million in annual revenues, without ever disclosing that Theranos earned no revenues several of those years and slim profit in 2014.
It was also alleged Holmes persisted in the pursuit of eight-figure deals with Walgreens and Safeway to deliver blood tests, despite repeated complaints by Theranos lab employees that some tests didn’t work.
The jury heard from patients and doctors who received erroneous blood test results incorrectly suggesting they had HIV, a miscarriage or prostate cancer, as well as testimony from investors, who claimed Holmes personally hid vital information during device demonstrations and misled them about contracts with the military and other pharmaceutical companies.
Former Theranos lab director Adam Rosendorff testified, criticizing both Holmes and Balwani, for allegedly ignoring his concerns about the tests and prioritizing profits over accuracy, causing him to quit in late 2014.
The jury listened to testimony that Balwani subsequently hired multiple lab directors to replace Rosendorff up until federal inspectors identified multiple shortcomings in Theranos’ lab in the fall of 2015.
Holmes admitted she made many mistakes as Theranos’ CEO, including placing Pfizer and Schering-Plough logos on Theranos validation reports before sending them to Walgreens’ executives. She did however defend some of her actions as well-intended and claimed investors didn’t ask many probing questions in their due diligence process before placing their funds and trust in the private company.
She also admitted that she intentionally hid from investors and journalists that Theranos modified third-party devices to run patient tests. She credited her actions to advice from Theranos’ corporate counsel and board member David Boies, who she claims told her the adjustments and modifications were esoteric trade secrets.
Both parties rested on Dec. 8 and jury deliberations lasted seven full days. A sentencing hearing for Holmes has not yet been scheduled.
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Source: https://www.law360.com/articles/1450144/jury-convicts-ex-theranos-ceo-elizabeth-holmes-of-fraud
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