SAN JOSE, Calif. — Theranos founder Elizabeth Holmes was convicted Monday of four federal charges of fraud for exaggerating to investors what her blood testing company's machines could do, how much money the company could earn and how widely the machines were being used.
Holmes faces a maximum of 20 years in prison per charge, likely to be served concurrently. A sentencing date could be set at a hearing next week. As a first-time offender, Holmes is unlikely to face the full term. She could also be fined and required to pay restitution to her former investors.
Of the 11 charges, Holmes was acquitted on all that related to defrauding patients and one count of conspiracy. The jury remained deadlocked on three counts of defrauding investors. The underlying wire fraud amounts on those counts ranged from $99 thousand to $5.3 million.
In total, Holmes was found guilty of defrauding investors of nearly $145 million. The underlying wire fraud amounts for those charges ranged from $38 million for PFM Healthcare Master Fund, a San-Francisco based healthcare hedge fund, to almost $100 million for Lakeshore Capital Management, a fund connected to the DeVos family office.
As the verdict was read out, Holmes appeared stoic, sitting much as she had during the course of the trial, bolt upright and nearly motionless.
After court was adjourned, Holmes went to her family. Her father, Christian Holmes, kissed her on her forehead, and she lightly touched her mother, Noel, and her partner, Billy Evans. The four left the courthouse hand in hand and, taking no questions, walked steadfastly through the crowd and the cold. Holmes remains free on bond.
Holmes, 37, was the force behind marketing a modernized blood test, advertising a cheap finger prick that could run any commercially available blood diagnostic on a device about the size of a large PC at lower cost than conventional labs that take up entire rooms.
As a freshman at Stanford University, Holmes became taken with the idea of performing blood tests on just a finger prick’s worth of blood instead of drawing it from a vein, which she said was inspired by her fear of needles. She filed for a patent for a wearable drug delivery patch and at 19 dropped out to form a company and recruit engineers and scientists to try to bring her ideas to life.
Holmes recruited big names to her board of directors, like former Secretary of State Henry Kissinger and former Secretary of Defense James Mattis, and drew hundreds of millions of dollars in private investment. Feted at conferences, gracing the covers of glossy business magazines, Holmes was held up as an icon of female leadership and achievement. And in 2014, she became the world’s youngest female self-made billionaire, and her company was valued at over $9 billion.
But The Wall Street Journal reported in 2015 and 2016 that Theranos' devices were inaccurate and that the company was secretly resorting to running blood tests on other companies' machines, the very ones her company was supposed to be disrupting.
She initially faced 12 fraud counts, but the ninth, referring to an individual patient, was dismissed during the trial, the result of an error by prosecutors.
The jury deliberated for seven days. On the third day, jurors asked the judge to listen to audio clips of a 2013 call Holmes had with investors, which was recorded without her knowledge. Holmes told investors that the device could perform any blood test and that the company was on track to earn over a billion dollars, and she implied that the devices were being used on military medevac helicopters. None of those statements were true.
A week into deliberations, the jury sent a note that said it was deadlocked on three charges. U.S. District Judge Edward J. Davila, at the prosecutor’s request, read the jurors instructions known as an “Allen charge” — telling them to resume deliberations and try to reach a verdict on the outstanding charges.
The jury remained unable to reach a unanimous verdict, it said in another note Monday.
Federal prosecutors have said Holmes duped investors into supporting a product she knew was faulty, particularly as Theranos began to teeter on bankruptcy.
“This is a case about fraud, about lying and cheating to get money,” Assistant U.S. Attorney Robert Leach said in opening arguments.
The government's case included text messages between Holmes and her former business partner and ex-boyfriend, Ramesh "Sunny" Balwani, discussing Wall Street Journal reporter John Carreyrou. The couple expressed concerns over Carreyrou's writing a negative article, with Balwani promising to "nail" the reporter.
Balwani, who faces his own charges and a separate trial, did not speak at Holmes' trial.
In her own testimony, Holmes repeatedly told prosecutors that she genuinely believed the statements she made to investors were true.
“At the time, you were not worried people would be given an inaccurate impression?” Leach asked her.
“I was not,” Holmes said.
During cross-examination, Holmes admitted that allegations raised by former Theranos employee Erika Cheung — who expressed concerns several times about quality issues with the company's signature blood-testing devices — were true.
“I sure as hell wish we treated her differently and listened to her,” Holmes said. She then answered that she now understood that Cheung's concerns were correct.
The defense tried to paint Holmes in a more humanizing light as a young visionary who made mistakes, countering the prosecution's characterization of her as shrewd and calculating.
Defense attorney Kevin Downey asked Holmes to recount the early days of Theranos, as she sought advisers through the Stanford community, developed a business plan, attracted investment and — she thought — “nailed” expectations.
He asked her whether she ever intended to mislead her investors.
“No,” she said.