Elizabeth Holmes: how the world’s youngest female billionaire found herself accused of scam and fraud

  • Kirill Belyaninov
  • BBC, Washington

September 10, 2021

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Image caption,

Elizabeth Holmes has already lost her business in court. Now she must fight for her personal freedom

Theranos founder Elizabeth Holmes, who seven years ago became the world’s youngest female billionaire, faces up to 20 years in prison for fraud and investor scams.

His company was developing a universal device for diagnosing disease, but after years of waiting it turned out to be just a pretty little box.

Today, August 31, the trial of Elizabeth Holmes and her partner Ramesh Balwani begins in federal court in California.

The trial has already been postponed four times, three times due to the coronavirus pandemic and then because Ms Holmes was pregnant. The trial is expected to last about three months.

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Elizabeth Holmes, 37, who was nicknamed “Steve Jobs in a skirt” in the early 2010s, faces up to 20 years in prison.

Its de facto activity ended in 2015 following a series of articles by Wall Street Journal reporter John Carreiro.

He investigated Theranos for several years and managed to prove that the company, in an extremely closed and rigid environment towards its own employees, was developing a shell.

In 2018, Carreiro wrote a book, Bad Blood, about the activities of Theranos, which became a bestseller.

A documentary based on this project was produced by HBO, one of the world’s leading players in this market. A feature film on the history of Theranos is also in production.

Jennifer Lawrence, star of The Hunger Games and Oscar winner, will play the role of Elizabeth Holmes.

An iPod for health

Ms. Holmes grew up in the Washington metropolitan area in the family of a federal official and a member of the United States Congress and, according to her official biography, she had dreamed from an early age of “changing the world.”

“All I really want is to discover something new,” she wrote in a letter to her father at the age of nine.

Elizabeth Holmes graduated with honors and entered prestigious Stanford University, but dropped out at age 19.

In 2003, she founded a startup called Theranos (combination of the words “therapy” and “diagnosis”).

His idea was very ambitious: to create a device capable of establishing a wide range of diagnoses from a single drop of blood.

The point is, Ms Holmes said she was very scared of vaccinations and needles.

She therefore set herself a goal: to diagnose a disease from a drop of blood taken from a finger.

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Ms Holmes has always emphasized that her role model was Apple founder Steve Jobs

Ms. Holmes has never concealed that she viewed Apple founder Steve Jobs as her idol.

She called the Edison Theranos system, which she created, “the iPod of medicine.” And she said he would soon be in every household.

In 2007, she invited several employees of Steve Jobs’ company to work at Theranos, commissioning them to design the blood analysis device.

Holmes predicted the device would feature an iPhone-like touchscreen, and hired famed Silicon Valley industrial designer Yves Behar to design the case.

The company was already the talking point of the market; Holmes has had a makeover.

She started wearing the black turtlenecks that Steve Jobs often wore in public and tight black pants.

In interviews, she claimed that the testing system she had developed could detect HIV infection and various forms of cancer in early stages.

In 2013, Holmes signed contracts to install Edison devices at Walgreens and Safeway drugstore and supermarket chains in the United States.

And in negotiations with their owners, for the first time she seriously went against the truth, claiming that the diagnostic system was already in use in the US military, when it had simply been introduced there.

And that this unique development would allow deadly diseases to be diagnosed before doctors can – evidence Holmes does not have either.

Theranos

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America’s Most Influential People Attend Theranos Presentations

“We are going to create a world where no one says goodbye too soon,” she said at the time.

Presidents, Secretaries of State and Billionaires

Theranos’ long list of investors includes media mogul Rupert Murdoch, former US President Bill Clinton and Betsy Devos, then Donald Trump’s cabinet education secretary, in just a few years.

Its board of directors includes former U.S. Secretaries of State George Shultz and Henry Kissinger, as well as General James Mattis, who led the Pentagon under President Trump.

Elizabeth Holmes et Bill Clinton

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Former US President Bill Clinton was one of Theranos’ investors

The Devos family invested $ 100 million in the company, and the total investment then exceeded $ 900 million.

In 2009, businessman Ramesh Balwani took over as head of Theranos.

It was later revealed that Holmes had an intimate relationship with him, but this was not disclosed to investors.

After signing contracts with Walgreens and Safeway, the startup’s capitalization reached $ 9 billion.

Holmes became the youngest woman in history to earn over $ 1 billion on her own.

His photo has made the cover of major US trade publications – Forbes and Fortune magazine. Time magazine named her one of America’s 100 most influential people.

Blood and nerves

Wall Street Journal reporter John Carreiro has been studying Theranos since the 2000s.

First with curiosity, then with growing astonishment, as he later wrote in his book Bad Blood (the title plays on Theranos’ slogan – True blood – le droit sang ou le sang natal).

From conversations with former and current employees (some of whom were so afraid that meetings were being held in complete secrecy), Mr. Carreiro discovered that key Theranos employees were intimidated, manipulated and directly threatened, coerced into commit fraud.

They were fired – and their contracts were terminated under conditions such that any publicity would have ruined them.

But above all, Theranos did not want to know anything. A single drop of blood was seriously insufficient for a reliable diagnosis.

Test results have been manipulated, with increasingly false and egregious information in investor documents.

On May 23, 2013, Ian Gibbons, a 67-year-old biochemist – the main developer of Theranos technology – committed suicide at his home.

He was scheduled to appear in court the next day, to defend his technology against the first plaintiffs.

The End of Theranos

According to a Wall Street Journal survey published in the fall of 2015, the developments at Theranos gave erroneous results, leading to massive false diagnoses.

Patients have been misdiagnosed with HIV and cancer, among others. New legal proceedings followed.

Elizabeth Holmes and Joe Biden

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A politician very interested in Theranos technology was Joe Biden, then Vice President of the United States

One of the sources for the publication was the grandson of former US Secretary of State George Shultz, Tyler Shultz, who was a member of the company’s board of directors – he was the first to say that the technology offered by Theranos just doesn’t work.

In November 2016, supermarket chain Walgreens sued Theranos, accusing it of breach of contract and demanding repayment of a $ 140 million investment.

In 2017, the lawsuit ended with a settlement agreement whereby Holmes was to pay just under $ 30 million.

In March 2018, Elizabeth Holmes announced the closure of the company and secured a settlement with the United States Federal Securities Commission (SEC).

It cost him $ 500,000 and a ten-year ban from holding managerial positions in state-owned companies.

But in the summer of 2018, the U.S. District Attorney’s Office for the Northern District of California charged Holmes and his partner Balwani with fraud after their own investigation into Theranos.

By this time, the couple had already broken up and both surrendered voluntarily to the FBI. They were released on bail.

Holmes and Balwani have pleaded not guilty and, according to Bloomberg sources, Holmes intends to argue during the trial that Balwani coerced her into fraud, exerting moral and even physical pressure on her.

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