As Elizabeth Holmes goes to prison for fraud, questions remain about her motives
SAN JOSE, Calif. (AP) — As Elizabeth Holmes prepares to report to prison next week, the criminal case that exposed the blood test fraud at the heart of her Theranos startup is entering its final phase.
The 11-year sentence represents a boost for the wide-eyed woman who broke through the “tech bro” culture to become one of Silicon Valley’s most famous entrepreneurs, only to be exposed as a fraud. Along the way, Holmes became a symbol of the shameless hyperbole that often saturates startup culture.
But questions remain about her true intentions — so many that even the federal judge presiding over her trial seemed mystified. And Holmes̵[ads1]7; defense attorneys continue to question whether the punishment fits the crime.
At 39, she seems most likely to be remembered as Silicon Valley’s Icarus – a high-flying entrepreneur fueled by reckless ambition whose odyssey culminated in fraud and conspiracy convictions.
Her motives remain somewhat mysterious, and some supporters say federal prosecutors unfairly charged her in their eagerness to take down one of the most prominent practitioners of fake-it-til-you-make-it — the tech sector’s brand of self-promotion that sometimes resorting to exaggeration and outright lies to raise money.
Holmes will begin paying the price for her betrayal on May 30 when she is scheduled to begin the sentence that will separate her from her two children – a son whose birth in July 2021 delayed the start of her trial and a three-month-old daughter she became pregnant with. after her conviction.
She is expected to be jailed in Bryan, Texas, about 100 miles (160 km) northwest of her hometown of Houston. The prison was recommended by the judge who sentenced Holmes, but authorities have not disclosed where she will be held.
Her many critics argue that she deserves to go to jail for selling a technology that she repeatedly boasted would quickly scan for hundreds of diseases and other health problems with a few drops of blood taken with a finger prick.
The technology never worked as promised. Instead, Theranos tests produced wildly unreliable results that could have put patients’ lives at risk — one of the most frequently cited reasons why she deserved to be prosecuted.
Before those lies were exposed in a series of explosive articles in The Wall Street Journal from October 2015, Holmes raised nearly $1 billion from a list of savvy investors, including Oracle co-founder Larry Ellison and media mogul Rupert Murdoch. It was the duping of these investors that led to her prison sentence and a $452 million restitution bill.
Holmes’ stake in Theranos at one point catapulted her paper fortune to $4.5 billion. She never sold any of her shares in the company, although evidence from the trial left no doubt that she enjoyed fame and fortune – so much so that she and the father of her children, William “Billy” Evans, lived in palatial silicon Valley Estate during the trial.
The theory that Holmes ran an elaborate scam was supported by trial evidence documenting her attempts to prevent the Journal’s investigation from being published. That campaign forced John Carreyrou—the reporter responsible for those bombshell stories—to appear in court and place himself in Holmes’ line of sight as she took the witness stand.
Holmes also signed off on surveillance aimed at intimidating Theranos employees who helped uncover the flaws with the blood sampling technology. The whistleblowers included Tyler Shultz, the grandson of former Secretary of State George Shultz, whom Holmes befriended and persuaded to join the Theranos board.
Tyler Shultz became so unnerved by Holmes’ attempts to shut him up that he began sleeping with a knife under his pillow, according to a chilling statement provided by his father, Alex, when she was sentenced.
Holmes’ supporters still maintain that she always had good intentions and was unfairly scapegoated by the Justice Department. They insist she was simply using the same exaggerated marketing tactics as many other tech executives, including Elon Musk, who has repeatedly made misleading statements about the capabilities of Tesla’s self-driving cars.
According to these supporters, Holmes was singled out because she was a woman who briefly eclipsed the men who tend to bask in Silicon Valley’s spotlight, and the trial turned her into a latter-day version of Hester Prynne — the protagonist of the 1850 novel “The Scarlet Letter .”
Holmes steadfastly maintained her innocence during seven often riveting days of testimony in her own defense — a spectacle that had people lining up shortly after midnight to secure one of the few dozen seats available in the courtroom in San Jose.
On one memorable day, Holmes recounted how she had never gotten over the trauma of being raped while enrolled at Stanford University. She then described being subjected to a long-term pattern of emotional and sexual abuse by her former boyfriend and Theranos co-conspirator, Ramesh “Sunny” Balwani, and suggested that his suffocating control clouded her thinking.
Balwani’s lawyer, Jeffrey Coopersmith, denied these allegations during the trial. In Balwani’s subsequent trial, Coopersmith tried unsuccessfully to portray his client as Holmes’ pawn.
Balwani, 57, is now serving a nearly 13-year sentence for fraud and conspiracy.
When it came time to sentence the then-pregnant Holmes in November, U.S. District Judge Edward Davila seemed as confused as anyone about why she did what she did.
“This is a fraud case where an exciting venture went ahead with great expectations and hopes, only to be crushed by falsehoods, misrepresentations, hubris and outright lies,” Davila lamented as Holmes stood before him. “I guess we go back and look at this and we think what is the pathology of fraud?”
The judge also harkened back to the days when Silicon Valley consisted mostly of orchards grown by immigrants. That was before the country was left to the tech boom that began in 1939, when William Hewlett and David Packard founded a company bearing their last names in a one-car garage in Palo Alto — the same city where Theranos was based.
“You will remember the amazing innovation of those two people in that little garage,” Davila reminded everyone in the rapt courtroom. “No exotic cars or lavish lifestyles, just a desire to create for the benefit of society through honest hard work. And that, I hope, would be the continuing history, legacy and practice of Silicon Valley.”
Michael Liedtke has covered Silicon Valley for the Associated Press for 23 years.