THeranos founder Elizabeth Holmes was found guilty of fraud on Monday, and ended a high-profile trial that imprisoned Silicon Valley and chronicled the missteps of the now-defunct start-up of blood tests.
After seven days of deliberation, the jury in San Jose, California, convicted Holmes on four charges: one case of conspiracy to defraud investors, and three cases of wire fraud against investors. It acquitted her on three charges, including a conspiracy to defraud patients and two charges related to patients who received inaccurate test results. It remained locked on three remaining charges.
The divided verdicts are “a mixed case for the prosecution, but it is a loss for Elizabeth Holmes because she will be in prison for at least a few years,” said David Ring, a lawyer who has followed the case closely.
A hearing is set for next week where the prosecution will reveal whether they plan to try Holmes again on the three charges that the jury could not agree on. Experts say that such a new trial is not very likely, as the existing convictions already have significant sentences.
Without previous convictions, Holmes is unlikely to face the maximum jail time her prosecutor has, which is 20 years, said Neama Rahmani, a former federal prosecutor and president of West Coast Trial Lawyers.
Although she is likely to meet more in prison and more on probation, Holmes is almost certain to appeal, Rahmani added: “She is not someone who will want to spend five months in prison, much less five years.” he said.
Holmes left the courthouse on Monday after the parties agreed that she would not be remanded in custody before her sentencing. That date will be set during the hearing on a new trial next week. It is expected that the judge will take into account the timing of the fraud case against Holmes’ former partner, Sunny Balwani. His trial is scheduled to begin next month in the same courtroom in San Jose where Holmes’ legal saga unfolded.
The loss of the former CEO marks a milestone for Silicon Valley – an industry that for years has avoided accountability in its pervasive culture of “fake it till you make it” that encourages founders to make big promises, often with little evidence.
“Silicon Valley has so far been known to be resistant to a lot of prosecution, because the business model assumes that you will have an aggressive, optimistic view of the product or service to attract investors,” said Jack Sharman, a white-collar defense attorney. at Lightfoot, a law firm in Alabama.
“And if that product or service succeeds, you are not a fraud, you are a visionary,” he added.
Theranos sold a pledge to improve health with several tests on one drop of blood – a claim that, despite little scientific evidence, raised hundreds of millions of dollars and attracted large investors such as media mogul Rupert Murdoch and former Secretary of State Henry Kissinger.
Once a charismatic figure, Holmes was originally hailed as a visionary. Her story represented how far the cult of personality in Silicon Valley can take anyone.
However, the same cult of personality became her downfall: during the trial, prosecutors painted a picture of Holmes as a strict, power-hungry leader who was willing to go to great lengths to save the company’s image, suppress internal and external dissent and manipulate pressure.
“She chose fraud over business failure,” prosecutor Jeff Schenk said in his closing arguments. “She chose to be dishonest with investors and patients. That choice was not only insensitive, it was criminal. “
The verdict could encourage prosecutors to more aggressively pursue cases of white-collar crime and fraud, Rahmani said. For its part, startups can now be more careful when making big promises, he added.
“In Silicon Valley, this belief will resonate with the big law firms that advise startups,” Rahmani said. “Lawyers are going to advise their clients to be more careful, especially in what they say to investors.”
Investors are already paying attention: Silicon Valley investor Jason Calacanis, who was an early supporter of big companies like Uber and Robinhood, said the verdict was a “reminder to the founders”.
“Never lie, never bend the truth, always be honest about where you are with your traction, especially when raising money,” he tweeted.
The Associated Press contributed reporting