Humans have been gifted, time and again, by people that open new gates to technological advancements and these people craft the future of many generations to come. However, rarely but surely, some geniuses turn out to be nothing short of disappointments and what follows is an embarrassment for the whole community.
Such is the case with Elizabeth Holmes, a name not entirely unknown to the world. Holmes is a former biotechnology entrepreneur who in 2003, founded and was the CEO of Theranos, a health technology company that is not functioning anymore.
The company saw a rise in valuation after claiming to have revolutionized blood testing by developing methods that used surprisingly small volumes of blood, such as from a small cut or finger prick. By 2015, she had been named the youngest and wealthiest self-made female billionaire in America based on a $9-billion valuation of her company by Forbes.
That didn’t last long, however, as her net worth was quickly rounded down to zero after a revelation that stripped her of her status and company. Holmes, once known as a genius, was now headed for prison. Why is Elizabeth Holmes going to prison? Here’s the answer.
Who is Elizabeth Holmes?
Elizabeth Anne Holmes was born on 3rd February 1984 in Washington, D.C., U.S. Her parents are Christian Rasmus Holmes IV, the vice president at Enron, an energy company that was declared bankrupt after an accounting fraud, and Noel Anne, a Congressional committee staffer.
Holmes' ancestry from her father’s side links her to Charles Louis Fleischmann, a Hungarian immigrant who founded the Fleischmann's Yeast company. Holmes is part Danish and part French Canadian.
Holmes went to St. John's School, a K-12 day school in Houston. She became interested in computer programming during high school and started her first business selling C++ compilers to Chinese universities. Her parents had arranged home tutoring in Mandarin Chinese for her.
Holmes began attending Stanford University's summer Mandarin program while she was still in high school. In 2002, Holmes began attending Stanford, where she studied chemical engineering. She also worked as a student researcher and lab assistant at the School of Engineering. She reported that she was raped at Stanford in 2003, which led her to drop out in March 2004.
In 2003, Holmes founded a company, named Real-Time Cures in Palo Alto, California, that aimed to "democratize healthcare".
When Holmes proposed the idea to obtain "vast amounts of data from a few droplets of blood derived from the tip of a finger" to her medicine professor Phyllis Gardner at Stanford, he turned her down and told her that something like that couldn’t be done.
Several other expert medical professors had the same thing to tell her but Holmes did not relent. She finally succeeded in getting her advisor and dean at the School of Engineering of Stanford, Channing Robertson, to back her idea.
In 2003, Holmes decided to rename her company to Theranos. Robertson (who later retired from Stanford) became the company's first board member and introduced her to some venture capitalists. By December 2004, Holmes had managed to raise $6 million in funds. By the end of 2010, her company had over $92 million in venture capital.
Rise to Popularity
Holmes kept much of Theranos’ operation under covers with no press releases or a company website. It wasn’t until September 2013 that the company gained recognition when it announced a partnership with Walgreens, a pharmacy store chain in America, to launch in-store blood sample collection centers.
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Media attention soared when Forbes named Holmes as the “world's youngest self-made female billionaire”, she ranked #110 on the Forbes 400 in 2014.
Theranos was valued at $9 billion and had managed to raise over $400 million in venture capital. During 2015, Holmes established agreements with various medical centers such as Cleveland Clinic, Capital BlueCross, and AmeriHealth Caritas to use Theranos technology.
John Carreyrou of the WSJ was the first that made a secret, months-long investigation of Theranos after receiving a tip from a medical expert who doubted Theranos's Edison blood testing devices.
Carreyrou obtained company documents from ex-employee whistleblowers. Upon learning of the investigation, Holmes initiated a campaign to stop Carreyrou from publishing the report. The article was published regardless and revealed how Theranos had been using commercially available machines manufactured by other companies for most of its testing and giving out inaccurate results. Holmes continued to deny all these claims. She promised the company would publish data proving the accuracy of its tests.
Banned from Blood Testing
In January 2016, the Centers for Medicare and Medicaid Services (CMS) inspected Theranos’ Newark, California, laboratory, uncovering irregularities with staff proficiency, procedures, and equipment.
When the issues remained unfixed till March, CMS decided to issue a ban, which happened shortly in July 2016. CMS banned Holmes from owning, operating, or directing a blood-testing service for two years, a decision which Theranos appealed to a U.S. Department of Health and Human Services appeals board.
Following the scandal, Walgreens ended its relationship with Theranos and shut down its in-store blood collection centers.
On 16th May 2017, approximately 99% of Theranos shareholders decided to dismiss all current and potential litigation in exchange for shares of preferred stock.
In March 2018, the SEC charged Holmes and Theranos's former president, Ramesh Balwani, also Holmes’ romantic partner, with fraud for taking over $700 million from investors while advertising a false product. On 14th March 2018, Holmes settled an SEC lawsuit, with the terms of settlement including surrendering voting control of Theranos, returning 18.9 million shares to the company, a ban on holding an officer or director position in a public company for a decade, and a fine of $500,000.
At its height in 2015, Theranos had more than 800 employees but it had to dismiss 340 people in October 2016 and an additional 155 in January 2017.
Why is Elizabeth Holmes going to Prison?
Holmes was tried in the U.S. District Court for the Northern District of California. The trial began on 31st August 2021, after being delayed for over a year due to the COVID-19 pandemic and Holmes's pregnancy.
Holmes continued to testify in self-defense for seven days, claiming many things such that her staff misled her about the technology and that her ex-romantic partner Sunny Balwani, who was also facing trial, held influence over her during much of the romantic relationship they had and which was still ongoing when the alleged criminal acts happened even though it had been kept secret.
The case's evidence heightened Holmes's role in falsified validation reports, faked demonstrations, misleading claims about contracts, and overstated financials at Theranos.
On 3rd January 2022, Holmes was found guilty on four counts of defrauding investors of her company, three counts of wire fraud, and one count of conspiracy to commit wire fraud. Holmes waited on sentencing while remaining 'at liberty' after paying a $500,000 bail, secured with property. She now faces a maximum sentence of 20 years in prison, and a fine of $250,000, plus restitution, for each conspiracy count and count of wire fraud she committed.