How DID she fool them all?
ELIZABETH HOLMES was a young woman possessed of vaulting ambition. She wanted to change the world and boasted that she would do so by revolutionising global healthcare, making state-of-the art screening for numerous diseases accessible to all.
She would show how a pinprick of blood could transform medical practice.
In the event, Holmes showed only that there is no shortage of gullibility and greed among America’s great and good and super-wealthy.
Bill Clinton, Rupert murdoch, former U.S. Defence Secretary James ‘mad Dog’ mattis — America’s most feted general — and two ex-U.S. Secretaries of State, Henry Kissinger and George Shultz, were among those taken in by the charismatic blonde with the piercing blue eyes, deep husky voice and astonishing powers of persuasion.
At the age of 19, Holmes had set up Theranos, one of Silicon Valley’s most successful new business ventures, raising billions of dollars and being hailed as the ‘next Steve Jobs’ after the mercurial co-founder of Apple.
Her life-changing product was a portable blood-testing machine that could quickly and cheaply screen for hundreds of diseases.
She even described it as a ‘gift from God’ although it would turn out to be little more than a box of expensive junk.
And on monday a federal jury in San Jose, California, found Holmes guilty of four fraud charges after a four-month trial in which she was portrayed as one of the most shameless con artists of modern times. Although Holmes, 37, was acquitted on four other charges and the jury failed to reach a verdict on three, each charge carries a maximum sentence of 20 years in prison, however they are likely to be served concurrently.
In finding her guilty of defrauding investors, jurors accepted the prosecution case that Holmes knowingly lied about her product — crucial to proving the fraud charges.
Holmes, who took the stand during the trial, and her legal team had tried hard to persuade jurors she had noble intentions throughout.
Her mistake, she claimed, had simply been to believe her company’s doctors and scientists when they assured her the technology worked.
As the verdicts were read out, Holmes, who gave birth to her first child last year, showed little emotion. But before leaving the court room she hugged her hotel-chain heir husband, Billy Evans, her parents and friends.
She is expected to appeal and will remain free while a sentencing date is agreed. The trial of her former business partner — and ex-lover — Ramesh ‘Sunny’ Balwani, on similar charges will start in a few weeks.
During her trial, Holmes sensationally claimed she had gone to Balwani, 20 years her senior, for comfort after being raped while a student at Stanford University — only for him to subject her to emotional and sexual abuse over many years, which she said had impaired her judgment. He has denied the claims.
H
OLMES’S conviction was greeted with particular relief yesterday by Rochelle Gibbons, the widow of Ian Gibbons, a Cambridge-educated British biochemist who became Theranos chief scientist in 2005.
Dr Gibbons committed suicide in 2013 convinced that Holmes was about to sack him for challenging her grandiose claims about her bloodtesting machine. Following his death, Holmes never offered any condolences but simply had an underling call his widow to demand the return of company property.
‘Ian would be very happy,’ mrs Gibbons told the mail. ‘He was a very kind, tolerant person but he hated her so much — she was a sociopath, a narcissist, a bully and a liar. When he realised she was pushing things on patients that were fraudulent, it destroyed him.’
mrs Gibbons knew Holmes in the early years of Theranos before she reinvented herself to appeal to would-be Silicon Valley investors — losing weight, dyeing her mousy brown hair blonde, cultivating a lower male-like voice, favouring black turtle necks as Jobs did, and developing a far more flamboyant personality. (like the famously ascetic Jobs, she would also talk of her spartan existence, keeping little more than a mattress in her bedroom.)
While Rochelle Gibbons said she believes Holmes genuinely believed in her miracle product ‘for a very brief time’, she fatally came to fall her own hype. ‘She couldn’t escape her persona as a wunderkind and got sucked into it,’ she said.
Holmes’s story is now being made into a film starring Jennifer lawrence and a TV mini-series with Amanda Seyfried, and it is not difficult to see why Hollywood should be enthralled by a saga that has been described as ‘Silicon Valley’s Greatest Disaster’, revealing the perils of hype and hubris in the avaricious $2.4trillion technology industry.
Holmes was studying chemical and electrical engineering at Stanford when she launched her company after she claimed she had a brainwave one night. She envisaged a device the size of a computer printer — which she called ‘The Edison’ — that would save millions of lives.
With blood from just a single pinprick on a patient’s finger, it could rapidly analyse the sample, detecting hundreds of diseases and substances, from cancer to cocaine.
She was encouraged by ambitious parents (her father had been a director of the scandal-hit energy company Enron) who had hot-housed her as a child in Washington DC.
When, in 2003, her father found venture capitalists willing to invest in her company, Holmes dropped out of university. Confident and highly plausible, Holmes worked tirelessly to win over more backers ready to attach either their money or reputation to a venture whose astonishing claims few appeared to question.
Drawn from the highest ranks of business and government, this coterie of powerful older men proved very useful in allaying scepticism over Holmes’s lack of experience.
So what drew them to her like bees to nectar? Perhaps it was her engaging account of how she’d been inspired by her hatred of injections. Giving blood was unpleasant and testing it expensive. Her invention would make it stress-free and cheap,
she said. More likely, it was charm and glamour. She effortlessly captured attention in an industry lacking both, and led by nerdy men with negligible social skills.
As funding poured in, Holmes spent lavishly, travelling by private jet, paying $1million a month to rent a grand HQ building in the Silicon Valley city of Palo Alto and spending $100,000 on a conference table. In interviews, she came across as infected with an almost religious zeal.
‘She has an ethereal quality, she’s like a member of a monastic order,’ enthused Henry Kissinger.
Holmes also had no qualms about using her sex appeal. Ian Gibbons told his wife she would ‘unbutton her blouse at board meetings and be really flirtatious with the older guys,’ Mrs Gibbons recalls. ‘I think she charmed the pants off them.’
Kissinger was soon joining fellow senior statesman George Shultz, and General James Mattis (later Donald Trump’s Defence Secretary) among the luminaries on the Theranos board of directors.
Rupert Murdoch, who invested $125million, Betsy DeVos — Trump’s education Secretary — and the Walton family, the multibillionaire owners of retail giant Walmart were among those who helped provide the nearly £700 million that Theranos attracted in investment, along with billionaire businessmen Robert Kraft and Larry ellison, founder of the technology company Oracle.
Within a dozen years of establishing Theranos, Holmes was running a supposedly revolutionary rapid blood testing company valued at $9 billion (£6.6 billion).
The company had 800 staff and, given the fact Holmes owned half of it, Forbes estimated she was worth $4.5billion, making her the world’s youngest self-made female billionaire. She graced the cover of myriad magazines — she loved to be photographed in a white lab coat — and was included in Time magazine’s list of the 100 most influential people. The Obama administration made her a Presidential Ambassador for Global entrepreneurship.
even the sort of experts who really should have known better were sucked in by the hype — with Harvard Medical School appointing her to its Board of Fellows.
And there was no shortage of wide-eyed but influential laymen, no doubt taking their cues from each other, itching to talk up her brilliance. ‘Don’t worry about the future,’ Bill Clinton gushed at a technology seminar as he applauded her. ‘We’re in good hands.’
Holmes, he assured his audience, was ‘wildly popular among people who follow things like this’.
Joe Biden, Vice President at the time, visited her gleaming, high tech operation and called it ‘the laboratory of the future’.
And yet if any of these wise men had looked a little more closely, the warning signs were there — not least Holmes’ technical knowledge which an interviewer described as ‘comically vague’ and, according to Mrs Gibbons, her academic struggles at Stanford. She would head off any searching questions about edison, saying the information was commercially sensitive or artfully changing the subject.
Many Theranos staff knew something wasn’t right. They saw that Holmes was so blase about the science behind The edison that she allowed her Siberian husky puppy to run amok through the laboratory, ignoring her chemists’ protests that dog hair could contaminate the blood samples.
Accompanied everywhere by armed guards who codenamed her ‘eagle 1’, Holmes was so secretive that employees never even knew whether the company was flourishing or on the brink of collapse.
She discouraged her scientists from discussing their work with each other in an obvious attempt to stop them from realising there was nothing behind her expansive claims. experts who told her it was physically impossible to do all she claimed were immediately sacked and threatened with legal action if they spoke out publicly.
Many former staff have described how Holmes presided over a work culture of vicious bullying and paranoia. Former receptionist Cheryl Gafner described Holmes — simply called ‘e’ by underlings — as so cold-blooded she might have been ‘hatched out of a pod’.
But even when a lucrative deal to supply edison machines in Walmart pharmacies in 2013 proved a flop — the machines were never installed and the blood testing was instead done by old-fashioned needles and then tested in conventional labs — no one challenged her.
‘We knew Theranos to be a deceptive organisation, but we had to chill out and not say anything about it because they would make our lives difficult,’ said Justin Maxwell, a former designer at the company.
But in the end the presence of so many venerable names on her board and investor list couldn’t protect her forever.
In late 2015, it all started to unravel when, with help from a whistleblower, the Wall Street Journal started running stories indicating the company was all smoke and mirrors. The edison simply didn’t work and Theranos had instead been using other laboratories and other brands of machines to do its blood testing.
Feted by billionaires and world leaders, Elizabeth Holmes was the darling of Silicon Valley. Now she’s going to jail — and they’re paying the price for their own greed and gullibility after her audacious £700m fraud
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CCORDING to doctors and patients, Theranos blood tests weren’t merely unreliable but so inaccurate they could be lethal. Holmes was defiant. ‘This is what happens when you work to change things. First they think you’re crazy, then they fight you,’ she told an interviewer. Yet facing a string of lawsuits from investors, partners and regulators, she was by now on the brink of bankruptcy.
In March 2018, the Securities and exchange Commission charged Holmes and her former business partner Balwani with what it called ‘an elaborate, years-long fraud’.
She settled and agreed to pay a $500,000 fine and surrender control of the business but neither admitted nor denied the allegations.
Three months later, the pair faced criminal charges that accused them of a ‘multi-million dollar’ scheme to defraud patients and investors. By September 2018, Theranos had shut down.
The elizabeth Holmes story is a parable of our high tech times, but will Silicon Valley and foolishlooking Theranos investors learn a valuable lesson from the fall out?
Don’t bet on it. Holmes certainly wasn’t the first to try to succeed by following the Valley creed to ‘Fake It Till You Make It’, she won’t be the last. Avarice and credulousness will do the rest.