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Elizabeth Holmes guilty of 4 counts of fraud, acquitted on 4 in Theranos trial

The jury remained deadlocked on the three remaining charges, forcing a mistrial on the unresolved counts.
/ Source: NBC News

Theranos founder Elizabeth Holmes was convicted Monday of four federal fraud charges of exaggerating to investors what her blood testing company’s machines could do, how much money the company could earn, and how widely the machines were being used.

Holmes faces a maximum of 20 years of prison time per charge, likely to be served concurrently. The judge will decide the length at a later sentencing hearing, the date of which has not been set yet. But as a first-time offender it’s unlikely that she would face the full term. She could also be fined and required to pay restitution to her former investors.

Out of the eleven charges, Holmes was acquitted on all that related to defrauding patients and one count of conspiracy. The jury remained deadlocked on three counts of defrauding investors.

In total, Holmes was found guilty of defrauding investors of more than $140 million, including nearly $100 million from Lakeshore Capital Management, a fund connected to the family office of former Education Secretary Betsy DeVos.

As the verdict was read out, Holmes appeared stoic, sitting much as she had during the course of the trial, bolt upright and nearly motionless.

As court was adjourned, Holmes went to her family. Her father, Christian Holmes, kissed her on her forehead and she lightly touched her mother, Noel, and partner, Billy Evans. The four left the courthouse hand-in-hand and, taking no questions, walked steadfastly through the crowd and the cold. Holmes remains free on bond.

Holmes, 37, was the force behind the marketing of a modernized blood test, advertising a cheap finger prick that could run any commercially available blood diagnostic on a device about the size of a large PC at lower cost than conventional labs that take up entire rooms, at lower cost. But The Wall Street Journal reported in 2015 and 2016 that Theranos‘ devices were inaccurate and the company was secretly resorting to running blood tests on other company’s machines, the very ones her company was supposed to be disrupting.

She initially faced 12 fraud counts, but the ninth, referring to an individual patient, was dismissed earlier in her trial, the result of an error by prosecutors.

The jury spent seven days going over the evidence and charges. On the third day of deliberations, jurors asked the judge to listen to audio clips of a 2013 call Holmes had with investors, recorded without her knowledge. Holmes told investors the device could perform any blood test, that the company was on track to earn over a billion dollars, and implied that the devices were being used on military medevac helicopters. But none of these statements were true.

A week into deliberations, the jury sent a note that said it was deadlocked on three charges. Judge Edward J. Davila, at the prosecutor’s request, read the jury instructions known as an “Allen charge” — telling them to resume deliberations and attempt to reach a verdict on the outstanding charges.

The jury remained unable to reach a unanimous verdict, they said in another note Monday.

Federal prosecutors have said that Holmes intentionally duped investors into supporting a product she knew was faulty, particularly as Theranos began to teeter on bankruptcy.

“This is a case about fraud, about lying and cheating to get money,” Assistant U.S. Attorney Robert Leach said in opening arguments.

The government’s case included text messages between Holmes’ former business partner and ex-boyfriend, Ramesh “Sunny” Balwani, discussing Wall Street Journal reporter John Carreyrou. The couple expressed concerns over Carreyrou writing a negative article, with Balwani promising to “nail” the reporter.

Balwani, who is facing his own charges and a separate trial, did not speak at Holmes’ trial.

In her own testimony, Holmes repeatedly told prosecutors that she genuinely believed the statements she made to investors were true.

“At the time, you were not worried people would be given an inaccurate impression?” Leach asked her.

“I was not,” Holmes said.

During cross-examination, Holmes admitted that allegations raised by former Theranos employee Erika Cheung — who expressed concerns several times about quality issues with the company’s signature blood-testing devices — were true.

“I sure as hell wish we treated her differently and listened to her,” Holmes said. She then answered that she now understood that Cheung’s concerns were correct.

The defense attempted to paint Holmes in a more humanizing light as a young visionary who made mistakes, countering the prosecution’s characterization of her as shrewd and calculating.

As a freshman at Stanford University, Holmes became taken with the idea of performing blood tests on just a fingerprick of blood instead of drawing arm from a vein, which she said was inspired by her fear of needles. She filed a patent for a wearable drug delivery patch and at 19 dropped out to form a company to try to bring her ideas to life. Holmes went on to become the world’s youngest female self-made billionaire and her company was valued at over $9 billion. 

Defense attorney Kevin Downey asked Holmes to recount the early days of Theranos, as she sought advisers through the Stanford community, developed a business plan, attracted investment, and — she thought — “nailed” expectations.

He asked her whether she ever intended to mislead her investors.

“No,” Holmes said.

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