Elizabeth Holmes' Theranos fraud trial begins: Defense claims all she did was fail – and that's not a crime Attorneys representing Theranos founder Elizabeth Holmes and the US Justice Department presented their opening arguments on Wednesday in a federal court in San Jose, outlining how they intend either to clear or convict Holmes of conspiracy and fraud charges. Holmes, 37, alongside her former partner and COO Ramesh "Sunny" …
"The law does usually care whether you deliberately deceived people or were just wrong. The problem here is that no-one believes it wasn't deliberate."
This! Lots of law, but fraud in particular, depends very much on proving intent. Otherwise it might just be naivety, a mistake or incompetence, which could lead to a vastly different outcome on whether the accused is found guilty or not and if so, how severe a sentence might be.
Name anyone who received 10 years for their sedition on January 6, 2021?
You can't. 8 months is the longest so far.
"638 people have been charged in the Capitol insurrection so far. This searchable table shows them all."
https://www.insider.com/all-the-us-capitol-pro-trump-riot-arrests-charges-names-2021-1
But deliberately hiding failures to investors and lying telling your devices really work is a crime...
Otherwise even the late Madoff was just someone who failed to obtain the promised returns on investments...
"go to work every day to lie, cheat and steal"
Actually it looks this is the only real thing she and Balwani were capable of...
No no, I think you'll find she went to work on some days only to lie or cheat or steal. Doing all three all the time would be a considerable effort. Lie on a Monday, cheat on a Tuesday, steal on a Wednesday and have the rest of the week off sounds more reasonable.
"Lawyers must not lie on behalf of their clients."
That's why defence lawyers are very, very careful about what they listen to from their clients, which questions they ask when working up the defence strategy and always, always warn the client not to tell the lawyer anything incriminating. That way, the lawyer can present a defence "in good faith" because any lies they tell are only because they didn't have all the information.
Of course, that's where a good prosecutor is supposed to ask the right questions and get "the truth, the whole truth and nothing but the truth" from the witnesses and/or defendants (if the defendants can be put on "the stand")
Oh yes, prosecutors. Now there's a tribe dedicated absolutely to the relentless pursuit of truth. </sarcasm>
It's an adversarial system. Defenders are supposed to do everything within the law to help their clients, while prosecutors do everything to damn them. Neither one is supposed to give a damn about "truth".
Without going beyond a brief scout through the legislation, the maximum sentence is 5 years. In specific circumstances (usually connected with Terrorism offences) - and the burden of proof is pretty high. That said I don't think there's been a test case in the UK so I'm not sure how it's applied in practice.
with Ramesh "Sunny" Balwani in the role of Monsieur Thénardier.
Let me see in how many ways this story makes me feel good:
A lot of rich investors lost their money, because they were greedy and didn't understand science. ✅
Lying and thieving corporate executives are prosecuted. ✅
We get such a nice reminder of how the size of peanuts depends on the size of your nuts. ✅ ("Ms Holmes walked away with nothing" versus Elizabeth Holmes living on grounds of $135m Silicon Valley estate.)
Get the popcorn ready, this promises to be entertaining!
If she were a fraud, she would have offloaded some of her shares when they were worth billions. Instead, she believed her own lies to the very end and went under with the ship.
I believe she was locked in a bubble, only seeing the positive, and probably losing her temper when anyone attempted to tell her about problems, until nobody did.
That doesn't make her any less guilty, of course.
But...
Wade also tried to cast doubt upon the doctors and patients scheduled to testify about bad Theranos test results, noting that these represent 0.00025 per cent of the eight million test results performed by the company and inviting jurors to consider how that compares to typical lab error rates.
You've completed 8m tests? That's impressive, have some money! Oh, but you're actually using COTS testing machines, not your own unique Edison universal test machines. They don't work? Give me my money back..
But the money's all gone. So to me, it seems a bit of a slam-dunk for the prosecution. Holmes appears to have mislead investors about the state of their technology, and the state of the company. If claims were made publicly, or privately that can be shown to be false or misleading, that seems to be fraudulent misrepresentation.
"Holmes appears to have mislead investors about the state of their technology, and the state of the company. If claims were made publicly, or privately that can be shown to be false or misleading, that seems to be fraudulent misrepresentation."
Indeed. While I'm certainly not a lawyer, her defence's arguments so far don't seem particularly helpful. They're focusing on her scientific claims and portraying her as someone who tried to do something new but ultimately failed. But the case isn't actually about the science at all, and whether she believed in her claims or whether they were ever plausible in the first place isn't relevant. The actual case is that she knew her new technology wasn't working yet and so used existing tests instead, but lied about doing so to both customers and investors. Everything else is irrelevant. It could have been just a couple of months more work from revolutionising the medical industry, or it could have been a total fraud from the start*, either way she lied about the current state of things and that's what she's now on trial for.
* Spoiler warning - it was the second one.
"she may have believed that it could be made to work and a little fraud until it did was acceptable
"Fake it 'til you make it" is widely endorsed by venture capitalists. It's part of the modern entrepreneurial culture, and quite possibly the only way now to attract big investment.
If she had sold shares, and lost control of the company it would have become far harder to keep the cover on the fraud. Financial analysts don't understand technology, but selling shares for billions would have raised their concerns...
Fraudster can enter a situation where they are prisoners of their own fraud and see no easy way out, ot it works so good they don't want to get out - yes, she was locked in her own bubble because she also liked to be famous and revered, so she couldn't just stop it.
Like many others probably she thought she could have escaped somehow from it before it was too late.
And yes, capable fraudster don't aim so high and usually fly away when they made enough money. Unless they founded a religion - that's the only way to keep a fraud running for years and years.
If she had sold shares, and lost control of the company it would have become far harder to keep the cover on the fraud. Financial analysts don't understand technology, but selling shares for billions would have raised their concerns...
Not strictly true, but I guess depends where they're working. AFAIK a lot of analysts are sector-specific, so meant to have a good understanding of how those businesses work. Plus reasearchers to support them. But I think there's also been some changes in the big banks around how their analysts work, so they're perhaps not getting the best advice. I've also been approached a couple of times by investment banks for short-term consultancy gigs to explain some telecomms stuff. They can be quite fun conversations.
I was chatting to someone who's in the business of tracking down the money fraudsters stole, amongst other things. He was talking about how many people get away with it, despite regulators etc.
I asked how they manage to get away with it. He said 'they stop'.
For every Kallakis there are a dozen others who quit while they're ahead.
she didn't sell some shares ? And there are other ways of capitalizing as the CEO of a bleeding edge, media darling, VC darling, revolutionary, Silicon Valley tech startup.
Cashing out of that is probably impossible, short of a motivated takeover (and maybe that was hoped for after Walgreens swallowed the appetizer bait ?).
Don't forget, Theranos was NOT publicly traded stock.
I agree, I suspect that she was being manipulated by the investors who only cared about their income, not the functionality. The concept initially "looked" good to them and caused considerable bloating of their wallets so when it appeared to be faulty they kept pushing her because they were very happy with their profits from her totally dumb mistakes.
I accept that my opinion could be totally wrong but it's going to take a lot of effort and investigations to actually know what happened ... right now it's all just opinions. It's easy to look back and call actions stupid, like selling all your bitcoin when it peaked at $2,000.
Failure is not a crime indeed, that's why nobody is prosecuting Magic Leap for completely failing to deliver on the massive hype it generated.
But when you're pushing a product that is supposed to help save lives and your product is not only a dud, but you know it so well that you are asking another company to do the tests for you, you deserve to go down hard.
And pretending that she has a mental condition ? That's only a guarantee that she should be barred from ever holding a position of responsibility again.
Lying scum right up until the end.
What happened to 'innocent until proven guilty'?
I think I would rather have a judge-only trial; judgement being decided by a jury of my peers who start listening on the basis of 'You are guilty until I see evidence to the contrary' would be detrimental to my health.
"What happened to 'innocent until proven guilty'?"
It never worked the way you think it did, I.E. when we see someone obviously commit a crime, we must sing their praises until they are in jail. We are not sentencing this person. We are correctly describing what happened, which is a matter of public record.
For the same reason, a person who killed someone gets legal assumption of innocence until the jury delivers their verdict, but those in the public who know what happened may well decide to speak ill of the person in the meantime. That is why jury selection usually ignores anyone who has heard of the person being tried, because they may have opinions which could bias them against the accused.
And then there's shit like this. This is like people on this side of the Atlantic trying to claim that thousands of people storming the Capitol Building in full bodyt armor, attacking the security forces, and building a gallows outside, were just peaceful tourists. I get that her lawyers at this point are probably left with nothing but hail mary type defenses, but this is just insulting to the intelligence of the members of the jury.
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