Theranos founder Elizabeth Holmes found guilty

Elizabeth Holmes has been convicted on four charges of fraud but prosecutors can still ask for another trial on three undecided counts against her.

Elizabeth Holmes leaves the courthouse accompanied by her partner, Billy Evans. Picture: AFP.

A federal jury convicted Elizabeth Holmes, the startup founder who claimed to revolutionize blood testing, on four of 11 charges for a yearslong fraud scheme while running Theranos Inc., which ended up as one of Silicon Valley’s most notorious implosions.

The verdict caps a steep fall for the former Silicon Valley darling who once graced magazine covers with headlines such as “This CEO is Out for Blood” and emulated Apple Inc. co-founder Steve Jobs by wearing black turtlenecks.

At the 15-week trial, Ms. Holmes testified in her own defense, showing regret for missteps and saying she never intended to mislead anyone. She accused her former boyfriend and deputy at Theranos of abusing her, allegations he has denied.

Ms. Holmes was charged with nine counts of wire fraud and two counts of conspiracy to commit wire fraud under an indictment brought 3 1/2 years ago. She was found guilty on three of the nine fraud counts and one of two conspiracy counts. The jury failed to reach a verdict on 3 counts, after saying earlier Monday there were having difficulty reaching consensus on three of the charges.

Lawyers for Elizabeth Holmes make their way to the courthouse. Picture: AFP.

Prosecutors can choose to pursue a new trial on the undecided counts. The timing of any new action by the US against Ms. Holmes would likely be affected by an upcoming trial of Mr. Balwani, who faces similar charges of defrauding investors and patients about the startup’s blood-testing capabilities, which he denies.

Prosecutors had to prove that she intended to defraud investors and patients, seeking a financial windfall. Ms. Holmes countered with testimony saying she made innocent mistakes and believed that Theranos’s blood-testing technology was showing signs of success.

The 37-year-old Ms. Holmes could face up to 20 years in prison for each count for which she was found guilty, but former prosecutors said such a stiff sentence is rare in white-collar fraud cases. That Ms. Holmes was acquitted of any charges likely lessens the overall penalty she will face, former prosecutors said. Sentencing will follow.

The US government, in a rare fraud prosecution of a technology executive, essentially put on trial Silicon Valley’s fake-it-until-you-make-it culture. In Theranos’s case, prosecutors said Ms. Holmes’s hype and hubris went far beyond norms, exposing patients and investors to harm by peddling faulty technology. It was one of the most high-profile white-collar criminal trials in years.

“She chose to be dishonest with her investors and with patients,” Assistant U.S. Attorney Jeff Schenk said of Ms. Holmes in his closing arguments to the jury. “That choice was not only callous, it was criminal.” Theranos rose nearly two decades ago out of an idea Ms. Holmes dreamed up as a 19-year-old student at Stanford University. She sought to upend the blood-testing business by developing technology that tested for a range of health conditions with just a few drops of blood from a finger prick, eliminating the need for large needles and vials of blood.

Theranos employed hundreds of scientists, engineers and marketers, and Ms. Holmes claimed it could cheaply and quickly run more than 200 health tests using proprietary technology. In a partnership, Theranos offered the tests at Walgreens pharmacies.

The trial showed a different reality. The company managed to use its proprietary finger-prick blood-testing device for just 12 types of patient tests. Those results were unreliable. At its lab, Theranos secretly ran most of its blood tests on commercial devices from other companies, including some that Theranos altered to work with tiny blood samples.

In her testimony, Ms. Holmes said: “There are many things that I wish I did differently.” She insisted, however, that she never set out to defraud anyone: “I believed in the company, and I wanted to put everything that I had into it,” Ms. Holmes testified.

Dow Jones