Who followed the Elizabeth Holmes trial?

by philg

Who followed the Elizabeth Holmes trial closely? “The Elizabeth Holmes Verdict: Theranos Founder Is Guilty on Four of 11 Charges in Fraud Trial” (WSJ, which is the newspaper primarily responsible for bringing down the company):

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.

She was found guilty on three of the nine fraud counts and one of two conspiracy counts. She was acquitted on four counts related to defrauding patients—one charge of conspiracy to commit wire fraud and three charges of wire fraud.

The verdict doesn’t make sense to me on its face. If the patients weren’t defrauded with false test results how could the investors have been defrauded? But I didn’t follow the trial, so probably the jury knows a lot that I don’t.

If it were up to me, I would imprison the investors for stupidity in thinking that a young American college dropout knew more about blood testing than the file cabinets full of Ph.D. chemists at Philips, Siemens, and F. Hoffmann-La Roche. I would have been reluctant to find Holmes guilty of anything or sentence this new mom to any prison time.

The man whom Holmes has accused of raping her daily, Ramesh Balwani, goes to trial next. Let’s see if readers, via the comments, can predict the ratio of prison sentence between these two defendants. I am going to guess that the immigrant/accused rapist receives a sentence that is 2X as long as whatever Holmes suffers. This is partly based on “Estimating Gender Disparities in Federal Criminal Cases” (University of Michigan Law and Economics Research Paper, 2018), which says, all else being equal, a person whom the jury identifies as a “man” will be sentenced to 1.6X the prison time that a person whom the jury identifies as a “woman” receives. I moved the needle from 1.6X to 2X because Mr. Balwani is an immigrant and I think both the jury and the judge will be angry that someone emigrated to the U.S. to become a criminal.

(If Mr. Balwani enters into a plea bargain, the above prediction should be revised to 1X.)

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20 thoughts on “Who followed the Elizabeth Holmes trial?”

  1. Figured she’d get away with it, but winning 7 out of 11 ain’t bad. Wonder if this means the next startup wave will be extremely conservative power meter startups for fear of a fraud lawsuit if anyone so much as thinks about another robotic dog walker. A $945 million raise at a $9 billion valuation is so small by today’s standards. 7 years a quantitative easing later, a unicorn starts at $1 trillion & a seed round is $70 billion.

  2. “The verdict doesn’t make sense to me on its face. If the patients weren’t defrauded with false test results how could the investors have been defrauded?”

    I, too, can reduce a 14-week trial to a half-assed opinion about the verdict!

    You’re incorrectly mashing together the different counts in the indictments, which involved different statements of fact to different persons. Criminal fraud requires proving that the speaker had scienter (intent to defraud) a specific listener through a specific false statement(s) of fact. The jury could’ve found the prosecution proved beyond a reasonable doubt that some specific statements were fraudulent, while others were not so proven. The jury also could’ve found that Holmes didn’t even know or intend to deceive any specific patient with a particular statement, while she certainly knew and approved false and misleading presentations to specific investors.

    • I, too, can selectively quote a paragraph! You omitted:

      “But I didn’t follow the trial, so probably the jury knows a lot that I don’t.”

    • DoaNB: As noted in the original post, I didn’t want to dig in and follow 14 weeks of testimony, so it is helpful to get explanations like yours.

  3. I followed the trial pretty closely.

    The conviction for fraud against investors was over claims like “our devices are being used in Afghanistan on military evac helicopters,” which she made to investors but was never true; and “our devices can run over a hundred tests with a drop of blood,” also claimed, also never true; and “pharmaceutical companies have validated our technology,” a false claim that was further bolstered by forged documents that Holmes admitted to creating.

    For fraud against patients, here the claim of the state was basically that they were knowingly selling a defective product. Note that all of the claims above about fraud against investors could stand even if the tests sold to the patients (which amounted to running a diluted sample through a Siemens machine) were sufficiently accurate. Here the state did a very poor job of proving that the test results were broadly inaccurate. They brought in 3 or 4 patients who received clearly incorrect results, but the defense argued that it was just anecdotal evidence, and that out of millions of tests you can expect a few errors. And here I have to agree with the defense, that the state did not offer any evidence that showed that the results were wrong on a large scale, or at a rate higher than typical. The reason why they didn’t is a longer story that has to do with them losing the whole database of Theranos test results due to their incompetence.

    As for “If it were up to me, I would imprison the investors for stupidity” – one of the major themes of the state’s closing argument was that lack of due diligence on the part of the investor is not a legally valid defense against fraud charges. But of course you are correct that a little less of the Silicon Valley exuberance and this never would have happened.

    • RS: Thanks. I wonder if the prosecution should have taken these counts out then. Though maybe they needed them in order to justify putting patients on the witness stand to talk about how much they’d suffered from getting incorrect test results. (If false results lead to suffering, Americans have suffered quite a bit in the past two years of 15 days to flatten the curve testing! Most of the folks I know who got COVID-19 had at least one false negative test (consistent with the Atlantic confession story referenced in https://philip.greenspun.com/blog/2021/11/22/perfect-illustration-of-risk-compensation-rendering-covid-19-vaccines-ineffective/ ). See also https://babylonbee.com/news/leftist-who-keeps-getting-covid-tests-says-he-can-quit-anytime )

      Maybe the judge can sentence Holmes to 20 years of traveling the country lecturing investors on how to do due diligence! She would have to wear a “Stanford dropouts are not better at chemistry than German PhDs in chemistry” turtleneck.

      Separately, I didn’t realize that Elizabeth Holmes has an MIT connection. Her husband is a young MIT graduate. https://www.the-sun.com/news/3581529/what-is-elizabeth-holmes-net-worth/ (British tabloids are our only remaining source of reliable information?)

    • The prosecution did end up taking one of the patient counts out. There was a fraud charge for a patient B.B. who had gotten a bad platelet count from a CBC test done by Theranos. They were forced to drop the charge because they had provided the court a list of 25 particular tests that they were claiming were inaccurate, and forgot to include the CBC. The U.S. Attorney said that the government “was confused” and mixed the test up with a different one. So the judge wouldn’t let B.B. testify about his test, and so they had to drop the charge. Given the incompetence shown by the government, it’s surprising they got any conviction, especially against what seems to have been a pretty high-powered defense.

      I recently had to get a COVID test for international travel. My top priority was avoiding false positives. I didn’t care too much about false negatives, maybe because I’m a horrible person who doesn’t care about those around me, but really because if I felt sick I wouldn’t go, and if I didn’t feel sick, then I wouldn’t trust a test to tell me if I might be infectious. I also have an attitude that if a disease spreads easily from asymptomatic people, it can’t reasonably be controlled, so you’re going to get it eventually, if not from me then from someone else. In any case, I did some research to figure out if there was any particular test with a lower false positive rate than others, so I could minimize the chance of my trip being unnecessarily disrupted. I learned that the false positive rates are about 0.05% for all tests, but what really surprised me was the false negative rate. The rapid antigen tests have (according to Science) a whopping 31.6% false negative rate:

      https://www.ncbi.nlm.nih.gov/pmc/articles/PMC8397079/

      Theranos was just a little ahead of its time – if it had survived long enough to get into the COVID testing game, no one would ever have noticed any issues, it would have been par for the course. “Daily COVID tests from a drop of saliva.” “No more painful nose swabs.”

      Next time I hear someone say they got a negative COVID test, I’m looking forward to responding “Great, there’s only a one in three chance of that if you actually had COVID. I like those odds!”

      In asymptomatic patients, the results are worse: a false negative rate of 45.4% means it’s basically a coin toss for whether or not a COVID infection will test positive.

      Of course this is all using a PCR test as a gold standard and so likely has no bearing on infectivity, but hey, that’s what the CDC says to do, so it’s unimpeachable.

    • Related to that: it’s a bit surprising that no journalists have pointed out the inherent racism in having testing be the foundation of the strategy to stop COVID. The rapid antigen tests are themselves racist:

      “the RAT kits had a lower sensitivity when used in the African (56.4%) and Asian (65.0%) populations compared with the European (70.0%) and American populations (74.1%).”

      This suggests that Black communities will have more false negatives and so will suffer more from COVID in a society that uses tests as a primary means of preventing the spread of COVID (which seems to be what the Biden administration has settled into).

      Despite the very appealing social justice angle, I suspect that no one dares to write that story because to do so would be to admit that the tests are frequently wrong, which is wrongthink. It seems that Science trumps social justice.

    • According to this study, though, the false positive ration is about 6.9% rather than 0.05%.

    • @Anonymous my particular choice here was whether to get an antigen or PCR test, and which antigen test to get, and they all have similar false positive rates of 0.05% relative to a PCR test baseline. So from a false positive perspective, there isn’t much difference to what test you use.

      As you note, however, the PCR test itself has some pretty bad performance characteristics. That article describes some, and doesn’t even dive into the issues around Ct and whether detecting a fragment of COVID genetic material is even a useful thing to do from a diagnostic point of view. Even the CDC had been forced to admit some of these issues, with just last week came the revelation that the PCR test can stay positive for up to 12 weeks after an infection has finished. They revealed that as part of their justification for ending the requirement to get a negative PCR test in order to end quarantine. But what I haven’t seen anyone talk about is the implication that this has for reported COVID deaths. As we all know here, COVID deaths are anyone that has a positive COVID test when they enter the hospital and subsequently dies, for whatever reason. The CDC has now admitted that this means anyone who had COVID in the _three months_ prior to dying might be counted as a COVID death. Whoops!

  5. BTW: MedPage TODAY, that wacky, identity-politics-as-medicine journal of #Science and #Medicine, apparently didn’t watch the trial either, at least judging from the length of their announcement today. One sentence! I guess they didn’t want to bum anyone out that Liz was convicted of something.

    “Former Theranos CEO Elizabeth Holmes was convicted on four counts of fraud and conspiracy, and found not guilty of four other felony charges — she could be imprisoned for up to 20 years for each count. (AP)”

    https://www.medpagetoday.com/meetingcoverage/sabcsvideopearlsmetastaticbreastca/96313

  6. Jury verdicts often have logical inconsistencies since they are arrived at through negotiations. Just FYI inconsistencies in jury verdicts are not grounds to overturn the verdict even if they are of the sort it is logically impossible to be guilty of count 2 and not guilty of count 1. Her defense was bizarre — that she made lots of misrepresentations to induce investors to invest because she had allegedly been raped some time in the past and that her boy friend was controlling or abusive or something. I thought it was interesting that she was represented by perhaps the best white collar criminal defense firm in the country and that she took the witness stand, always a risky bet, and that the jury did not believe her. Her testimony was not coherent — which suggests that she demanded to testify against her lawyers’ better judgment. My expectation is she will be hammered on sentencing since I thought she came across as a sociopath with no ability to differentiate right from wrong. Precisely the kind of person who should be locked away.

    • Jack: Unlike with a violent criminal who is statistically likely to continue committing violent crimes, what is the purpose of locking Elizabeth Holmes away? Other than perhaps the federal government (see https://en.wikipedia.org/wiki/Solyndra ) there are no investors reckless enough to give her money again, right?

    • @Jack that’s an interesting question, whether her lawyers wanted her to testify or she pushed it on them. I thought it was a bold move because while she is apparently quite captivating to VCs and famous rich men, even before it was all revealed to be a lie I found her to be pretty wacko and got negative vibes from her. At the time I just assumed it means I’m secretly a misogynist. But I think that she thinks she’s quite convincing, but the way she comes off to a jury of her peers is, I suspect, as a little crazy. Especially when they’ve been hearing for the last two weeks that you’re not actually a young genius, but that your big idea never really worked and spectacularly failed. So I can definitely see her pushing to testify against the recommendation of her attorneys. At the same time, I don’t think the defense was in a very strong position prior to her testimony, so they did need to do something. Absent her testimony, I wonder if there is something else they could have done to better cast doubt on the fraud charges.

  7. Investors are the big mystery here. College drop aside, the wild unblinking eyes, deep voice and black turtlenecks should have made investors ask more questions. Confidence >> PhD Chemistry.

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