Elizabeth Holmes Accused of Fraud

| Mar 21, 2019 | Firm News |

Elizabeth Holmes, founder and CEO of Theranos, has been indicted on charges of conspiracy and wire fraud for allegedly deceiving countless investors out of millions of dollars. The Stanford University dropout is accused of manipulating investors, doctors, and patients into jumping on her bandwagon to support and test an innovative blood testing device that she created. According to the allegations against her, the device has proven to be far less effective and promising than investors were led to believe.

According to reports from various sources, Holmes has a dynamic personality that has been compared to that of Steve Jobs and Mark Zuckerberg. Her vision for a medical device that would change the face of modern medicine and her passion for success drew in an impressive list of corporate executives and financial supporters, but the company’s hostile work environment soon led to its downfall.  Compared by one former employee to a dictatorship, Holmes reportedly led a work environment that bred mistrust among executives.

Charges Facing Holmes and Theranos

Civil fraud charges were filed by the Securities and Exchange Commission last March against Holmes and Theranos for allegedly making false claims about how successful the company’s blood testing device had been in trials. Holmes also declared that the company had a contract with the Department of Defense that would take the blood testing device to a new level of success. There is no evidence that such a contract exists.

Holmes is charged with marketing the blood testing device through a partnership with the Walgreens pharmacy chain, asking doctors and patients to have blood tests conducted using the Theranos blood testing device. Wire fraud charges stem from Holmes channeling the payments through the pharmacies instead of the patients.

Though the charges against Holmes and Theranos are clear, proving that Holmes deliberately made false statements for her own gain can be difficult. To do so successfully, the jury will have to believe that Holmes intentionally marketed the product and sought investor support knowing that the claims she made about the potential success of the device were false.

Given the dynamic personality that Holmes utilized to successfully persuade many high-level executives, it may be hard to convince a jury. The burden of proof that the intention to defraud exists falls on the prosecution. The defense may have to prove that there is not enough evidence to support the prosecution’s claims for the charges to be dismissed.

Holmes faces significant penalties if found guilty by a jury, or if she pleads guilty to the charges against her. The Securities and Exchange Commission claim sources invested $700 million into Holmes’ company and product. If this money cannot be reclaimed, the penalty for conspiracy and wire fraud is 15 to 20 years in federal prison.

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