Count one of conspiring to commit wire fraud against investors in Theranos between 2010 and 2015: Guilty.
Count two of conspiring to commit wire fraud against patients who paid for Theranos’s blood testing services between 2013 and 2016: Not guilty.
Count three of wire fraud in connection with a wire transfer of $99,990 on or about Dec. 30, 2013: No verdict.
Count four of wire fraud in connection with a wire transfer of $5,349,900 on or about Dec. 31, 2013: No verdict.
Count five of wire fraud in connection with a wire transfer of $4,875,000 on or about Dec. 31, 2013: No verdict.
Count six of wire fraud in connection with a wire transfer of $38,336,632 on or about Feb. 6, 2014: Guilty.
Count seven of wire fraud in connection with a wire transfer of $99,999,984 on or about Oct. 31, 2014:Guilty.
Count eight of wire fraud in connection with a wire transfer of $5,999,997 on or about Oct. 31, 2014: Guilty.
Count nine was dropped.
Count 10 of wire fraud in connection with a patient’s laboratory blood test results on or about May 11, 2015: Not guilty.
Count 11 of wire fraud in connection with a patient’s laboratory blood test results on or about May 16, 2015: Not guilty.
Count 12 of wire fraud in connection with a wire transfer of $1,126,661 on or about Aug. 3, 2015: Not guilty.
That's the maximum possible the judge could decide to give. It bears little relationship to what the federal sentencing guidelines will actually suggest or the judge will deliver.
Racial and gender disparities are real, but against the 'rich' part in this case...
In any case, she'll definitely do time. You're forgetting the victims in this case are not only also rich, but probably vastly better connected since they have yet to steal from their friends.
Saying she'll get off because she's white, a woman, and rich is like saying your car stalled because your tires were low, you had groceries in the back seat, and your engine hadn't had its oil changed in 18 years.
That make more sense?
Edit: I'm saying being white and being a woman helps, but being rich helps such an astronomically huge amount more emphasizing anything else feels less like informing and more like baiting.
Technically 20 years per count, but realistically not too many. White collar crimes are anyways not punished very strictly, and she's a new mother on top of that. She'll negotiate a short term at some country club prison.
I'm not an expert in US sentencing guidelines, but a quick crack at the sentencing guidelines calculator [1] suggests ~97-121 months, or about 8-10 years.
[If you're not familiar with sentencing, the basic procedure is this:
1. Compute an 'offense level' for each count. For counts that are strongly related (which all of these likely are), combine by taking the maximum offense level. If they're not related, it's more complicated (not simply adding them up).
2. Compute a 'criminal history level'. For Holmes, that's basically "no criminal history."
3. Adjust for things like the convicted person's remorse or cooperation with investigators.
4. Look up a table that maps offense and criminal history to an actual sentencing range.
5. Adjust that (primarily, but not exclusively, in the previously output range) based on the judge's feelings.]
> And the judge will probably declare a mistrial as to the 3 counts they couldn’t reach consensus on.
> The 4 guilty counts are all investor counts. The investor conspiracy count and the counts relating to the hedge fund PFM, the ex Cravath attorney Mosley and the DeVos family.
EDIT: Mistrial only on those 3 counts which got no verdict, not the full trial. Also this is only if the Feds want to do it or now which will also depend upon how many years Holmes gets as well as if she just decides to plead guilty on those 3 charges.
It's not about sending a message, it's that the sentence will almost certainly be carried out concurrently. That means even if she is found guilty of the remaining counts it won't result in any additional time served.
She wasn't being tried on the technology. The technology had failed, the issue is she knew it didn't work and told people it did to get their money. If the technology worked then even if the business failed with huge losses, there was no fraud.
The presumption of innocence in this case, is that she did not mislead Investors.
My understanding is that it worked in the sense that the results were accurate. But the results were gotten by means other than what the investors/customers thought. So the end-user patients really had no claim since they got correct results. But the companies and investors got scammed bigtime.
I haven't been following the trial closely, but I spent a bit of time skimming through some of the case documents a while back. The government's allegations included a bunch of supporting statements from doctors, who claimed that Theranos frequently gave their patients wildly inaccurate results. It sounds like they weren't able to convince the jury of Holmes' guilt on those charges.
(IIRC, Holmes' lawyers also made the argument that it was not legally possible for her to have committed wire fraud against the patients, because any money that Theranos received would have come from their insurance companies.)
Part of the difficulty is that the empirical data that would have proven how well (or poorly) the technology worked was allegedly stored in a proprietary, bespoke database. When Theranos was ordered to turn over the data to the feds for discovery, they delivered an encrypted copy, and then claimed that the encryption key was lost and the original disk arrays were unrecoverable. Both sides of the case then blamed each other for destroying the last remaining copy of the data, which made for some fun reading.
This is wrong. I read Bad Blood by John Carreyrou a few years ago and it mentions there were a lot of false results due to mishandling the blood samples (watering them down to run enough tests etc). I recommend the book if you're interested in the case.
> there were a lot of false results due to mishandling the blood samples
This doesn't hold with what was found in the trial. She was found not guilty on those counts. Just because a dude wrote it down in a book doesn't mean it's true. And the legal process found it to be, in fact, not true.
The jury didn't find that the results given to the patients were accurate. They found that Holmes was not personally, criminally culpable for wire fraud in those cases. Wire fraud is a crime that has very specific elements, well beyond the question of how accurate the test results were.
The vast majority of results were not only not accurate, couldn't possibly have been accurate given the methods they were using to conduct the tests. This is well documented. I suggest John Carreyrou's book, _Bad Blood_, which gets into great detail on this.
Once again, just because some dude wrote it down in a book doesn't mean it's a fact. The jury just acquitted her of those charges. Maybe they didn't the read dude's book?
The jury made no judgements as to the efficacy of the tests. In fact, both the prosecution and the defense stipulated that the Theranos project was a failure. The defense even stated that "Failure is not fraud." The question before the jury was whether or not she had defrauded investors.
They decided that she had.
FWIW, every single firm that had medical expertise declined to invest in Theranos. They could see it had extremely minimal chance of success.
Longer answer: Theranos never really got their own custom machines working. Until those machines were working, they did use other machines and processes which did work. However, their entire shtick was trying to do a lot of tests on less blood than usual, so... they simply diluted the blood samples to get enough volume for those machines to function in the first place, and correspondingly, the results were absolute garbage. Effectively, they were using working machines incorrectly to cover up for their non-working machines.
I think it goes further than that, the point is that scientifically the tests could never have worked.
Carreyrou originally got tipped off by pathologists saying that this was impossible, then they got sued into oblivion (see thepathologyblawg).
(IANAP but this is my understanding)
Some real tests rely on having a huge blood sample (e.g. 100ml), being filtered (e.g. by centrifuge) and then a test of a known sensitivity applied.
Theranos claimed that their tests were more sensitive so could work with smaller samples. Statistically this doesn't work because with a finger-prick test (e.g. 1ml) the sample is 100x less likely to contain the target cells - cells are integers.
Additionally finger-prick tests contain only capillary blood - they're filtered by the finger blood vessels only allowing tiny cells - some of the Theranos tests claimed they could detect markers that only exist in arterial and venous blood.
My understanding is that the tests that Theranos actually ran on patients' blood was actually based on drawing blood from the veins, not the finger-prick test. While Theranos did want to do the finger-prick tests--and it wouldn't have worked for the reasons you mentioned--that they didn't get them working meant they couldn't get certification for actually running those tests. So they ran the tests they did get certification for (which was using venous blood draws), for the most part, but even then, they were running tests in ways that violated the procedures they were supposed to be using.
(I do realize that keeping track of how precisely Theranos was lying can be frustrating, since they were doing multiple levels of lying here.)
Count six of wire fraud in connection with a wire transfer of $38,336,632 on or about Feb. 6, 2014: Guilty.
Count seven of wire fraud in connection with a wire transfer of $99,999,984 on or about Oct. 31, 2014:Guilty.
Count eight of wire fraud in connection with a wire transfer of $5,999,997 on or about Oct. 31, 2014: Guilty.
The $38m one likely has to do with share count or funds.
Often shares will be split %-wise between two or more funds. I.e. 22.5% goes to XYZ Fund 1, 85.5% goes to XYZ Fund 2. These % can be super specific and make it so wires go down to the cent.
Don't know all of the details behind each count, but glad to see this result, which seems good and fair. Basically, looks like the majority of "committing fraud against investors" charges were guilty, but the "committing fraud against patients", which always seemed like more of a stretch to me, were not guilty.
I wonder if that was because they used other testing methods to check patient samples, so they patient got a result regardless of the means by which it was obtained.
NAL, but I believe the prosecution would need to prove damages.
If, like you said, the patients still got their results, the results were correct, and it was only how those results were obtained that lead to the patient fraud charges, then I think you maybe correct.
Again, I'm not a lawyer, so people should feel free to correct me if what I said was wrong.
I might be wrong but my understanding is that the patients' blood was tested on legit equipment so they did get valid results. It just wasn't using the Theranos technology. So investors (and Wallgreens) were defrauded because they were mislead but the patient experience was valid (since the results were correct and from proper equipment).
Not exactly sure what you are referring to, but this seems consistent with my article.
> To use traditional machines, Theranos had to dilute some of the smaller samples it collected. It appears that Theranos carried out another 60 tests using this method in December 2014.
> Some of the potassium results at Theranos were so high that patients would have to be dead for the results to be correct, according to one former employee. This is because, lab experts told The Journal, "finger-pricked blood samples can be less pure than those drawn from a vein because finger-pricked blood often mixes with fluids from tissue and cells that can interfere with tests."
Holmes clearly lied to investors, and even if she may have "believed" in the long term prospects of her company, she also clearly intentionally lied to investors to get their money. The investors were also obviously harmed (they lost their money). Also, the fact that VCs expect a lot of their companies to fail is totally irrelevant. VCs (and more importantly, the law) also expect founders to tell the truth on simple statements of fact, e.g. "We recieved this much revenue" or "This machine can perform X, Y, Z tests now". Again, Holmes didn't just exaggerate or say "This machine can perform X, Y, Z tests in the future". She flat out lied about the current capabilities of her company.
With patients, most of the tests were done on standard equipment. I don't believe patients were ever told "we will test your blood on Edison", and more importantly, they probably wouldn't have cared that much - they just wanted their test results. So with the tests done on standard equipment, hard to argue there was much harm done there.
Now, some tests were done on Edison, and I know Walgreens invalidated a whole bunch of Theranos tests. But even then, it's harder to say Holmes intended to deceive in that case (a prerequisite for the fraud charge) - presumably they chose to run them on Edison and not the other equipment because they thought Edison could handle those tests. The fact that the lab was sloppy, the fact that Edison had issues, that in my mind wouldn't be enough to assert wire fraud on the part of Holmes. All in all it's just kind of hard to say that patients were really defrauded at all. If Theranos had instead just completely made up some of their test results, and Holmes directed that behavior, then yes, that would have been fraud against patients, but that's not what happened.
I feel the exact opposite. The investors that actually did their due diligence ran away from Theranos. I feel no sympathy for the investors that bought into it. I do however feel tremendous sympathy for the patients that received erroneous test results.
Sympathy has nothing to do with it. The fact that the defrauded investors didn't do more due diligence also has nothing to do with it. The question when it comes to fraud is whether Holmes intentionally deceived the defrauded party, and was that defrauded party harmed (again, I'm not a lawyer, just my understanding). With the investors that was clearly an unambiguous yes. With patients it's much more of a gray area on both the "intentionally" point and the "were they actually harmed" point.
It's fraud case, so it exists entirely because someone was separated from their money illegally. I imagine in part this case was brought to protect some of that money through insurance, which may pay out if the fraud is proven.
I think it's about wire fraud because the prosecution was able to prove she had motive to commit fraud. Whereas with the patients, it seems, the jury believed she did not intend to cause fraud upon the patients.
> Very little is known of Mr. Balwani, including why he is called “Sunny.”
This might be because Saturday in Hindi and other Indian languages is “sunny-var”, and the day of the week you are born on is a common nickname, in conjunction with “sunny” being an easy to pronounce and common English word.
And you d expect they d ask a random Indian in the street just it case, as you seem to say, this would be so trivial people dont feel the need to explain it.
I have no idea if it is true in this specific case, just from what I know of Indian acquaintances who also go by Sunny. Very well could be he picked his own Englishized nickname to be Sunny because he was born on a Sunday, or any other reason.
I am Indian and I've never heard the "day of the week as nickname" thing. Nicknames are generally shortened first names or (in hindu cases) based on some astrological calculations that are too detailed to explain here.
The one thing I remember distinctly about Balwani (although I can't remember where from) was him boasting about the 100k LOC he wrote while at Microsoft. Like it was supposed to be a badge of honour or indicator of intellectual prowess.
This is absolutely incorrect. Saturday is called "Shani"-var (pronounced shunny) after the name for the Hindu god of justice [1]. Hindus also map his presence to the planet Saturn. Either way, no relation to the name Sunny at all. Source: several Indian friends of ages 18-50.
Hey, maybe it factored into the decision to name them, although it's unlikely.
From what I understand, the reasons for picking nicknames are quite random. As another commenter mentioned, people named Sunil or Sanjeev go by Sunny sometimes, although other times it is just picked out of the blue, like with Bollywood actor Sunny Deol, whose real name is Ajay. His brother Vijay uses the screen name Bobby, by the way. Random.
More commonly Shani is the harbinger of bad luck & retribution, which is why you’ll rarely see any Indian origin person named Shani. In a Hindu mythology Shani is the elder brother of Yama, the lord of death & justice.
Sometime people named Sunil, such as the cricketer Sunil Gavaskar, use Sunny as a nickname.
NO formal sentencing by Judge Davila yet, including the length of imprisonment and fines (technically the judge can overturn a jury-declared guilt, however it's very unlikely here).
("U.S. District Court Judge Edward Davila will sentence Holmes at a later date.", according to CNBC.)
> On Monday, U.S. Department of Justice attorneys responded. “Thousands of patients received unreliable blood tests, depriving them of money or property, placing their health at risk and, in many cases, causing actual harm,” prosecutors alleged in a filing in U.S. district court in San Jose.
Considering the vast weight of the harms she caused, in a "fair" retributive justice system, she would get far worse the sentences routinely doled out to typical criminals.
But the US "justice system" is hardly "fair".
Personally, I don't really believe in retributive justice. The light sentences afforded to privileged criminals bother me, but what bothers me more are the draconian sentences received by those of less privilege.
a single charge can be 20 years. likely the charges will run concurrently, so probably less than 10 years if I had to guess, which is the cutoff for a minimum security prison.
A $100 million wire transfer. Is this literally how people invest in start-ups, just wiring huge sums of money to someone they do not know , on a promise/hope.
There are lawyers and contracts involved. There are people who connect the money and the startup,these guys have relationships with the money people so there is trust at that level, but lawyers for the rest of it.
The wire transfer is just how the money exchanges hands. There would be a contract of some sort defining why that money is changing hands, and with what strings attached.
This is not some random Western Union fly-by-night process. These are serious bank-to-bank transfers with plenty of documentation about who's who on both ends. That documentation is required not only by bank policy but by law (e.g. IRS and anti-terrorism laws). The fact that the wire transfers are highlighted so much in the charges is that they are interstate transactions, which makes them federal crimes rather than state crimes. Which gives the Feds an excuse to get involved.
Refer to Wickard v Filburn. Whether a transaction leaves the state doesn't mean dick to interstate commerce clause. The interstate commerce is interpreted to mean basically any possession/production/consumption of goods regardless if they leave the state or even enter commerce. Supreme court decided even growing crops for use on animals on your own land is interstate commerce.
This is the reason why you can catch a federal charge for growing your own pot or making your own machine gun, despite it never leaving your property nor any desire or act to enter commerce/trade. Even merely _where_ you store your goods for personal non-commercial use in your own state is considered interstate commerce, a la Gun-Free School Zone Act.
Fair enough. But United States v Lopez weakened the Gun-Free School Zone Act a bit to require prosecutors to prove a link between the gun in question and interstate commerce.
In theory it weakened it but in practice it did not. Merely creating a good yourself in your own state for your own personal non-commercial use is considered interstate commerce. See Supreme Court refusing to hear Kettler's conviction for buying a suppressor made in the same state (the NFA regulating suppressors is constitutional through the interstate commerce clause, and gun parts made completely in one state for consumption in that state are interstate commerce), and the many other convictions for home made guns. All firearms have interstate commerce legally even if there is no link from any practical/physical viewpoint. You could pull iron out of the ground underneath your house, refine and form it yourself and create your own machine shop purely from raw material in your state and then make a gun, completely bypassing any trade of a single molecule from another state and it would be interstate commerce. The requirement for a link is a meaningless gesture to ensure the writing of it is constitutionally accurate.
It looks like Balwani's trial is scheduled for next year - is there any reason why they would have the two trials so far apart? Is this common in cases such as these?
One reason is that if this trial ended in not guilty on all counts they would be unlikely to prosecute a successful case against Balwani. they have a stronger hand now and Balwani may choose a plea deal before trial now, which the prosecution may accept due to today's result.
They were initially meant to be tried together, but Holmes' legal team requested a separate trial because part of their strategy was to portray her as abused and controlled by Balwani and shift the blame on him. His trial is to start a few weeks from now.
So she was found guilty on 4 charges. Not guilty on 4 charges. And no verdict on the remaining 3 charges. So does she have to get another trial on the remaining 3?
This will sound weird but I am a collector of swag from large companies that have collapsed due to anything from mismanagement to outright fraud. While we're a rare breed there are others like me out there. Still, even with this oddly specific marketplace being small, let me tell you, the Theranos swag market is hot right now (check eBay if you're curious).
Wish I had gone big on this one earlier, because I have a feeling this verdict is going to spice things up in the short term.
All that to be said, if you've got any authentic Theranos gear hiding in storage please do let me know, I'm a motivated buyer.
For those curious as one example: Nothing raises a few eyebrows more than a note written on Lehman Brothers letterhead with a Purdue Pharma OxyContin pen with the dosage pullout.
To be completely honest, I'm more of a buyer than a seller. I have a few items that are "worth" (in a loose sense) in the hundreds and thousands, but most are nothing more than a rare conversation piece I have on my desk.
This thread is the most interested anyone has ever been in this stuff, I'll have to consider some sort of catalog as the collection grows, not a bad idea.
Did you get the MSCHF fucked company toys? The tiny Theranos machine is adorable.
Like you, I collect fucked/defunct company merch, tho my collection isn’t just fraud related, I’ve got Quibi merch — most of it is. I’ve got MoviePass, Fyre Festival legit merch with tags, Ozy Media was a recent one, Enron business cards, Arthur Andersen tote bags, Worldcom mugs, etc. I’ve even got some old Internet Explorer merch, because it’s kitsch!
I don't remember where I first heard this, but it's good advice: don't collect as an investment, collect because you really enjoy the objects. I collect rare books, but never because I think they'll go up in value (although they probably will). I just like having them around. Socially, infamous corpo-swag is really even better - what a conversation starter! But I personally wouldn't want that sort of stuff in my shared spaces. Interesting or not, its still just corpo-swag.
It took me a while to realize I was collecting books. Before, the way I thought of it was "I would never walk past an out-of-print book about computing history! I might never come across it again!" But now I am a bit more focused on the collection aspect, for example, there are now specific titles and authors that I seek out.
I have a good collection of old science books. One of my favorites is called "The Perfect Woman", publish in 1896, and it is a manual for women. It's precisely as horrifying and unintentionally hilarious as you would expect. But mostly I collect early editions of my favorite stories, or occasionally limited editions like from Subterranean Press. And no, I have not seen The Booksellers. I got into this because as a kid I'd buy a lot of books from our neighborhood used book dealer, mostly cheap science fiction paperbacks. I've tried ebooks a couple of times, and I just don't like them. I wish I did because it's highly convenient. But I just really prefer paper. For one thing you can give away your book when you're finished with it, or loan it to a friend, neither of which you can do with an ebook.
I've seen a lot of Pawn Stars in the past six months. They never say this, but you can put it together. Most things that people collect trade in low volumes, so pricing is hard, and the bid/ask spread kills you. If you decide to sell, you'll either get 70% of the value if you sell it fast, or maybe 100% if you're ready to wait two years. If you want to liquidate everything, it might depress the market. There's also a discount when you have it as a collection because someone could part it out, but that's even more time. That, and the drive to collect is building the collection, so there's less utility in getting an instant collection.
While I totally agree about not collecting as an investment, "because you really enjoy the objects as a person who likes this stuff" is probably not actually a terrible metric for future desirability of an item in a niche area of collecting. Other fans/collectors likely feel the same. Of course, it doesn't tell you if that niche will die out and no one will want anything, although I suspect rare books are less at risk of that.
As a collector of memorabilia for a band that's been around a while: The items I was drawn to, either because I just loved the look or because they were from a show/tour/album I particularly found special, have often turned out to be the ones that have appreciated much more in value than the average thing of that level of rarity for the band.
One of my prized possessions is a Kozmo-branded CD opener, which I got by ordering a single CD from Kozmo, with free one-hour delivery. Thanks, venture capital!
blinks
Do you mean to say that Beenz wasn't a fever dream I enjoyed? Next you'll be telling me that Swatch's Beats was a real, actual attempt at redefining time, and wasn't just something I overheard being invented by a bunch of Jolly People at the pub one night.
The crazy thing is, Beats is a reasonable idea. The whole hype surrounding it was stupid, but a fully-remote-across-seventeen-timezones team would really benefit from a single, well-defined time standard. No more "Can I call you at 8am your time?" "Sorry do you mean my time at home, or my time in Costa Rica (came here for the holidays)"
Just out of curiosity, how does one prove provenance?
I’d think the only way is to be the original owner (ie proof of employment at the company), but even then, given such a hot marketplace it would be super easy to just purchase and resell knockoffs.
But with art there is only one work produced by an artist, or if a series, probably some way to properly id it based on a number of factors.
With say a sweatshirt produced by a third party based on some digital stencil art, do you know for sure the one you're receiving was printed by the company and given to an employee/customer? Literally hundreds, possibly thousands would be in circulation. How would you be able to distinguish that from say something a former employee w/ access to the original art data having it reprinted?
I try my best to only procure swag that was actually distributed by the company at time of operation. As an example, you can buy "joke" Enron t-shirts, which I wouldn't be interested in, but some authentic team building event-specific shirt distributed to 50ish people? Oh baby, I'm all ears.
I think that's part of the fun, hunting for the original stuff.
Not to put words in OP’s mouth, but I think they were using “cancel” descriptively, not pejoratively. I don’t think there was a suggestion he didn’t deserve to be cancelled, just that he was.
It's my fault for not being more clear with my language.
But I actually meant "literally" cancelled. The Lego set was planned to come out with an actual REBOOT of the Cosby Show, which was cancelled in the traditional meaning of the word, like the TV did not go to air.
> Not to put words in OP’s mouth, but I think they were using “cancel” descriptively, not pejoratively.
If that was the intent, it was a pretty big mistake to use “before he got cancelled” instead of “before the show got cancelled”. The former construct in modern usage is pretty exclusively used for pejorative references to actions attributed to “cancel culture”.
“Canceling” means removal of support and denouncement of a public figure, justified or not. In Bill Cosby’s case, it was absolutely justified, as he himself admitted to his wrongdoings. What issue do you have with that term being used to describe what happened?
I can only speak for myself but I can't say I've ever seen anyone talk about someone having been "canceled" unless they objected to the person losing their stature or were making a joke.
Have you missed the entire #MeToo movement? Because people were cheering themselves on for (justifiably) canceling Harvey Weinstein using that exact same word to refer to the actions taken against him.
I'm sure it was unintentional, but your comment here is where the thread went haywire. Maybe it would be helpful to explain why.
The discussion about disgraced-public-figure memorabilia was certainly offtopic, but it was offtopic in a whimsical and unpredictable way. That's ok on HN because it's interesting. What's not interesting, and is the bad kind of offtopicness, is turning the thread into a generic argument about some inflammatory thing that has already had countless flamewars. If you review https://news.ycombinator.com/newsguidelines.html, you'll see that we have several rules that are intended to act as flame retardant against this kind of thing:
"Eschew flamebait. Avoid unrelated controversies and generic tangents."
"Please respond to the strongest plausible interpretation of what someone says, not a weaker one that's easier to criticize. Assume good faith."
"Please don't pick the most provocative thing in an article or post to complain about in the thread. Find something interesting to respond to instead."
The high-indignation, high-repetition flamewar topics are like black holes that suck in threads that swerve too close to them. Since they're so repetitive (and generally so nasty), they're definitely not what HN is for, so we should all try to steer clear of them.
> Would you be interested in an unreleased "Cosby Show" lego set that was supposed to come out right before he got cancelled?
Can't tell if serious. If serious, was this out of Lego Ideas (Cuusoo)? [I worked on the Back to the Future DeLorean set with the designers in Denmark]
Former Enron employee here - I have some swag I was given when I first started (lunch kit, values booklet, etc. Also have some golf shirts and baseball caps.
> As an example, you can buy "joke" Enron t-shirts, which I wouldn't be interested in
I would not be interested in authentic Theranos swag, but I would pay a lot for a new knockoff mock turtleneck with the old MPlayer logo on it. Now I can't even find the old MPlayer logo anymore.
Other people have commented, but I'd also enjoy a post or album of your most prized dead company swag artifacts.
I worked for a "hot" a16z startup just out of college, with a trendy office and the :rocket: :moon: vibe. They went under a few years after I bailed, but I still wear the t-shirt because it makes me chuckle.
In a strange twist of fate, I decided to exercise my few options, and I had to mail my stock exercise notice to some place with a check for ~$2500 to purchase them. USPS lost the letter and saved me $2500.
I assume you could buy the stuff from the company's bankruptcy auction or when it gets auctioned off by the Feds like in the case of Martin Shkreli's exclusive Wu Tang album.
The whole bre-x saga really amazes some Americans when I explain the depths of fraud that have historically existed in AB and BC small cap mining stocks...
For the longest time the historical Vancouver stock exchange, vsx, was known as something like the fraud capital of North America.
All of that is before we even get into the ugly history of some Canadian mining companies that have got into bed with non-democratic regimes in places in the developing world, where they did actually have a real mineral resource to extract, and damn the consequences.
Never heard of this, reading the wiki on bre-x now...
" ...one of the five women who considered themselves his wife... "
This is some serious drama. Have you got any reading you can recommend on the topic? I recently bought "The Prize" to catch up on my oil & gas history, perhaps there is a sibling book for minerals?
as I recall several Canadian journalists wrote books on it. It was also extensively covered in the western provinces' newspapers and national papers (the globe and mail, etc) at the time.
How exactly do you check if something is authentic? I can have a hundred Theranos-branded t-shirts, mugs, pens, diaries, socks and whatever else you want made and shipped to me in like 2 weeks.
Yes that's hilarious but you're missing the interesting part. How does the seller provide convincing evidence that withstands scrutiny such that a diligent buyer would be satisfied that it is authentic then.
I would suggest checking some of the high value auctions and seeing what their proof is.
It would be trivial to prove you worked at a company if that's how you were given it, you might even have photos of an event where stuff was given out, emails detailing a "welcome pack", I'm guessing it's these sort of things that are used as proof.
I can totally get behind this. Holding tight on my Blockchains LLC swag half-hoping there will have a wider audience of recognition than the other people at that Prague conference. The other half hoping they actually manage to create something of lasting value, of course ;)
I am also a fucked company swag collector and Theranos has been my white whale since 2015/early 2016. Now it’s all knockoffs. I wish you luck in your search!
My intern job back in 2005 was to take Enron's wind turbine division's technical handbooks and scan them on large flat bed scanners. They were all stored in Tehachapi desert, flooded and with water damage. I found a bunch of cool stuff in these boxes including a binder containing Enron's branding assets and standards manual.
> I am a collector of swag from large companies that have collapsed due to anything from mismanagement to outright fraud
That's a really cool collection! I always find it interesting to learn what obscure things folks collect.
> any authentic Theranos gear
How do you tell if it's authentic? If I was a collector in this area, my big concern would be that especially given that the market is hot, someone could just look on ebay for images of branded products, and then make replicas of them by passing the same logo onto promotional printers.
>I always find it interesting to learn what obscure things folks collect.
A buddy of mine has a similar fascination with picking things up from defunct companies, specializing in film/video post production companies. One of the items he picked up was a standard banker's box. Inside were a pile of CD-Rs which turned out to be the entire digital back up of an unfinished 3D animated feature. The entire recordings of the actor's lines. The 3D objects, scenes, etc to an unknown level of completeness. Even though the work product was purchased from the bankruptcy auction, the copyright was still owned by the creators and could not be rendered/released just because they bought a box in auction for $20.
There were actors you'd recognize the names of, but not sure they would qualify as A-list (at least at the time it was recorded). I'm just not able to recall who they were. That was 15-ish years ago, and it was only a story told over a lunch. Not something that made it to long term memory.
> Even though the work product was purchased from the bankruptcy auction, the copyright was still owned by the creators and could not be rendered/released just because they bought a box in auction for $20.
>I am a collector of swag from large companies that have collapsed due to anything from mismanagement to outright fraud
This is why I log on to this site.
>the Theranos swag market is hot right now (check eBay if you're curious).
I was curious. My ebay search for "theranos" turned up 50 items. There were fleece jackets with high asking prices, so that certainly was something. But everything else I saw for mugs and hats and t-shirts was in the $20-50 range.
Most of those were likely never truly distributed specifically to employees in the first place. Reprint or print on demand swag is generally obvious with the white background. Look for real photos, especially in people’s homes.
In my totally arbitrary set of rules the item must have been available or given to employees only.
As someone who used to work there and has one of those water bottles and likely knows the person selling that one on ebay (based on the username) I find this hilarious...
Until seeing your comment I had never considered that someone might actually want any of that stuff, so I had never considered selling or otherwise parting with it since it is fun to keep all that stuff around. I'll certainly let you know first if I decide to part with it, though.
I worked with a guy who collected stock certificates of dead startups that he'd worked at, and displayed then in frames on his wall. I think he called them good misspent youth.
The Lehman Brothers risk management/principles cube was a hot seller for a while, but I'm curious as to long term valuations. Thought the art collection didn't actually do that well on resale.
Someone in my neighborhood wore a Theranos sweatshirt while jogging last year, I made up a story in my head that it was in solidarity with Ms. Holmes. If I'm right, I assume she wouldn't be willing to part with it.
What an awesome collection/hobby Thanks for sharing. Is there any way to see all that you have?. I became interested in this after seeing someone with an Enron shirt on at a music festival earlier this year. Surely it was not an “original”, as you collect, but it had me reflecting on the artistic value.
About 15 years ago, I worked at a small tech/political agency in DC. We got a new office just off NW 16th & K near the lobbying & financial areas. While I was setting up the server closet, I found a rolled-up blueprint from the office design. We unrolled it and... turns out it was built by Enron. Ken Lay had just died, so we always kinda-sorta felt haunted by his ghost.
My favorite tshirt is for a company picnic for Enron (scheduled for after it’s dissolution); the back is covered in MBAspeak: honesty, integrity, … It’s one of my favorites — up there with my Orwellian yellow plastic “Great Place To Work” Intel tamborine.
That's funny. I was just talking a friend of mine the other day that is printing a bunch of swag gear for Nikola Motors. I would guess he doesn't know the history of Nikola Motors and I didn't say anything, but I was thinking, how much swag does a potential scam company need?
Great timing! Not sure if this qualifies, but I just listed a copy of the Oct 2015 Inc Magazine where she was touted as "The Next Steve Jobs". Was a subscriber back in the day. https://ebay.com/itm/255312572520
I wish I'd known that notorious S.W.A.G. was A Thing because I pegged her as a scam artist when she first entered the public sphere. Next time my spidey-senses tip me off I'm gonna acquire as much promotional material as possible.
A colleague of mine was contracted by one of several firms tasked with liquidating Theranos' Newark facilities back in Aug 2018. I took the opportunity to grab the equivalent of $15,000 of tools, furniture, scientific equipment, and of course, swag. All legally - liquidators are tasked with clearing the site of everything by a set time.
Had free reign throughout the facility for two days, scavenging through 200k sqft+ of warehouse, marveling at the cringey pseudo-motivational blather posted everywhere and grabbing whatever could fit into my apartment at the time. At one point, we spotted Holmes (and her "special needs" Siberian Husky puppy who left dribbles of urine on the warehouse floor) arguing with some operators from afar.
We weren't allowed to touch specific computers, chemicals or any hardware locked in the cages (incl Edison devices), but everything else was up for grabs, from high-end Mitutoyo measuring tools to Aeron chairs to U-Line desks, Theranos bumper stickers, water bottles, etc etc etc.
So yeah, I've got a few bits of Theranos branded gear... Still waiting on the right time to sell.
If you're in the mood to sell, I'd be interested. 0 -> o + .co @ gmail.
I like hubris branding for the same (mythical) reason Canadian engineers do iron rings [0]: so that maybe when I'm waivering on an important decision, I'll look down at the logo on my coffee cup and remember that some things are more important than immediate professional gratification.
I've actually wanted to write about people who do this kind of collection! If you're interested in talking more about it, lemme know! charliewarzel@gmail.com
I have a friend who is cousins with Elizabeth Holmes. His mom was her first investor and she has the original stock certificates... They're planning on turning them into NFT's and selling them.
I think that's the key point here. Was Jucero fraud? I think there's a clear line between a) we have an idea for a product but we have certain limitations that are feasible to overcome, with more time and investment; versus b) we have a product, we're using it in the field, patients are using it, and it works great. In the first scenario, you could fake the dream but you're not promising something that you know to be absolutely false.
What's an example of a fakery that doesn't harm innocent parties? If you pretend a product (or a feature) that doesn't exist exists, then at the very least a competitor is unfairly harmed.
Innocent is perhaps the operative word. If investors expect and/or used to certain amount of fakery they are not "innocent" [1] or if the competitors are doing the same thing they are not necessarily "innocent" either.
[1] In this context to take meaning as knowledge, not meaning "not guilty" here.
If a site like Reddit gets started by creating nonexistent or sock-puppet users, for instance, that's hardly on the same level as falsifying medical tests "just until we get the bugs sorted out."
The Justice Department was only interested in the case because Theranos operated in a highly regulated industry with lots of government oversight. SaaS and consumer tech startup founders lie and cheat and blow up investor money every day and no one really cares.
All the wealthy investors gain nothing from Holmes going to jail. In fact the lengthy trial only drags them into the spotlight, which they'd rather stay clear of.
> The Justice Department was only interested in the case because Theranos operated in a highly regulated industry with lots of government oversight.
I don't think so. I think there were very powerful investors and others associated with the company (like board members) who were stung and embarrassed.
> SaaS and consumer tech startup founders lie and cheat and blow up investor money every day and no one really cares.
Do you have any roughly equivalent examples on the scale of the fraud and the people associated?
> All the wealthy investors gain nothing from Holmes going to jail. In fact the lengthy trial only drags them into the spotlight, which they'd rather stay clear of.
I disagree with this too. It's a good way to clear their names as it were ("we aren't greedy gullible idiots, she tricked us"), and a great way to send a message not to cross the ruling class.
the point is she could have never made it. First year grads of meds schools would look at it and tell you its impossible. Its like knowing a floppy stores 1.44 MB and showing it as a breaking technology - we won't change anything but we tell you it will fit 16TB with our magical formula.
"Fake it till you make it" originally meant behaving as an established company would, as opposed to presenting yourself as an upstart startup without a lot of customers. Basically: Professional website, formal company structure, normal business sales practices, having people available to answer the phones, and so on. You still had to do the work and deliver the results, but the goal was to overcome hesitancy to use startups instead of established companies.
It didn't mean literally lying about your capabilities or accomplishments in order to garner more investment money.
That's not "fake it till you make it". That's just fraud. It's not really hard to distinguish between the two, despite the way some people are trying to merge the two definitions.
It's fairly common to see an element of outright fakery before the hopeful-but-not-guaranteed "till you make it".
A coworker was using a mobile app from a startup offering to do "receipt OCR using AI/ML" when in fact they were sending most of the scanned pictures to a call-center in India to be manually entered. They hadn't yet figured out the fancy image recognition algorithm, so they were just throwing AWS Mechanical Turk at it while building up a user base. Realistically, they might never get to that level of AI while staying solvent.
That's not so different ethically to what Theranos was doing. The only difference with Theranos is the scale of it all.
There are two parts to this comparison. The first is, do they outright lie. If they are claiming "we are using AI" to investors, that might be fraud. But that is avoidable with just adding in "we are using AI for some receipts".
The second, and more important, question is, are they harming customers. Theranus gave people unreliable blood test results and lied about their reliability. That does actual harm to customers. Whereas for scanning receipts the only thing a customer really cares about is accuracy.
> That's not so different ethically to what Theranos was doing
No. One is we know we can do OCR, we know we can do AI, it's just an engineering effort to put those pieces together. The risk is schedule risk.
Theranos was hard science. They did not know if they could do what they fraudulently claimed they had already done. They needed scientific discoveries to deliver. The risk was can the necessary technology be invented.
I thought "fake it till you make it" was more of an individual strategy, not a company strategy. If a company behaves like an established company would, they are not faking anything, they are behaving like an established company would. For the individual strategy it's more about combating impostor syndrome. At higher levels many people have this feeling that others have something they don't, so it's telling people to just accept that feeling and be the impostor, because, in fact, everyone is an impostor anyway.
FITYMI can also be interpreted as presenting yourself (and company) with confidence that sometimes only more successful people (and companies) radiate. Like the comment above says, this does _not_ mean lying.
I could almost see "fake it til you make it" if your idea is based on already proven technology, but success depends on something like brand recognition, network effect, etc. In the case of Theranos, whether her technology worked or not was ultimately going to be decided by Mother Nature, not by a market.
No, no, no. I see this all the time around Theranos ("Hey, there are lots of other fake-it-til-you-make-it companies out there, Theranos just went to extremes"), and I don't think it's accurate, at all.
The line around fraud is really not that gray. If you're lying about current facts for personal gain, that's fraud. You can hype all you want about the future, and most VCs are actually fine with you selling them the "yeah, it's hamster wheels in the backend now, but just wait until we build out our tech and scale!" line (just see all the well funded "AI" startups that just have legions of people "training" the AI), but if you say that it's the whizbang tech right now, but it's really just hamster wheels, that's fraud.
Fraud is not just an extension of "aggressive selling".
Looking forward to JLaw's portrayal of Holmes in Adam McKay's Apple Studios adaptation of Bad Blood. Hope they pick up from where the book ended and cover this trial.
That project has been in the works for many years now, and is no closer to seeing the light of day. Hulu's miniseries 'The Dropout', with Amanda Seyfried, debuts in March though.
It blows my mind that she was found guilty for defrauding investors, but not guilty for defrauding patients about their test results.
Investors know that every dollar they put into a company could disappear, it's why startups get capital from investors and not bank loans.
But a patient does not expect for their blood test results to be completely wrong. Her tests weren't giving false-negatives or false-positives, they were using lab techniques that we have known to be inaccurate for decades. She knowingly sold Walgreens on 1 test, and then performed a different test.
I need to sit down and properly inform myself about how the prosecutors fucked that up so badly.
> It blows my mind that she was found guilty for defrauding investors, but not guilty for defrauding patients about their test results.
Not excusing it, but maybe it was a company vs personal thing (eg. consumer harm perhaps didn't pierce the corporate veil[1]). Whereas Fraud against investors is much more of a personal/individual thing.
Because und test results where in general correctish, they where just not gotten in exactly the way it was claimed, which was also not noticable less reliable or anything.
And what the user bought was the test result.
As far as I understood, with my very limited understanding of US law it seems hard to sue as a consumer as you where deceived but not hurt/damaged in any way.
>> test results where in general correctish, they where just not gotten in exactly the way it was claimed, which was also not noticable less reliable or anything.
Guess they just answered the question of "If you can't tell the difference, does it matter?".
Wasn't Theranos' claim that they could do tests from much less blood? So how could the results be accurate if they presumably didn't have enough samples?
During the purported early use of their technology, they were also taking full-size blood draws for "validation" against existing machines, i.e. the results were actually from off-the-shelf full-sample-size machines.
If Theranos still existed as a company, some of their results were bogus enough that they probably could get sued (IANAL). But Theranos doesn't exist any more.
Could this be because they were secretly doing the testing using traditional lab testing machines (as described in Bad Blood)? Maybe that made it hard to prove any specific test was tainted.
My layman's interpretation is that she willingly defrauded investors but did in fact deliver test results to the patients, albeit at a lower quality level than you would expect in the industry.
I think in the HBO documentary they say the unravelling started because of FDA complaints on the bloodwork being sub par. But I think you can't jail someone for 120 years because they did a shoddy product. Maybe the prosecutors simply went for the biggest bang for their buck?
They had a fully functional lab though, it just wasn't using Theranos' devices.
This is what they did to Wallgreens, they sold them on the idea that they would have theranos machines in-store, but instead what they did was do IV blood draws (calling it a comparison check) .. and then would just process the samples the same way as everyone else using standard equipment.
People were getting good results because Theranos was using machines from Siemens in their hidden lab.
My understanding is they took much smaller samples of blood which lead to lots of reproducibility problems. The standard machines they were using were being fed with up-sampled blood because Theranos didn't have the normal sample size.
> People were getting good results because Theranos was using machines from Siemens in their hidden lab.
Thus the tests sometimes were good, and sometimes bad. Some patients underwent unnecessary medical treatments and procedures based on bad tests.
I believe they also reverse engineered a lot of the third party machines, in an attempt to make them work the way they wanted to. That's... that's bad.
I think that's entirely fine - both for patients and investors (Siemens might be a bit Irate, but I don't know if I would put that in the "Bad" category). The issue would be if they informed their investors that tests were being done on Theranos technology, but were actually using siemens technology. With regards to the patients - all they should care about is accuracy of test results - whether Theranos was doing it with Theranos tech, Siemens Tech, Reverse Engineered Siemens Tech + dilution of the blood to get enough volume is mostly irrelevant to a patient - they just want to get the highest quality information possible, regardless of the route taken.
> Reverse Engineered Siemens Tech + dilution of the blood to get enough volume is mostly irrelevant to a patient
Those machines weren't designed to work that way though, so the test results were wildly inaccurate when they did dilutions. And they fired people who wanted to delay rollout in order to ensure that they had consistently accurate results.
The point I was making was that it was irrelevant how the original designs were intended - if Theranos had been able to successfully reverse engineers the tests, and determine a way to make them work reliably, while it would have made those of us who believed Theranos had some incredible new technology, and that Elizabeth Holmes was the next coming, no patients need to have been concerned. It was the fact that the tests were unreliable, that made Theranos guilty.
Lying about it to the Investors, and possible intellectual/contract issues with Siemens are another issue.
> It was the fact that the tests were unreliable, that made Theranos guilty.
Very few tests are 100% reliable, so I would expect that Theranos claims about how the tests where performed would play a significant role in determining the guilt. People where told they would get the perfect magic pixy dust test that worked on one drop of blood instead they got one of the early covid tests that needed at least four repeats to give a "most likely negative" result, unsurprisingly the covid tests also resulted in confused tweets by the one or other VC.
Well - some of the tests have to be 100% reliable, because medication decisions are made on them, and the incorrect dosage can be harmful. It's not like a cheap $10 antigen tests that has sub 100% specificity and sensitivity - a bunch of the tests were trying to measure particular levels. Theranos was just overall horrible. They were trying to do some tests that were impossible based on the physics of what can be measured by pinprick blood.
Yeah, I think we're actually in agreement here. Sometimes I think about how, if Theranos had figured out how to make things work over the last year before the WSJ article, all of their horrible and unethical practices would have been swept under the rug even if they were essentially lying for years to investors and patients.
Unfortunately, it turns out that "fake it til you make it" doesn't work with some problems that are seemingly unsolvable (at least by the approach they took).
> Unfortunately, it turns out that "fake it til you make it" doesn't work with some problems that are seemingly unsolvable (at least by the approach they took).
IOW, it turns out that "fake it til you make it" doesn't work if you don't actually make it.
Reverse engineering is an important right that is protected by centuries of patent and trade secret law in the US and many other countries. It's fundamental to innovation, even though non-innovative bad people like Theranos also do it.
Reverse engineering is not bad, and it is dismaying that someone posting on a site called "Hacker News" would think so.
Reverse engineering is not bad, and it is dismaying that someone posting on a site called "Hacker News" would think so.
Personal attacks aside,
I'm just saying that if I get a blood test and it says I've got AIDS and I actually don't -
and that's all because some sociopath grifter with less of an education than what's been proven with my own Bachelors of Fine Arts realized that to swindle millions of more dollars from her geriatric backers she's been manipulating (and ruining the lives of their own family members),
she needs to fake the test results from an impossible dream machine that does NOT exist and couldn't ever - because it defies the laws of physics,
and does this by running modified machines of her competitors that are now basically broken,
in secret rooms she doesn't tell journalists or inspectors about,
I do think there's nuance when the product is a medical testing device, and the company doing the reverse engineering is a competitor of the company who made said device and that engineering was faulty and could have cost people's lives.
But I don't know if the context of any of this is what some really want to discuss. It's just the slogans. You know: "hack the planet" and all.
I also don't think I'd be really OK with working for a company that told me to do this reverse engineering, but if your morality says differently, then: hey.
I don't think you should be criticizing reverse engineering here any more than you should be criticizing programming, science, skill, studying, engineering, logic, thought, changing your mind when you're wrong, or any of the other basic aspects of hacking. You're as out of place here as someone complaining about how nerds study all the time, get better grades than you do, and know how to fix their computers while you're stuck paying someone else to do it. You come off as a troll posting deliberate flamebait in hopes of getting a rise out of us.
Of course badly done reverse engineering can be bad. But that's not because it's reverse engineering; it's because it reaches incorrect conclusions that hurt people, just like not doing any reverse engineering at all. The problem that put people at risk in this case wasn't that Theranos did reverse engineering; it's that they didn't do enough reverse engineering.
> I don't think you should be criticizing reverse engineering here any more than you should be criticizing ...
No, sure, real reverse engineering is fine.
But when "reverse engineering" is used in the sense Theranos (and/or Holmes' defense team) apparently did -- i.e. tampering with a competitor's machines so they sometimes don't work properly, and passing off the sometimes-invalid results as super-duper hot stuff created by your new and superior WonderTech™ -- then yes, it darn well should be criticized to Hell and back.
I think "reverse engineering" in the gp was just an ill-considered choice of word. What they are describing doesn't really have anything to do with reverse engineering -- it's just using the devices in a way that will not produce the desired reliability of results. The fact that their methods differed from what the manufacturer recommends would not be a problem if they could prove that the false positive/false negative rates were up to the relevant standards.
> The fact that their methods differed from what the manufacturer recommends would not be a problem if they could prove that the false positive/false negative rates were up to the relevant standards.
Well, better than the relevant standards. Otherwise all the "reverse engineering" -- i.e, tampering -- is fucking meaningless.
It's meaningless if nothing is better about how you're doing it. Presumably in this case the thing they wanted to improve was the amount of sample you need to use, not the false positive/negative rates.
But they knew at the time they were peddling it that they didn't yet have that advantage. So selling it on the premise that they did was... Well, fraudulent, in my book.
Their use of the term "reverse engineering" is perhaps not ideal.
If they were taking apart and studying the hardware inside competitors' machines, then that would not have been a problem. It's something which many companies do. But they would not be using this for patient testing, they would use it as input to product development and engineering.
Theranos were modifying the machines to operate outside their design parameters. Medical diagnostic equipment is validated at great expense to operate within given parameters to give a diagnostic result which is known to be accurate with a very high probability. They are carefully calibrated and tested to guarantee the accuracy of every test. Tampering with them makes them invalidated and destroys any guarantee of diagnostic result accuracy. The FDA approval for the equipment is only valid if they are operated as intended.
Agreed. My concern is precisely with this conflation of Theranos's negligent misconduct with the exercise of the fundamental rights which allow us to fix our cars (if you fix your car without a shop manual, you're doing reverse engineering --- and both Chilton and Haynes do reverse engineering to write their shop manuals), fix our laptops (see Louis Rossmann), uncover Microsoft's dirty tricks to break competitors' software (reverse-engineering was crucial to the antitrust trial), preserve our information (both PDF and Word formats were reverse engineered before they were opened), use IBM-compatible PCs (the clone industry was able to launch because Phoenix reverse engineered the BIOS and wrote a cleanroom clone), and generally do anything with a manufactured device that the manufacturer didn't intend.
For this reason there are carve-outs in copyright law where something is illegal except when done for the purpose of reverse engineering; for example, in the US, you have Sega v. Accolade.
After failing to produce their own reagents and hardware, Theranos pivoted to using off-the-shelf Siemens hardware and reagents (purchased through a shell company) and dramatically diluting the blood samples to make good on the "single drop of blood" customer promise.
This would've been an impressive feat of reverse engineering, software eating the world, IF IT WORKED. But it didn't. Results couldn't even pass internal audits and the FDA forced Theranos to invalidate ~1 million test results when they found what was going on.
They were using traditional siemens for most tests but were doing some tests with a fingerprick that they diluted - like their PSA test sometimes coming back super high for cis women, indicating that they had prostate cancer.
Iirc with Fyre Festival the dude got convicted of wire fraud for defrauding an investor, not for selling tickets to a sham festival. The joke was, screw the small people, that's fine, screw a rich investor, that's when you go to jail...
It's more that wire fraud can cover pretty much anything, making it a lot easier for the feds to get a conviction. Plus, the charges weren't related to the festival or its investors; it was for a whole different scammy "venture."
I'm not even sure they could be criminally charged for a sham festival since the festival did actually happen. I'd imagine that the whole thing turning out to be a complete wreck would probably be something that could be handled in a civil case.
>> Investors know that every dollar they put into a company could disappear, it's why startups get capital from investors and not bank loans.
The above does not excuse fraud. Investors know their investments are risky, but that does not give you permission to deliberately lie or mislead, with an intent to deceive the potential investor.
For example, if you tell investors that you anticipate getting $50M in new contracts over the next year, well, assuming you mean it in good faith, that's not fraud even if it doesn't pan out or was delusional to begin with.
If you tell an investor you just signed a contract for $50M, in order to get them to invest, and that's a total lie, that's fraud. Whether or not the investor did appropriate due diligence to confirm that fact or not, it's still criminal.
In one sense you are correct, just because investors are knowingly making speculative investments, that doesn't make it OK to defraud them.
On the other hand, perhaps the argument was that investors know there's a risk and know they should be skeptical. It would be unreasonable to expect patients requesting a blood test to be suspicious and question the results.
> On the other hand, perhaps the argument was that investors know there's a risk and know they should be skeptical.
If you've ever dealt with competent VCs, they are very skeptical, which is why they pretty much ignore your forward looking statements and just look at your current data. And the reason they do that is because forward looking statements can be all kinds of BS, but current data is just facts (unless you're lying about them, in which case it's fraud).
Of course, they also want to know your vision and drive for the future, but they'll basically ignore statements like "We have 10 big deals I'm the pipeline" and just say "How many signed contracts do you have?"
There was pretty strong evidence she defrauded investors, lots of hard evidence of her making claims that we now know aren't true. I haven't heard much strong evidence that she intentionally defrauded patients though. I think it is totally possible that she lied to investors about Theranos's capabilities (ex. How many tests they could run), while still thinking that the tests they were running were accurate.
As other posters have commented, since they were claiming results from much smaller samples, these "good" machines weren't given the amount of blood required for reliable results so this is also fraudulent and much worse imho because the people operating these machines must have know they were artifically amplifying samples.
> It blows my mind that she was found guilty for defrauding investors, but not guilty for defrauding patients about their test results.
my thoughts exactly. i'm woefully underread on the whole situation but something is weird and different about it.
one thing that does jump to mind is that the investor list and board composition isn't what i'm used to seeing for stem ventures. i can imagine that perhaps they're less forgiving of failure and were operating with more blind trust in company leadership on stem/technology matters.
My impression is that the defense put the onus on the lab directors etc and that she didn't know what was going on. I don't buy that, but the jury is supposed to go on only evidence presented at the trial, so I guess the defense did a good job.
It’s the elephant in the room. Hardly ever remarked upon but a complete head scratcher. This company is fated to play a staring role in at least one conspiracy theory going forward.
I've been reading Dorothy Atkins' live tweet coverage of the trial since day 1, and it gives a blow by blow account of it. It starts at [1], and runs all the way up until the verdict. Strongly recommended.
Are Walgreen's customers given any sort of guarantee about the results?
I mean, if you could find someone that experience material loss from it, or death, I think they'd have a very legitimate chance to sue. It's not clear to me what promises Walgreen's is actually making though.
How does it work in a case where the customer's relationship is with a reseller, but the reseller was given false information from the test maker? Is only the test maker liable, or are both the reseller and test maker liable?
Just going by Carryous podcast, it seems like there was a lot more hard evidence (emails, transcripts, texts, etc) that she was knowingly lying to investors. On the other hand, I don't think there was any hard proof that she didnt know the results delivered by her labs (which were using third party machines, albeit ones being used improperly), were bunk.
I feel like John Carreyrou deserves a medal for exposing the entire scam. First in WSJ articles and then in his book, which is a great read. It's incredible how much trouble this caused for him when Theranos tried to fight him.
Who knows how long the scam would have continued without him, and how many more people would have gotten bogus test results.
If Tiger Woods can get a presidential medal of freedom for playing golf, it seems like it's the least they could do for Carreyrou.
I agree the proof for defrauding investors was less arguable. However there were still clear indications that she should have known the tests offered to patients were unreliable. For example, Schultz told her, before resigning, that it was not OK for Theranos to continue re-running their benchmark tests until they got a passing result (kind of like shaking the magic 8 ball until it, on the fourth shake, correctly answers the question “Is today Sunday?” — then selling it as an oracle). One employee flagged it for her attention that females were getting results that should only be possible if they had prostates — and she dismissed this as well! There was other evidence introduced during court that showed she knew the tests her company was doing for customers were not as accurate as she claimed, too. I would have loved to see her found guilty on these counts as a result, and I would also love to hear about the jurors' reasoning for not doing so.
They weren't really being charged with the stuff about patients, in part I think because the communication between Holmes and investors was direct, whereas Holmes was not personally communicating with the patients. Basically, the prosecutors went for the charges that were easier to prove.
If Theranos still existed as a company, it would doubtless be getting buried under a blizzard of charges relating to how Theranos, the company, treated their patients. One of several reasons why Theranos the company no longer exists.
It's fairly easy to set up situations where the people doing the actual work are not knowingly defrauding anyone. The salespeople are told the machine is real, the delivery people never see inside the lab, the testers inside the lab are trained by the few people really in on it (I don't think they had the proper independent training) so they don't know how bad the tests are, and the scientists think everyone knows they're working on version 2.0 but they're told not to discuss readiness, leading the salespeople to get the wrong idea. Heck, most frauds don't want their people to know that it's a fraud - too many people raises secrecy and conscience issues.
> [She wasn’t] really being charged with [wire fraud with regard to] patients
Unless the word "really" is doing some heavy lifting here, this is incorrect. There were multiple counts directly and specifically related to defrauding patients. These counts came back not guilty, but they were, in fact, charged, and customers testified in court in support of these charges.
The articles says "This case was specifically about what Holmes told Theranos investors, although her lies also impacted partners and patients" which I took as the patients claims were not part of this trial, but maybe they were?
You're correct, I saw that all of the counts were wire fraud or conspiracy to commit wire fraud, and didn't realize that they included wire fraud...of patients.
I have to think, though, that the fact that it was such an odd charge in relation to patients, had a part in why those charges didn't stick. I think wire fraud in relation to investors succeeded because it was a much more accurate description of the act involved. But you're correct, some of the counts that didn't stick were wire fraud related to patients.
Correct, it is all about what they have a paper trail for. It is also very difficult to prove harm to patients. Any prosecution would depend on a lot of statistics and scientific detective work, which the prosecutors frankly aren't equipped to take on.
Theranos tests gave some inaccurate results, but the defense will say Traditional blood tests can be wrong as well. This devolves into statistical evaluation of the methods used for testing, e.g. if the standard test is 99.9 what was the Theranos result?
This is a huge mess, and why the pragmatic charge was financial fraud.
My guess about the discrepancy is that the lies she told investors were more brazen and came directly from her own mouth. She told investors and journalists that Theranos was working on military contracts (no such contracts ever existed), and she straight up told investors that no third party testing was involved in Theranos test results (a lie). She directly ordered employees to omit positive test results from investors' blood tests because she didn't have confidence in the results. This is all documented and she has admitted to much of it.
The lies told to patients and fraudulent test results could be (and were) denied by saying she wasn't aware of what was happening in the labs.
It's not that investors are more important in the eyes of the law or that patients weren't lied to, it's about the quality of the evidence available. Her not guilty verdicts do not mean she's innocent, simply that there wasn't enough evidence available to convince a jury.
It's not particularly surprising, if you assume that the jury was essentially looking for a specific, traceable line between representations from Elizabeth Holmes herself (and nobody else) and the subsequent payment as a necessary element of fraud. (Whether or not the jury was doing so could be guessed from reading the jury instructions, which I haven't done).
Being found guilty of defrauding investors in that light is easy because Holmes did specific acts, such as basically saying "we're endorsed by $BIG_PHARMA" knowing that they weren't, as part of her investor pitch--that's a pretty unambiguous traceable injury. But tracing anything she herself said to getting a random schmoe on the street to take a blood test... again, if you think fraud requires that specific act, it's not hard to see why someone would vote not guilty there.
Of course, I would still have liked to see her proclaimed guilty on fraud for the test results. But as abhorrent as her actions may have been, they may not have necessarily climbed the bar into illegality.
I agree with everything you said, but I think the person you're replying to is less upset at the prosecutors/jury, and more upset about the laws in the first place. They protect the rich and powerful, and don't worry about the average person getting hurt.
I maybe agree that that's what that comment probably should have been focussed on, but they did explicitly cal out the "prosecutors" for having "fucked up" getting the conviction.
In this case it seems to be a matter of distance, not power.
Imagine that, rather than the CEO making shit up, the case was about a lowly lab technician who faked results out of laziness or recklessness. Even though his fraud ultimately impacted the patients, he would probably still get convicted for defrauding his boss or the company he directly worked for, not the patients he never met or knew.
I think you have to look at the client side of the power equation. Nobody in the government is going to stick their neck out because a few voiceless plebs may have got the wrong blood test results at Walmart.
If your client was a wealthy person or large corporation and you knowingly lied to them about the performance of your product or service which caused them damages, would you get charged?
There's a difference, lab tech would impact individuals, but he wouldn't make false claims to the general public as the company's main selling point. Here we have someone basically selling snake oil to people, and still she was found guilt only for hurting her investors.
Ultimately, does this mean that the next fraudster will get away with it as long as they keep their investors in the loop about the lies?
> There's a difference, lab tech would impact individuals, but he wouldn't make false claims to the general public as the company's main selling point.
But when it's the CEO who does it, doesn't she do both? I mean, those individuals who get the fake test results are also members of the general public.
From what I've read, patients were prevented from testifying about the impact of the damage caused by the incorrect test results. That means life-changing pain and suffering was concealed from the jury.
This diffusion of responsibility in corporations drives me crazy. A CEO can create a crimogenic environment, and as long as there are enough layers of management or outsourcers, you can't pin the specific crime on anyone, and you can't jail a corporation.
Makes me wonder how much of the rapidly established covid testing infrastructure around the world delivers actual results.
Fun fact: In some places like Singapore you don't even get the chance to test again to verify the result, you just serve your time in quarantine and then get back your "safe" status.
Probably for the best back in populations of close to 0 community incidence, low acquired immunity, and prior to the vaccines being available. Better to have a few hundred (few thousand?) people incorrectly spend time in quarantine, than to have community spread results in people/businesses being locked down.
That's the state right now with almost all of the population vaccinated.
I don't think it's for the best, it ignores any other medical conditions and offers no way to double check a result that could come from a dodgy test center.
I think once their is some population immunity, that you start to put more effort into confirming people really are infectious. It's partially why I don't think the CDC rules about not requiring a test after the fifth day really matters in most places in the United States - 20+% of people in the general population are already infected in places like New York. Wearing a mask for 5 days after quarantining for 5 days, while not ideal - ensures that our medical and logistic and other critical systems keep working for the next 3-4 weeks.
But even with the established PCR tests and with all the theatre around it, I doubt that this quantity of testing is being performed up to the highest standards and there are a bunch of "entrepreneurs" in this space too who may benefit from little supervision or consequences.
Blood tests have also been around decades and are taught to first year students. The devil is in the details.
In this case the people claiming COVID PCR tests were bogus were right. The US CDC has now admitted it. They recently changed their testing rules to stop PCR testing people at the end of their self isolation period because PCR tests can stay positive for up to 12 weeks whilst being clinical false positives, and thus (Rochelle Walensky's words) "we would have people in isolation for a very long time if we were relying on PCRs" [1]. Nothing changed to prompt this - no new science or discovery or anything like that. They just suddenly noticed something that random bloggers knew in April 2020: that COVID PCR positives don't imply you're infectious. Also note the use of the word "would" and not "did"; apparently she's in denial about what happened here.
There are lots of other issues with them beyond the cold positive problems of course. In theory PCR tests are precise because they triangulate the presence of at least three genes. In the beginning that's what they looked for. Over time that's slipped and they're now routinely reporting PCR tests as positive if they only detect a single gene. I took a PCR last week where the certificate stated outright they only looked for one gene.
This crops up in other ways. To detect Omicron, they were taking PCR tests that failed to trigger on one gene (thus technically should have been classed as negative) and then treated them as positives, being sent for sequencing to determine if they were Omicron or not. But only samples with Ct <= 30 were sent. They use this threshold when normally even 40 is accepted to be a positive (Ct is log scale so 40 is a very tiny level of detection compared to 30) because it turns out any sample that triggers over 30 is so destroyed it's unsequenceable. They can't even find enough viable virus to know what it is. That doesn't stop them classifying such samples as "infectious and must self isolate" normally, though.
And all that's before you even get to the cause/effect confusion the tests represent.
No, COVID PCR testing is a mess. The only reason Holmes is a convict and those guys aren't is that Holmes wanted to be the next Steve Jobs, so she worked entirely in the private sector. If she'd been selling COVID stuff to the government she'd have been fine, even doing the same things.
In some cases they were, in other cases they tried their machines. Even when they used the real machines, it's unclear if they had enough blood, skilled operators, time and maintenance to generate accurate results.
It upsets me, but I wouldn't say "blows my mind". Prosecutors need to focus their strike where the charges are the strongest against well armored defendants. The people who suffered health-wise will now be able to more easily win civil suits, which will help them more than adding jail time to her impending swntence.
This wouldn't be satisfying. It is hard to accept that one person was responsible for all of the dishonesty. Even if you were "only" the CFO or COO, you must know what is happening in the company. What about all of the scientists who must have knowingly been reporting results that were not consistent with best (or legal) practice?
There is obviously a culture issue with "white collar" crime and a large hole in most countries ability to correctly police what is and isn't acceptable. There are also questions around "business secrets" and how these were used to justify a lack of scrutiny or due-diligence.
But then you must charge all the employees who did so, instead of her. Her crime is fraud because she told investor one thing and commanded employees another.
But it's not the army, they could refuse, they all did the tests and gave the false results back to humans, which is unfathomable in healthcare. She s eventually responsible but her job was on investor relationship.
Officers are not only allowed to, but required to, refuse illegal orders in the Army. Enlisted troops are allowed the "just following orders" excuse, but not officers who should know better.
Is this actually the end of her legal trouble? I assumed they were pushing the financial stuff because it is relatively easy to prove, and would go after her for more serious medical crimes over time.
I can’t find details of the specific wire fraud charges that she was found guilty of, but it is far easier to find and prove technical breeches of law (documents showing X was claimed to investors to obtain money when other documents show it wasn’t true) than proving intent or knowledge by the accused beforehand.
A couple years ago the only reason I wasn't on a jury was because I wasn't one of the people whose name was randomly drawn, after they'd filtered out everybody who was unable to serve or had other conflicts that would make them unfit (such as 'visceral opinions about the nature of the charges').
Could I have gotten out of it? Sure. Could I have gotten out of it without lying under oath? I don't see how.
It's a bit like Al Capone being done for tax evasion rather than murder - you convict them on the charges that have the most evidence and are likely to stand up in court, even if they are lesser charges from a criminal and moral standpoint.
Didn't they use real lab equipment to conduct real tests? In which case the results would be ok, it just wasn't the tech she promised. Quite a while I read something about the details, so.
I get that investors should know any investment can go to 0. But she was defrauding them by outright lying about how well the tech worked and what it could do. This verdict I think restores that contract between entrepreneurs and investors by saying if both invest in good faith then the whole thing works out. Otherwise we allow grifters like her and her business partner to suck good money out of the system. Now future folks who would try to do the same have this verdict to look at.
Patients who were wronged by the company did get screwed though. Such is the nature of trials by jury sometimes the jury doesn’t come through.
> Investors know that every dollar they put into a company could disappear
Is not it kinda different if you are being lied though? If Holmes were faking her accomplishments and you investments were depending on those then I don't see why this wouldn't be fraud
If the patients were still getting correct results (I assume they were still being tested, but in traditional ways) then it makes sense that they were not being scammed
"But a patient does not expect for their blood test results to be completely wrong."
The patient's state of mind, e.g., their expectations, is not an element of wire fraud. Only Holmes' state of mind is relevant; specifically, her intent.
"As a general rule, the crime is done when the scheme is hatched and an attendant mailing or interstate phone call or email has occurred. Thus, the statutes are said to condemn a scheme to defraud regardless of its success.34 It is not uncommon for the courts to declare that to demonstrate a scheme to defraud the government needs to show that the defendants communications were reasonably calculated to deceive persons of ordinary prudence and comprehension.35 Even a casual reading, however, might suggest that the statutes also cover a scheme specifically designed to deceive a nave victim.36 Nevertheless, the courts have long acknowledged the possibility of a puffing defense, and there may be some question whether the statutes reach those schemes designed to deceive the gullible though they could not ensnare the reasonably prudent.37 In any event, the question may be more clearly presented in the context of the defendants intent and the materiality of the deception.38"
"In any event, the question may be more clearly presented in the context of the defendant's intent and the materiality of the deception."
Whether a patient expected that results might be inaccurate, or even whether a "reasonably prudent" person would have expected results might be inaccurate, is not necessarily a defence to wire fraud. Even if such a defence were asserted, the focus would still be on Holmes, her conduct and her intent, not the patient.
FTA: “This case was specifically about what Holmes told Theranos investors, although her lies also impacted partners and patients.“
If that’s true, it isn’t surprising she wasn’t found guilty for defrauding patients, and more cases (¿maybe one focusing on partners and one focusing on patients?) could follow. I don’t know whether something like that is in the pipeline.
“In February 2020, Holmes's defense requested a federal court to drop all charges against her and her co-defendant Balwani. A federal judge examined the charges and ruled that some charges should be dropped: since the Theranos blood tests were paid for by medical insurance companies, the patients were not deprived of any money or property. Prosecutors would hence not be allowed to argue that doctors and patients were fraud victims. However, the judge kept the 11 charges of wire fraud”
I think that leaves open prosecuting for something else than fraud for knowingly delivering unreliable test results, but wouldn’t know what that “something else” would be.
I am neither American nor a native English speaker, but I always thought fraud was mostly a deliberate action, and negligence was mostly resulting out of either lack of action or accidental consequences of an action.
So if a company deliberately and knowingly markets a "sepsis-test" that puts out completely random results and leads to people getting their limbs amputated (bear with me, I know the example is terrible), they can only be held responsible for "negligence" by those patients? Or would patients only be able to claim financial loss due to fraudulent loss of work ability and such?
There was similar reporting of those prenatal genetic tests a few days ago (they have led to unnecessary pregnancy abortions due to incorrect results), and I wonder what corrective action we can do to ensure these things don't happen?
Negligence is not an absolute concept, there is a scale going from accidental to willful - which is where it borders on fraud. The legal definitions around these terms are complex, because the difference between gross negligence, willful misconduct, and outright fraud, can often be philosophical more than practical. In your example, I reckon that the random tests would be considered willfully negligent.
I’m not a lawyer, but the Wikipedia part I quoted gives me the impression that, in US law or maybe the specific state this case was in, “fraud” is legally defined “depriving somebody of any money or property”.
Again assuming Wikipedia (https://en.wikipedia.org/wiki/Negligence#Procedure_in_the_Un...) has this right, negligence requires injury (“The United States generally recognizes four elements to a negligence action: duty, breach, proximate causation and injury. A plaintiff who makes a negligence claim must prove all four elements of negligence in order to win his or her case”
“Injury” may have a wider meaning in US law than elsewhere, though. Wikipedia gives me https://en.wikipedia.org/wiki/Personal_injury, which says “Personal injury is a legal term for an injury to the body, mind or emotions, as opposed to an injury to property”, so properties can be injured, too, and https://dictionary.law.com/Default.aspx?selected=1646 sort-of shows that’s a synonym for “property damage”.
Yeah negligence is a better fit. Their process sucked unacceptably and they knew it but they didn't set out to lie with test results or never performed them.
I think they might have contracted out tests to real labs which could be fraud but that would be both harder to link to Holmes and potentially defensible. Imagine an alternate world with a Nega-Theranos which actually had machines which worked but were say five percentage points less accurate. Say Nega-Theranos used some patient samples with enough blood that way to check their accuracy in comparison. Technically not the machines they advertised but still done in patient interests.
We don't have a NegaTheranos and there were biophysical and statistical constraints which made the concept flawed from the start (not all blood sources are identical in the person and statistical limitations) . The smart thing to do was not try that method from the start. The ethical thing would be to tell the board and let them decide if they should dissolve the venture or try to pivot to another approach or task. It would be stupidly harder to try to identify the contents of blood non-invasively but actually possible. There are already several insulin only blood scanners in trial or development by multiple companies.
> Their process sucked unacceptably and they knew it but they didn't set out to lie with test results
They lied about what test they were doing, and people paid them based on that lie. While the jury here may be correct that that wasn't federal wire fraud by Holmes personally, it absolutely was a fraud by Theranos.
On the other hand Theranos and by extension Holmes had a duty to the patients which they clearly breached. It's definitely more clear cut in terms of negligence.
False. Fraud deals with any time in which something of value (not just something financial) is obtained under false pretenses, and (where civil damages or criminal restitution is sought/awarded for it) can address all compensable harms resulting from the misrepresentation, not just loss that was financial in character (the restitution will be financial, of course, but that's also true of negligence.)
Loss of property or of value is still monetary loss, which is financial. The fact is that for fraud, you much prove that something of value has been lost.
> “In February 2020, Holmes's defense requested a federal court to drop all charges against her and her co-defendant Balwani. A federal judge examined the charges and ruled that some charges should be dropped: since the Theranos blood tests were paid for by medical insurance companies, the patients were not deprived of any money or property. Prosecutors would hence not be allowed to argue that doctors and patients were fraud victims. However, the judge kept the 11 charges of wire fraud”
I don't know anything about that ruling except what you've quoted from Wikipedia, but didn't many of the patients have to make coinsurance payments for these tests? I just paid a medical bill today with a coinsurance component, and so both I and my insurance carrier have now paid for those medical services.
I also wonder about whether getting people to have a fraudulent medical test (which might cause some amount of pain or anxiety, especially for people who are afraid of needles) could have been a cognizable harm even if they didn't have to pay money to undergo it. But I realize that the law will often distinguish between suffering and losses of tangible property for many purposes.
> I also wonder about whether getting people to have a fraudulent medical test (which might cause some amount of pain or anxiety, especially for people who are afraid of needles) could have been a cognizable harm
If I remember right one of the witnesses was a woman who got a false-positive HIV test result, so they probably went for that angle.
> As I often write, this theory can turn anything bad that a public company does into securities fraud [...] The stock will drop (because the bad things are bad for the company); the shareholders will sue, saying “you said you were good, we believed you, we bought the stock, but you were bad and we lost money.” And so climate change and sexual harassment and lax customer data protections and mistreatment of orcas can all be transmuted into securities fraud.
This is a criminal case, which follows stricter rules than civil action. The relationship between Holmes personally and the investors is clear enough, but I can see how any claim of her committing fraud against the patients is much subtler and much likelier to fail.
If protection of patient health was a critical component of the US healthcare system we would have a public option. We don't, so we don't. The only thing that is protected in the US is money.
Holmes was found guilty of one 18 USC 1349 charge, and 3 18 USC 1343 charges; the 1343's she was found guilty on were in amounts ranging from $100k to $100MM(!).
It should be possible to come up with a better guess than the New York Times' "20 years per count, but likely served concurrently".
Does multiple counts served concurrently mean that the effective sentence is just the longest individual sentence?
Also: I'm seeing from various websites that the maximum time-left-to-serve for minimum security (federal prison camp) is 10 years, but nothing definitive - [1] is the most in-depth but only specifies this requirement for male prisoners, whereas other requirements are clearly distinguished between male and female.
Yes, the guidelines are kind of explicit about this for basic economic crimes. Ken White's the lawyer, though, not me!
They're actually even more specific for fraud cases, beyond the general 2B1.1 basic economic crime rule of sentencing according to the most severe count; for fraud, you apparently sum up all the losses from all the counts, which has the net effect of bumping Holmes up 2 additional levels.
> Does multiple counts served concurrently mean that the effective sentence is just the longest individual sentence?
Generally, yes.
If her sentence is high she might not classify as minimum security (prison camp) and might have to serve some years at a medium before being moved.
Remember, federal prison sentences are generally "85%" which means you can get 15% off your sentence for good behavior. Almost every prisoner will get the maximum 15%.
I didn't read the indictment. Are her offenses nonprobationable? Usually non-violent offenses are probationable for first-time offenders.
Yeah, that's a surprising thing for him to say, since he's generally one of the loudest voices against this "add up the sentences" stuff. The grouping rules are in the sentencing guidelines too! Go look!
For another, because the guidelines are pretty specific in this case --- that 2B1.1 crimes are charged according to --- well, here's the wording from the guidelines: "the applicable base offense level is determined by the count of conviction that provides the highest statutory maximum term of imprisonment.". So "3x20" seems off the table.
The thing here is, you get up to around 20 years just with a single wire fraud count, because the amounts involved here are so high. We're at $143MM in losses on the three wire fraud charges together (2B1.1 states they're to be summed up), which gets you a 26(!)-level enhancement from the base level of 7. That's 12 years (at the bottom of the range), and every other enhancement you take after level 33 is another ~4 years; there are 3-4 enhancements (like "sophisticated means") that seem likely to apply.
On the flip side, given the huge sums involved, it's not easy to make the numbers make sense served consecutively.
Yes there's lots of very high and very low guesses as to what she might get going around. I'm just commenting here specifically on this twitter guy's opinion.
Yikes. Plus, my understanding is that > 10 means no minimum security camp and > 20 means no low security, so she would start off in medium security. - assuming it works the same way with woman as with men)
Is that how it works? I’d hope you’re wrong, but have no reason to think so, because I’d like to believe that the kind of prison you’re sent to is related to how much of a risk you are to others. I’m not remotely an Elizabeth Holmes fan, but she isn’t going to be beating people up in the prison yard.
> I’d hope you’re wrong, but have no reason to think so, because I’d like to believe that the kind of prison you’re sent to is related to how much of a risk you are to others.
I think in theory escape risk is a part of it, too, and people with extremely long sentences are presumed to have rather more motivation to escape.
I guess that makes sense, although on a personal level, I’d rather serve time in a minimum security prison and get it over with than escape, inevitably get caught, and have additional time in a worse place.
I don't know, in principal I'd rather go and live in south america on a modest income (assuming you have carefully sequestered some investments) for the rest of my life than spend 20+ in prison which is effectively the rest of my life anyway.
Do you mean 'how crudely and unintelligently you harm others'? It sounds like you're setting up a framework where you get sent to the mean prison if you're physically bullying people, and the more intelligently you deliver your harm the better treatment you get, perhaps up to a point where if you're smart enough you can harm people on an enormous scale and get, I don't know, praise for it instead of prison.
Elizabeth seems the sort of person most capable of executing a plan whereby she pulls off a prison break through enlisting the aid of a bunch of other prisoners who're promised freedom themselves, but in her plan are actually there as decoys to be killed. It seems analogous to stuff she's already happily done. She is potentially a risk even to other prisoners if she carries on as she has done. I don't buy that she's not a risk to others.
Well, that’s certainly one way to interpret it. Another way is that the point of prison is to separate someone from society, not to put them in physical harm. If an accountant embezzles from his employer, he should do time, but maybe surrounded by other accountants and not armed robbers.
I’m not talking about just Holmes here, but about prisons in general. It’s not supposed to be fun, but neither is it meant to support a collective revenge fantasy.
>Yikes. Plus, my understanding is that > 10 means no minimum security camp and > 20 means no low security, so she would start off in medium security. - assuming it works the same way with woman as with men)
I'm curious where you got that understanding. Would you mind sharing?
Especially since that could put the khibosh on my retirement plans (commit a serious, but non-violent federal crime and receive a lengthy -- hopefully the rest of my life -- sentence at a minimum security "Club Fed"[0] facility).
Free housing, food, health care and clothes with no tax liability for the rest of my life? It makes me want to to massively defraud some congress-critters once I turn 70 or so.
Assuming I could be assured of conviction, I'd even hold on to the stolen money so it could be returned to the victims.
Yes, I'm being somewhat facetious. But decent assisted living facilities run from USD6-12k/month and once I've spent all my money, it's off to a Medicaid facility that isn't much better than minimum security prisons anyway.
This way, I can give my money to those I care about and not have to worry about spending down my life savings to ~USD2,000 in order to qualify for crappy accommodations at a facility that accepts Medicaid patients.
A better alternative to a retirement home is to retire to a cruise ship. It’s actually a lot more affordable than many retirement homes and far more luxurious, entertaining, and with way better food. You also get the benefit of being able to take day trips in various ports of call and of course you get full housekeeping services like any other cruise passenger.
Elderly are one of the most reliable voting blocs, whereas I’d argue most folks looking at long federal sentences are likely already convicted of at least one felony charge, thus stripping them of their rights to vote in nearly all states, at least while incarcerated.
If war is politics by other means, I suppose a prison riot is democracy by other means.
It's not surprising, because there's a very good argument that the guideline range for what she has been convicted of (and taking into account her conduct at trial, which is relevant) is life, with the actual sentence capped at the statutory maximum of the offenses stacked consecutively rather than concurrently.
Now, it's possible that the court wouldn't agree with that analysis and find slightly fewer points, or that it would agree but would make a downward departure, but...
He was just responding to this paragraph in the NPR article:
> Holmes' sentencing date has not yet been set. But she faces the maximum penalty of 20 years behind bars, though legal experts say she will likely face a lesser punishment.
That is, he wasn't arguing that she will serve the max of 65, just that the max is much higher than what NPR reported.
Argh! The linked NPR article on that tweet had me yelling at my phone:
> It is unusual for tech executives to face criminal changes when their startups collapse under the weight of unrealized promises.
That's because it's not illegal to over promise about your future results. It is illegal to lie about simple facts regarding the present state of your business to attract funding.
I'm so sick of so many press outlets framing this as just "fake it til you make it" gone wrong, "a page from the Silicon Valley playbook", or that it's just an over hyped company take to extremes.
No, Theranos was outright, egregious fraud, and most startups that "collapse under the weight of unrealized promises" are not committing fraud.
> No, Theranos was outright, egregious fraud, and most startups that "collapse under the weight of unrealized promises" are not committing fraud.
Most startups don't get the traction and publicity that Theranos got, however. I wouldn't be surprised if a lot of founders would go to similar lengths given the chance; they just happen to have someone apply some reality check on them before things get out of hand.
Look, there is still a big jump from the usual founder sharing partial vague optimistic statments (e.g., "our algorithm is great"), to the not so common direct lie (e.g., "we tested it with statistical significance, it works, here you can see these results on these real world inputs", while completely faking the results)
Under-engineered, if anything. If they had spent more time on development, a simpler machine could have been built. "Insert your favourite bridge building quote"
Definition written by management who can't tell good from bad. Ya see too many engineers got involved I reckon, should done what I told em, keep it simple fellas.
You’re right about the colloquial definition but I think the OP is more on point about the crux of the issue. Most physical world engineering applications are about the skill of stripping away as much as possible and still getting the job done. It’s an exercise of working within constraints. “Over-engineering” is ignoring those constraints.
"Perfection is achieved not when there is nothing more to add, but when there is nothing left to take away. Now please take away this overpriced juicer."
It happens more than you think, in many cases it’s easier to just sweep under the rug and move on. Few VCs want to admit they were swindled, and even fewer want the industry perception that they get founders investigated for fraud when things go sideways.
Theranos was unique in both the scale of the fraud and how non-investors were potentially harmed. Most of these are just founders who knowingly or unknowingly get in over their head and then basically walk away after having lied about the state of things.
I’ve heard a bunch of stories from VC friends, but the one I was the most involved with directly was probably 10 years ago. My mom mentioned to me that she had been chatting with some senior local government official who mentioned they had a startup datacenter provider taking over a nearby abandoned office complex and converting it to a green datacenter, bringing hundreds of jobs to the area - had I heard of them?
I had not, and after some digging determined that the company had claimed to have a bunch of unique technology, and leveraged that to get preferential terms from the local government - free rent, no property or payroll taxes, and other cash- and non-cash concessions. They had also raised millions from private investors by saying they had active datacenters with customers and they needed money to expand.
Except none of it was true. They had no customers, no datacenters, no employees other than the three founders and one of their daughters. They had made commitments in three different locations over the past three years to build a datacenter while simultaneously raising money by saying they ALREADY had active datacenters and customers.
I shared this with my mom, who shared it with local government, who hand waved it away as nonsense. But nothing ever happened at any of these sites, and after they ran through the money they filed for bankruptcy with revenue of $0 and assets of ~$12k. Their biggest investor took control of their land lease from the local government. Some investors complained online about being lied to, and the local government quietly swept it under the rug. I spoke with a local business reporter who basically shrugged and said, “yup, you’re right, but no one wants to talk about it”.
There`s a difference. I worked in a few startups. We make promisses that we can expect to accomplish in the future, we where clear that whatever we where working was still a prototipe or a promissing idea, but it was not ready.
She was going to great lenghts, saying her machine was already ready to production, and able to do acurate blood tests, when she knew it was impossible, and was using regular blood tests to fake results.
Agreed, but there's a non zero number of startups I had first hand experience with that I would define fraudulent without hesitation. They just didn't become as big or raised enough money to matter.
Wasn't her and the companies case that they knew what they wanted to achieve, wearing the bandaid that communicates with the phone to the server was impossible and that its various simpler versions of devices did produce results that did knowingly mislead people about their health. That's is potentially life threatening and different from an i.e. chat AI company that blatantly lies, this may lead to some peoples misery as well, but Theranos had way less network hops leading to health threatening outcomes.
I hate Holmes as much as anyone [0], but life in prison (65 years when you're 37 = out when you're 102) sounds unreasonably harsh.
She's not convicted of actually, physically harming anyone, esp. patients (which doesn't mean she didn't -- but she wasn't found guilty of that); she's convicted of lying to investors.
That's obviously bad, and should carry some form of punishment. Maybe 5 years? But life?? That's insane.
[0] I read John Carreyrou's book when it came out.
5 years?! People can get that much for stealing a car or jewelry. She stole tens of millions! Not only that, she did it through fraud. It’s not like you can just build a higher fence. For the system to work, it must be free of fraud.
Fraud is different from theft. Fraud is manipulating consent. Theft is taking by force what isn't yours. I don't know why everyone seems to be conflating the two everywhere in this thread.
The question is not just the state of the victim, it is (mainly) the intent of the perpetrator and the means used. That's why you don't get the same sentence if you harm somebody by accident or if you meant to do it.
The sentiment that sentencing is justified by retribution is the number one reason why the US criminal justice system is messed up. The concept of right-and-wrong and mens rea are inextricably one.
Intent. Both fraud and theft require intent, rear ending a car can happen regardless of intent, and would be a much more severe charge if there was intent.
In this case, fraud is far worse than theft. She defrauded investors of hundreds of millions of dollars and spent them on a what was essentially a vanity project. She destroyed hundreds of millions of dollars of private property.
Destroying 100 million is best compared to something like a "killdozer"[0] rampage. Holmes' crime was the destructive equivalent of leveling ~300 homes.
Sometimes it's not all just about the monetary amount. Someone choosing to use the threat of violence or death on a single individual one time to even take as little as $20 doesn't belong in a society.
Even if you're lying to trick some companies and investors to give you millions you're still not as evil or dangerous to society as the person who chooses to terrorize individuals for their gain. The actions are what matters.
“Do you understand what I'm saying?" shouted Moist. "You can't just go around killing people!"
"Why Not? You Do." The golem lowered his arm.
"What?" snapped Moist. "I do not! Who told you that?"
"I Worked It Out. You Have Killed Two Point Three Three Eight People," said the golem calmly.
"I have never laid a finger on anyone in my life, Mr Pump. I may be–– all the things you know I am, but I am not a killer! I have never so much as drawn a sword!"
"No, You Have Not. But You Have Stolen, Embezzled, Defrauded And Swindled Without Discrimination, Mr Lipvig. You Have Ruined Businesses And Destroyed Jobs. When Banks Fail, It Is Seldom Bankers Who Starve. Your Actions Have Taken Money From Those Who Had Little Enough To Begin With. In A Myriad Small Ways You Have Hastened The Deaths Of Many. You Do Not Know Them. You Did Not See Them Bleed. But You Snatched Bread From Their Mouths And Tore Clothes From Their Backs. For Sport, Mr Lipvig. For Sport. For The Joy Of The Game.”
- Going Postal, Terry Prachett
Fraud is not a zero-victim crime and less than petty theft is. Just because the investors can 'afford' it, their losses are passed on to society eventually.
Right, and it wasn’t cruel at all for her to put out medical devices she knew could and did produce false results for patients - in one case a false positive for HIV - solely for her own gain?
The reverse, that you are in effect advocating, amounts to letting the big fish get away with fleecing LOTS of people while coming down much harder on the small fry that robs one person at a time.
I think this is an interesting perspective because there have to be some unconscious biases at play to see these things so differently, even down to one person 'tricking some investors' and the other 'terrorizing individuals for their gain'. Furthermore, one of these people is 'more evil' and 'more dangerous'. In my own mind there's an element of classism involved because of how we see these two kinds of people so differently, and how we imagine them to live their lives.
In that sense, this CEO could be like the Sackler family - responsible for so much suffering across American society for the past decade or so, but because the scale is so large they've effectively abstracted themselves away from the evil and terror they are responsible for. The implication being that the opioid addict gets the full judgment of the law and society for terrorizing individuals to feed their addition, but the people who made the addiction possible get away with being tricksters. The only reason Elizabeth Holmes doesn't approach that level is because she and her startup got caught before they could release their fake products at scale, before the more serious consequences would begin.
If you ask me, I'd prefer to see both being held appropriately accountable, preferably in a way that encourages rehabilitation and not retribution or cruelty.
Above all, I think, because it's so diluted across a lot of people. To me, all these fraud-on-a-grand-scale-apologists are as naïve as Moist von Lipwig in the Pratchett quote in a sibling comment.
I think that there are two components in your argument, the personal harm element and social policing. The question for me is what responsibility and therefore forefit there should be on an individual for the social element. Interestingly it seems to me that the more libertarian folks are the harsher their view of punitive measures for social enforcement seems.
Just on your last sentence: The ideal amount of fraud is not zero, the cost of checking everything is too high. I recommend the book “lying for money” which breaks down what fraud is and what that tells us about the overall system
> Grand theft includes theft of property with a value of more than $950 or theft of a firearm (any value). The penalty for stealing a firearm is a felony, punishable by a state prison term of 16 months, two years, or three years. In all other cases, grand theft is a wobbler and can be charged as a misdemeanor or felony. A misdemeanor sentence results in up to one year in jail and a felony sentence results in prison time of 16 months, two years, or three years. (Cal. Penal Code §§ 487, 490.2 (2020).)
You actually can't get that much time for stealing a car or jewelry. What gives a criminal that much time is that "theft" is often actually "robbery", which involves the use of coercive violence. Violence is generally punished much more harshly.
> California Penal Code 211 PC defines the crime of robbery as “the felonious taking of personal property in the possession of another, from his person or immediate presence, and against his will, accomplished by means of force or fear.” Robbery is a felony punishable by up to 9 years in state prison.
> First-degree robbery includes robbery of
> any driver or passenger on a bus, taxi, streetcar, subway, cable car, etc.,
any person in an inhabited structure, or
any person who has just used an ATM and is still in the vicinity of the ATM.4
> First-degree robbery leads to a California state prison sentence of between three (3) and nine (9) years.5
It's not pedantry. Those people who got "much more time" aren't there for taking money, they're there for pointing guns and knives at people. Threatening to take someone's life is much worse than actually taking some money.
The jury acquitted her of 4 counts regarding defrauding patients. She may have caused them civil harm, but that’s a different case than what was being considered here.
Your argument is applicable to all white-collar crime. And it's emotionally-based, because she looks like one of us, not like a stereotypical thug. But in fact, she lied to take money from investors - theft on a grand scale - even if she wasn't wielding a sawn-off shotgun and wearing a ski mask.
Edit: aside from that, I agree the potential sentence is very long, but that is characteristic of the US justice system, right across the board. In my country, the maximum sentence is 25 years, regardless of the crime.
On the other side, one might make the argument that someone with millions of dollars to spare on early-stage investments should also be able to do their own due diligence on investments - otherwise, why would the status "accredited investor" be required? And, implicitly, that people like Holmes and Madoff who decide to exploit greed and unprofessionalism serve a vital purpose in a free market by acting as predators removing weak elements from the market.
Experts have warned from the beginning that Theranos made unrealistic to impossible announcements. Anyone investing at that scale without consulting experts IMO does not deserve protection from the law.
If Theranos is one thing, it is a real life example of why group dynamics and investing don't mix, and why the best thing to come out of r/wallstreetbets is the saying "do your own DD".
She straight up said she was backed by partnerships with big pharma and that the device was working. I would have invested in a heart beat given the claimm. Lying at that level is insane. She need removed from the presence of law abiding citizens as long as possible.
I've been involved in investment due diligence investigations. You don't just take people's word for that sort of stuff. You literally pry through everything and confirm it for sure.
I think that argument gets lost when the company actively lies. In Theranos’ case, they forged letters by Pfizer claiming the system was validated. If a company is forging, say accounting books, it’s hard to claim due diligence would have prevented being swindled.
> In Theranos’ case, they forged letters by Pfizer claiming the system was validated.
Wirecard did the same with accounting statements from the Philippines, and EY accepted them without verifying that the statements are correct at the bank offices, they didn't even cross check if the billions of dollars could even be on the books of the Philippine banking system, and now EY is in hot waters.
If I were an investor and were presented with claims of validation of a technology that is hotly contested, the very first thing I'd do is call up or otherwise contact the issuer and verify the authenticity of that claim. It's like ten minutes to find out the contact information of Pfizer's Investor Relations team and compose a letter - investors who are unwilling to commit at least this little bit of verification deserve to be relieved of their money and office.
You bring up good points (although I think I disagree with your conclusion that people ‘deserve’ to be defrauded). There seems to be active collusion at times between oversight and the companies being audited. This isn’t the first time EY has been accused of this and we see it with credit ratings agencies too.
I think I come to a different conclusion because we all outsource our quality assurance on a daily basis. Did you review the airworthiness certificate of the last plane you flew on? If not, do you “deserve” to crash because you outsourced to the FAA without verifying it yourself?
I’d say the blame should fall to the third party auditors who failed the system, not necessarily to those who trusted them.
> Did you review the airworthiness certificate of the last plane you flew on? If not, do you “deserve” to crash because you outsourced to the FAA without verifying it yourself?
Am I a normal airline passenger/pilot or did I sign up as a test pilot for experimental / new / freshly repaired aircraft?
The latter get higher pay simply because that risk is part of their job, and to my knowledge test pilots have the option to refuse jobs they deem to be too dangerous. Same is for investors, with the difference that human lives can irrevocably be lost whereas money is only a virtual thing.
I don't think that's a good analogy to illustrate the risk profiles. You are incurring a risk by getting on a plane, but you have generally assumed that risk is mitigated by a third party verification process (namely, certification by the FAA in the U.S.). Likewise, an investor relies on third parties (auditors, SEC, etc.) to mitigate risk. Test pilots, by definition, are flying non-certified airframes meaning they are paid to take on the additional risk not mitigated by a third party verification process. This is why many investors will abstain from investing in companies from countries with weak third party certification processes.
The system breaks down when the third party is corrupted or incompetent in terms mitigating that risk. If we're going to say investors/airline passengers 'deserve' an outcome regardless of the role of a third party verifier, I'd probably say there's no reason for an SEC, FAA, audits, or even journalists for that matter. We've largely said as a society those organizations play an important oversight role in mitigating risk.
Your everyday normal "retail" investor should be protected by the law and regulatory agencies, e.g. requirement that companies offered to trade their stocks for unqualified investors need to follow SEC guidelines on accounting and business best practices, that insider and politicians' deals are regulated/reported, that environmental, consumer protection and labor laws are followed and that such companies are audited for compliance. For investment vehicles (e.g. funds, stock options that are not part of "employee stock" programs), that the risk of major or complete loss is limited (=investments done by these with the assets of normal investors should follow the same rules, and that investments into assets requiring accreditation do not exceed 20% of the assets under management of the investment vehicle). Obviously, that also limits the return of investment aka the pricing of risk.
Accredited investors / investment vehicles allowed to invest in high-risk assets however? The accreditation should represent an exchange: you get the potential to higher return of investment unlocked, but as a price for that you have to:
1. prove you can stomach significant losses (=you have to own your residence and can only invest 80% of your net worth into investments requiring accreditation)
2. spread investments so that no single or related (e.g. by majority ownership) high-risk investment exceeds more than 20% of your total portfolio. Exceptions can be made for holding companies, SPACs and similar investment vehicles, provided that their investors follow the same exposure limit.
3. prove you/your staff are actually qualified to make qualified decisions: professional education (e.g. a university degree in economics, finance and related subjects or training provided as part of employment at a bank or other financial institution) and the time to adequately review the companies you invest (=someone who works 60 hours a week in a non-finance related job should not be assumed to have enough free time and mental capacity to review and follow-up documents)
4. waive your right to protection by regulatory agencies and the judicial system to a degree that reasonably expectable efforts (such as calling up certification issuers to verify authenticity of a certificate) have to be undertaken.
5. agree to be held fully liable for your loss and the loss of your clients if you violate the rules or act negligently.
That way, the assets of the majority of the population are protected against loss of their investments, actual professionals now have a monetary incentive to responsibly invest their assets, and auditors have the incentive to actually do their job (and if they do not do that on their own, their liability insurance will make them do!).
A case could also be made for an intermediate class of investor to allow people not meeting the criteria to invest a limited portion of their assets (e.g. cap at 20% of net worth excluding primary residence, require a minimum net worth of 200k $) into high-risk investment.
We do the same with other high-stakes jobs (doctors, pilots) and organizations (see e.g. how cyber-security insurances force companies to introduce IT security measures as part of providing insurance coverage) - why don't we do the same with the finance industry? There have been more than enough high-profile cases now, some of which actually caused global crisis events.
ETA: Additionally, "margin trading" should be banned or at least strictly regulated for all investors. The amounts one can see in the "Loss Porn" section of r/wallstreetbets are simply inconceivable. No one should be able to YOLO their retirement funds into Gamestop ffs, and no one should feel forced to off themselves because their bank showed them a 730k US-$ margin call [1].
This clarifies your position well and I largely agree. It wasn’t immediately apparent from your earlier post that you were talking about the specific case of accredited investors.
Regarding the margin call type investments, I would add it’s not to just prevent endangering oneself but protects society as a whole. As a layman looking at past economic bubbles, it seems the one corollary is excessive speculation coupled with excessive leverage.
The key thing with regulating margin trade is that most home loans have less equity requirements than margin trading accounts - you can get homes with zero equity sans closing costs these days, while you have to maintain at least 25% equity in a margin trading account, and people don't have much of an issue with either.
As long as the economy, the financial, employment and housing markets behave somewhat reasonable, even extreme leverage is not a problem... but in sudden uncontrolled crashes, that amount of collective leverage explodes backwards and everyone has a problem.
I'm actually not sure if it is possible to regulate margin at all to a resilience degree that stands up to market depressions, given that debt and leverage are essential to the working of any economic system (including all the various forms of socialism!) in a scarcity-based world itself.
For the most part, it wasn’t really possible to perform due diligence in this case, because Theranos refused to submit to an audit, and otherwise lied and actively prevented investors from getting the true story. For that reason, some potential investors walked away.
Not to defend her actions, but why do Americans particularly insist on severe, inhumane, and disproportional punishment? It would be completely unthinkable for her to get anything >15 years in Germany, likely much much less than that (let'ss ee how Wirecard goes). She didn't murder or harm anyone. She committed fraud.
As if sending her to prison for 5-10 years wouldn't be enough? Who will give her money or believe anything she does afterwards? She's done for no matter what. 65+ years is just to be cruel and enjoyment of the cruelty.
Even if it is the health sector where harm can easily be done, punishments shouldn't be based on hypotheticals.
Misdiagnosing people is not harmless. Compare it to selling snake-oil cures, that prevent folks from getting actual medical help. It could kill people. Not harmless, done at a huge scale, and probably killed people or shortened their lives.
Personally, I think she should get 12 years. That’s a long time.
I’m an American. As a society, we believe in the deterrent value of punishment (which is proven not to work). We also see prison as a place to put dangerous people in order to protect society. We see only the risk of letting dangerous people out of prison, not any potential benefit. If we have to lock up 1 innocent person to be sure that 9 dangerous people gets locked up, those numbers work for us. It’s a kind of tunnel vision focused on the worst offenders and ignoring the many non-violent or rehabilitated offenders.
So, it’s just this very one-sided view, very risk averse and without much empathy or grace toward the offender.
Also, I think we tend to minimize how hard it is to serve time in a cage. And when people come out of prison and commit further crimes, we assume they didn’t spend enough time behind bars. It’s the one and only solution to the problem. If it’s not working, we apparently just need more of it.
It doesn't seem to have worked for Elizabeth Holmes or Bernie Madoff.
According to this fact sheet, "the certainty of being caught is a vastly more powerful deterrent than punishment". Elizabeth Holmes and Bernie Madoff probably didn't think they would be caught.
What Elizabeth Holmes tried to do is possible. So we can be a bit kinder than that: she thought with enough help she’d figure it out and make her lies the truth before being found out.
She didn’t of course, but it wasn’t impossible to do. She just wasn’t good enough.
After all most cells in your body do a few thousand blood tests on millilitres of blood every second. Our technology has a long way to go but it can be done.
> It doesn't seem to have worked for Elizabeth Holmes or Bernie Madoff.
Penalizing mass murder also doesn't seem to have worked to prevent 9/11. The question is how representative the perpetrators are in these cases. I'd say not very -- do you disagree?
> According to this fact sheet, "the certainty of being caught is a vastly more powerful deterrent than punishment".
Just because you read it in some fact sheet doesn't mean it's true or even makes any sense. Probabilities and punishments are not commensurable so what does this even mean (without some attempt to describe a subjective loss function)?
Taken literally it's obviously untrue. Examples abound where people don't care much about being caught because the punishment close to non-existent or very light in comparison to the rewards. This is why why gangs like to groom minors, the likely reason why San Francisco has a shoplifting problem, or to bring it back to white-collar crime, why certain types of corporate and individual malfeasance occur over and over again, because the risks, even when caught, are minor but the rewards are not.
Your original claim is tantamount to saying that people don't react to incentives. Which beggars belief. That is not to say that criminals in particular respond to incentives in a way that maximizes their life outcomes or is intuitively obvious, or that for many crimes lowering penalties and investing in other things instead (like detection or prevention) wouldn't produce better societal results. But on the whole I'd expect high-flying financial criminals to respond to incentives set by justice system in a way that is more aligned with their actual utility function than say crack addicts committing robberies to finance their next fix.
> why do Americans particularly insist on severe, inhumane, and disproportional punishment?
Part of the reason is because punishment is so wildly variable and also sentences are almost always shortened drastically. It never looks like justice prevails. A "20 year sentence" is never actually "20 years", it could easily end up being a few years + probation, or even less.
Not sure why you replied to me, I was objecting to the parent comment’s casual endorsement of a racist archetype.
Also, america sure as shit better not go light on a rich lady who sold profit dreams to old men while giving outrageous sentences to poor people everyday. You want to talk about criminal Justice reform she is definitely last on the list of people who deserve leniency.
She effectively stole millions. That's multiple lifetimes worth of work for a lot of people.
If you assume average salary of 100k per year per person with 1/4th of time work per year. that's effectively 400k per year per person. He stole a hundred million which would be 250 years.
If it matters how rich the investors she defrauded actually are, perhaps she should get just a few months in jail:
"Notably, Theranos’ investors weren’t the usual-suspect venture capital firms. Rather, her funding came from individuals like former Secretary of Education Betsy DeVos, billionaire media mogul Rupert Murdoch, former Secretary of State Henry Kissinger and the Walton family, among other wealthy elites. Some evidence showed that these investors were willing to give Theranos money even when Holmes evaded their more probing questions."
> her funding came from individuals like former Secretary of Education Betsy DeVos, billionaire media mogul Rupert Murdoch, former Secretary of State Henry Kissinger and the Walton family, among other wealthy elites.
And there we have the crux of why she was prosecuted...
You're much better off screwing average people, then it's just "capitalism".
From people who could easily afford to lose it and who should have known better. None of the people she defrauded have a materially worse quality of life than they did before.
Her biggest crime was making rich people look stupid, and they REALLY don't like that.
In the book Bad Blood, people wanted to come out to expose Theranos and she had the most expensive law firm in CA basically threaden to sue people into oblivion. The person who spoke to the WSJ journalist who broke the story and put his name on the record did so because his dad mortgaged their house to deal with legal implications. Before that there were patients, doctors, employees etc. bullied by the company into submission.
Really? What about the literal stalking by her legal team? Two people directly involved in the company were suicidal due to the environment she created, one of whom did end up committing suicide.
Apparently not a serious crime it would seem, since no prosecutor seems to care. It is very clear that in the current court system defrauding rich people is a much worse crime that 'accidentally' killing a few poor people. Had she gotten drunk and killed someone with her car, she would be looking at a much lighter sentence.
> The crime she was convicted of isn't a crime you should spend effectively the rest of your life in jail for. It's as simple as that.
Not if you're a young(-ish) and relatively good-looking female billionaire CEO, at least.
Apparently, judging from the fact that I haven't seen all you people spouting this line on the barricades fighting for more lenient sentences for ordinary lowlife ugly middle-aged male fraudsters.
This is the inverse of implying the people Kyle Rittenhouse deserved to die because of their criminal history.
It does not matter at all that they could afford to lose it. Her biggest crime was the one she just got convicted of, being a fraud and lying for profit.
One side of this conversation is unnecessarily harsh, I get that, but the other side of this conversation is playing mental gymnastics to try and downplay what she did. Both are wrong.
Personally, I find it desirable that people who commit massive fraud in the health care sector get punished severely (based on whatever charges they are actually convicted of), because chances are someone will actually be physically harmed even if that is hard to prove to a standard necessary for conviction (even if no actual harmful treatment resulted, which seems likely in this case, the misallocation of resources to the fraud means someone will likely be deprived of a treatment they would otherwise have received). So IMO 5 years would be insane -- Madoff got done for 10 years, and his fraud was much more benign (I suspect a very significant percentage of his victims knew the returns were to good to be true and that someone was being defrauded; they just didn't realize it was them).
You don't understand. In our system of capitalism, fleecing investors under false pretenses is the gravest of sins. She must be punished accordingly, in order to make a legal statement to other potential capital thieves.
And to note, these are federal charges so there’s no parole. When you get 20 years in federal time, you may get some time off for good behavior but you’re going to serve most of your sentence.
Based on a very quick reading, I think the most serious offense (the $100M one) would at least land in the 97-121 months bucket. If she serves half of that, best case for her is 4 years. Not too bad.
To me the justice system already failed. It supposed to protect small people, society, vulnerable entities. There are stories how Holmes test were indirect result of someone death because they rely on those.
Meanwhile the only real sticking crimes are the one she commit against Betsy Davos (dirty corrupted rabbit hole warning if you Google her name). Obviously Bets placed few phonecalls. It it wasn't some VIP, she would get away with that too because all investments comes with risk.
Come on. You make it sound like it was only Betsy Devos she defrauded. There’s a long list of other ultra-rich people, including Oracle guy Larry Ellison, Walton Family (Walmart owners), and Rupert Murdoch.
Not fair to frame her sentence as Betsy pulling strings, even when I’m no fan of that woman for obvious reasons.
If you added those names to elicit more sympathy for the defrauded investors, you're not exactly succeeding so far. You could throw in Henry Kissinger as well, and I still wouldn't feel particularly sorry for them…
Yes, I understand, it was just that the list was not just populated with run-of-the-mill meh billionaires, these are some of the least popular (at least in certain circles) billionaires one could pick (Nighttime noise disturbances — destroying small businesses - facilitating genocide — they really cover a wide portfolio).
If Holmes had decided to reinvent herself as a Robin Hood figure, she might be feted in Jacobin by now.
> You make it sound like it was only Betsy Devos she defrauded
In fairness, Betsy was 16th in line for for the US Presidency when Holmes was being charged and everything set up. And were it not for COVID-19 she would have been in that position for the entire trial. I'm sure with that kind of political power she was pulling some strings for vengeance.
I believe you're missing forest for the trees. Some other commenters in this thread actually gave better explanation but think practically about this.
The prosecutors are not stupid. They have to come up with charges that actually stick, otherwise they risk losing this case in a spectacular fashion. If they went with an angle "X is morally bankrupt and her actions caused some deaths", it would make so much harder to prove and get the jury to agree to it.
Ok I'm not American so perhaps my perspective is different... More than 10 years would be utterly barbaric. The 65 years mentioned in another comment chain would be well beyond the pale.
I'm no fan of Holmes, but what good does it serve to lock up non violent criminals for decades?
The BBC said she faces upto 20 years, but predicts she will get a much lower sentence because she has no criminal history and she is a first time mother with a young child.
Google "federal sentence table". The "no criminal history" thing is directly expressed on the chart (she'll be sentenced from the first column); each cell in the table is a range of months, and the first-time mother thing might get her the lower end of that range. The crimes she's convicted of are so severely sentenced that it's hard to see her not getting double digit years.
With all the charges grouped, including the conspiracy charge, we'd be looking at an offense level around 35 --- 168 to 210 months.
Federal judges must calculate the guidelines and consider them when determining a sentence, but are not required to issue sentences within the guidelines. So I wouldn't be surprised if we saw a downward departure from the guidelines.
I'm not saying I agree there should be a downward departure (imo, her pregnancy came across as a "Pregnancy Of Convenience"), just that there could be.
A sentence of 10 years or longer seems excessive in my personal opinion as well, but I can't help thinking that the baby only entered the picture when she was already facing those criminal charges, so there might have been an element of calculation involved.
Never having a baby seems better than having a baby you won't be able to be a mother to for 10-20 years. It's not unlikely the kid would hate you when you get out of prison.
Ideal no, but she isn't going to be in prison 20 years, most likely not 10 either.
Kid will be raised by father and family, won't be poor, and it is unlikely kid will hate his mom.
She has a demonstrated record of cold, amoral manipulation and calculation. Just my opinion, but I think the child is a clear effort to increase sympathy. I would like to be wrong, but I think the truth is more sad and horrifying than most decent people can or want to imagine.
Given her cold rationality, the timing of the child may be her lawyer's advice, to get her sentence reduced. No consideration for the actual baby, how it would be raised given the circumstances...
you should expect leniency if you had a young child and it was a first time offense.
I would also expect leniency if you got the child after you were charged, even though that implies people could just get kids to look for leniency, there is the idea that once someone gets a child they calm down and become more cautious. Maybe not so important in cases of non-violent, monetary crime.
However as it is commonly thought in society, and backed up by science ( https://www.psychologicalscience.org/publications/observer/o... ), that women take on a more nurturing role for the children and the absence of a mother would be more traumatizing (statistically, in the case of my son he freaks out if I leave but doesn't care much about the mother), the father can expect less leniency than a woman.
Why should having a child give any sort of leniency? Actually the aim of harming that child should increase the penalty. I believe in equality, giving discounts on crimes because family just seems absolutely unquestionably evil and immoral.
If we really think of it, shouldn't single person get leniency because him being in jail doesn't hurt others. So that can be considered in thinking about planning of crime. As others clearly aimed to hurt their families and friends by getting in jail in first place.
“Acted an criminal act with aim to harm the child.” Don’t see anyone suing her for that one - as an evil human being, of course- except for online underdogs screaming “crusify her!”
Well, because she's a rich white woman. If she were a poor black woman, having children would probably result in worse treatment. Having children after being charged might get her child taken away; clearly someone who has a child while facing significant prison time would be an unfit mother.
You do realize actual patients got completely wrong results on their blood tests, thereby potentially jeopardizing their ongoing treatment for pretty serious conditions? How is it a "non-violet" crime when we're talking about potentially killing patients due to fraud?
I agree with you from a moral perspective, and think that's far more important than the financial aspect. But she was convicted of other crimes.
Perhaps the judge can factor that kind of thing into the sentencing; I'm not sure.
In an ideal world (not that we live in anything resembling a perfect world) it seems to me that the harm you're talking about would be remedied in separate criminal and/or civil trials. Certainly, unless I'm mistaken, the victims of the fraudulent tests could still file civil suits.
I'm not a lawyer, in case it wasn't blindingly clear.
"More than 10 years would be utterly barbaric." False.
65 years in prison would be a fair sentence for her. Homeless people in America have been sentenced to over 15 years in prison for stealing $100. Holmes stole an order of magnitude more than that. The US justice system needs to send a clear message to the would-be fraudsters that there are indeed some very serious penalties for being a criminal in this society.
The jaded view on this would be that we should then serve justice from the bottom-up, rather than pretending to be reformative to let another privileged, white criminal get off easy while not fundamentally changing anything. I can't say I disagree too much with it either. There is no indication that widespread reform in the justice system is impending, or that starting here and now would have a cascading effect leading to a better, less vengeful system for everyone.
I'm claiming Holmes is a criminal that deserves to be sentenced to the full extent of the law for the crimes she has committed. The US needs to hold criminals accountable for their actions. Otherwise we will continue to have a society full of criminals who exploit the justice system's leniency. 65 years in prison is completely fair for everything she did. In my opinion anyone who believes otherwise either doesn't care about the damage she has caused or doesn't fully understand the damage she has caused.
>>Homeless people in American have been sentenced to over 15 years in prison for stealing $100
>
> Using an existing injustice in the US to defend another does not make it right.
While that is true, it is also true that the law must be fairly enforced on everyone. Having some people receive lighter sentences for similar-in-intent but larger-in-scale crimes is not fair enforcement.
The US is a jigsaw of different legal jurisdictions with varying laws, legal standards and sentencing practices. A crime in one state with a life sentence might not even be a crime in another. I know this is a federal case, but it seems unlikely the case of the homeless person was too.
That is heartbreaking, though I'm not sure the bank teller would feel that way after having a "gun" pointed at them while the man yelled "this is a stickup". Also, the perpetrator may have had prior convictions.
In general we prosecute violet offenses (including the threat of violence, even if the gun wasn't real) more seriously than nonviolent offenses. While 15 years seems excessive (as do most prison sentences in the US, IMO), there's a lot of important context missing in your statement. Hyperbole might not be the right word, but I'd call it "substantially misleading".
I am curious to know what direction it is that you think would be the appropriate direction my comment should be leading towards and also, I am curious to know which direction you think my comment is actually pointing towards with its "substantially misleading" content?
I get the vibe you are a white-collar criminal apologist, I could be wrong, but am I?
> what good does it serve to lock up non violent criminals for decades?
If you're stealing hundreds of millions of dollars, is anything less than a decade really a deterrent? Especially since sophisticated actors are the most likely to be deterred by long prison sentences.
Heck, does it really do any good to lock up someone who comes home to find his wife cheating and kills her and her lover for 20-plus years? I would contend that locking up the white-collar criminal does more good.
But I'll take on your specific example. Any crazy rich people out there, I will serve 5 years in a minimum security Western European prison for 143MM USD safely accruing interest in accounts for when I get out.
I doubt she legally gets to keep all of it. In theory she probably cannot keep any, but if it's sufficiently hidden or already spent or given away it may be impossible to recover. The people she defrauded may accept recoverable cents on the dollar to get something back, and she may have access to more than she has to return.
Sorry to respond a second time, but another thought occurred to me. The frauds took place a while ago. Even if she had invested half in an index fund, she should still have 2x+ of the funds left. I don't know what if any interest is charged, but she might be able to repay the original investors at 110% and still make a tidy amount of cash, depending on what she did with the money.
Here in school we learn that the chance to get actually caught is the primary deterrent and second the weight of the sentence in either monetary terms or time served.
Because people are bad at estimating low probability and high outcome expected values. If you are old you might even not deterred at all by a very long sentence if there is only a small chance that you actually both get caught and have to serve the time.
I think as a general rule, probability is more important to dissuade things like speeding or murder. I think advanced financial crimes and especially fraud have such an inherently low risk of getting caught quickly enough (after all, by definition they weren't caught by the sophisticated investors who have the most to lose) that we will have far more success by having heavy punishments.
> I'm no fan of Holmes, but what good does it serve to lock up non violent criminals for decades?
“non-violent” criminals can do much more widespread damage individually than violent criminals are likely to, but are also more likely to be rationally deterrable with a sufficient consequences (which anything you'd willing gamble against the potential upside of the massive crime is not.)
> “non-violent” criminals can do much more widespread damage individually than violent criminals are likely to
How did you come to that conclusion? It seems like a difficult argument to support.
In terms of human life, probably not, right? I mean hypothetically the investors could have gone on to spend their money on lifesaving ventures and charities but that seems like a roll of the dice.
Not saying this is the case for Holmes', but scams can definitely destroy people's lives. It's not just about being financially ruined - which isn't a small thing - but also the feeling of guilt associated with having fallen for the trick.
Are we allowed to include executives who lie about the dangers of tobacco, asbestos, climate change, or politicians and bureaucrats who lie about the evidence they use to justify wars, things of that nature -- all lies for profit which materially damaged others -- in the non-violent bucket to answer your question?
They may not not technically be criminals because the government and judicial system protect this class of people, so in the interest of liability let's not allege they committed any crimes, but in the context of the the question yes white-collar or non-violent "whoopsie daisies" can do much more widespread damage.
It does, I guess, technically answer my question in isolation.
In the context of the broader discussion here, though I find it unsatisfying -- Holmes was specifically found guilty of defrauding the investors, and (as far as I've seen) acquitted of defrauding the patients. I don't think the main punishment for tobacco, etc company execs should be based around, hypothetically, ripping off investors (actually I guess their investors don't feel ripped off in many cases).
The main victims, in the case of tobacco and asbestos, seem to be people who've essentially been poisoned. This ought to be considered a violent act in my opinion. Unfortunately the legal system seems to see it differently, so again you are correct, but again I'm left a bit unsatisfied...
Basing severity on dollars stolen is flawed - it should based on the percentage of the victims assets stolen. Taking $1 million fraudulently from Warren Buffett is not the same as taking it from the average pensioner.
For many (though certainly not all) of the investors victimized by Holmes, I'm not terribly sympathetic. As implied by "qualified investor", if you write such a big check, it's sort of up to you to do the homework.
I do have some sympathy for people who got Theranos tests and were mislead about their efficacy, but on the charges of defrauding patients Holmes was found not guilty! (Similarly, I have some sympathy for employees who went to work at Theranos and ended up bullied and threatened by the company, as with Tyler Schultz, but they aren't represented by any of the criminal charges!)
She took money of retail investors as well. There is a podcast called "the dropout" which has featured done pretty ordinary people that lost their savings. Ok, we can judge them, just like we will judge all the nft & crypto victims, but the suffering is real.
This might be overly handwavy of me, but I struggle to see a scenario where a rationale Elizabeth Holmes thinks the expected value of what she did is positive if the standard sentence is 10 years, but thinks it's negative if the sentence is 65 years.
Maybe the takeaway is that criminals (and humans) aren't entirely rational, and 65 years is just a great "headline" for deterrence. But framing this as about deterring rational criminals strikes me as then putting a high burden of proof on the argument for 65 vs 10.
The harshness of sentences has zero deterrence effect. This has been demonstrated many times. Also, if it had, then the US would be crime free, as it has the harshest system in the world.
The only thing that has a small deterrent effect is how likely a potential offender think they are of getting caught.
Have you studied this kind of crime specifically, and looked at specific sentencing terms, eg. 5 vs. 10 vs. 15 years? I'm guessing no, and more than likely there's no data available for this.
My understanding is that even in cases where deterrents are known to work poorly, there's still some effect. For example, with drug addicts, there are diminishing returns in as little as a couple days, but I think there was still SOME effect.
It just winds up being mostly pointless, because a weekend sentence works pretty much the same as eg. months to years or more. You should be careful about extrapolating from behavioral studies, and other crimes.
It's not just about deterrent IMO. I also care about justice, fairness, and making it not worth it to commit white collar crimes. If the sentence is not substantial, you've basically gotten away with it to me.
It's worth 1-5 years in prison to spend 5-10 years in luxury, being told how amazing you are. Maybe not for me, but it certainly is for a lot of people. A ton of white collar criminals end up better off for their crimes, if you're not harsh enough.
Beyond stealing piles of money from investors, lying to people about medical treatments. Folks were making serious medical decisions with the results from their faked / half-assed tests.
We should destroy her life for cavalierly playing around with other people's lives in that manner. Theranos intentionally destroyed the database of test results, but their clear goal was to yolo out medical tests.
She should absolutely be put on trial for playing with people's medical diagnoses. But that's not the crime she's been found guilty of yet, right?
Hopefully screwing around with medical tests will have much more serious consequences than stealing money. Hopefully this was just the first step, and having her in jail will prevent her from tampering with the evidence for the more serious crimes. Hopefully we live in a society that values lives more than money...
Was she? I saw that she was acquitted of defrauding patients, but surely handing out known bad diagnoses also has some consequences from a 'risking lives' viewpoint, right?
Like if you order some bullets from a gun shop, and the guy delivers them by doing a drive-by on your house, surely the only legal problem for the deliveryman can't be "these bullets were a ripoff, the gunpowder is already expended!"
> I saw that she was acquitted of defrauding patients, but surely handing out known bad diagnoses also has some consequences from a 'risking lives' viewpoint, right?
The bad diagnostic test in exchange for money is the essence of the fraud she was acquitted of, not some separate harm.
I mean, it's not impossible she could face state law claims about it separate from the federal ones, but any federal criminal claims from the same set of actions would be foreclosed now by double jeopardy (besides retrial on the charges that the jury hung on.)
10 years for 145 million seems cheap. I believe in linear sentencing. The time in prison should linearly scale with amount of damages done. Stealing 1000 vs 100 should result in 10x sentence. Stealing million vs ten thousand an hundred x.
Agreed. Holmes is 37, so 65 years is a life sentence. From a European perspective, life sentences should be for people who are too dangerous to ever allow back into the community, or whose crimes are so monstrous society requires such retribution - terrorists, child killers, serial killers and so on. US sentencing appears very vindictive, not so much for trust-fund faildaughters but for people of colour arrested for minor drugs offences or under "three strikes" laws. Reminds me a lot of the "Bloody Code" of 18th century England.
The US generally has much longer prison terms than most of the rest of the world. Compared to sentences for crimes of different/lesser severity in the US, more than 10 years is completely sane and, indeed, fair.
If you have a problem with US sentencing culture, as a moral and a political issue you should probably not start with rich well-connected scammers.
It would be totally justified to cap it at 10 years in this case, provided she's forever banned from being an executive in any company. Not sure if it's compatible with US laws though.
Non-violent does not mean that she did not cause physical harm. People underwent invasive and unnecessary medical procedures as a direct result of Holmes‘ fraud.
Well, frankly sentences in the USA are barbaric. We also have the habit of handing down terms that are impossible to satisfy, eg. for probation. They'll take away your drivers license then tell you to appear in several locations around town to avoid jail (btw a driving infraction isn't always necessary, although even if they did commit a DUI, that doesn't change the practical side). You'll get charged money and taken to jail for being too poor. It's not uncommon to resort to crime to raise money to pay the state to avoid jail.
All that said, I would hope for at least 8-12 years, possibly more. I don't take that sentence lightly and consider it very harsh (I can't stand people from the USA that consider less than 5 years and "easy sentence"). 3 years is a serious sentence, and 8-12 is extremely harsh, for good reason. It's very important to me to call this like it is. There should be heavy handed punishment, because this is among our most serious crimes.
She blatantly lied multiple times about a medical product. She had a team of enforcers harass people who tried to talk. Across the board, it was a very extreme case. More importantly, with so much at stake, these type of white collar crimes are quite frankly worth committing if the sentence is less than 5 years (I'm not sure the exact number, but it's at least 5).
For a substantial portion of the population, having that kind of wealth and influence for a short time is worth it; in some cases, even if you die. So it might not deter everyone, but I do think the possibility of spending lots of time locked up, will stop a lot of gray area people.
I also think it is necessary for fairness. I care about making these crimes "not worth it". At a certain point, you're basically letting people keep their ill gotten gains. Getting to be king for a decade, then go away for a year or two is no punishment at all.
I don't think 10-20 years is necessarily inappropriate.
"Hopefully she'll get more, SV could use a good example."
I knows Theranos was headquartered in Palo Alto for part of its life, but is it really a SV company? Looking at their board I see mostly old-school business people from a construction company, Wells Fargo, and James Mattis and a former head of CDC. Only real tech person seems to be someone from NetApp. On the investor side, I don't see any of the big SV names either. Initial funding came from Rupert Murdoch.
I think there's some quibbling over what a SV company is.
Theranos was located in SV and Holmes referred to it as a SV style company, you might argue this is enough to make something a "Silicon Valley Company". I think OP would view such a company as one both in SV and embraced by the local ecosystem of developers and investors. I think SV "learning a lesson" from the downfall of a company only makes sense for the latter definition, and I don't think Theranos fits it.
In reading Bad Blood it becomes apparent that, Tim Draper aside, the SV investor community realized much earlier than anyone else that Theranos was shady and either pulled their money or stopped investing. As someone living here in the area at the time I felt it was common knowledge in dev circles that Theranos was shady and lying about their capabilities (though not to the level that was revealed). Certainly it did not seem to be a prestigious place to have on your resume.
Given that the SV ecosystem seemed to largely sniff out Theranos before the rest of the world it seems weird to expect them to learn a lesson from its downfall.
The answer to this depends a lot on whether you consider e.g. Arrillaga-Andreessen "SV" or not. Holmes certainly wanted Theranos, and herself, to be viewed and valuated as such.
While I don’t share in the misanthropic sentiment of the OP, it’s difficult for me to not sit here and say well if you didn’t want to go to prison you shouldn’t have defrauded people and violated the law…
I don't think anyone here is saying she shouldn't be going to prison or that she should be going there for less than a decade. But spending 65 years in jail for _anything_ short of substantially heinous crimes should cause anyone to question the motivation behind the sentencing. I understand that the wire fraud is what's causing the time to stack up here, but a 65 year sentence would be ridiculous. I'm much more onboard with a 10-25 year sentence though, even if there's perjury involved.
Alternatively, there were retirement funds and real people whom she defrauded, some of which needed that money to live on and now do not have it. Strong punishments befit serious crimes. More than 140 million defrauded counts as serious. Maybe she shouldn't have broken the law?
Besides, she can likely get probation with good behavior after a decade or two of time served.
Can you name another "wantrepeneur" that needed deterring by this case?
I don't follow startups that closely. The only example I can think of is Elon Musk's "full self driving" promises, but the gap between promise and reality is a lot smaller in that case. Even then, the claims are still mostly future timelines, not "it works now, no I can't show you, trust me!!"
Unlike many state systems, in the federal system the sentence is close to the actual time you’ll serve, short of a Presidential commutation or some other special intervention. Other than up to 54 days/year good conduct time, there's not systematic early release.
Holmes is not particularly attractive. Martha Stewart was (accounting for age) attractive and somewhat beloved in the US and served time. I don't think Holmes really has anyone in her corner when it comes to a 'beauty pass'.
Non American here, why do people use this infantile term to refer to a spouse? Unless I am mistaken, the father of her child is her husband - why use another term?
Edit: Thanks everyone for pointing out that you don't need to be married to have a child, wow, everyday a school day on HN.
But her husband _is_ as far as we know, the father of her child.
she is not currently jailed. i saw on the news this morning after her guilty verdict walking out with her lawyer. i don't believe they jail you until sentencing for white collar crimes since you aren't a "threat" to the general public
And words towards 'won't she be in jail through any appeal process.'
But in response to the original comment saying she won't get jail time at all due to appeals, do you think she will not be sentenced and the appeal with happen before then where they disregard this conviction during that process?
Anyway, confusion aside I was trying to politely point out they seem wrong in their assumption she will never see jail due to an appeal process. That's not how the process works.
You slightly misunderstood my cynicism: I don't think they'll overturn this convinction and cancel her sentence.
I think she'll only start serving time once the very last round of appeals ends - which is going to be many years after her death. They'll just Jarndyce v Jarndyce for decades to come.
I guess I understand the cynicism but her net worth appears to be not much. Usually you'd want to use your money to avoid getting convicted but here we are.
It's non-violent. Nobody died. I think 5-10 years. Maybe she can be Shkreli's pen pal.
Wasn't it mostly vapor ware medical testing services? Afaik they mainly wasted investor time and money and took customer money for test services they just never ended up providing. Unless I'm missing something??
I think their customers just ended up stuck with the bill and had to go to a regular lab.
Don't discount the possibility that she'll have her sentence commuted by a future President. Look at the roster of political heavyweights that she was able to attract to the company. It wouldn't surprise me if one or more of these people still have an affinity for her and, at the right time, throw some good words in the President's ears on her behalf.
This disgusts me. The president should not have the power to free anyone from prison. If the laws are broken then (attempt
to) change those, but otherwise you’re just saying “yeah, you’re guilty, but I like you so you don’t need to serve your time like everyone else”.
I believe it was originally designed to be a safety valve in the system. A person can be found guilty because the laws are blind, but if a (loud) majority of the population thinks it was a misjustice, the president can fix the situation.
I don't think any of the founding fathers foresaw presidents using their power to pardon their friends. The whole system is extremely vulnerable to an insider attack - very few tools are in place to work around corrupt leaders.
That was only one of the reasons given in the Federalist Papers for its inclusion; the other is the need to be able to throw around pardons as a bargaining chip in quelling rebellions and civil disorders. The post-Civil-War pardons are a classic example - getting people off the hook for death-penalty treason stuff in order to keep them from going into a new rebellion in a few years - as are the post-Vietnam blanket pardons for draft dodgers.
It's a power Kings have. "The Royal Prerogative of Mercy". That's why the President has it, there weren't a lot of other examples for the Executive to be modelled on. However of course in modern constitutional monarchies the King doesn't operate this power any more, for example Liz's pardon power is operated by her government and ordinarily via some dusty committee looking into injustices (the government occasionally has used it directly e.g. some guy years into his life sentence for murder tackled a terrorist who was stabbing people at an event in London, the Pardon power was used to reduce his sentence in recognition of this bravery)
The US President should have handed this power over to a similarly dusty committee resolving real injustice years ago. This would be less corrupting and more effective because a President is busy whereas the committee would be doing nothing else except investigating the circumstances of potential injustice and choosing how to resolve them (new trial, pardon, etc.)
Well, realistically, it was just copied off powers that the British monarch had at the time. Lots of the oddities of the US presidential institution can be traced back to that.
Interestingly, this pattern repeats itself; countries which became independent from Britain later on often have a far less powerful president, with similar powers to when _they_ left. The president of Ireland, for instance, is non-executive, doesn't have a veto, and can't commute sentences... much like the British monarch when Ireland became independent.
As it stands, it's an anachronism that only survives because it's _really_ difficult to change the US constitution, I suspect.
IIRC the President only has the power to pardon Federal crimes, not "anyone".
As for Ms. Holmes, she defrauded very rich and powerful people. I would be surprised if she were shown any leniency at all, never mind a Presidential pardon.
I suspect that was peak Ridiculous President Behaviour, tbh. Any future president that venal will take care to hide it a _little_ better.
And I think that was a little different; in that highly polarized environment it was possibly a little easier to sell corrupt pardons if they were of people on the president's 'team'; at least some of his supporters would put up with it on that basis. Holmes wouldn't qualify; she's just a generic wealthy criminal.
I'm genuinely surprised. I thought after seven days it would be deadlocked on everything, particularly being silicon valley, successful, beautiful woman, I just didn't have a lot of faith in the jury. I guess this is a very mixed verdict.
She didn't significantly injure those people - she misled consumers about the technology but not the results. They did the actual testing on other legitimate machines.
The wire fraud charges were by far the much better target.
They used legitimate machines, but were among other things watering down the samples and using lower volumes of blood than necessary for correct and accurate operation.
Question: could Holmes have avoided all of this by pivoting to something else and not losing investors money. It is extremely common for startups to exaggerate their tech just to later pivot to something else without any repercussions.
I followed the case very closely, read the transcripts I could find daily etc. What Elizabeth did wasn't far from what many many many founders do. This was held to a legal standard, sure, but let's be real here... since when was the legal standard the SV standard? Is SV really the bastion of morality and legal ethics? Is that the new norm, good behaviour? Notably some investors refused to participate and iirc Draper basically said she flew too close to the sun, but it wasn't fraud. I'm sure it's going to be an unpopular opinion but personally if this is the new standard, the SEC should have a pretty long list of founders to try at this standard. The saddest thing of it all to me is that she was onto something, people are having success with her ideas today. She should have just not gone to market, she should have just quietly refined the tech behind the scenes, but as I said, she flew too close to the sun. Tesla and uber have literally killed people.
> What Elizabeth did wasn't far from what many many many founders do
I'm not sure this is true. She told a lot of egregious lies to investors while trying to get money from them. She repeated those lies in the press and to anyone who questioned it. And I don't mean a lie like lying that your product is more effective than it is. I mean she told prospective investors about huge contracts with the defense department that did not exist. She told investors that her machines were being use in the battle field. These were lies that were never going to be true.
That's not what she said at all. At least not from the near daily coverage and transcripts I watched[1][2][3][4]
She said it was being trialed by the military, in reality what had happened was Mattis said he would be able to introduce the technology to the military. This type of "abstraction" is in very many pitches I've read over the years.
> She said it was being trialed by the military, in reality what had happened was Mattis said he would be able to introduce the technology to the military. This type of "abstraction" is in very many pitches I've read over the years.
That's not an "abstraction". It's a lie, and therefore fraudulent.
If you're seeing these sort of lies all over the place, you might be in a weird bubble. Startups are known for creative wordplay, but if you're straight up lying about something happening when it's not happening at all or even started, that's fraud.
Feel free to add me on linkedin and share your deal flow! I'd genuinely love to see the startups you see and are invested in. When I was still in startups, I encountered more than one experience where various investors begged me to lie to them. In one instance because they wanted their IRR higher, and in another because they felt if a specific metric was inflated considerably more, it would be easier to execute something. I'm not kidding around either, that happened.
Inflating some metric is one thing. Saying that a thing that's impossible by laws of physics, has been done in your product is quite another. I do admit however that it's not the first time. When I worked in a large tech company, our investment arm asked me to look at a startup that was clearly the same kind of fraud (doing things that are impossible according to Shannon), and indeed did turn out to be a fraud. But that's one example in my entire career.
Whether or not it’s “abstraction” really depends on who hears it. I don’t think it’s cool but maybe in a slightly more fuzzy area as to if it’s a lie.
Surely there would be a contract with the military if that was the claim and surely these investors did due diligence and audited the contracts, nobody would ever get wrapped up in the hysteria and hype and burn a billion dollars…
From what I saw from the trial, no one did any real diligence at all, except the people who testified they didn't invest because they did diligence. The Devos family office testimony was.... laughable, what a joke, they basically just went off what everyone else said, and that has primarily been my experience in startup. If big names are involved, people almost ALWAYS do the diligence they want to do so that you pass, not so that you fail.
tbqh, I came away from the trial really feeling like the investors who testified against her deserved what they got because of how they approached the situation. IMO Elizabeth Holms isn't some mastermind manipulator, she's more akin to a child who was enabled by moronic parents.
It seems so, as she's going to jail. However, that wasn't the crux of my original point. The legal standard and the SV standard have been divergent in may circles for quite some time. May folks do "take liberties with the truth" because your investors should know better - If someone went for coffee with 26th US secretary of defense for the united states of america and explained how it would be useful for the military, and that person said it would be and they could easily have the military look at testing it, I don't believe it would be uncommon for a founder to then turn around and say to an investor "the military is going to be running a test with our equipment", I wouldn't traditionally expect then to have the possibility of being prosecuted for wire fraud hanging over me if my startup failed. That said, we should all now _expect_ the legal standard is the SV standard. It will be interesting to see how it impacts the industry, if at all.
> If someone went for coffee with 26th US secretary of defense for the united states of america and explained how it would be useful for the military, and that person said it would be and they could easily have the military look at testing it, I don't believe it would be uncommon for a founder to then turn around and say to an investor "the military is going to be running a test with our equipment", I wouldn't traditionally expect then to have the possibility of being prosecuted for wire fraud hanging over me if my startup failed.
I think the crucial distinction between a slight stretch like you describe and what Holmes did is the tense: the military is going to test our product vs. the military is testing our product (which did not, uh, exactly exist then). One is a rosy forecast and the other is just a lie.
> ...say to an investor "the military is going to be running a test with our equipment"...
But as I understood it, that's not what she said. Your phrasing is about the future, i.e. something nobody can know at the time it is being said whether it will come true or not. Therefore, something anyone with the least bit of common sense would think "Yeah, let's hope that will happen" about.
Completely different than saying "the military is running / has run a test with our equipment". That's a statement of actual ongoing or concluded fact. If it actually is happening or has happened when you say it is happening or has happened, then you're telling the truth; if it isn't / hasn't, then it's a lie.
From what I gather, what she said was the latter -- but it never actually happened: So, a lie. Said with intent to induce people to give her money: So, fraud.
Fortunately the law doesn't have a victim blaming statute in these cases, so any mistakes the investors made don't excuse Holmes for lying and commiting fraud.
>She said it was being trialed by the military, in reality what had happened was Mattis said he would be able to introduce the technology to the military. This type of "abstraction"...
That's pretty far from a fair summary. Mattis made the introduction, Holmes could not get past the initial military diligence, and killed the project, and yet years later continued to represent that it was an important part of Theranos' business, to add an imprimatur of success and reliability of the testing.
Citation needed. The whole concept has a critical flaw, as pointed out by her engineering staff and medical advisors: blood tests require a certain minimum volume of blood to work, and that's inescapable because blood components are discrete, not continuous.
For example, a drop of blood is about .05mL, or about 1/20th of a milliliter. A common testing sample size in a normal lab is 3mL, or about 60x larger what Theranos claimed they could work with. Now, suppose you're testing for some cell that's may be present in concentrations of 10 per mL, or 1 per .1mL blood volume on average. In a conventional lab, then, you'd probably have about 30 of those in the 3mL sample. In a Theranos lab, even if it worked perfectly, you're equally likely to have either 0 or 1 present in the .05mL sample. In other words, you're 50% likely to get a false negative, even if the equipment is working perfectly, based purely on the tiny sample volume.
By analogy, if you poll 100,000,000 Americans, you might get a pretty good idea of an election's result. If you poll 3, you have no idea, even if the poll is perfectly designed. Well, that's what Theranos was up against.
OK, sure, but that doesn't change my point. You could run all of someone's blood through a scanner and then back into them to get a complete view, but a lab only samples a few mL of it.
Maybe not quite as extravagant a claim as hers, hers was def a 100 year vision, but many people are working on and having progress in a very similar area. Heck even Tyler Shultz the kid who is on the road doing a press tour about how "he took down Theranos", is working on a Theranos-esq startup.
One thing that seems to be forgotten or lost in all of these armchair analyses is that while it is true that something like 3mL of blood is collected for a conventional lab test, the machine itself when it runs the test only takes a few microliters (maybe 10s of uL, all of this is depending on the test of course). The rest is frozen for follow-up or repeat testing or used for other tests or just discarded after some time.
EDIT: And my favorite part is the first step the Siemens machines they used for testing is to "dilute" the part of the sample it is going to use (addition of DI water, to get the blood to the desired concentration). That is hard-coded into the protocol, with a specific dilution amount, and it is done for all the official Siemens tests, as well, hah.
> Holmes described the miniLab as “the most important thing humanity has ever built”. But at best, the lab could do immunoassays using microfluidics. The tiny blood sample had to be diluted extensively (for which there are no reference standards or precedents), leading to artefacts and spurious results.
That (and other reports) sound like they diluted way more than usual.
While it is published on their site, it appears to really just be a summary of the book by Carreyrou? And I have yet to see anyone actually publish any of the dilution ratios and compare that to any existing process, so it seems like an easy-but-easily-incorrect leap to conclude that it is "way more than usual".
While Theranos claims were absurd , it is not hard to believe there is scope for improvements in specific areas which is what OP is trying to say I guess.
1. The premise assumes there are not significant wastage in the current processes and those are near optimal. Any non optimal paths could potentially benefit from improvements
2. While there are some tests at that low concentrations not all tests have components at that low concentrations. Those could certainly be improved ?
3. Reuse and cross testing the same samples, or testing for multiple things at the same time etc, are all areas that could yield better outcomes than current standard.
4. Perhaps it is also possible that while primary marker for a test is not present in the sample, its presence in the blood could have left other markers that are detectable
I don't know anything about lab testing, if I can think of few approaches to solution for the low sample problem. Experts may have many other approaches so it shouldn't be surprising if there are improvements claimed ?
Many people are working very hard on solving these problems. Holmes simply claimed to have solved them all with one machine. They never had any idea of how to actually do that, never even tried. It wasn't like "If we use this new development in nanotechnology we might be able to...". It was just entirely made up, the whole time.
If I falsely claim to have invented a warp drive, I don't get credit for whatever work people do in that area in the future.
Not exactly how it works. There are lot of brilliant people working on lot of good stuff, very few get funding to do meaningful work. The job of someone like Holmes is to bring that funding.
Holmes was an agent to energize the industry in the sense that she was instrument to attracting a lot of new VC investors willing to throw money and experiment with new tech like this . I doubt she personally claimed to have invented anything new, even had Theranos succeeded her claim to fame would be only building the organization that enabled such innovation and not the innovation itself.
Even though Theranos failed as firm, a lot of smart people got funding to work on interesting projects while there and potentially either developed or started developing products because of holmes being able keep them and Theranos funded. A lot of new people are getting funding, because Theranos and Holmes opened this industry to VC funding when it was not traditionally so.
To your example, if you falsely claim to invent a warp drive, raise a lot of money, hire a lot of smart people who do interesting work while working for you, eventually fail as company and those people go on to build parts of the drive partly with experience they gained in your research. This kind of research was not well funded before you, Likely without you this would have never been a VC funded industry don't you have some hand in that ?
Do you think it's easier for people to raise money in the blood testing space now after this very high profile fraud? I've heard people say that it makes things much more difficult.
Also, Holmes's lies sucked up a ton of funding at the time. Not just the money given to her, but the investors who said "theranos already dominates blood testing, so we'll invest in another space"
This was a disaster all around for everyone but her.
>This was a disaster all around for everyone but her.
I don't know how you can say that, some of the trial evidence was heart breaking. Some of the emails, the texts back and forth between her and Sunny, what a mess, it sounded like she was totally losing her mind and stressed out to no end while being pushed and cajole by an unreasonably intense person behind the scenes. She was clearly devastated when the company collapsed, she very clearly believed in what she was doing, and now she is going to jail. That sound like beyond a disaster, it sounds like hell.
She clearly believed in what? The vision of low cost, multi function blood testing? Maybe she did, but she made almost no progress toward that goal. All while accepting credit for having already accomplished it. Not to mention that she's been living the lifestyle of a multi millionaire the whole time.
She's a human being and it is a sad situation. But this is justice.
Read the comments. Nobody cares how she feels now. Everybody cares only about their own opinion they have the need to express. For her it’s all devastating, for resonable people too, for majority of shitty people the main thing ia to grow in their own eyes while barking at someone else.
True, and there are chemistry tests that would probably be reasonably testable. For instance, blood glucose is already testable from a finger prick, so that’d be just fine. Still, a lot of people with the background to have informed opinions have spoken up to say that some of her claims weren’t possible on a theory basis, not just because of an engineering challenge.
A mL of water has ~10^22 water molecules in it. Dilute substances are usually measured in ppm (parts per million). Even 1 ppm would have 10^16 molecules. I think your orders of magnitude are way off here.
> What Elizabeth did wasn't far from what many many many founders do.
Hard disagree on that one.
It's certainly not common nor acceptable to knowingly lie to investors like Holmes did.
There is nothing normal or common about the type of fraud that Holmes perpetuated, despite attempts to downplay or normalize it.
> I'm sure it's going to be an unpopular opinion but personally if this is the new standard, the SEC should have a pretty long list of founders to try at this standard.
Can you name a single one? Or is this just cynical speculation?
I've seen a lot of attempts to downplay Theranos' blatant fraud as an "everybody does it", but I haven't seen anyone calling out other companies who were caught committing fraud and everyone, including their investors, just shrugged it off. It's not normal.
Of course I can name multiple, I've been involved in hundreds and hundreds and hundreds of millions of dollars in startups deals, I've spent over 15 years in the industry...
No. I don't think what they did was wrong a), and, b) because it genuinely is prevalent. Maybe if the statue of limitations passed on some of the startups I've been involved in, I might consider it, but even then, doubtful.. It doesn't matter what was done, the startups were successful and the investors got paid back, so who is going to ask questions and why?
Your implied question is "why is this case special?", when so many startups supposedly do this. Most startups aren't giving people input into major medical decisions.
I mean, on one hand, yes, if nobody is harmed, there really isn't a case for fraud.
But I agree with the other responder, I've also been in many startups and have certainly seen tons of exaggerations about the future but never outright lies about the present that Holmes was guilty of. Even worse, if you're going to lie about the present, you should at least have strong confidence your lie is physically possible - Theranos tech was always a sham from day 1.
I just don't buy at all the "everyone in Silicon Valley does it" spiel, because if they did, investors of failed startups (i.e. the majority) would have tons of reasons to sue and put people in jail.
Frankly, making an outrageous claim and then just blithely going "Nope, I'm not going to give even a single example" makes it sound like you are spouting just as much bullshit as Holmes did. Or alternatively, like you're just not understanding the difference between over-optimistic forecasts and claims of actual outcome. Which is it?
No. It's one thing to say "My company is going to change the world" or "I am the best president of all time". It's different to repeatedly make a claim that is verifiably untrue, like "I have perfected cold fusion" or "I have a cure for all forms of cancer". The average startup founder doesn't do this, no sane person does this.
> "The saddest thing of it all to me is that she was onto something, people are having success with her ideas today."
This is a very poorly informed statement. Who bought the valuable IP that Theranos spent hundreds of millions of dollars developing? No one is "having success with her ideas" because the ideas didn't exist. That's why she's going to prison
Exactly. Many of her ideas are physically impossible because there is good evidence capillary blood isn't homogeneous enough to give accurate results for quantitative tests at the volumes Holmes was touting.
Underrated comment. The investors were investing in her because she was willing to take the risk of move fast and break things (where things in this case is the diagnostic accuracy of blood tests). She got nailed, ironically, not for hurting patients, but instead for harming the egos of the investors.
As a participant in the startup investment world you are willing
Participant of SUSPENSION OF DISBELIEF. This is roughly equivalent speak for REALITY DISTORTION FIELD. The point is you as an investor are a willing participant in believing that something more is possible than what has already been achieved.
If you're a founder: you should be worried about being held to a legal standard of the representations and warranties. That section is in every share purchase agreement and it's the stuff that gets you sued. And sometimes, like in this case, it's WIRE FRAUD and it's criminal. Crazy. We need another section to replace REPS AND WARRANTIES.
> We need another section to replace REPS AND WARRANTIES
Ain't that the truth. Hand on heart: the number of decks I saw last year that have an INSANE 2 page legal disclaimer at the start AND finish of the deck is up ~90%, ninety percent. I knew people who used this as a signal of an inexperienced founder, over night it's the signal of an experienced founder.
A pivot wasn't necessary. She could have avoided it by recognizing when the writing was on the wall for the company and working towards a graceful shutdown rather than doubling and tripling down on their failures.
That still would have cost investors most of their investment, and probably would have led to this same conspiracy and fraud outcome, since she lied to them to get their funding well before the company shut down. Maybe she could have afforded a bigger/better legal team that way though?
Based on what one of the engineers of edison were saying, if they could acquire more than a "drop of blood" for analysis, they would have been able to get more accurate results.
You might be able to consider that a pivot, since she had been saying "drop of blood" the whole time.
It was Holmes' unwavering attitude to imitate Steve Jobs that got in the way of her decisions, and I think more than a pivot of product, that a pivot away from this ideology could have saved Theranos. Willingness to give up on perfect design in order to acquire a working engineered product could have made a world of a difference.
It has been definitively admitted. Now we see the vultures tearing this fraudster apart and you what?
That is good, and it is absolutely magnificent.
Since many have gotten away with it, She is now the first of many that have been caught and need to be investigated and the other exit scams of this decade to be unveiled before the scammers race to the exit with a mountain of cash.
If the global economy doesn't pick up soon we may see many more exposed. But next up I think wi be the Wirecard trial in Germany, if they find someone to prosecute
They have Markus Braun, ex-CEO, in 'Untersuchungshaft' / on remand in Augsburg, near Munich. He has been there for 1.5 years and will probably be prosecuted this year. In addition, around 30 Wirecard associates are being investigated[0]. Of course The One That Got Away, and likely prime instigator, Jan Marsalek, is oresently in an unknown location with a lot of money on his hands.
It was Jan Marsalek I was meaning, thank you for the information. If going into hiding is your response to the issue then you must be pretty sure of your own guilt.
Yes, In order to invoke federal jurisdiction the SEC uses the fact that they communicated beyond state lines over the wire. This is why all the charges are called wire fraud. Relevant: https://www.law.cornell.edu/wex/commerce_clause
Basically everything is interstate commerce. See Wickard v Filburn. It's why growing your own pot or making your own machine gun earns you federal jail time, even if they never enter commerce or leave the state. Basically whether commerce leaves state lines means nothing in terms of whether there is interstate commerce; even growing your own crops to feed to your own animals is considered interstate commerce.
Whether a wire left the state means dick to whether the federal government has constitutional authority over it, per supreme court.
Guilty of taking a billion+ dollars from rich and influential people who couldn't bother to do the bare minimum due diligence into their investments due to greed and FOMO.
Not guilty of endangering thousands of lives by running fraudulent and inaccurate tests under sub-par lab conditions.
Our justice system works well. You are confusing your own emotional feelings for what you would have liked to see with the reality of what was able to be proven without reasonable doubt. The type of populist mob justice you allude* to is not just at all.
Sure, but if the precedent isn’t generating justice, then it’s worth considering alternatives. There is no holy scripture which says proof beyond a reasonable doubt is the correct way to run a justice system.
Your comments in regard to this case are right but our justice system does not work well. People who can afford lawyers do much better than those who can’t.
Our justice system is terrible. Look at the huge racist disparities like 5-10x rate of incarceration of Black people for weed, even though Whites use weed at similar rates. Then the for profit prisons, ridiculously high sentences, appalling prison conditions, and mass incarceration of 21% of the world's prison population.
No one goes to prison for using weed. You go to prison for trafficking it.
Our prison population reflects our crime rate demographics. Certain demographics commit far more crime, especially violent crime, than other demographics. They are represented accordingly in our prisons.
Justice is pretty fair and blind across the board. Do the crime then do the time.
Unless someone is “alluding” to a lynching then “populist mob justice” is a gross mischaracterization of laypeople expressing disdain for the justice system.
The FDA voided over a million tests performed by Theranos due to unsanitary lab conditions, contaminated samples and unauthorized modifications of testing machines. Their results were anything but accurate.
"When Theranos' machines were rolled out to Walgreens stores in California and Arizona, they gave patients false or flawed results. One patient testified that she was led to believe she was having a miscarriage after taking a Theranos test, when indeed her pregnancy was viable. Another patient thought her cancer had returned when it had not, following a test. But in the end, jurors did not believe that Holmes intentionally deceived patients."
These examples by themselves are clear instances of harm. However, it's not unlikely that more patients were affected and perhaps even some of them took actions that were harmful to their health based on this false data.
What always amazed me is they had nothing… nothing that could do the thing they claimed. To the point they used competitors machines to produce results.
While it is unusual for the med tech industry, isnt it what startups do all the time ? it is not that surprising to me .
It is not pure SaaS companies either, in the EV/self-driving space we have outright frauds like Nikola rolled a truck downhill to make the video and were public at $8 Billion. Others like Rivian/ tuSimple are definitely are not going to meet the projections in sales and plans they have published. Tesla constantly says a lot of things they never delivery or deliver much later than promised.
Is this pedantic correction as in you would not comment had I said "most" of the time or do you mean to imply it is rare/uncommon/ unusual for startups to do so ?
Startups do NOT regularly re-package other companies' deliverables as their own, and especially not to cover for the fact that they've promised the impossible.
I think most of the start up proposals are more “here is what we do, where we’re going to go and how”.
They may have nothing / not much yet… but you know that investing and generally their products are very “doable”. Online focused cleaning service for example… it’s a crud app, maybe they don’t get users and fail, but the service was doable.
Theranos claimed to already do the magic thing with blood (many tests with very little blood) that they simply could not do and never did.
Big difference is Theranos lied about what the could do. Rando start up who is honest that they don’t yet do the thing, no big deal.
You can take money and have nothing… fail, but if you’re honest it’s not fraud.
The equivalent in SaaS would be something like saying you had a single non-distributed non-sharded table RDBMS technology that could perform equivalent at 10 billion records on full ACID as well as Postgres could on 100K records. You have no such thing. No one knows how to make such a thing. It would require a breakthrough in software at Turing award level. You should get slapped with charges if you take investor money claiming such a thing.
The magnitude of the lie isn't hugely relevant, a lie is a lie.
Sales people lie all the time and make claims about features that don't exist, often because the company has other priorities not because they are 'impossible' - but again, that doesn't really matter either.
It's a tactic used by salespeople to get the company to rally around a feature or set of features.
It's very common.
You have to ask yourself how that is not prosecuted as being illegal.
At least Tesla actually delivered shit though and had actual real working electric cars. I don't think any investors are regretting investing in Tesla based on Elon's promises...
This is a vast oversimplification. They had machines. The machines did (sometimes) work for some tests. They were doing R&D to improve things. Rather than be honest Holmes decided to build a house of cards of lies.
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[ 3.2 ms ] story [ 408 ms ] threadhttps://www.popehat.com/2013/02/05/crime-whale-sushi-sentenc...
In any case, she'll definitely do time. You're forgetting the victims in this case are not only also rich, but probably vastly better connected since they have yet to steal from their friends.
Sorry I didnt understand what you meant here.
That make more sense?
Edit: I'm saying being white and being a woman helps, but being rich helps such an astronomically huge amount more emphasizing anything else feels less like informing and more like baiting.
Not sure how that wasn't crazy clear.
Are you saying white, rich people and women dont get preferential treatment in the US justice system?
edit: wow, reading gp's "clarification" below, I was way off
Yes, there are minimum security prison camps for first time, non violent offenders, which seems entirely appropriate, but a day spa it aint.
https://www.washingtonpost.com/news/reliable-source/wp/2015/...
[If you're not familiar with sentencing, the basic procedure is this:
1. Compute an 'offense level' for each count. For counts that are strongly related (which all of these likely are), combine by taking the maximum offense level. If they're not related, it's more complicated (not simply adding them up).
2. Compute a 'criminal history level'. For Holmes, that's basically "no criminal history."
3. Adjust for things like the convicted person's remorse or cooperation with investigators.
4. Look up a table that maps offense and criminal history to an actual sentencing range.
5. Adjust that (primarily, but not exclusively, in the previously output range) based on the judge's feelings.]
[1] https://www.sentencing.us/
For those unaware John Carreyrou played a major role in exposing Holmes. His book is a good read: Bad Blood and host of Bad Blood: The Final Chapter
https://twitter.com/JohnCarreyrou/status/1478158063379042304
> And the judge will probably declare a mistrial as to the 3 counts they couldn’t reach consensus on.
> The 4 guilty counts are all investor counts. The investor conspiracy count and the counts relating to the hedge fund PFM, the ex Cravath attorney Mosley and the DeVos family.
EDIT: Mistrial only on those 3 counts which got no verdict, not the full trial. Also this is only if the Feds want to do it or now which will also depend upon how many years Holmes gets as well as if she just decides to plead guilty on those 3 charges.
The presumption of innocence in this case, is that she did not mislead Investors.
(IIRC, Holmes' lawyers also made the argument that it was not legally possible for her to have committed wire fraud against the patients, because any money that Theranos received would have come from their insurance companies.)
Part of the difficulty is that the empirical data that would have proven how well (or poorly) the technology worked was allegedly stored in a proprietary, bespoke database. When Theranos was ordered to turn over the data to the feds for discovery, they delivered an encrypted copy, and then claimed that the encryption key was lost and the original disk arrays were unrecoverable. Both sides of the case then blamed each other for destroying the last remaining copy of the data, which made for some fun reading.
Here's one report on an invalid pregnancy test:
https://www.theverge.com/2021/9/21/22687026/theranos-patient...
This doesn't hold with what was found in the trial. She was found not guilty on those counts. Just because a dude wrote it down in a book doesn't mean it's true. And the legal process found it to be, in fact, not true.
The jury didn't find that the results given to the patients were accurate. They found that Holmes was not personally, criminally culpable for wire fraud in those cases. Wire fraud is a crime that has very specific elements, well beyond the question of how accurate the test results were.
They decided that she had.
FWIW, every single firm that had medical expertise declined to invest in Theranos. They could see it had extremely minimal chance of success.
Longer answer: Theranos never really got their own custom machines working. Until those machines were working, they did use other machines and processes which did work. However, their entire shtick was trying to do a lot of tests on less blood than usual, so... they simply diluted the blood samples to get enough volume for those machines to function in the first place, and correspondingly, the results were absolute garbage. Effectively, they were using working machines incorrectly to cover up for their non-working machines.
Carreyrou originally got tipped off by pathologists saying that this was impossible, then they got sued into oblivion (see thepathologyblawg).
(IANAP but this is my understanding)
Some real tests rely on having a huge blood sample (e.g. 100ml), being filtered (e.g. by centrifuge) and then a test of a known sensitivity applied.
Theranos claimed that their tests were more sensitive so could work with smaller samples. Statistically this doesn't work because with a finger-prick test (e.g. 1ml) the sample is 100x less likely to contain the target cells - cells are integers.
Additionally finger-prick tests contain only capillary blood - they're filtered by the finger blood vessels only allowing tiny cells - some of the Theranos tests claimed they could detect markers that only exist in arterial and venous blood.
(I do realize that keeping track of how precisely Theranos was lying can be frustrating, since they were doing multiple levels of lying here.)
Often shares will be split %-wise between two or more funds. I.e. 22.5% goes to XYZ Fund 1, 85.5% goes to XYZ Fund 2. These % can be super specific and make it so wires go down to the cent.
If, like you said, the patients still got their results, the results were correct, and it was only how those results were obtained that lead to the patient fraud charges, then I think you maybe correct.
Again, I'm not a lawyer, so people should feel free to correct me if what I said was wrong.
Patients just saw a blood testing service promising the same accuracy as a blood draw and went for it
I think you are: https://www.theverge.com/2021/9/21/22687026/theranos-patient...
https://www.businessinsider.com/theranos-problems-blood-test...
> To use traditional machines, Theranos had to dilute some of the smaller samples it collected. It appears that Theranos carried out another 60 tests using this method in December 2014.
> Some of the potassium results at Theranos were so high that patients would have to be dead for the results to be correct, according to one former employee. This is because, lab experts told The Journal, "finger-pricked blood samples can be less pure than those drawn from a vein because finger-pricked blood often mixes with fluids from tissue and cells that can interfere with tests."
Holmes clearly lied to investors, and even if she may have "believed" in the long term prospects of her company, she also clearly intentionally lied to investors to get their money. The investors were also obviously harmed (they lost their money). Also, the fact that VCs expect a lot of their companies to fail is totally irrelevant. VCs (and more importantly, the law) also expect founders to tell the truth on simple statements of fact, e.g. "We recieved this much revenue" or "This machine can perform X, Y, Z tests now". Again, Holmes didn't just exaggerate or say "This machine can perform X, Y, Z tests in the future". She flat out lied about the current capabilities of her company.
With patients, most of the tests were done on standard equipment. I don't believe patients were ever told "we will test your blood on Edison", and more importantly, they probably wouldn't have cared that much - they just wanted their test results. So with the tests done on standard equipment, hard to argue there was much harm done there.
Now, some tests were done on Edison, and I know Walgreens invalidated a whole bunch of Theranos tests. But even then, it's harder to say Holmes intended to deceive in that case (a prerequisite for the fraud charge) - presumably they chose to run them on Edison and not the other equipment because they thought Edison could handle those tests. The fact that the lab was sloppy, the fact that Edison had issues, that in my mind wouldn't be enough to assert wire fraud on the part of Holmes. All in all it's just kind of hard to say that patients were really defrauded at all. If Theranos had instead just completely made up some of their test results, and Holmes directed that behavior, then yes, that would have been fraud against patients, but that's not what happened.
https://www.nytimes.com/live/2022/01/03/technology/elizabeth...
https://news.ycombinator.com/item?id=29789074
This might be because Saturday in Hindi and other Indian languages is “sunny-var”, and the day of the week you are born on is a common nickname, in conjunction with “sunny” being an easy to pronounce and common English word.
I feel cheated. I got my nickname because my baby sister couldn't pronounce my name correctly.
1: https://en.wikipedia.org/wiki/Shani
From what I understand, the reasons for picking nicknames are quite random. As another commenter mentioned, people named Sunil or Sanjeev go by Sunny sometimes, although other times it is just picked out of the blue, like with Bollywood actor Sunny Deol, whose real name is Ajay. His brother Vijay uses the screen name Bobby, by the way. Random.
Sometime people named Sunil, such as the cricketer Sunil Gavaskar, use Sunny as a nickname.
("U.S. District Court Judge Edward Davila will sentence Holmes at a later date.", according to CNBC.)
> On Monday, U.S. Department of Justice attorneys responded. “Thousands of patients received unreliable blood tests, depriving them of money or property, placing their health at risk and, in many cases, causing actual harm,” prosecutors alleged in a filing in U.S. district court in San Jose.
Considering the vast weight of the harms she caused, in a "fair" retributive justice system, she would get far worse the sentences routinely doled out to typical criminals.
But the US "justice system" is hardly "fair".
Personally, I don't really believe in retributive justice. The light sentences afforded to privileged criminals bother me, but what bothers me more are the draconian sentences received by those of less privilege.
Look at the people who went to jail following the housing collapse vs the madoff ponzi scheme
Depressingly that seems to be the primary factor in such cases.
that just seems so reckless on so many levels
This is the reason why you can catch a federal charge for growing your own pot or making your own machine gun, despite it never leaving your property nor any desire or act to enter commerce/trade. Even merely _where_ you store your goods for personal non-commercial use in your own state is considered interstate commerce, a la Gun-Free School Zone Act.
[1]: https://www.bloomberg.com/news/articles/2021-12-14/balwani-s...
Considering she was found guilty on 4, it's not obvious that they will bother.
Wish I had gone big on this one earlier, because I have a feeling this verdict is going to spice things up in the short term.
All that to be said, if you've got any authentic Theranos gear hiding in storage please do let me know, I'm a motivated buyer.
For those curious as one example: Nothing raises a few eyebrows more than a note written on Lehman Brothers letterhead with a Purdue Pharma OxyContin pen with the dosage pullout.
At first I read 'worth in the hundreds of thousands' and I was really curious what garnered such value. Language ambiguity is fun.
Like you, I collect fucked/defunct company merch, tho my collection isn’t just fraud related, I’ve got Quibi merch — most of it is. I’ve got MoviePass, Fyre Festival legit merch with tags, Ozy Media was a recent one, Enron business cards, Arthur Andersen tote bags, Worldcom mugs, etc. I’ve even got some old Internet Explorer merch, because it’s kitsch!
What is your favorite piece?
Also, have you seen The Booksellers?
It took me a while to realize I was collecting books. Before, the way I thought of it was "I would never walk past an out-of-print book about computing history! I might never come across it again!" But now I am a bit more focused on the collection aspect, for example, there are now specific titles and authors that I seek out.
I've seen a lot of Pawn Stars in the past six months. They never say this, but you can put it together. Most things that people collect trade in low volumes, so pricing is hard, and the bid/ask spread kills you. If you decide to sell, you'll either get 70% of the value if you sell it fast, or maybe 100% if you're ready to wait two years. If you want to liquidate everything, it might depress the market. There's also a discount when you have it as a collection because someone could part it out, but that's even more time. That, and the drive to collect is building the collection, so there's less utility in getting an instant collection.
As a collector of memorabilia for a band that's been around a while: The items I was drawn to, either because I just loved the look or because they were from a show/tour/album I particularly found special, have often turned out to be the ones that have appreciated much more in value than the average thing of that level of rarity for the band.
But it sure does make me nostalgic!
https://www.ebay.com/b/CueCat-POS-Barcode-Scanners/46706/bn_...
Even some cases of 100 for $500.
Hey OP, I got a Theranos-branded mug I can drop-ship you from Alibaba. $800 OBO
I’d think the only way is to be the original owner (ie proof of employment at the company), but even then, given such a hot marketplace it would be super easy to just purchase and resell knockoffs.
The same way they do it with art ... research.
With say a sweatshirt produced by a third party based on some digital stencil art, do you know for sure the one you're receiving was printed by the company and given to an employee/customer? Literally hundreds, possibly thousands would be in circulation. How would you be able to distinguish that from say something a former employee w/ access to the original art data having it reprinted?
I think that's part of the fun, hunting for the original stuff.
Would you be interested in an unreleased "Cosby Show" lego set that was supposed to come out right before he got cancelled?
0: https://www.cnn.com/2015/07/07/us/bill-cosby-quaaludes-sexua...
But I actually meant "literally" cancelled. The Lego set was planned to come out with an actual REBOOT of the Cosby Show, which was cancelled in the traditional meaning of the word, like the TV did not go to air.
https://tvseriesfinale.com/tv-show/nbc-kills-new-bill-cosby-....
If that was the intent, it was a pretty big mistake to use “before he got cancelled” instead of “before the show got cancelled”. The former construct in modern usage is pretty exclusively used for pejorative references to actions attributed to “cancel culture”.
That was the meaning before “cancel culture” and was the intent of the parent.
I didn’t at all read it the way you did, maybe I’m older than you and I’ve seen more shows cancelled. (Firefly, for a famous enough example)
The discussion about disgraced-public-figure memorabilia was certainly offtopic, but it was offtopic in a whimsical and unpredictable way. That's ok on HN because it's interesting. What's not interesting, and is the bad kind of offtopicness, is turning the thread into a generic argument about some inflammatory thing that has already had countless flamewars. If you review https://news.ycombinator.com/newsguidelines.html, you'll see that we have several rules that are intended to act as flame retardant against this kind of thing:
"Eschew flamebait. Avoid unrelated controversies and generic tangents."
"Please respond to the strongest plausible interpretation of what someone says, not a weaker one that's easier to criticize. Assume good faith."
"Please don't pick the most provocative thing in an article or post to complain about in the thread. Find something interesting to respond to instead."
The high-indignation, high-repetition flamewar topics are like black holes that suck in threads that swerve too close to them. Since they're so repetitive (and generally so nasty), they're definitely not what HN is for, so we should all try to steer clear of them.
https://hn.algolia.com/?dateRange=all&page=0&prefix=true&que...
Can't tell if serious. If serious, was this out of Lego Ideas (Cuusoo)? [I worked on the Back to the Future DeLorean set with the designers in Denmark]
Worth anything?
Very very very curious of the text contained within.
I would not be interested in authentic Theranos swag, but I would pay a lot for a new knockoff mock turtleneck with the old MPlayer logo on it. Now I can't even find the old MPlayer logo anymore.
I worked for a "hot" a16z startup just out of college, with a trendy office and the :rocket: :moon: vibe. They went under a few years after I bailed, but I still wear the t-shirt because it makes me chuckle.
In a strange twist of fate, I decided to exercise my few options, and I had to mail my stock exercise notice to some place with a check for ~$2500 to purchase them. USPS lost the letter and saved me $2500.
For the longest time the historical Vancouver stock exchange, vsx, was known as something like the fraud capital of North America.
All of that is before we even get into the ugly history of some Canadian mining companies that have got into bed with non-democratic regimes in places in the developing world, where they did actually have a real mineral resource to extract, and damn the consequences.
" ...one of the five women who considered themselves his wife... "
This is some serious drama. Have you got any reading you can recommend on the topic? I recently bought "The Prize" to catch up on my oil & gas history, perhaps there is a sibling book for minerals?
It would be trivial to prove you worked at a company if that's how you were given it, you might even have photos of an event where stuff was given out, emails detailing a "welcome pack", I'm guessing it's these sort of things that are used as proof.
[*from What We Do In The Shadows]
https://www.apmex.com/product/50847/enron-corp-stock-certifi...
Also I love that website. As a recent casual collector of paper currency. I never thought to buy some old stocks/bonds.
Edit: it’d be hilarious I’d the Enron stock was fake
That's a really cool collection! I always find it interesting to learn what obscure things folks collect.
> any authentic Theranos gear
How do you tell if it's authentic? If I was a collector in this area, my big concern would be that especially given that the market is hot, someone could just look on ebay for images of branded products, and then make replicas of them by passing the same logo onto promotional printers.
And rip offs will often have subpar artwork obviously not using original AI/EPS files.
A buddy of mine has a similar fascination with picking things up from defunct companies, specializing in film/video post production companies. One of the items he picked up was a standard banker's box. Inside were a pile of CD-Rs which turned out to be the entire digital back up of an unfinished 3D animated feature. The entire recordings of the actor's lines. The 3D objects, scenes, etc to an unknown level of completeness. Even though the work product was purchased from the bankruptcy auction, the copyright was still owned by the creators and could not be rendered/released just because they bought a box in auction for $20.
Does the first-sale doctrine not apply here?
https://en.wikipedia.org/wiki/First-sale_doctrine
I was curious. My ebay search for "theranos" turned up 50 items. There were fleece jackets with high asking prices, so that certainly was something. But everything else I saw for mugs and hats and t-shirts was in the $20-50 range.
https://www.ebay.com/sch/i.html?_nkw=theranos
Seems like plenty of new things not collectors items.
In my totally arbitrary set of rules the item must have been available or given to employees only.
Here’s one I’d love to get my hands on if not for the price: https://www.ebay.com/itm/255014966170?hash=item3b6013939a:g:...
The Lehman Brothers risk management/principles cube was a hot seller for a while, but I'm curious as to long term valuations. Thought the art collection didn't actually do that well on resale.
(Hmm... might as well fabricate the collectibles themselves, as some other commenters have suggested...)
That sounds hilarious, can you post a picture?
Had free reign throughout the facility for two days, scavenging through 200k sqft+ of warehouse, marveling at the cringey pseudo-motivational blather posted everywhere and grabbing whatever could fit into my apartment at the time. At one point, we spotted Holmes (and her "special needs" Siberian Husky puppy who left dribbles of urine on the warehouse floor) arguing with some operators from afar.
We weren't allowed to touch specific computers, chemicals or any hardware locked in the cages (incl Edison devices), but everything else was up for grabs, from high-end Mitutoyo measuring tools to Aeron chairs to U-Line desks, Theranos bumper stickers, water bottles, etc etc etc.
So yeah, I've got a few bits of Theranos branded gear... Still waiting on the right time to sell.
[0] https://imgur.com/a/36HtZCp
I like hubris branding for the same (mythical) reason Canadian engineers do iron rings [0]: so that maybe when I'm waivering on an important decision, I'll look down at the logo on my coffee cup and remember that some things are more important than immediate professional gratification.
[0] https://en.m.wikipedia.org/wiki/Iron_Ring
I have a friend who is cousins with Elizabeth Holmes. His mom was her first investor and she has the original stock certificates... They're planning on turning them into NFT's and selling them.
[1] In this context to take meaning as knowledge, not meaning "not guilty" here.
If Reddit included those sock-puppet users in their metrics to investors, then that would be roughly equivalent fraud.
This was about the wealthy investors. They will come after you whether you fake medical devices or bombs.
All the wealthy investors gain nothing from Holmes going to jail. In fact the lengthy trial only drags them into the spotlight, which they'd rather stay clear of.
I don't think so. I think there were very powerful investors and others associated with the company (like board members) who were stung and embarrassed.
> SaaS and consumer tech startup founders lie and cheat and blow up investor money every day and no one really cares.
Do you have any roughly equivalent examples on the scale of the fraud and the people associated?
> All the wealthy investors gain nothing from Holmes going to jail. In fact the lengthy trial only drags them into the spotlight, which they'd rather stay clear of.
I disagree with this too. It's a good way to clear their names as it were ("we aren't greedy gullible idiots, she tricked us"), and a great way to send a message not to cross the ruling class.
In any case I'm not sure how the comment addresses what I wrote.
It didn't mean literally lying about your capabilities or accomplishments in order to garner more investment money.
That's not "fake it till you make it". That's just fraud. It's not really hard to distinguish between the two, despite the way some people are trying to merge the two definitions.
A coworker was using a mobile app from a startup offering to do "receipt OCR using AI/ML" when in fact they were sending most of the scanned pictures to a call-center in India to be manually entered. They hadn't yet figured out the fancy image recognition algorithm, so they were just throwing AWS Mechanical Turk at it while building up a user base. Realistically, they might never get to that level of AI while staying solvent.
That's not so different ethically to what Theranos was doing. The only difference with Theranos is the scale of it all.
The second, and more important, question is, are they harming customers. Theranus gave people unreliable blood test results and lied about their reliability. That does actual harm to customers. Whereas for scanning receipts the only thing a customer really cares about is accuracy.
No. One is we know we can do OCR, we know we can do AI, it's just an engineering effort to put those pieces together. The risk is schedule risk.
Theranos was hard science. They did not know if they could do what they fraudulently claimed they had already done. They needed scientific discoveries to deliver. The risk was can the necessary technology be invented.
The line around fraud is really not that gray. If you're lying about current facts for personal gain, that's fraud. You can hype all you want about the future, and most VCs are actually fine with you selling them the "yeah, it's hamster wheels in the backend now, but just wait until we build out our tech and scale!" line (just see all the well funded "AI" startups that just have legions of people "training" the AI), but if you say that it's the whizbang tech right now, but it's really just hamster wheels, that's fraud.
Fraud is not just an extension of "aggressive selling".
https://variety.com/2021/film/news/jennifer-lawrence-elizabe...
Investors know that every dollar they put into a company could disappear, it's why startups get capital from investors and not bank loans.
But a patient does not expect for their blood test results to be completely wrong. Her tests weren't giving false-negatives or false-positives, they were using lab techniques that we have known to be inaccurate for decades. She knowingly sold Walgreens on 1 test, and then performed a different test.
I need to sit down and properly inform myself about how the prosecutors fucked that up so badly.
Not excusing it, but maybe it was a company vs personal thing (eg. consumer harm perhaps didn't pierce the corporate veil[1]). Whereas Fraud against investors is much more of a personal/individual thing.
[1]: https://www.law.cornell.edu/wex/piercing_the_corporate_veil
Because und test results where in general correctish, they where just not gotten in exactly the way it was claimed, which was also not noticable less reliable or anything.
And what the user bought was the test result.
As far as I understood, with my very limited understanding of US law it seems hard to sue as a consumer as you where deceived but not hurt/damaged in any way.
Guess they just answered the question of "If you can't tell the difference, does it matter?".
"we gave you treatmemt for wrong type of cancer, close enought!"
They diluted the blood. They couldn't possibly be correct.
The maybe not right information I got was:
During the trial phase they get full sized blood samples + finger prick to do cross validation.
The results they send back where "from the validation" as it was basically the only test done.
I think in the HBO documentary they say the unravelling started because of FDA complaints on the bloodwork being sub par. But I think you can't jail someone for 120 years because they did a shoddy product. Maybe the prosecutors simply went for the biggest bang for their buck?
This is what they did to Wallgreens, they sold them on the idea that they would have theranos machines in-store, but instead what they did was do IV blood draws (calling it a comparison check) .. and then would just process the samples the same way as everyone else using standard equipment.
People were getting good results because Theranos was using machines from Siemens in their hidden lab.
> People were getting good results because Theranos was using machines from Siemens in their hidden lab.
Thus the tests sometimes were good, and sometimes bad. Some patients underwent unnecessary medical treatments and procedures based on bad tests.
Those machines weren't designed to work that way though, so the test results were wildly inaccurate when they did dilutions. And they fired people who wanted to delay rollout in order to ensure that they had consistently accurate results.
Lying about it to the Investors, and possible intellectual/contract issues with Siemens are another issue.
Very few tests are 100% reliable, so I would expect that Theranos claims about how the tests where performed would play a significant role in determining the guilt. People where told they would get the perfect magic pixy dust test that worked on one drop of blood instead they got one of the early covid tests that needed at least four repeats to give a "most likely negative" result, unsurprisingly the covid tests also resulted in confused tweets by the one or other VC.
Unfortunately, it turns out that "fake it til you make it" doesn't work with some problems that are seemingly unsolvable (at least by the approach they took).
IOW, it turns out that "fake it til you make it" doesn't work if you don't actually make it.
Reverse engineering is not bad, and it is dismaying that someone posting on a site called "Hacker News" would think so.
Personal attacks aside,
I'm just saying that if I get a blood test and it says I've got AIDS and I actually don't -
and that's all because some sociopath grifter with less of an education than what's been proven with my own Bachelors of Fine Arts realized that to swindle millions of more dollars from her geriatric backers she's been manipulating (and ruining the lives of their own family members),
she needs to fake the test results from an impossible dream machine that does NOT exist and couldn't ever - because it defies the laws of physics,
and does this by running modified machines of her competitors that are now basically broken,
in secret rooms she doesn't tell journalists or inspectors about,
well: that's truly fucked.
But I don't know if the context of any of this is what some really want to discuss. It's just the slogans. You know: "hack the planet" and all.
I also don't think I'd be really OK with working for a company that told me to do this reverse engineering, but if your morality says differently, then: hey.
Of course badly done reverse engineering can be bad. But that's not because it's reverse engineering; it's because it reaches incorrect conclusions that hurt people, just like not doing any reverse engineering at all. The problem that put people at risk in this case wasn't that Theranos did reverse engineering; it's that they didn't do enough reverse engineering.
No, sure, real reverse engineering is fine.
But when "reverse engineering" is used in the sense Theranos (and/or Holmes' defense team) apparently did -- i.e. tampering with a competitor's machines so they sometimes don't work properly, and passing off the sometimes-invalid results as super-duper hot stuff created by your new and superior WonderTech™ -- then yes, it darn well should be criticized to Hell and back.
Well, better than the relevant standards. Otherwise all the "reverse engineering" -- i.e, tampering -- is fucking meaningless.
If they were taking apart and studying the hardware inside competitors' machines, then that would not have been a problem. It's something which many companies do. But they would not be using this for patient testing, they would use it as input to product development and engineering.
Theranos were modifying the machines to operate outside their design parameters. Medical diagnostic equipment is validated at great expense to operate within given parameters to give a diagnostic result which is known to be accurate with a very high probability. They are carefully calibrated and tested to guarantee the accuracy of every test. Tampering with them makes them invalidated and destroys any guarantee of diagnostic result accuracy. The FDA approval for the equipment is only valid if they are operated as intended.
For this reason there are carve-outs in copyright law where something is illegal except when done for the purpose of reverse engineering; for example, in the US, you have Sega v. Accolade.
After failing to produce their own reagents and hardware, Theranos pivoted to using off-the-shelf Siemens hardware and reagents (purchased through a shell company) and dramatically diluting the blood samples to make good on the "single drop of blood" customer promise.
This would've been an impressive feat of reverse engineering, software eating the world, IF IT WORKED. But it didn't. Results couldn't even pass internal audits and the FDA forced Theranos to invalidate ~1 million test results when they found what was going on.
You'd have to prove to the court that theranos used their bad techniques instead of their good ones.
I am not as optimistic they kept such detailed records of their crimes, and feel this would be a tough angle to successfully prosecute.
https://www.bloomberg.com/opinion/articles/2019-06-26/everyt...
I'm not even sure they could be criminally charged for a sham festival since the festival did actually happen. I'd imagine that the whole thing turning out to be a complete wreck would probably be something that could be handled in a civil case.
The above does not excuse fraud. Investors know their investments are risky, but that does not give you permission to deliberately lie or mislead, with an intent to deceive the potential investor.
For example, if you tell investors that you anticipate getting $50M in new contracts over the next year, well, assuming you mean it in good faith, that's not fraud even if it doesn't pan out or was delusional to begin with.
If you tell an investor you just signed a contract for $50M, in order to get them to invest, and that's a total lie, that's fraud. Whether or not the investor did appropriate due diligence to confirm that fact or not, it's still criminal.
On the other hand, perhaps the argument was that investors know there's a risk and know they should be skeptical. It would be unreasonable to expect patients requesting a blood test to be suspicious and question the results.
If you've ever dealt with competent VCs, they are very skeptical, which is why they pretty much ignore your forward looking statements and just look at your current data. And the reason they do that is because forward looking statements can be all kinds of BS, but current data is just facts (unless you're lying about them, in which case it's fraud).
Of course, they also want to know your vision and drive for the future, but they'll basically ignore statements like "We have 10 big deals I'm the pipeline" and just say "How many signed contracts do you have?"
my thoughts exactly. i'm woefully underread on the whole situation but something is weird and different about it.
one thing that does jump to mind is that the investor list and board composition isn't what i'm used to seeing for stem ventures. i can imagine that perhaps they're less forgiving of failure and were operating with more blind trust in company leadership on stem/technology matters.
[1]: https://twitter.com/doratki/status/1435590320897478657
For those stuck at the end of first day coverage the way I found is: type «from:doratki day 2» in search
I mean, if you could find someone that experience material loss from it, or death, I think they'd have a very legitimate chance to sue. It's not clear to me what promises Walgreen's is actually making though.
Who knows how long the scam would have continued without him, and how many more people would have gotten bogus test results.
If Tiger Woods can get a presidential medal of freedom for playing golf, it seems like it's the least they could do for Carreyrou.
If Theranos still existed as a company, it would doubtless be getting buried under a blizzard of charges relating to how Theranos, the company, treated their patients. One of several reasons why Theranos the company no longer exists.
Unless the word "really" is doing some heavy lifting here, this is incorrect. There were multiple counts directly and specifically related to defrauding patients. These counts came back not guilty, but they were, in fact, charged, and customers testified in court in support of these charges.
I have to think, though, that the fact that it was such an odd charge in relation to patients, had a part in why those charges didn't stick. I think wire fraud in relation to investors succeeded because it was a much more accurate description of the act involved. But you're correct, some of the counts that didn't stick were wire fraud related to patients.
Theranos tests gave some inaccurate results, but the defense will say Traditional blood tests can be wrong as well. This devolves into statistical evaluation of the methods used for testing, e.g. if the standard test is 99.9 what was the Theranos result?
This is a huge mess, and why the pragmatic charge was financial fraud.
The lies to patients and investors were quite well linked anyway, if you want to think about it like that.
The lies told to patients and fraudulent test results could be (and were) denied by saying she wasn't aware of what was happening in the labs.
It's not that investors are more important in the eyes of the law or that patients weren't lied to, it's about the quality of the evidence available. Her not guilty verdicts do not mean she's innocent, simply that there wasn't enough evidence available to convince a jury.
Being found guilty of defrauding investors in that light is easy because Holmes did specific acts, such as basically saying "we're endorsed by $BIG_PHARMA" knowing that they weren't, as part of her investor pitch--that's a pretty unambiguous traceable injury. But tracing anything she herself said to getting a random schmoe on the street to take a blood test... again, if you think fraud requires that specific act, it's not hard to see why someone would vote not guilty there.
Of course, I would still have liked to see her proclaimed guilty on fraud for the test results. But as abhorrent as her actions may have been, they may not have necessarily climbed the bar into illegality.
Imagine that, rather than the CEO making shit up, the case was about a lowly lab technician who faked results out of laziness or recklessness. Even though his fraud ultimately impacted the patients, he would probably still get convicted for defrauding his boss or the company he directly worked for, not the patients he never met or knew.
If your client was a wealthy person or large corporation and you knowingly lied to them about the performance of your product or service which caused them damages, would you get charged?
Ultimately, does this mean that the next fraudster will get away with it as long as they keep their investors in the loop about the lies?
The law really is weighted in favor of investors.
https://www.reuters.com/business/judge-tosses-deal-shielding...
But when it's the CEO who does it, doesn't she do both? I mean, those individuals who get the fake test results are also members of the general public.
https://www.cnbc.com/2021/11/17/theranos-patient-says-blood-...
Fun fact: In some places like Singapore you don't even get the chance to test again to verify the result, you just serve your time in quarantine and then get back your "safe" status.
I don't think it's for the best, it ignores any other medical conditions and offers no way to double check a result that could come from a dodgy test center.
Whereas Theranos' newfangled secret "innovation" was ... well, a secret throughout.
But even with the established PCR tests and with all the theatre around it, I doubt that this quantity of testing is being performed up to the highest standards and there are a bunch of "entrepreneurs" in this space too who may benefit from little supervision or consequences.
In this case the people claiming COVID PCR tests were bogus were right. The US CDC has now admitted it. They recently changed their testing rules to stop PCR testing people at the end of their self isolation period because PCR tests can stay positive for up to 12 weeks whilst being clinical false positives, and thus (Rochelle Walensky's words) "we would have people in isolation for a very long time if we were relying on PCRs" [1]. Nothing changed to prompt this - no new science or discovery or anything like that. They just suddenly noticed something that random bloggers knew in April 2020: that COVID PCR positives don't imply you're infectious. Also note the use of the word "would" and not "did"; apparently she's in denial about what happened here.
There are lots of other issues with them beyond the cold positive problems of course. In theory PCR tests are precise because they triangulate the presence of at least three genes. In the beginning that's what they looked for. Over time that's slipped and they're now routinely reporting PCR tests as positive if they only detect a single gene. I took a PCR last week where the certificate stated outright they only looked for one gene.
This crops up in other ways. To detect Omicron, they were taking PCR tests that failed to trigger on one gene (thus technically should have been classed as negative) and then treated them as positives, being sent for sequencing to determine if they were Omicron or not. But only samples with Ct <= 30 were sent. They use this threshold when normally even 40 is accepted to be a positive (Ct is log scale so 40 is a very tiny level of detection compared to 30) because it turns out any sample that triggers over 30 is so destroyed it's unsequenceable. They can't even find enough viable virus to know what it is. That doesn't stop them classifying such samples as "infectious and must self isolate" normally, though.
And all that's before you even get to the cause/effect confusion the tests represent.
No, COVID PCR testing is a mess. The only reason Holmes is a convict and those guys aren't is that Holmes wanted to be the next Steve Jobs, so she worked entirely in the private sector. If she'd been selling COVID stuff to the government she'd have been fine, even doing the same things.
[1] https://abcnews.go.com/Health/live-updates/coronavirus/?id=8...
There was a scammy company is Sweden that wrote everyone negative covid results, without actually bothering to analyze the samples:
https://www.euractiv.com/section/politics/short_news/swedish...
Yup - https://www.businessinsider.com/theranos-gets-fda-approval-2...
Maybe it's just me, but with all the anti-consumer practices going on, it doesn't surprise me in the least. Gotta protect those profits.
In my own mind, the test result fraud is far worse ethically - however as long as she is locked up, it still works.
There is obviously a culture issue with "white collar" crime and a large hole in most countries ability to correctly police what is and isn't acceptable. There are also questions around "business secrets" and how these were used to justify a lack of scrutiny or due-diligence.
Not excusing it. But maybe the jurors think the doctors and/or insurance companies ordered/interpreted these tests have some responsibilities too?
But it's not the army, they could refuse, they all did the tests and gave the false results back to humans, which is unfathomable in healthcare. She s eventually responsible but her job was on investor relationship.
Officers are not only allowed to, but required to, refuse illegal orders in the Army. Enlisted troops are allowed the "just following orders" excuse, but not officers who should know better.
Within certain bounds; even enlisted can be convicted of crimes for following palpably unlawful orders.
I can’t find details of the specific wire fraud charges that she was found guilty of, but it is far easier to find and prove technical breeches of law (documents showing X was claimed to investors to obtain money when other documents show it wasn’t true) than proving intent or knowledge by the accused beforehand.
Could I have gotten out of it? Sure. Could I have gotten out of it without lying under oath? I don't see how.
Exactly. This is the exact opposite of the justice I'd expect.
Invest money? Expect to lose it most of the time, that's the game.
Pay for a service? There should be an expectation of honest delivery of said service.
Patients who were wronged by the company did get screwed though. Such is the nature of trials by jury sometimes the jury doesn’t come through.
If the patients were still getting correct results (I assume they were still being tested, but in traditional ways) then it makes sense that they were not being scammed
The patient's state of mind, e.g., their expectations, is not an element of wire fraud. Only Holmes' state of mind is relevant; specifically, her intent.
https://sgp.fas.org/crs/misc/R41930.pdf
"In any event, the question may be more clearly presented in the context of the defendant's intent and the materiality of the deception."
Whether a patient expected that results might be inaccurate, or even whether a "reasonably prudent" person would have expected results might be inaccurate, is not necessarily a defence to wire fraud. Even if such a defence were asserted, the focus would still be on Holmes, her conduct and her intent, not the patient.
If that’s true, it isn’t surprising she wasn’t found guilty for defrauding patients, and more cases (¿maybe one focusing on partners and one focusing on patients?) could follow. I don’t know whether something like that is in the pipeline.
Edit: reading https://en.wikipedia.org/wiki/Elizabeth_Holmes#Criminal_char..., that’s unlikely to happen:
“In February 2020, Holmes's defense requested a federal court to drop all charges against her and her co-defendant Balwani. A federal judge examined the charges and ruled that some charges should be dropped: since the Theranos blood tests were paid for by medical insurance companies, the patients were not deprived of any money or property. Prosecutors would hence not be allowed to argue that doctors and patients were fraud victims. However, the judge kept the 11 charges of wire fraud”
I think that leaves open prosecuting for something else than fraud for knowingly delivering unreliable test results, but wouldn’t know what that “something else” would be.
Theranos had a duty of care to the patients and they very blatantly breached that duty.
Fraud deals with purely financial loss, while negligence deals with harm which is much wider in scope.
So if a company deliberately and knowingly markets a "sepsis-test" that puts out completely random results and leads to people getting their limbs amputated (bear with me, I know the example is terrible), they can only be held responsible for "negligence" by those patients? Or would patients only be able to claim financial loss due to fraudulent loss of work ability and such?
There was similar reporting of those prenatal genetic tests a few days ago (they have led to unnecessary pregnancy abortions due to incorrect results), and I wonder what corrective action we can do to ensure these things don't happen?
Again assuming Wikipedia (https://en.wikipedia.org/wiki/Negligence#Procedure_in_the_Un...) has this right, negligence requires injury (“The United States generally recognizes four elements to a negligence action: duty, breach, proximate causation and injury. A plaintiff who makes a negligence claim must prove all four elements of negligence in order to win his or her case”
“Injury” may have a wider meaning in US law than elsewhere, though. Wikipedia gives me https://en.wikipedia.org/wiki/Personal_injury, which says “Personal injury is a legal term for an injury to the body, mind or emotions, as opposed to an injury to property”, so properties can be injured, too, and https://dictionary.law.com/Default.aspx?selected=1646 sort-of shows that’s a synonym for “property damage”.
I think they might have contracted out tests to real labs which could be fraud but that would be both harder to link to Holmes and potentially defensible. Imagine an alternate world with a Nega-Theranos which actually had machines which worked but were say five percentage points less accurate. Say Nega-Theranos used some patient samples with enough blood that way to check their accuracy in comparison. Technically not the machines they advertised but still done in patient interests.
We don't have a NegaTheranos and there were biophysical and statistical constraints which made the concept flawed from the start (not all blood sources are identical in the person and statistical limitations) . The smart thing to do was not try that method from the start. The ethical thing would be to tell the board and let them decide if they should dissolve the venture or try to pivot to another approach or task. It would be stupidly harder to try to identify the contents of blood non-invasively but actually possible. There are already several insulin only blood scanners in trial or development by multiple companies.
They lied about what test they were doing, and people paid them based on that lie. While the jury here may be correct that that wasn't federal wire fraud by Holmes personally, it absolutely was a fraud by Theranos.
False. Fraud deals with any time in which something of value (not just something financial) is obtained under false pretenses, and (where civil damages or criminal restitution is sought/awarded for it) can address all compensable harms resulting from the misrepresentation, not just loss that was financial in character (the restitution will be financial, of course, but that's also true of negligence.)
I don't know anything about that ruling except what you've quoted from Wikipedia, but didn't many of the patients have to make coinsurance payments for these tests? I just paid a medical bill today with a coinsurance component, and so both I and my insurance carrier have now paid for those medical services.
I also wonder about whether getting people to have a fraudulent medical test (which might cause some amount of pain or anxiety, especially for people who are afraid of needles) could have been a cognizable harm even if they didn't have to pay money to undergo it. But I realize that the law will often distinguish between suffering and losses of tangible property for many purposes.
If I remember right one of the witnesses was a woman who got a false-positive HIV test result, so they probably went for that angle.
If it's easier to prove that someone defrauded investors, then this is what prosecutors will go for.
Side note: I highly recommend subscribing to Matt Levine's newsletter.
[0] https://www.bloomberg.com/opinion/articles/2021-02-03/goldma...
> As I often write, this theory can turn anything bad that a public company does into securities fraud [...] The stock will drop (because the bad things are bad for the company); the shareholders will sue, saying “you said you were good, we believed you, we bought the stock, but you were bad and we lost money.” And so climate change and sexual harassment and lax customer data protections and mistreatment of orcas can all be transmuted into securities fraud.
Holmes was convicted of fraud, which is a crime.
If hubris was a crime, the meek would inherit the earth, and Silicone Valley real estate would be affordable.
https://www.ussc.gov/sites/default/files/pdf/guidelines-manu...
They're long and mostly not relevant except for the sections pertaining to Holmes conduct.
Here's the indictment:
https://www.justice.gov/usao-ndca/page/file/1135066/download
Holmes was found guilty of one 18 USC 1349 charge, and 3 18 USC 1343 charges; the 1343's she was found guilty on were in amounts ranging from $100k to $100MM(!).
It should be possible to come up with a better guess than the New York Times' "20 years per count, but likely served concurrently".
Also: I'm seeing from various websites that the maximum time-left-to-serve for minimum security (federal prison camp) is 10 years, but nothing definitive - [1] is the most in-depth but only specifies this requirement for male prisoners, whereas other requirements are clearly distinguished between male and female.
[1] https://alanellis.com/securing-favorable-federal-prison-plac...
They're actually even more specific for fraud cases, beyond the general 2B1.1 basic economic crime rule of sentencing according to the most severe count; for fraud, you apparently sum up all the losses from all the counts, which has the net effect of bumping Holmes up 2 additional levels.
Generally, yes.
If her sentence is high she might not classify as minimum security (prison camp) and might have to serve some years at a medium before being moved.
Remember, federal prison sentences are generally "85%" which means you can get 15% off your sentence for good behavior. Almost every prisoner will get the maximum 15%.
I didn't read the indictment. Are her offenses nonprobationable? Usually non-violent offenses are probationable for first-time offenders.
"She faces a max of 65 years (3x20 + 1x5). And it's not at all clear she'll do less than 20."
Apparently the sentences will not necessarily be served concurrently.
https://twitter.com/Popehat/status/1478170494130003976?s=20
https://www.popehat.com/2013/02/05/crime-whale-sushi-sentenc...
For another, because the guidelines are pretty specific in this case --- that 2B1.1 crimes are charged according to --- well, here's the wording from the guidelines: "the applicable base offense level is determined by the count of conviction that provides the highest statutory maximum term of imprisonment.". So "3x20" seems off the table.
"They run concurrently except to the extent necessary to serve the full sentence the judge selects."
When he said it's not clear she'll do less than 20, I don't think he meant she might get more than 20, just that she might get 20.
On the flip side, given the huge sums involved, it's not easy to make the numbers make sense served consecutively.
Here's an article about grouping:
https://www.josephabramslaw.com/understanding-grouping-rules...
Consecutive vs. concurrent isn't the issue here; doing a $140MM wire fraud puts you on the hook for an insane sentence.
So this is a case where the whale sushi sentence is... theoretically possible?! Wow.
https://mitchellepner.substack.com/p/elizabeth-holmes-found-...
I think in theory escape risk is a part of it, too, and people with extremely long sentences are presumed to have rather more motivation to escape.
Elizabeth seems the sort of person most capable of executing a plan whereby she pulls off a prison break through enlisting the aid of a bunch of other prisoners who're promised freedom themselves, but in her plan are actually there as decoys to be killed. It seems analogous to stuff she's already happily done. She is potentially a risk even to other prisoners if she carries on as she has done. I don't buy that she's not a risk to others.
I’m not talking about just Holmes here, but about prisons in general. It’s not supposed to be fun, but neither is it meant to support a collective revenge fantasy.
I'm curious where you got that understanding. Would you mind sharing?
Especially since that could put the khibosh on my retirement plans (commit a serious, but non-violent federal crime and receive a lengthy -- hopefully the rest of my life -- sentence at a minimum security "Club Fed"[0] facility).
Free housing, food, health care and clothes with no tax liability for the rest of my life? It makes me want to to massively defraud some congress-critters once I turn 70 or so.
Assuming I could be assured of conviction, I'd even hold on to the stolen money so it could be returned to the victims.
Yes, I'm being somewhat facetious. But decent assisted living facilities run from USD6-12k/month and once I've spent all my money, it's off to a Medicaid facility that isn't much better than minimum security prisons anyway.
This way, I can give my money to those I care about and not have to worry about spending down my life savings to ~USD2,000 in order to qualify for crappy accommodations at a facility that accepts Medicaid patients.
Just sayin'.
[0] https://www.washingtonpost.com/news/reliable-source/wp/2015/...
Shitty housing, unhealthy, often poorly prepared food, and frequently inadequate health care... when it isn't denied outright.
Being a prisoner in the USA, especially an elderly one, is terrible and shouldn't be joked about.
But being elderly and relying solely on Medicaid also sucks.
As a vertebrate, I take umbrage with that characterization.
If war is politics by other means, I suppose a prison riot is democracy by other means.
Agreed, but most US citizens who have worked at least a few years during their lives will get Medicare, too, which is significantly better.
Note that that is a big except, when you have lots of points, which big $ frauds get you quickly.
Now, it's possible that the court wouldn't agree with that analysis and find slightly fewer points, or that it would agree but would make a downward departure, but...
> Holmes' sentencing date has not yet been set. But she faces the maximum penalty of 20 years behind bars, though legal experts say she will likely face a lesser punishment.
That is, he wasn't arguing that she will serve the max of 65, just that the max is much higher than what NPR reported.
> It is unusual for tech executives to face criminal changes when their startups collapse under the weight of unrealized promises.
That's because it's not illegal to over promise about your future results. It is illegal to lie about simple facts regarding the present state of your business to attract funding.
I'm so sick of so many press outlets framing this as just "fake it til you make it" gone wrong, "a page from the Silicon Valley playbook", or that it's just an over hyped company take to extremes.
No, Theranos was outright, egregious fraud, and most startups that "collapse under the weight of unrealized promises" are not committing fraud.
Most startups don't get the traction and publicity that Theranos got, however. I wouldn't be surprised if a lot of founders would go to similar lengths given the chance; they just happen to have someone apply some reality check on them before things get out of hand.
I saw tons of teardowns of their machine saying how over-engineered it was for something that squeezes a bag of precut fruits and veggies.
That's the definition of over-engineering: https://en.m.wikipedia.org/wiki/Overengineering
Theranos was unique in both the scale of the fraud and how non-investors were potentially harmed. Most of these are just founders who knowingly or unknowingly get in over their head and then basically walk away after having lied about the state of things.
I’ve heard a bunch of stories from VC friends, but the one I was the most involved with directly was probably 10 years ago. My mom mentioned to me that she had been chatting with some senior local government official who mentioned they had a startup datacenter provider taking over a nearby abandoned office complex and converting it to a green datacenter, bringing hundreds of jobs to the area - had I heard of them?
I had not, and after some digging determined that the company had claimed to have a bunch of unique technology, and leveraged that to get preferential terms from the local government - free rent, no property or payroll taxes, and other cash- and non-cash concessions. They had also raised millions from private investors by saying they had active datacenters with customers and they needed money to expand.
Except none of it was true. They had no customers, no datacenters, no employees other than the three founders and one of their daughters. They had made commitments in three different locations over the past three years to build a datacenter while simultaneously raising money by saying they ALREADY had active datacenters and customers.
I shared this with my mom, who shared it with local government, who hand waved it away as nonsense. But nothing ever happened at any of these sites, and after they ran through the money they filed for bankruptcy with revenue of $0 and assets of ~$12k. Their biggest investor took control of their land lease from the local government. Some investors complained online about being lied to, and the local government quietly swept it under the rug. I spoke with a local business reporter who basically shrugged and said, “yup, you’re right, but no one wants to talk about it”.
That would be refreshing! I might pitch to them.
She was going to great lenghts, saying her machine was already ready to production, and able to do acurate blood tests, when she knew it was impossible, and was using regular blood tests to fake results.
She's not convicted of actually, physically harming anyone, esp. patients (which doesn't mean she didn't -- but she wasn't found guilty of that); she's convicted of lying to investors.
That's obviously bad, and should carry some form of punishment. Maybe 5 years? But life?? That's insane.
[0] I read John Carreyrou's book when it came out.
In both theft and fraud, the victim is deprived of of something. That’s why people consider them similar crimes.
Destroying 100 million is best compared to something like a "killdozer"[0] rampage. Holmes' crime was the destructive equivalent of leveling ~300 homes.
[0]https://en.wikipedia.org/wiki/Marvin_Heemeyer#The_'Killdozer...
It was very lucky nobody was seriously injured by that thing.
Even if you're lying to trick some companies and investors to give you millions you're still not as evil or dangerous to society as the person who chooses to terrorize individuals for their gain. The actions are what matters.
Fraud is not a zero-victim crime and less than petty theft is. Just because the investors can 'afford' it, their losses are passed on to society eventually.
Also a very American way of thinking AFAICS.
In that sense, this CEO could be like the Sackler family - responsible for so much suffering across American society for the past decade or so, but because the scale is so large they've effectively abstracted themselves away from the evil and terror they are responsible for. The implication being that the opioid addict gets the full judgment of the law and society for terrorizing individuals to feed their addition, but the people who made the addiction possible get away with being tricksters. The only reason Elizabeth Holmes doesn't approach that level is because she and her startup got caught before they could release their fake products at scale, before the more serious consequences would begin.
If you ask me, I'd prefer to see both being held appropriately accountable, preferably in a way that encourages rehabilitation and not retribution or cruelty.
Above all, I think, because it's so diluted across a lot of people. To me, all these fraud-on-a-grand-scale-apologists are as naïve as Moist von Lipwig in the Pratchett quote in a sibling comment.
Personally, I'm with the gholem.
> Grand theft includes theft of property with a value of more than $950 or theft of a firearm (any value). The penalty for stealing a firearm is a felony, punishable by a state prison term of 16 months, two years, or three years. In all other cases, grand theft is a wobbler and can be charged as a misdemeanor or felony. A misdemeanor sentence results in up to one year in jail and a felony sentence results in prison time of 16 months, two years, or three years. (Cal. Penal Code §§ 487, 490.2 (2020).)
You actually can't get that much time for stealing a car or jewelry. What gives a criminal that much time is that "theft" is often actually "robbery", which involves the use of coercive violence. Violence is generally punished much more harshly.
> California Penal Code 211 PC defines the crime of robbery as “the felonious taking of personal property in the possession of another, from his person or immediate presence, and against his will, accomplished by means of force or fear.” Robbery is a felony punishable by up to 9 years in state prison.
> First-degree robbery includes robbery of
> any driver or passenger on a bus, taxi, streetcar, subway, cable car, etc., any person in an inhabited structure, or any person who has just used an ATM and is still in the vicinity of the ATM.4
> First-degree robbery leads to a California state prison sentence of between three (3) and nine (9) years.5
She should be though. People had unnecessary and invasive medical treatment as a direct result pf her fraud.
The actus reus is her fraud, the original criminal act, and having decided to do crimes she is also responsible for any harm caused.
https://en.wikipedia.org/wiki/Actus_reus
In the US is it up to the harmed individuals or their surviving relatives to peruse this?
Experts have warned from the beginning that Theranos made unrealistic to impossible announcements. Anyone investing at that scale without consulting experts IMO does not deserve protection from the law.
If Theranos is one thing, it is a real life example of why group dynamics and investing don't mix, and why the best thing to come out of r/wallstreetbets is the saying "do your own DD".
Wirecard did the same with accounting statements from the Philippines, and EY accepted them without verifying that the statements are correct at the bank offices, they didn't even cross check if the billions of dollars could even be on the books of the Philippine banking system, and now EY is in hot waters.
If I were an investor and were presented with claims of validation of a technology that is hotly contested, the very first thing I'd do is call up or otherwise contact the issuer and verify the authenticity of that claim. It's like ten minutes to find out the contact information of Pfizer's Investor Relations team and compose a letter - investors who are unwilling to commit at least this little bit of verification deserve to be relieved of their money and office.
You bring up good points (although I think I disagree with your conclusion that people ‘deserve’ to be defrauded). There seems to be active collusion at times between oversight and the companies being audited. This isn’t the first time EY has been accused of this and we see it with credit ratings agencies too.
I think I come to a different conclusion because we all outsource our quality assurance on a daily basis. Did you review the airworthiness certificate of the last plane you flew on? If not, do you “deserve” to crash because you outsourced to the FAA without verifying it yourself?
I’d say the blame should fall to the third party auditors who failed the system, not necessarily to those who trusted them.
Am I a normal airline passenger/pilot or did I sign up as a test pilot for experimental / new / freshly repaired aircraft?
The latter get higher pay simply because that risk is part of their job, and to my knowledge test pilots have the option to refuse jobs they deem to be too dangerous. Same is for investors, with the difference that human lives can irrevocably be lost whereas money is only a virtual thing.
The system breaks down when the third party is corrupted or incompetent in terms mitigating that risk. If we're going to say investors/airline passengers 'deserve' an outcome regardless of the role of a third party verifier, I'd probably say there's no reason for an SEC, FAA, audits, or even journalists for that matter. We've largely said as a society those organizations play an important oversight role in mitigating risk.
Your everyday normal "retail" investor should be protected by the law and regulatory agencies, e.g. requirement that companies offered to trade their stocks for unqualified investors need to follow SEC guidelines on accounting and business best practices, that insider and politicians' deals are regulated/reported, that environmental, consumer protection and labor laws are followed and that such companies are audited for compliance. For investment vehicles (e.g. funds, stock options that are not part of "employee stock" programs), that the risk of major or complete loss is limited (=investments done by these with the assets of normal investors should follow the same rules, and that investments into assets requiring accreditation do not exceed 20% of the assets under management of the investment vehicle). Obviously, that also limits the return of investment aka the pricing of risk.
Accredited investors / investment vehicles allowed to invest in high-risk assets however? The accreditation should represent an exchange: you get the potential to higher return of investment unlocked, but as a price for that you have to:
1. prove you can stomach significant losses (=you have to own your residence and can only invest 80% of your net worth into investments requiring accreditation)
2. spread investments so that no single or related (e.g. by majority ownership) high-risk investment exceeds more than 20% of your total portfolio. Exceptions can be made for holding companies, SPACs and similar investment vehicles, provided that their investors follow the same exposure limit.
3. prove you/your staff are actually qualified to make qualified decisions: professional education (e.g. a university degree in economics, finance and related subjects or training provided as part of employment at a bank or other financial institution) and the time to adequately review the companies you invest (=someone who works 60 hours a week in a non-finance related job should not be assumed to have enough free time and mental capacity to review and follow-up documents)
4. waive your right to protection by regulatory agencies and the judicial system to a degree that reasonably expectable efforts (such as calling up certification issuers to verify authenticity of a certificate) have to be undertaken.
5. agree to be held fully liable for your loss and the loss of your clients if you violate the rules or act negligently.
That way, the assets of the majority of the population are protected against loss of their investments, actual professionals now have a monetary incentive to responsibly invest their assets, and auditors have the incentive to actually do their job (and if they do not do that on their own, their liability insurance will make them do!).
A case could also be made for an intermediate class of investor to allow people not meeting the criteria to invest a limited portion of their assets (e.g. cap at 20% of net worth excluding primary residence, require a minimum net worth of 200k $) into high-risk investment.
We do the same with other high-stakes jobs (doctors, pilots) and organizations (see e.g. how cyber-security insurances force companies to introduce IT security measures as part of providing insurance coverage) - why don't we do the same with the finance industry? There have been more than enough high-profile cases now, some of which actually caused global crisis events.
ETA: Additionally, "margin trading" should be banned or at least strictly regulated for all investors. The amounts one can see in the "Loss Porn" section of r/wallstreetbets are simply inconceivable. No one should be able to YOLO their retirement funds into Gamestop ffs, and no one should feel forced to off themselves because their bank showed them a 730k US-$ margin call [1].
[1]: bumby ↗ This clarifies your position well and I largely agree. It wasn’t immediately apparent from your earlier post that you were talking about the specific case of accredited investors. mschuster91 ↗ The key thing with regulating margin trade is that most home loans have less equity requirements than margin trading accounts - you can get homes with zero equity sans closing costs these days, while you have to maintain at least 25% equity in a margin trading account, and people don't have much of an issue with either. [deleted] ↗ (comment deleted)
Regarding the margin call type investments, I would add it’s not to just prevent endangering oneself but protects society as a whole. As a layman looking at past economic bubbles, it seems the one corollary is excessive speculation coupled with excessive leverage.
As long as the economy, the financial, employment and housing markets behave somewhat reasonable, even extreme leverage is not a problem... but in sudden uncontrolled crashes, that amount of collective leverage explodes backwards and everyone has a problem.
I'm actually not sure if it is possible to regulate margin at all to a resilience degree that stands up to market depressions, given that debt and leverage are essential to the working of any economic system (including all the various forms of socialism!) in a scarcity-based world itself.
As if sending her to prison for 5-10 years wouldn't be enough? Who will give her money or believe anything she does afterwards? She's done for no matter what. 65+ years is just to be cruel and enjoyment of the cruelty.
Even if it is the health sector where harm can easily be done, punishments shouldn't be based on hypotheticals.
Fraud is harm.
I’m an American. As a society, we believe in the deterrent value of punishment (which is proven not to work). We also see prison as a place to put dangerous people in order to protect society. We see only the risk of letting dangerous people out of prison, not any potential benefit. If we have to lock up 1 innocent person to be sure that 9 dangerous people gets locked up, those numbers work for us. It’s a kind of tunnel vision focused on the worst offenders and ignoring the many non-violent or rehabilitated offenders.
So, it’s just this very one-sided view, very risk averse and without much empathy or grace toward the offender.
Do you genuinely believe that high-IQ white collar criminals are exactly the type of person unable to do even the most basic risk-reward analysis?
According to this fact sheet, "the certainty of being caught is a vastly more powerful deterrent than punishment". Elizabeth Holmes and Bernie Madoff probably didn't think they would be caught.
https://www.ojp.gov/pdffiles1/nij/247350.pdf
NIJ is the research, development and evaluation agency of the U.S. Department of Justice.
She didn’t of course, but it wasn’t impossible to do. She just wasn’t good enough.
After all most cells in your body do a few thousand blood tests on millilitres of blood every second. Our technology has a long way to go but it can be done.
Penalizing mass murder also doesn't seem to have worked to prevent 9/11. The question is how representative the perpetrators are in these cases. I'd say not very -- do you disagree?
> According to this fact sheet, "the certainty of being caught is a vastly more powerful deterrent than punishment".
Just because you read it in some fact sheet doesn't mean it's true or even makes any sense. Probabilities and punishments are not commensurable so what does this even mean (without some attempt to describe a subjective loss function)?
Taken literally it's obviously untrue. Examples abound where people don't care much about being caught because the punishment close to non-existent or very light in comparison to the rewards. This is why why gangs like to groom minors, the likely reason why San Francisco has a shoplifting problem, or to bring it back to white-collar crime, why certain types of corporate and individual malfeasance occur over and over again, because the risks, even when caught, are minor but the rewards are not.
Your original claim is tantamount to saying that people don't react to incentives. Which beggars belief. That is not to say that criminals in particular respond to incentives in a way that maximizes their life outcomes or is intuitively obvious, or that for many crimes lowering penalties and investing in other things instead (like detection or prevention) wouldn't produce better societal results. But on the whole I'd expect high-flying financial criminals to respond to incentives set by justice system in a way that is more aligned with their actual utility function than say crack addicts committing robberies to finance their next fix.
Part of the reason is because punishment is so wildly variable and also sentences are almost always shortened drastically. It never looks like justice prevails. A "20 year sentence" is never actually "20 years", it could easily end up being a few years + probation, or even less.
Also, america sure as shit better not go light on a rich lady who sold profit dreams to old men while giving outrageous sentences to poor people everyday. You want to talk about criminal Justice reform she is definitely last on the list of people who deserve leniency.
If you assume average salary of 100k per year per person with 1/4th of time work per year. that's effectively 400k per year per person. He stole a hundred million which would be 250 years.
"Notably, Theranos’ investors weren’t the usual-suspect venture capital firms. Rather, her funding came from individuals like former Secretary of Education Betsy DeVos, billionaire media mogul Rupert Murdoch, former Secretary of State Henry Kissinger and the Walton family, among other wealthy elites. Some evidence showed that these investors were willing to give Theranos money even when Holmes evaded their more probing questions."
https://techcrunch.com/2022/01/03/elizabeth-holmes-verdict-g...
And there we have the crux of why she was prosecuted...
You're much better off screwing average people, then it's just "capitalism".
From people who could easily afford to lose it and who should have known better. None of the people she defrauded have a materially worse quality of life than they did before.
Her biggest crime was making rich people look stupid, and they REALLY don't like that.
Who in turn gained their money from trickle-up economics targeting the working and middle classes, in all likelihood.
I don't get this apologetic comment.
The crime she was convicted of isn't a crime you should spend effectively the rest of your life in jail for. It's as simple as that.
Not if you're a young(-ish) and relatively good-looking female billionaire CEO, at least.
Apparently, judging from the fact that I haven't seen all you people spouting this line on the barricades fighting for more lenient sentences for ordinary lowlife ugly middle-aged male fraudsters.
That's how simple it is.
It does not matter at all that they could afford to lose it. Her biggest crime was the one she just got convicted of, being a fraud and lying for profit.
One side of this conversation is unnecessarily harsh, I get that, but the other side of this conversation is playing mental gymnastics to try and downplay what she did. Both are wrong.
Otherwise it signals that wantrepeneurs can keep doing it with minimal repercussions.
Meanwhile the only real sticking crimes are the one she commit against Betsy Davos (dirty corrupted rabbit hole warning if you Google her name). Obviously Bets placed few phonecalls. It it wasn't some VIP, she would get away with that too because all investments comes with risk.
Not fair to frame her sentence as Betsy pulling strings, even when I’m no fan of that woman for obvious reasons.
I couldn’t care less or sympathize with billionaires who have already made back magnitudes of the money they lost on Theranos with other investments.
For example, Larry is up $14 billion(!) on a $1 billion investment in Tesla in 2018.
https://markets.businessinsider.com/news/stocks/larry-elliso...
If Holmes had decided to reinvent herself as a Robin Hood figure, she might be feted in Jacobin by now.
In fairness, Betsy was 16th in line for for the US Presidency when Holmes was being charged and everything set up. And were it not for COVID-19 she would have been in that position for the entire trial. I'm sure with that kind of political power she was pulling some strings for vengeance.
The prosecutors are not stupid. They have to come up with charges that actually stick, otherwise they risk losing this case in a spectacular fashion. If they went with an angle "X is morally bankrupt and her actions caused some deaths", it would make so much harder to prove and get the jury to agree to it.
I'm no fan of Holmes, but what good does it serve to lock up non violent criminals for decades?
With all the charges grouped, including the conspiracy charge, we'd be looking at an offense level around 35 --- 168 to 210 months.
I'm not saying I agree there should be a downward departure (imo, her pregnancy came across as a "Pregnancy Of Convenience"), just that there could be.
Never having a baby seems better than having a baby you won't be able to be a mother to for 10-20 years. It's not unlikely the kid would hate you when you get out of prison.
I would also expect leniency if you got the child after you were charged, even though that implies people could just get kids to look for leniency, there is the idea that once someone gets a child they calm down and become more cautious. Maybe not so important in cases of non-violent, monetary crime.
However as it is commonly thought in society, and backed up by science ( https://www.psychologicalscience.org/publications/observer/o... ), that women take on a more nurturing role for the children and the absence of a mother would be more traumatizing (statistically, in the case of my son he freaks out if I leave but doesn't care much about the mother), the father can expect less leniency than a woman.
If we really think of it, shouldn't single person get leniency because him being in jail doesn't hurt others. So that can be considered in thinking about planning of crime. As others clearly aimed to hurt their families and friends by getting in jail in first place.
Perhaps the judge can factor that kind of thing into the sentencing; I'm not sure.
In an ideal world (not that we live in anything resembling a perfect world) it seems to me that the harm you're talking about would be remedied in separate criminal and/or civil trials. Certainly, unless I'm mistaken, the victims of the fraudulent tests could still file civil suits.
I'm not a lawyer, in case it wasn't blindingly clear.
Because words have meaning and fraud is non-violent no matter how much you stretch it
65 years in prison would be a fair sentence for her. Homeless people in America have been sentenced to over 15 years in prison for stealing $100. Holmes stole an order of magnitude more than that. The US justice system needs to send a clear message to the would-be fraudsters that there are indeed some very serious penalties for being a criminal in this society.
Using an existing injustice in the US to defend another does not make it right.
I am no fan of Holmes or what she did, but locking away people for life is clearly not a winning strategy.
>
> Using an existing injustice in the US to defend another does not make it right.
While that is true, it is also true that the law must be fairly enforced on everyone. Having some people receive lighter sentences for similar-in-intent but larger-in-scale crimes is not fair enforcement.
Though, it was my intent to communicate on the interwebs with a writing concept often referred to in some circles as 'a figure of speech'...
Do you have a link for that? I can't tell if this is hyperbole or not.
https://www.ktbs.com/news/man-who-took-one-bill-and-handed-r...
In general we prosecute violet offenses (including the threat of violence, even if the gun wasn't real) more seriously than nonviolent offenses. While 15 years seems excessive (as do most prison sentences in the US, IMO), there's a lot of important context missing in your statement. Hyperbole might not be the right word, but I'd call it "substantially misleading".
I get the vibe you are a white-collar criminal apologist, I could be wrong, but am I?
No. SIX OR SEVEN orders of magnitude.
Our system is ludicrous, but within its current bounds, over 10 years would be just.
Absurd statement. Of course it does, if the punishment is harsh enough.
If you're stealing hundreds of millions of dollars, is anything less than a decade really a deterrent? Especially since sophisticated actors are the most likely to be deterred by long prison sentences.
Heck, does it really do any good to lock up someone who comes home to find his wife cheating and kills her and her lover for 20-plus years? I would contend that locking up the white-collar criminal does more good.
But I'll take on your specific example. Any crazy rich people out there, I will serve 5 years in a minimum security Western European prison for 143MM USD safely accruing interest in accounts for when I get out.
Because people are bad at estimating low probability and high outcome expected values. If you are old you might even not deterred at all by a very long sentence if there is only a small chance that you actually both get caught and have to serve the time.
“non-violent” criminals can do much more widespread damage individually than violent criminals are likely to, but are also more likely to be rationally deterrable with a sufficient consequences (which anything you'd willing gamble against the potential upside of the massive crime is not.)
How did you come to that conclusion? It seems like a difficult argument to support.
In terms of human life, probably not, right? I mean hypothetically the investors could have gone on to spend their money on lifesaving ventures and charities but that seems like a roll of the dice.
They may not not technically be criminals because the government and judicial system protect this class of people, so in the interest of liability let's not allege they committed any crimes, but in the context of the the question yes white-collar or non-violent "whoopsie daisies" can do much more widespread damage.
In the context of the broader discussion here, though I find it unsatisfying -- Holmes was specifically found guilty of defrauding the investors, and (as far as I've seen) acquitted of defrauding the patients. I don't think the main punishment for tobacco, etc company execs should be based around, hypothetically, ripping off investors (actually I guess their investors don't feel ripped off in many cases).
The main victims, in the case of tobacco and asbestos, seem to be people who've essentially been poisoned. This ought to be considered a violent act in my opinion. Unfortunately the legal system seems to see it differently, so again you are correct, but again I'm left a bit unsatisfied...
For many (though certainly not all) of the investors victimized by Holmes, I'm not terribly sympathetic. As implied by "qualified investor", if you write such a big check, it's sort of up to you to do the homework.
I do have some sympathy for people who got Theranos tests and were mislead about their efficacy, but on the charges of defrauding patients Holmes was found not guilty! (Similarly, I have some sympathy for employees who went to work at Theranos and ended up bullied and threatened by the company, as with Tyler Schultz, but they aren't represented by any of the criminal charges!)
Maybe the takeaway is that criminals (and humans) aren't entirely rational, and 65 years is just a great "headline" for deterrence. But framing this as about deterring rational criminals strikes me as then putting a high burden of proof on the argument for 65 vs 10.
The only thing that has a small deterrent effect is how likely a potential offender think they are of getting caught.
My understanding is that even in cases where deterrents are known to work poorly, there's still some effect. For example, with drug addicts, there are diminishing returns in as little as a couple days, but I think there was still SOME effect.
It just winds up being mostly pointless, because a weekend sentence works pretty much the same as eg. months to years or more. You should be careful about extrapolating from behavioral studies, and other crimes.
It's not just about deterrent IMO. I also care about justice, fairness, and making it not worth it to commit white collar crimes. If the sentence is not substantial, you've basically gotten away with it to me.
It's worth 1-5 years in prison to spend 5-10 years in luxury, being told how amazing you are. Maybe not for me, but it certainly is for a lot of people. A ton of white collar criminals end up better off for their crimes, if you're not harsh enough.
We should destroy her life for cavalierly playing around with other people's lives in that manner. Theranos intentionally destroyed the database of test results, but their clear goal was to yolo out medical tests.
See eg [1] or [2]
[1] https://mondaynote.com/theranos-trouble-a-first-person-accou...
[2] https://www.theverge.com/2021/9/21/22687026/theranos-patient...
Hopefully screwing around with medical tests will have much more serious consequences than stealing money. Hopefully this was just the first step, and having her in jail will prevent her from tampering with the evidence for the more serious crimes. Hopefully we live in a society that values lives more than money...
She was, but she was acquitted on those charges.
Like if you order some bullets from a gun shop, and the guy delivers them by doing a drive-by on your house, surely the only legal problem for the deliveryman can't be "these bullets were a ripoff, the gunpowder is already expended!"
The bad diagnostic test in exchange for money is the essence of the fraud she was acquitted of, not some separate harm.
I mean, it's not impossible she could face state law claims about it separate from the federal ones, but any federal criminal claims from the same set of actions would be foreclosed now by double jeopardy (besides retrial on the charges that the jury hung on.)
We absolutely love throwing people in prison for ridiculous lengths of time, because we are, for the most part, violent busybodies.
If you have a problem with US sentencing culture, as a moral and a political issue you should probably not start with rich well-connected scammers.
All that said, I would hope for at least 8-12 years, possibly more. I don't take that sentence lightly and consider it very harsh (I can't stand people from the USA that consider less than 5 years and "easy sentence"). 3 years is a serious sentence, and 8-12 is extremely harsh, for good reason. It's very important to me to call this like it is. There should be heavy handed punishment, because this is among our most serious crimes.
She blatantly lied multiple times about a medical product. She had a team of enforcers harass people who tried to talk. Across the board, it was a very extreme case. More importantly, with so much at stake, these type of white collar crimes are quite frankly worth committing if the sentence is less than 5 years (I'm not sure the exact number, but it's at least 5).
For a substantial portion of the population, having that kind of wealth and influence for a short time is worth it; in some cases, even if you die. So it might not deter everyone, but I do think the possibility of spending lots of time locked up, will stop a lot of gray area people.
I also think it is necessary for fairness. I care about making these crimes "not worth it". At a certain point, you're basically letting people keep their ill gotten gains. Getting to be king for a decade, then go away for a year or two is no punishment at all.
I don't think 10-20 years is necessarily inappropriate.
I knows Theranos was headquartered in Palo Alto for part of its life, but is it really a SV company? Looking at their board I see mostly old-school business people from a construction company, Wells Fargo, and James Mattis and a former head of CDC. Only real tech person seems to be someone from NetApp. On the investor side, I don't see any of the big SV names either. Initial funding came from Rupert Murdoch.
Theranos was located in SV and Holmes referred to it as a SV style company, you might argue this is enough to make something a "Silicon Valley Company". I think OP would view such a company as one both in SV and embraced by the local ecosystem of developers and investors. I think SV "learning a lesson" from the downfall of a company only makes sense for the latter definition, and I don't think Theranos fits it.
In reading Bad Blood it becomes apparent that, Tim Draper aside, the SV investor community realized much earlier than anyone else that Theranos was shady and either pulled their money or stopped investing. As someone living here in the area at the time I felt it was common knowledge in dev circles that Theranos was shady and lying about their capabilities (though not to the level that was revealed). Certainly it did not seem to be a prestigious place to have on your resume.
Given that the SV ecosystem seemed to largely sniff out Theranos before the rest of the world it seems weird to expect them to learn a lesson from its downfall.
The answer to this depends a lot on whether you consider e.g. Arrillaga-Andreessen "SV" or not. Holmes certainly wanted Theranos, and herself, to be viewed and valuated as such.
Besides, she can likely get probation with good behavior after a decade or two of time served.
I don't follow startups that closely. The only example I can think of is Elon Musk's "full self driving" promises, but the gap between promise and reality is a lot smaller in that case. Even then, the claims are still mostly future timelines, not "it works now, no I can't show you, trust me!!"
That's because his original 24 year sentence was reduced to 14 after a Supreme Court case vacated part of his convictions.
My bet, based on some calculators I've seen, is that Holmes serves (actually in jail) 14-18 years.
What does that mean to you? I am curious to know why you'd make that bet with the OP with those two facts alone.
Edit: Duh, four.
Non American here, why do people use this infantile term to refer to a spouse? Unless I am mistaken, the father of her child is her husband - why use another term?
Edit: Thanks everyone for pointing out that you don't need to be married to have a child, wow, everyday a school day on HN.
But her husband _is_ as far as we know, the father of her child.
Not exactly sure where the term came from, but I know I’ve heard it in songs, seen it in movies and on TV, etc. It’s just a popular phrase.
Yes. And, as the G(GG...?)P said, a stupid one.
She then married her current spouse.
"Baby daddy" is often used to imply that the woman is not really attracted or attached to the man who fathered a child.
I think OP is implying that Holmes hooked up with and married the new guy as a cynical ploy to get a war chest for the impending legal actions.
I can't speak at all to Holmes' motivations, but it certainly doesn't conflict with what I read on Wikipedia, or with her apparent ethics.
I said soon to be sentenced.
And words towards 'won't she be in jail through any appeal process.'
But in response to the original comment saying she won't get jail time at all due to appeals, do you think she will not be sentenced and the appeal with happen before then where they disregard this conviction during that process?
Anyway, confusion aside I was trying to politely point out they seem wrong in their assumption she will never see jail due to an appeal process. That's not how the process works.
I think she'll only start serving time once the very last round of appeals ends - which is going to be many years after her death. They'll just Jarndyce v Jarndyce for decades to come.
It's non-violent. Nobody died. I think 5-10 years. Maybe she can be Shkreli's pen pal.
She was peddling non functional healthcare devices and services. People could have died, and she clearly didn't care.
I think their customers just ended up stuck with the bill and had to go to a regular lab.
I don't think any of the founding fathers foresaw presidents using their power to pardon their friends. The whole system is extremely vulnerable to an insider attack - very few tools are in place to work around corrupt leaders.
The US President should have handed this power over to a similarly dusty committee resolving real injustice years ago. This would be less corrupting and more effective because a President is busy whereas the committee would be doing nothing else except investigating the circumstances of potential injustice and choosing how to resolve them (new trial, pardon, etc.)
Interestingly, this pattern repeats itself; countries which became independent from Britain later on often have a far less powerful president, with similar powers to when _they_ left. The president of Ireland, for instance, is non-executive, doesn't have a veto, and can't commute sentences... much like the British monarch when Ireland became independent.
As it stands, it's an anachronism that only survives because it's _really_ difficult to change the US constitution, I suspect.
As for Ms. Holmes, she defrauded very rich and powerful people. I would be surprised if she were shown any leniency at all, never mind a Presidential pardon.
And the optics would be _awful_; no sensible president would do it in the first place.
That's obviously no longer a constraint. The optics of pardoning Anthony Lewandowski (among many, many others) looked awful and he was still pardoned.
And I think that was a little different; in that highly polarized environment it was possibly a little easier to sell corrupt pardons if they were of people on the president's 'team'; at least some of his supporters would put up with it on that basis. Holmes wouldn't qualify; she's just a generic wealthy criminal.
This pardon abuse has been going on for awhile.
The wire fraud charges were by far the much better target.
I'm not sure this is true. She told a lot of egregious lies to investors while trying to get money from them. She repeated those lies in the press and to anyone who questioned it. And I don't mean a lie like lying that your product is more effective than it is. I mean she told prospective investors about huge contracts with the defense department that did not exist. She told investors that her machines were being use in the battle field. These were lies that were never going to be true.
She said it was being trialed by the military, in reality what had happened was Mattis said he would be able to introduce the technology to the military. This type of "abstraction" is in very many pitches I've read over the years.
[1]https://www.youtube.com/c/LawyerYouKnow [2]https://www.youtube.com/channel/UCOShJ_GPEegXscrlKWfpwCA [3]https://www.youtube.com/channel/UCiWXvA_5bzvOFdbS353Ll-Q [4]https://www.youtube.com/channel/UCwCqasesYi60fSrOjlUSNzg
That's not an "abstraction". It's a lie, and therefore fraudulent.
If you're seeing these sort of lies all over the place, you might be in a weird bubble. Startups are known for creative wordplay, but if you're straight up lying about something happening when it's not happening at all or even started, that's fraud.
Surely there would be a contract with the military if that was the claim and surely these investors did due diligence and audited the contracts, nobody would ever get wrapped up in the hysteria and hype and burn a billion dollars…
tbqh, I came away from the trial really feeling like the investors who testified against her deserved what they got because of how they approached the situation. IMO Elizabeth Holms isn't some mastermind manipulator, she's more akin to a child who was enabled by moronic parents.
I think the crucial distinction between a slight stretch like you describe and what Holmes did is the tense: the military is going to test our product vs. the military is testing our product (which did not, uh, exactly exist then). One is a rosy forecast and the other is just a lie.
But as I understood it, that's not what she said. Your phrasing is about the future, i.e. something nobody can know at the time it is being said whether it will come true or not. Therefore, something anyone with the least bit of common sense would think "Yeah, let's hope that will happen" about.
Completely different than saying "the military is running / has run a test with our equipment". That's a statement of actual ongoing or concluded fact. If it actually is happening or has happened when you say it is happening or has happened, then you're telling the truth; if it isn't / hasn't, then it's a lie.
From what I gather, what she said was the latter -- but it never actually happened: So, a lie. Said with intent to induce people to give her money: So, fraud.
That's pretty far from a fair summary. Mattis made the introduction, Holmes could not get past the initial military diligence, and killed the project, and yet years later continued to represent that it was an important part of Theranos' business, to add an imprimatur of success and reliability of the testing.
Nice of you to use quote marks... Because that's not at all what "abstraction" means.
Citation needed. The whole concept has a critical flaw, as pointed out by her engineering staff and medical advisors: blood tests require a certain minimum volume of blood to work, and that's inescapable because blood components are discrete, not continuous.
For example, a drop of blood is about .05mL, or about 1/20th of a milliliter. A common testing sample size in a normal lab is 3mL, or about 60x larger what Theranos claimed they could work with. Now, suppose you're testing for some cell that's may be present in concentrations of 10 per mL, or 1 per .1mL blood volume on average. In a conventional lab, then, you'd probably have about 30 of those in the 3mL sample. In a Theranos lab, even if it worked perfectly, you're equally likely to have either 0 or 1 present in the .05mL sample. In other words, you're 50% likely to get a false negative, even if the equipment is working perfectly, based purely on the tiny sample volume.
By analogy, if you poll 100,000,000 Americans, you might get a pretty good idea of an election's result. If you poll 3, you have no idea, even if the poll is perfectly designed. Well, that's what Theranos was up against.
NB: I'm not a lab tech, and the above is my understanding of it. That's my distillation of a lot of articles I read about Theranos, such as https://theconversation.com/the-rise-and-fall-of-theranos-so... .
Of course, like everything it could be biased by the used methodology.
Maybe not quite as extravagant a claim as hers, hers was def a 100 year vision, but many people are working on and having progress in a very similar area. Heck even Tyler Shultz the kid who is on the road doing a press tour about how "he took down Theranos", is working on a Theranos-esq startup.
EDIT: And my favorite part is the first step the Siemens machines they used for testing is to "dilute" the part of the sample it is going to use (addition of DI water, to get the blood to the desired concentration). That is hard-coded into the protocol, with a specific dilution amount, and it is done for all the official Siemens tests, as well, hah.
> Holmes described the miniLab as “the most important thing humanity has ever built”. But at best, the lab could do immunoassays using microfluidics. The tiny blood sample had to be diluted extensively (for which there are no reference standards or precedents), leading to artefacts and spurious results.
That (and other reports) sound like they diluted way more than usual.
[1] https://www.nature.com/articles/d41586-018-05149-2
1. The premise assumes there are not significant wastage in the current processes and those are near optimal. Any non optimal paths could potentially benefit from improvements
2. While there are some tests at that low concentrations not all tests have components at that low concentrations. Those could certainly be improved ?
3. Reuse and cross testing the same samples, or testing for multiple things at the same time etc, are all areas that could yield better outcomes than current standard.
4. Perhaps it is also possible that while primary marker for a test is not present in the sample, its presence in the blood could have left other markers that are detectable
I don't know anything about lab testing, if I can think of few approaches to solution for the low sample problem. Experts may have many other approaches so it shouldn't be surprising if there are improvements claimed ?
If I falsely claim to have invented a warp drive, I don't get credit for whatever work people do in that area in the future.
Holmes was an agent to energize the industry in the sense that she was instrument to attracting a lot of new VC investors willing to throw money and experiment with new tech like this . I doubt she personally claimed to have invented anything new, even had Theranos succeeded her claim to fame would be only building the organization that enabled such innovation and not the innovation itself.
Even though Theranos failed as firm, a lot of smart people got funding to work on interesting projects while there and potentially either developed or started developing products because of holmes being able keep them and Theranos funded. A lot of new people are getting funding, because Theranos and Holmes opened this industry to VC funding when it was not traditionally so.
To your example, if you falsely claim to invent a warp drive, raise a lot of money, hire a lot of smart people who do interesting work while working for you, eventually fail as company and those people go on to build parts of the drive partly with experience they gained in your research. This kind of research was not well funded before you, Likely without you this would have never been a VC funded industry don't you have some hand in that ?
Also, Holmes's lies sucked up a ton of funding at the time. Not just the money given to her, but the investors who said "theranos already dominates blood testing, so we'll invest in another space"
This was a disaster all around for everyone but her.
I don't know how you can say that, some of the trial evidence was heart breaking. Some of the emails, the texts back and forth between her and Sunny, what a mess, it sounded like she was totally losing her mind and stressed out to no end while being pushed and cajole by an unreasonably intense person behind the scenes. She was clearly devastated when the company collapsed, she very clearly believed in what she was doing, and now she is going to jail. That sound like beyond a disaster, it sounds like hell.
She's a human being and it is a sad situation. But this is justice.
A mL of water has ~10^22 water molecules in it. Dilute substances are usually measured in ppm (parts per million). Even 1 ppm would have 10^16 molecules. I think your orders of magnitude are way off here.
Hard disagree on that one.
It's certainly not common nor acceptable to knowingly lie to investors like Holmes did.
There is nothing normal or common about the type of fraud that Holmes perpetuated, despite attempts to downplay or normalize it.
> I'm sure it's going to be an unpopular opinion but personally if this is the new standard, the SEC should have a pretty long list of founders to try at this standard.
Can you name a single one? Or is this just cynical speculation?
I've seen a lot of attempts to downplay Theranos' blatant fraud as an "everybody does it", but I haven't seen anyone calling out other companies who were caught committing fraud and everyone, including their investors, just shrugged it off. It's not normal.
But I agree with the other responder, I've also been in many startups and have certainly seen tons of exaggerations about the future but never outright lies about the present that Holmes was guilty of. Even worse, if you're going to lie about the present, you should at least have strong confidence your lie is physically possible - Theranos tech was always a sham from day 1.
I just don't buy at all the "everyone in Silicon Valley does it" spiel, because if they did, investors of failed startups (i.e. the majority) would have tons of reasons to sue and put people in jail.
> "The saddest thing of it all to me is that she was onto something, people are having success with her ideas today."
This is a very poorly informed statement. Who bought the valuable IP that Theranos spent hundreds of millions of dollars developing? No one is "having success with her ideas" because the ideas didn't exist. That's why she's going to prison
As a participant in the startup investment world you are willing Participant of SUSPENSION OF DISBELIEF. This is roughly equivalent speak for REALITY DISTORTION FIELD. The point is you as an investor are a willing participant in believing that something more is possible than what has already been achieved.
If you're a founder: you should be worried about being held to a legal standard of the representations and warranties. That section is in every share purchase agreement and it's the stuff that gets you sued. And sometimes, like in this case, it's WIRE FRAUD and it's criminal. Crazy. We need another section to replace REPS AND WARRANTIES.
Ain't that the truth. Hand on heart: the number of decks I saw last year that have an INSANE 2 page legal disclaimer at the start AND finish of the deck is up ~90%, ninety percent. I knew people who used this as a signal of an inexperienced founder, over night it's the signal of an experienced founder.
You might be able to consider that a pivot, since she had been saying "drop of blood" the whole time.
It was Holmes' unwavering attitude to imitate Steve Jobs that got in the way of her decisions, and I think more than a pivot of product, that a pivot away from this ideology could have saved Theranos. Willingness to give up on perfect design in order to acquire a working engineered product could have made a world of a difference.
https://www.wired.com/2016/08/theranos-chance-clear-name-ins...
So who is next?
[0] https://www.tagesschau.de/wirtschaft/unternehmen/wirecard-ch...
is there some technicality at play here?
Whether a wire left the state means dick to whether the federal government has constitutional authority over it, per supreme court.
Interesting case, thanks. Here's a link if someone else is interested: https://en.wikipedia.org/wiki/Wickard_v._Filburn
Not guilty of endangering thousands of lives by running fraudulent and inaccurate tests under sub-par lab conditions.
Our justice system is such a farce.
*(Fixed grammar error specified below)
If not here where would you rather draw the line? Incarcerate 1 more innocents s that 1 more guilty makes it into jail?
We could have a more likely than not standard of 51% chance like civil law, and 49% of inmates are innocent.
Would you personally really want to send someone to prison if you had reasonable doubts of their guilt?
Our prison population reflects our crime rate demographics. Certain demographics commit far more crime, especially violent crime, than other demographics. They are represented accordingly in our prisons.
Justice is pretty fair and blind across the board. Do the crime then do the time.
"When Theranos' machines were rolled out to Walgreens stores in California and Arizona, they gave patients false or flawed results. One patient testified that she was led to believe she was having a miscarriage after taking a Theranos test, when indeed her pregnancy was viable. Another patient thought her cancer had returned when it had not, following a test. But in the end, jurors did not believe that Holmes intentionally deceived patients."
These examples by themselves are clear instances of harm. However, it's not unlikely that more patients were affected and perhaps even some of them took actions that were harmful to their health based on this false data.
Pretty amazing.
It is not pure SaaS companies either, in the EV/self-driving space we have outright frauds like Nikola rolled a truck downhill to make the video and were public at $8 Billion. Others like Rivian/ tuSimple are definitely are not going to meet the projections in sales and plans they have published. Tesla constantly says a lot of things they never delivery or deliver much later than promised.
All the time? No.
They may have nothing / not much yet… but you know that investing and generally their products are very “doable”. Online focused cleaning service for example… it’s a crud app, maybe they don’t get users and fail, but the service was doable.
Theranos claimed to already do the magic thing with blood (many tests with very little blood) that they simply could not do and never did.
Big difference is Theranos lied about what the could do. Rando start up who is honest that they don’t yet do the thing, no big deal.
You can take money and have nothing… fail, but if you’re honest it’s not fraud.
Sales people lie all the time and make claims about features that don't exist, often because the company has other priorities not because they are 'impossible' - but again, that doesn't really matter either.
It's a tactic used by salespeople to get the company to rally around a feature or set of features.
It's very common.
You have to ask yourself how that is not prosecuted as being illegal.