Joe Biden faces embarrassment after Elizabeth Holmes convicted of fraud

Joe Biden was among a host of elite US political and financial figures facing embarrassment after Elizabeth Holmes, the former Silicon Valley wunderkind, was convicted of defrauding investors with fake blood-test technology.

Mr Biden once praised Holmes as "inspired and amazing," and her company Theranos as a "laboratory of the future," comments the fraudster then used to promote her firm as a revolutioniser of preventative healthcare.

Bill Clinton, Henry Kissinger, former defence secretary Jim Mattis, the Walmart-founding Walton family, and the family of former education secretary Betsy DeVos, were also among those caught up in Holmes’ web of deceit, after she claimed to have invented a transformative medical device.

In a complex three-month trial prosecutors depicted Holmes as a fame-obsessed charlatan who had pushed the boundaries of "fake it until you make it" – an approach followed by some Silicon Valley entrepreneurs – into criminality.

The defence claimed she was, and remained, a genuine visionary trailblazer who thought she was changing the world.

After seven days of deliberations, a jury on Monday night found Holmes guilty on four of 11 charges.

She was convicted of two counts of wire fraud, and two counts of conspiracy to commit fraud.

Elizabeth Holmes, founder of Theranos Inc., left center, departs from federal court with, from left, husband Billy Evans, parents Noel Holmes and Christian Holmes IV

Credit: David Paul Morris/Bloomberg

Holmes was acquitted on three counts of defrauding patients who paid for Theranos tests, and a separate conspiracy charge.

The jury could not reach a decision on three charges related to other investors.

Holmes, 37, wearing a grey suit, remained emotionless after the verdict was read.

She faces a maximum 80 years in prison but legal experts said they expected her to serve much less, probably "at least a few years". She is expected to appeal her conviction.

Holmes founded Theranos  – a word derived from "therapy" and "diagnosis" – in 2003 when she dropped out of Stanford aged 19.

Modelled on Steve Jobs

The young businesswoman modelled herself on Apple co-founder Steve Jobs, wearing similar black turtleneck tops.

She became a Silicon Valley sensation, attracting high-profile investors and board members.

By 2015 Forbes estimated her worth at $4.5 billion.

But prosecutors laid out how she had swindled investors into believing she was revolutionising laboratory testing.

She convinced them that Theranos had developed a small machine, called the Edison, that could successfully scan for hundreds of diseases and other medical problems using a single blood drop from a finger prick, rather than drawing blood from a vein.

The idea was said to have been inspired by Holmes’ own fear of needles.

Holmes wanted to set up "mini-labs" in pharmacies and supermarkets across the United States.

Former Theranos CEO Elizabeth Holmes, center, her partner Billy Evans, right, arrive at the Robert F. Peckham Federal Building and U.S. Courthouse in San Jose, Calif.

Credit: Tony Avelar/AP

But the company was secretly relying on conventional machines, manufactured by Siemens, to run its tests, prosecutors said.

The deception was publicly revealed by the Wall Street Journal which reported that Theranos’ machines were flawed and inaccurate.

Holmes had raised nearly $1 billion in funding with backers including billionaires Rupert Murdoch, Oracle founder Larry Ellison, the Waltons, and the DeVos family.

Those Holmes convinced to sit on the Theranos board included two former US secretaries of state, Henry Kissinger and the late George Shultz, and two former defence secretaries, James Mattis and William Perry.

In 2015 she appeared on stage with Bill Clinton at the Clinton Global Initiative’s annual meeting.

– Biden: ‘It is amazing’ – 

The same year, Joe Biden, who was then vice president, visited Theranos in Newark, California and had a detailed discussion with Holmes.

Holmes then issued a press release touting Mr Biden’s backing, and calling his visit a "health summit".

The company detailed how Mr Biden took a tour with Holmes and "saw first hand Theranos’ laboratory" and its "proprietary systems on which it runs its groundbreaking finger stick blood tests."

Mr Biden also "toured the manufacturing facility where its proprietary systems are manufactured," the company said.

The vice president met more than a dozen Theranos employees.

During his visit Mr Biden said: "Talk about being inspired. This is inspiration. It is amazing to me, Elizabeth, what you’ve been able to do."

He added: “What’s most impressive to me is you’re not only making these lab tests more accessible, you’re charging historically low prices, which is a small fraction of what is charged now."

Then Vice President Joe Biden, right, speaks as Elizabeth Holmes, founder and CEO of Theranos, left, listens during a visit to Theranos manufacturing in Newark, Calif., on Thursday, July 23, 2015

In 2018 Holmes was charged along with Ramesh "Sunny" Balwani, Theranos’ chief operating officer, who was also her romantic partner.

Balwani has pleaded not guilty and will be tried at a later date.

Following the not guilty verdicts over defrauding patients there were calls for Holmes to be pursued further over misdiagnoses by Theranos.

Those included one which reportedly wrongly indicated a woman could be HIV positive, and another that mistakenly led a woman to believe she was miscarrying.

David Ring, a lawyer who has followed the case closely, said the charges relating to patients had been more difficult to prove because, unlike Theranos investors, Holmes did not communicate directly with the patients.

He said the verdicts were "a mixed bag for the prosecution" but "a loss for Elizabeth Holmes because she is going away to prison."

Holmes’ trial in San Jose, California, featured evidence from investors, patients and former employees, and transfixed Silicon Valley, where it was viewed by many as a cautionary tale.

Investors testified that Holmes had made misleading claims, including that her machines were being used by the US military.

Patients told the court they would not have used the tests if they had known they were flawed.

And former employees testified that there had been problems with the Theranos technology.

Prosecutors said Holmes made a "callous and criminal" choice to be dishonest and opted for "fraud over business failure".

Holmes claimed she never meant to deceive anyone, that she never stopped believing Theranos’ technology would ultimately succeed, and that she was "building a technology that would change the world."

Her downfall, which has already been the subject of books and documentaries, will soon be retold in a TV series starring the actress Amanda Seyfried.

Following the verdict Holmes remained on bail ahead of sentencing.

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