He Made Me Do It: Elizabeth Holmes’ Defense
By
Leonard Zwelling
Readers of this blog know that there are a couple of recurrent themes that I write about. Guns is certainly one. I’m against them except for policemen, soldiers, and hunters. But there are others and a trial going on in California right now illustrates one of my favorites or really two of my favorites: conflict of interest and fraud among the rich and powerful.
As most of you will remember, Elizabeth Holmes was the much praised, black turtlenecked, deep-voiced, blonde bombshell CEO of Theranos, a company that purported to have developed a machine that would allow multiple clinical tests to be done on a single drop of blood. To make a long story (see the book Bad Blood by John Carreyrou of The Wall Street Journal), Elizabeth Holmes, a Stanford dropout was and is a fraud who managed to get very rich and very famous people to believe her nonsense and invest to the tune of a $9 billion market capitalization when she had no product. I don’t know how she did it either but this is Henry Kissinger, George Schultz and General William Mattox that we are talking about.
The trial is a test of “fake it ‘til you make it,” the watch words of Silicon Valley. Ms. Holmes blames it all on her COO Ramesh “Sunny” Balwani who was also her live-in lover and according to her, an abusive partner who forced her into the foolish decisions she made at Theranos. She is asking the jury to believe “the devil made me do it” and not to convict her on the 11 counts of wire fraud and conspiracy of which she is charged.
Let’s be straight about this story.
First, while Elizabeth Holmes may be able to play a CEO on television and magazine covers and elicit the endorsement of presidents and corporate titans, she is a liar and was in total control of that company when she ignored many warning signs from her workers that her technology did not work and that Theranos was a house of cards.
Second, if she was adult enough to bilk grown men (and it was mostly men) of millions of dollars, she is adult enough to be held accountable for the company she founded. It was her idea and it consumed her to the point of dropping out of college to found the firm. She was Theranos.
I am reminded of Enron (listen to a great eight-part podcast called Bad Bets to be reminded of the dirtbags involved with that one, some of whom I knew), and ImClone, two 2001 business meltdowns that left executives in jail and shareholders poor.
Surely, all of us have met these people. They appear brilliant and are always supremely confident in their abilities. They make you feel stupid because you can’t keep up with their daunting plans and fearless demeanor. Then it hits the fan and the truth rolls out like so much toilet paper.
Ms. Holmes is just the latest in a long line of Bernie Madoff-like scam artists who took in the rich and the famous. The idea that somehow her abusive lover was really the puppeteer controlling the strings will be decided in this trial and in Bulwani’s separate trial next year. Both of these people need to be behind bars.
How desperate is Ms. Holmes to stay out of jail? She had a baby in the time between her indictment and the trial. She’ll do anything and say anything to remain free. Let’s hope the jury is not fooled like her investors were. As Mr. Carreyrou’s book makes very clear, she’s a criminal and needs to be sent to prison once and for all and send a message to the scam artists of business start-ups in Silicon Valley who think anything is OK to do if it turns out OK. It’s not and Holmes is the poster child for corporate greed, conflict of interest and lying to the markets. Lock her up along with Ken Lay (who died after being convicted, but before sentencing), Jeff Skilling, Andy Fastow and Sam Waksal.
Cockiness in business is no substitute for having a real innovation. Jeff Bezos and Elon Musk can be cocky. Elizabeth Homes needs to be imprisoned for wannabeeism and fraud.
