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?
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.
The law really is weighted in favor of investors.
https://www.reuters.com/business/judge-tosses-deal-shielding...
https://www.cnbc.com/2021/11/17/theranos-patient-says-blood-...
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.
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.
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.
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.
Reverse engineering is not bad, and it is dismaying that someone posting on a site called "Hacker News" would think so.
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.
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.
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.
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.
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.
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?"
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.
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.
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
For those stuck at the end of first day coverage the way I found is: type «from:doratki day 2» in search
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.
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.
"we gave you treatmemt for wrong type of cancer, close enought!"
Guess they just answered the question of "If you can't tell the difference, does it matter?".
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.
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.
The lies to patients and investors were quite well linked anyway, if you want to think about it like that.
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.
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...
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.
Yup - https://www.businessinsider.com/theranos-gets-fda-approval-2...
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?
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.
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.
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.
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.
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
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.
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.
Not excusing it. But maybe the jurors think the doctors and/or insurance companies ordered/interpreted these tests have some responsibilities too?
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.
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.
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.
https://www.bloomberg.com/opinion/articles/2019-06-26/everyt...
Could I have gotten out of it? Sure. Could I have gotten out of it without lying under oath? I don't see how.
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.
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.