How Did Elizabeth Holmes Build Her Fraudulent Biomedical Empire?

The trial of Elizabeth Holmes — the founder of fraudulent medical startup Theranos — is now underway.

Along with former boyfriend Ramesh “Sunny” Balwani, the young entrepreneur has been indicted on nine counts of wire fraud and two counts of conspiracy to commit wire fraud. Holmes deceived investors into thinking her company’s portable blood analyzer could “conduct comprehensive blood tests” from no more than “finger drops of blood.” As a result, she may now face up to twenty years in federal prison.

Before her would-be empire collapsed, Holmes managed to secure a $9 billion valuation for Theranos; with a $4.5 billion net worth of her own, she once topped Forbes’ list of “America’s Richest Self-Made Women.”

In essence, the story of Theranos — which was exposed and detailed by Wall Street Journal investigative reporter John Carreyrou in his book Bad Blood: Secrets and Lies in a Silicon Valley Startup — centers upon an ambitious young entrepreneur who duped America’s most influential corporations and political elites into supporting an entirely worthless enterprise.

Born With A Silver Spoon

Holmes entered the world — and Silicon Valley — through an elite family.

Holmes’ father, Chris, was a former vice president at Enron, academic at Rice University, and Chief Operating Officer at the Office of U.S. Foreign Disaster Assistance. According to Carreyrou, Holmes learned from her father that “if she wanted to truly leave her mark on the world, she would need to accomplish something that furthered the greater good, not just become rich.” 

Biotechnology offered the perfect opportunity to carry out this vision, so Holmes enrolled in Stanford University’s chemical engineering program in 2002. By 2004, however, she dropped out to begin working on her first product — a wearable arm patch that could diagnose medical conditions and treat them on the spot.

Holmes reportedly leveraged her family’s connections to raise over $6 million in seed money. Among the investors were Victor Palmieri, who served with Holmes’ father in the Carter administration. 

By late 2005, Holmes and her small team had pivoted into developing the prototype of Theranos 1.0 — a device that allowed a patient to prick their finger, place a drop of blood on a small cartridge, insert the cartridge into a device, and instantly send test results to a doctor. Holmes envisioned the product as a cutting-edge, stylish, user-friendly innovation that could disrupt medicine in the same way that Apple once disrupted personal computing.

Over the next few years, Theranos developed the Edison — a slightly larger device that used a technique called “chemiluminescent immunoassay” to test patients’ blood. 

Partnerships With Pharmaceutical Companies

Holmes managed to secure partnerships with several pharmaceutical development and retail companies — despite the Edison’s lack of versatility.

Safeway, for one, saw Theranos as a “breakthrough technology that made blood tests not only more convenient, but faster and cheaper.” The startup’s value proposition, according to Carreyrou, “offered a way to improve the supermarket chain’s stagnating revenues and razor-thin profit margins.” Safeway approved a $30 million deal with Theranos and renovated many of its stores to include blood testing clinics that could be outfitted with Theranos devices.

Walgreens, Pfizer, and GlaxoSmithKline also seriously considered working with the startup at various stages of its development.

Despite the new partnerships, the Edison could only perform a handful of minor blood tests. Therefore, Holmes — still fixated on the idea of a small, sleek piece of technology — initiated the development of the miniLab. The new device required the miniaturization of several previously existing technologies, leading to many delays in production. 

Eventually, Balwani ordered engineers at Theranos to “write an application for the miniLab’s software that masked test malfunctions” by preventing an error message from appearing on the device’s digital display. Meanwhile, Theranos secretly used traditional blood testing machines manufactured by Siemens and other companies to complete tests for their partners.

In the absence of a functioning device, Holmes still managed to “convince board members, prospective investors, and journalists that the miniLab was a finished, working product.”

Endorsed By Political Elites

Far beyond her father’s own connections, Holmes was able to bring some of the most important political leaders of the twentieth century into her inner circle.

For instance, George Shultz — who served as Secretary of Labor, Director of the Office of Management and Budget, Secretary of the Treasury, and Secretary of State under the Nixon and Reagan administrations — joined Theranos’ board of directors in 2011. According to Carreyrou, Shultz was “one of Elizabeth’s biggest champions” — and he even hosted Holmes’ thirtieth birthday.

Shultz’s grandson, Tyler, worked at Theranos as a research engineer. However, he eventually resigned and became a leading whistleblower against the firm and its fraudulent practices. 

Theranos’ board was composed of several other powerful individuals — including former Defense Secretary James Mattis, former Secretary of State Henry Kissinger, former Defense Secretary William Perry, former Senate Armed Services Committee Chairman Sam Nunn, and former Navy Admiral Gary Roughead. As Carreyrou writes, “these were men with sterling, larger-than-life reputations who gave Theranos a stamp of legitimacy.”

Holmes also developed a close relationship with the Clinton family. She became friends with Chelsea Clinton, attended several Clinton Foundation events, and hosted a fundraiser for Hillary Clinton as she campaigned against Donald Trump in 2016.

Despite her political connections, Holmes was unable to continue channeling Silicon Valley’s “fake-it-until-you-make-it” culture.

“A sociopath is often described as someone with little or no conscience,” said Carreyrou in his epilogue. “I’ll leave it to the psychologists to decide whether Holmes fits the clinical profile, but there’s no question that her moral compass is badly askew.”

“I’m fairly certain she didn’t initially set out to defraud investors and put patients in harm’s way when she dropped out of Stanford,” he continued. “By all accounts, she had a vision that she genuinely believed in and threw herself into realizing.”

“But in her all-consuming quest to be the second coming of Steve Jobs amid the gold rush of the ‘unicorn’ boom, there came a point when she stopped listening to sound advice and began to cut corners. Her ambition was voracious and it brooked no interference. If there was collateral damage on her way to riches and fame, so be it.”

The views expressed in this opinion piece are the author’s own and do not necessarily represent those of The Daily Wire.

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