Silicon Valley Fake: Elizabeth Holmes and the Fraudster’s Motivation
It has been one noisy time for the paladins of big tech. Jobs have been shed by the thousands at Meta, Amazon, and Twitter; FTX, the second-largest cryptocurrency company, has collapsed. Then came the conviction of Elizabeth Holmes, founder of the healthcare company Theranos, for fraud.
Pursuing the steps of the college drop-out turned billionaire, Holmes claimed that her company had remarkable technology, capable of diagnosing a number of medical conditions from a mere drop of blood. The ruse of the blood analyzer known as the Theranos Sample Processing Unit (TSPU), Edison or minilab, worked – at least for a time. All the way, Holmes was very consciously promoting herself in the mould of Steve Jobs, initially mocked only to become mighty. Investment flowed into the company coffers. By 2014, Theranos was valued at $10 billion.
Some noses were detecting a strange smell in such success. The Wall Street Journal picked up a scent in 2015. Unreliable results arising from ineffectual blood-testing technology from Theranos, made available across dozens of Walgreens stores, actually posed a risk to patients.
The response from Holmes regarding suspicions was pure Apple, which is to say, copied. “This is what happens when you work to change things. First, they think you’re crazy, then they fight you, then you change the world.”
Cliché followed cliché, platitude bolstered platitude. At the Forbes 30 Under 30 Summit, a gathering bound to be unreliable if not questionable in ethics, she was there to add to the show, only this time sounding like Chumbawamba. “You’ll get knocked down over and over again, and you get back up…I’ve been knocked down a lot, and it became really clear that this was what I wanted to do, and I would start this company over 10,000 times if I had to.”
In 2018, the US Securities and Exchange Commission rather punctured the balloon of hubris by charging Theranos, Holmes, and former President Ramesh “Sunny” Balwani “with raising more than $700 million from investors through an elaborate, years-long fraud in which they exaggerated or made false statements about the company’s technology, business, and financial performance.”
As the Commission’s media release continued to explain, the allegations focused on false and misleading statements across investor presentations, product demonstrations, and media articles claiming that the “portable blood analyzer – could conduct comprehensive blood tests from finger drops of blood, revolutionizing the blood testing industry.”
Theranos, Holmes and Balwani had also claimed that company products were used to effect by the US Department of Defense in Afghanistan and on medevac helicopters. This fabulous fib was complete by assertions that $100 million in revenue would flow back to the company. In the Commission’s words, “Theranos’ technology was never deployed by the US Department of Defense and generated a little more than $100,000 in revenue from operations in 2014.”
After a trial lasting a month, Holmes was found guilty on three counts of wire fraud and one of conspiracy. She was found not guilty on four other counts, and the jury failed to reach a unanimous verdict on the remaining three counts. This month, she received a prison sentence of 11 years and three months. (Lawyers for the government had asked for 15 years.)
“I am devastated by my failings,” Holmes stated. “Looking back there are so many things I’d do differently if I had the chance. I tried to realise my dream too quickly.” And there, the rationale of the fraud was set out, the fine line between tolerated crookedness and the crookedness that gets you found out.
Big fraud is an indispensable element to society. To succeed, a presumption must work: the fraudulent behaviour can only hit a mark with the collusion of the gullible, those willing to fall for the outrageous suggestion, the astonishing proposition. The world of art forgeries is the best illustration of this fact: is the purchaser intent on collecting the original, or merely a signature? Throw in a few experts to sign off on authenticity and provenance, and we can forget the reality.
Orson Welles, in characteristically brilliant fashion, drew out this point in his idiosyncratically subversive F for Fake (1973). The two stars are the Hungarian aristocrat – or so he purported to be – Elmyr de Hory, and Clifford Irving. Both figures perpetrated, in their own way, frauds of daring.
Irving made his name by convincing McGraw-Hill, Inc. that he had worked with billionaire Howard Hughes to produce his life story. To substantiate the account, Irving forged Hughes’ handwriting, which was, as it were, authenticated by the publishing house. It took the sceptical approach of postal inspectors to change tack and ask for samples of Clifford’s own writing.
Elmyr’s own contribution to fakery came with art forgeries verging on genius. With breezy effortlessness, he would whip up a Picasso, a Monet or a Modigliani. Art collectors and galleries acquired them by the dozens. Along the way, the armies of the duped and cheated, refusing to do their own critical research and even ask the basic questions, grew.
While the most gullible are often thought of as the weakest and most vulnerable in society, they can sometimes be the most powerful. The most acute illustration of this is the fact that those in power, at the very least those with supposed expertise, hate being fooled so blatantly.
Fraud, for it to be committed to scale, comes with a certain style, a fashion. Make it plausible, make it receivable. Holmes did that to a tee, aping, mimicking the Jobs factor, even dressing in his fashion.
Engineer Andy Hertzfeld’s own account of Jobs is relevant in this regard. The founder of Apple had a “reality distortion field, a confounding mélange of a charismatic style, an indomitable will, and an eagerness to bend any fact to fit the purpose at hand.” Holmes was exploiting the notion of dropout chic, but she was also operating in a world of evangelical hustling and truth-stretching.
The dupes, to some extent, deserve it, and Holmes, as egregious as her behaviour might have been, merely fed it. To that end, the sentence she received was harsh, even vengeful. Former New York federal prosecutor Andrey Spektor is one who thinks as much. Federal sentencing, while seeming arbitrary, “requires a humane and common sense result: Defendants must not be punished more than necessary.” To lock up Holmes in a federal penitentiary till her 50s, was not necessary. But such is the vicious retaliation that comes from the duped.
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17 comments
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Harry Lime -
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Harry Lime -
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Michael Taylor -
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Fred -
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Canguro -
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B Sullivan -
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paul walter
Return to home pageAh, yes, ‘home of the brave,land of the free’,where there’s a sucker born every minute, and a shill to take him down.Has the Trumpster offered her a spot on his ‘campaign’ team yet?She’d fit right in.Probably studied “The Art of the Deal’
I think it’s timely to remember that shysters aren’t limited to the US. Just a reminder that Putin is possibly the richest man in the world. And not exactly through his hard work.
However thus far he seems to face zero (internal) legal impediment, unlike Trump, Holmes etc.
The Putin regime applies “trickle down (lack of) ethics”
Crooks and hucksters are not confined to L’America,they just do it on a much grander scale.As they do everything…from wars ,to coups,to manipulation of other countries’ politics,to local mass murders,to stacking of the Supreme Court,even managing to elect possibly the worst puppet President(George Fucking Bush) in recent times,which worked out really well.Carrying on the time honoured tradition of failed projections of power at unimaginable cost of lives and American citizens unrealised social benefits.As we watch from the cheap seats,the Military Industrial Complex is eating it’s own.
As I’ve said in the past, I’m not in favour of superpowers, but given that we have them, I’m glad one is (a flawed) western democracy.
The idea of the autocratic CCP and the fascist Putin regime dividing the world into their spheres of influence is an ugly one.
Those that endlessly look to criticise western democracy, while contextualising and ignoring/overlooking the actions of brutal autocratic regimes, display display significant and willful ignorance
AC, Binoy – and others – have written many articles (rightly) condemning Putin. I have chosen not to publish those articles for a couple of reasons. 1) The attacks of Russian bots on this site have been very disturbing. Someone, somewhere (in Russia) must have some sort of alert on targeted websites whenever the words “Putin”, “Russia” or “Ukraine” are used. The damage they are doing do not make it worthwhile to publish such articles. I can’t stress enough the damage they are causing. If these bots were harmless, I would not bother. Their presence leads to… 2) The misinformation they are spreading places us at risk of losing Google advertising. Without the advertising, this site would not survive. Google have very strict rules, which we are contracted to adhere to.
That’s entirely understandable Michael.
My comments weren’t particularly directed to Dr Kampmark, it’s simply my observation – that criticism of the US triggers a type of Pavlov response in some here.
M T, you are right to protect this site from idiotic perverted intrusion in 360 degrees directions, for so many “enemies ” thrive today. And childish idiotic comments here about admiration for a filthite regime recently run by a syphilitic, incontinent, thieving, lying, outrageous, treacherous perverted traitor, Donald Dogshit, is such puerile slavish pronation, as is to invite universal ridicule. Despite Putin, and the real risk of USA, NATO and assorted support to corner Putin, The core Russia is no threat to anyone and has receded sullently inside from old USSR borders and Warsaw pact outposts. It is the filthy USA which spends over TEN TIMES the money on murderous arms, which it exports to Perverted Outliers, than any next ten powers in TOTAL. China is NO THREAT to anyone, except the USA sticks fingers up dates to excite resentment,. Displaying significant and wilful ignorance is not enough.., go on and display some professional awareness of what happens, how it does, what works in diplomacy, why, and what might result. China is growing, Putin is condemned and irremediable, the world is devoted to egotistical stupid chidish comments here and from media perverts, while some of us of no power or influence can only be horrified at egofixated brainless assertion, high and low. “Western democracy” remains a good idea, a dream, like the boofheads who stare at the ceiling in a daze of being in a majority of ONE, in the whole world of delusion. Put up some sense, or SHUT UP.
For example, refer to the above
PP: Please justify “core Russia is no threat to anyone” and “China is NO THREAT to anyone” when combined with the US they represent the top 3 military powers of the world. All 3 are dangerous and capable of mistakes. Putin has shown us his stripes. Xi is building islands to claim more of the south china sea and increasing influence in the Pacific. US foreign policy and military involvement in other countries has been less than stellar. After finally getting a candid response from a tight lipped Russian friend, found that he had concerns about Putin but more so about who would replace him – it’s 75/25 whether it would be somebody nuttier or more moderate. Most Russians without external web access have no real idea of what is going on due to the barrage of propaganda across all of the media.
…”the fasict Putin, the fascist Putin, the fascist Putin”.., double figures over weeks from an obsessive patient.., hey Pavlov, come and get your mad barking dog! Fred, you (and everyone) are right to worry, but, actually observe. Russia will resort to a core after Putin is finished, as he is doomed. Russia is surrounded by USA bases, equipment, NATO, and there is no reverse in equivalence. Germany in particular and Europe generally. China has invaded no-one, but the USA does it murderously. The USA has 1,600 overseas bases and no-one else has, except China’s port rights at Djibouti. On spending, equipment, intrusions, invasions, murderous occupations, networks like the oppressive NATO, designed to smash the Old USSR and kill all citizens there, the USA is clearly the world’s lawless leader in aggression, posturing, outspending the NEXT TEN put together, (including Russia and China). Is China or Russia off the Florida sea, the California sea, the Caribbean? Where are the USA’s subs, bases, even B 52’s? (soon to be in Australia.) Let us keep worrying as we need peace and balanced security, not the ultimate, desperate BIG response.
1# Russia spends 4.4% of its GDP on the military, US spends 3.3%.. Russia therefore devotes more of it’s economic activity to the military
#2 Russia has illegally annexed the territory of another country.
3# Putin has suggested his expansionist ambitions are not limited to Ukraine
4# Every former Warsaw Pact country now opposes Putin’s (fascist) regime. They voluntarily joined NATO because of their legitimate security concerns
5# Can you name any country where the US holds bases without the approval of the country?
6# You’re welcome to post a definition of fascism of your choice, it will describe the Putin regime
AC, a classic case of false equivalence, or of the misleading nature of statistics;
Russia’s GDP: 1.776 trillion USD (2021)
America’s GDP: 23 trillion USD (2021)
At the GDP percentages quoted:
Russia’s annual military spend is 78.144 billion USD
America’s annual military spend is 759 billion USD
Therefore, your first point becomes somewhat meaningless; America’s commitment to weapons, war, armies, aggression is in the order of ten times greater than Russia’s.
As for point number five: that’s an utterly elastic statement. Who is approving? Who holds authority to approve? A political party may be in power with a margin of 1%, or by virtue of coalition, a supping with the enemy, an unwelcome but semi-functional alliance between opposing political groups. Do they represent the will of all the people? It’s unlikely. Many governments make decisions, approvals, pacts, unions, alliances, that are detested and abhorred by the majority of the citizenry. It’s ludicrous to suggest that political parties have some magical access to prescient and wise behaviour in the best interests of all the citizens and the country’s future. Most politicians are just as dumb as you and me, and in many cases, much more so. How can it be legitimately argued that they know what they are doing, and that what they are doing represents best practice, politically? And, to drill the point, it’s not the country that approves, it’s people.
I’d suggest many countries grudgingly tolerate the presence of the American jackboots simply because of coercion and threat. The Okinawans certainly don’t want the American bases. Neither do the natives of Guam. It’s likely that if a comprehensive poll were conducted, the majority of Australians would also say ‘Yankee, go home’. Possibly the Philippines too, given the war crimes committed by America one century ago in that archipelago.
As I’ve said, I’d prefer that there weren’t superpowers. But given that we have them, I’m glad one is a (flawed) western democracy
The endless Pavlov response of some to anything other than condemnation of the US isn’t paying any attention to the option, in my opinion.
And yes, it’s a fact that Russia is an economic minnow, with an economy about the same size as Australia’s. It is also a fact that a huge proportion of it is devoted to military expenditure
I note that you’ve previously expressed criticism of the level of attention most people pay to political issues and leadership. But you’re using speculation about public sentiment to argue that the people don’t want military bases.
Odd.
A Commentator: “I’m glad one is a (flawed) western democracy”
What good is a flawed democracy that allows a privileged class of the few to hold sway over a manipulated majority? A government of oligarchs, by oligarchs for oligarchs.
We’ve all been shown how US democracy works. You get a choice of two candidates from two parties that have essentially the same right leaning political aspirations. The US is a two party state that is indistinguishable from a one party state. No one who offers an alternative to the two/might as well be one party state gets a look in. If, like Bernie Sanders, they do get a look in due to genuine grass roots support by the people, the state party nomination conventions will ultimately ensure they are rejected.
Eventually the people whose voting rights aren’t suppressed will get to vote for one of the two party approved candidates, but their votes aren’t used to determine a democratically elected president. They just determine how many electoral college votes the candidates win in each state. Then the undemocratically representative electoral college votes determine how many states each candidate wins, and who ever gets the most states wins the presidency. Then the president has the sole authority to undemocratically appoint an excecutive government, ie ministry, of whoever he likes from his family, friends, or backers from the private sector, who may have no democratic support or authority to serve, and these appointments are subject only to the ratification of the two party state controlled congress. The result is a government that is just as authoritarian as that of a one party state masquerading as a democracy. The subsequent government policies confirm it.
It is not a flawed democracy, it is a confidence trick, deliberately designed to fool not just the people it claims to represent, but also those people in other countries who are inclined to give US policies more democratic legitimacy than is deserved. A democracy that is as flawed as the US has no right to claim the moral high ground when comparing its oppressive behaviour with that of other nations.
B Sullivan, well said. Thank you.
Well put,B.Sullivan…we await an answer from the usual suspect.
Surprised at Binoy, but it’s ok to lighten things (not wallets) sometimes.
I have to laugh. The US does things on a grander scale than us, but we must remember the fool who tried to swindle everyone by saying she had miraculously recovered from cancer- buy my quack nostrums- for example.
I don’t laugh for too long though. These people can do immense harm to their victims. I got hacked (again) by the Nigerians, (accoding to the tech support) and had to spend painful hours of time getting things running properly again and this itself is miniscule compared to people scammed by swindlers crypto and of course TNC’s, while governments do next to nothing a lot of the time.