The media once again goes gaga over celebrity and fails to notice a scam. It has gone from reporting to obsequious sucking up to anyone it thinks makes good copy. Law professor Jonathan Turley tells the tale of Elizabeth Holmes.
Elizabeth Holmes, the founder of Theranos, now awaits sentencing after being found guilty of four of 11 charges of fraud on Monday. Each count of wire fraud carries up to 20 years in prison, and Holmes can appeal the conviction, her sentence or both. https://t.co/fudU5LExaW
— The New York Times (@nytimes) January 4, 2022
Turley: The conviction of Elizabeth Holmes in four out of 11 counts was a measured verdict by the jury which spent weeks combing through the debris from her epic fall.
Indeed, as with other high-profile cases in 2021, this jury showed our system at its best in carefully deliberating and reaching balanced conclusions. The jury saw criminal fraud in Holmes’s dealings with investors while rejecting such claims with regard to patients. (The jury also hung on three counts.)
The distinction between the investors and patients was nuanced but principled. What the jury did not consider are those who helped Holmes create her elaborate scam. In many ways, the conviction is an indictment of those in business and the media who helped create the massive fraud that was Elizabeth Holmes.
Holmes was convicted of defrauding investors with false claims that the start-up Theranos company would revolutionize blood testing using a few drops of blood in a so-called “nanotainer.”
The three counts of wire fraud come with a 20-year maximum penalty while a conspiracy count has a maximum five-year penalty. Often courts will have the counts run concurrently, so she would be looking at a horizon of 20 years with an expectation of much less as a first offender.
However, that is not a given. Holmes was convicted of a Bernie Madoff-sized fraud with hundreds of millions lost to investors. Just under these counts, there were $144 million in losses. She also has denied all of the allegations, including on the stand. That might prompt the court to consider a more severe framing of the sentencing in the case.
Holmes can expect a long prison stint, but she was able to engage in this fraud to build a counterfeit $9 billion company with the help of equally dishonest business and media cultures. The prosecution put a spotlight on the fraudulent practices rampant in Silicon Valley where executives often invoke the rule that, to be successful, you have to “fake it till you make it.” It is often more than a simple adage to be bold and confident. The idea is that you can get away with fraudulent pitches as long as you use the money to make good on the pitch in the end.
Under this logic, big frauds are better than small frauds. If you get billions invested in your company, it is hard not to make something worth selling. Moreover, flaming out on a product is treated as a cost of doing business. Few executives are forced to account for their early pitches when their products flop…
The Holmes story is all too familiar in the age of advocacy journalism. Coverage is now often about advancing a narrative and achieving social progress. Reporting has been supplanted by promoting images and messages. As Stanford journalism professor Ted Glasser explained, “Journalists need to be overt and candid advocates for social justice, and it’s hard to do that under the constraints of objectivity.” Celebrity journalism has many of the same flaws where images transcend the facts. In this case, Holmes was both a cause and a celebrity.
Holmes knew the media would shed the constraints of objectivity in favor of her irresistible story. She was the hero the times called for, including Time magazine itself. Time gushed that Holmes was “striking, somewhat ethereal, iron-willed, she is on the verge of achieving her vision.” The fact that the vision turned out to be fraud is just another inconvenient fact. F. Scott Fitzgerald once said, “Show me a hero and I’ll write you a tragedy.” Neither Holmes nor her tragedy was entirely self-made. It took a collective effort and this verdict should have come with a list of unindicted co-conspirators.