Prosecutor Jeffrey Schenk opened his closing argument in the case against Elizabeth Holmes by talking about a banker. Holmes knew that Theranos, the company she founded, was running out of money, and she was on the phone asking her banker to cash a check early.
“Holmes had to make a choice,” Schenk said. She could figure out a way to raise money to keep the business moving, or risk seeing it languish. And her choice, he said, was to raise the money through fraud.
The prosecutor’s final statement on Thursday was a reminder of what this process is really about: money, and especially money from rich people. Those rich people, who gave their money to Theranos after Holmes threw them on the company promise, have been called “victims” by the prosecution. Their money has been manipulated according to the legal system during the years when Theranos was the most popular startup in Silicon Valley.
That focus is because Holmes is on trial for fraud. That could put her in trouble in the wake of Theranos’ collapse — a misrepresentation of what the company could be doing to get money from (mostly) investors (but technically, too) patients and doctors. Holmes is not on trial because the tests her company did were bad. She’s not in trouble because her company has been giving people inaccurate information about potentially devastating health conditions. She couldn’t go to jail because she supervised former workplace employees who were described as secretive and unhealthy, and where the chief scientist died by suicide.
Theoretically, she could have overseen a company that does all of these things, and not face 20 years in prison. The reason she’s staring at jail isn’t because she took bad tests — it’s because she lies about those tests to raise money. “An honest pitch filled with honest statements to its investors and to patients would have generated no revenue,” Schenk said.
She didn’t make a fair pitch, Schenk argued. And for that, he told the jury, she should be found guilty of fraud.
Before addressing the specific ways in which Holmes was not being honest, Schenk laid out exactly what the government had to prove to show it met the technical, legal requirements for fraud. Holmes is on trial for two counts: conspiracy to commit fraud and fraud. She allegedly conspired to commit fraud against investors and patients, and allegedly involved fraud against investors and patients.
To meet the bar for a conspiracy, Holmes had to be part of an agreement to make false statements with the aim of getting money that would keep Theranos alive. To have committed fraud, she had to have known and participated in a scheme to get money by making misleading statements, and those statements had to be things that could reasonably induce someone to spend money. And — in one key element — she must have acted with the intention to light someone up.
Schenk spent about three hours pacing in front of the jury and guiding them through all the ways Holmes made misleading statements to investors. He talked about the drug company logos she admitted as an addition to lab reports conducted by Theranos, which investors said gave the impression that those companies had prepared the reports themselves. He stressed that she had given investors misleading information about the types of tests that could be performed on the Theranos machines, giving the impression that the machines were accurate even though they were not. He pointed to media interviews where she had given the same kind of answers, and said Holmes then turned around and sent articles based on those interviews to investors.
Schenk then showed jury evidence that he claimed Holmes had deliberately given that misleading information — such as text messages about Theranos’ money problems and emails about problems with demonstrations of the Theranos devices.
(Defense attorney Kevin Downey focused his closing statements on the idea that Holmes actually didn’t mean to. He started that argument on Thursday and will continue it Friday morning).
Schenk pointed out that patients also saw the misleading statements in media interviews, which is one way they would have been ripped off. Patients were also given poor information about the accuracy of the Theranos tests in advertisements and on the company’s website, although Holmes was new that there were problems with certain tests, such as the hCG test, which patient Brittany Gould told her might be a miscarried.
Holmes deliberately sent misleading statements to patients for the same reason she did investors, Schenk said: to raise money. But, as he pointed out several times, individual tests brought in less money than investors. He spent less time with the patients and their experience than with the investors. Unlike the investors, he did not name the patients who received poor medical test results as victims.
The prosecution’s closing arguments told a story about a company that was running out of money, and a CEO who lied to people to get them to give them more money. That’s illegal. And that’s what the legal system is equipped to get people into trouble. Schenk summed it up pretty well towards the end of his closing argument: “This case is about real people, who have lost real money.”