In October of 2015, Elizabeth Holmes, the CEO of medical device startup Theranos, declared that “Every time you see a glass ceiling there’s an ‘iron woman’ underneath it.” America had every reason to believe she was one of them.
She was the “self-made billionaire” head of a company that was valued at $9 billion, which was at one point more than Uber or Spotify. Its Edison platform promised a revolutionary blood test that only required a finger prick as opposed to blood drawn from a vein. Bill Clinton interviewed her with Alibaba founder Jack Ma in an event for the Clinton Global Initiative. Barack Obama appointed her as a Presidential Ambassador for Global Entrepreneurship. She raised money for Hillary Clinton’s presidential run.
On Friday, Holmes was indicted on wire fraud charges by federal prosecutors in the Northern District of California. Theranos is very close to being liquidated, basically having lapsed into “Enron 2: Electric Boogaloo.”
As it turned out, its “revolutionary platform” could barely perform a few of the 240 tests the company had promised, and even then it didn’t perform them well. As Vanity Fair reports, Holmes, 34, could be spending decades in jail, all because the company she started in 2003 after dropping out of Stanford apparently turned out to be little more than a way to spend investors’ dollars, poorly.
“According to the indictment, Holmes and (Theranos COO and president Ramesh) Balwani used advertisements and solicitations to encourage and induce doctors and patients to use Theranos’s blood testing laboratory services, even though the defendants knew Theranos was not capable of consistently producing accurate and reliable results for certain blood tests,” a statement from the U.S. Attorney’s Office read. “The tests performed on Theranos technology, in addition, were likely to contain inaccurate and unreliable results.”
“The indictment alleges that the defendants used a combination of direct communications, marketing materials, statements to the media, financial statements, models, and other information to defraud potential investors. Specifically, the defendants claimed that Theranos developed a revolutionary and proprietary analyzer that the defendants referred to by various names, including as the TSPU, Edison, or minilab. The defendants claimed the analyzer was able to perform a full range of clinical tests using small blood samples drawn from a finger stick. The defendants also represented that the analyzer could produce results that were more accurate and reliable than those yielded by conventional methods — all at a faster speed than previously possible.”
In addition to the criminal indictment, Holmes has already agreed to pay a civil penalty of $500,000 to the Securities and Exchange Commission for fraud in an agreement that mandated she not be able to head a public company for 10 years. (Theranos is a privately held company, although Holmes stepped down as CEO on Friday after her indictment.)
So, how did Elizabeth Holmes sucker so many people? It’s worth noting that this is a bipartisan scandal in many ways. Before he became defense secretary, James Mattis served on Theranos’ board, as did former Reagan administration Secretary of State George Shultz. (Shultz’s grandson was one of the whistleblowers on Theranos’ alleged illegal activity, according to The Wall Street Journal.) According to The New York Times, media mogul Rupert Murdoch and Secretary of Education Betsy DeVos lost huge amounts of money in the enterprise.
However, each of them seemed to have been taken either by the science behind Theranos’ device or the possible applications for it (in the case of Shultz and Mattis) or because it represented a prime investment opportunity (in the case of Murdoch and DeVos).
When it comes to the Clintons and Obama, however, things get a bit murkier.
It probably won’t surprise you, given that she helmed a Silicon Valley startup, that Holmes was a Clinton donor. Not only that, but Hillary Clinton had planned to host a fundraiser at Theranos until media attention forced her to host it elsewhere. (Even liberals were embarrassed.) The planned $2,700 a head event was to feature Chelsea Clinton, but apparently even the media couldn’t ignore the fact that she was hosting an event at a company that was under federal investigation.
“(The event) is not connected to a specific company or policy, but a chance to talk directly to women in tech,” Clinton’s campaign said at the time, according to the Washington Free Beacon. “We frequently send initial invitations while host committees are still being formed and locations finalized. This was never a health care event and the location wasn’t set. It will not be at Theranos.”
That was hardly the only contact that the Clintons had with her, however. When Bill Clinton interviewed Holmes in 2015 for his Clinton Global Initiative, an arm of the scandal-plagued Clinton Foundation, he noted that she started the company when she was only 19.
“Don’t worry about the future, we’re in good hands,” Clinton said. Holmes, for her part, talked about bringing “equality” to health care.
President Obama went even further than the Clintons in embracing Holmes. In 2015, he invited the CEO to the White House, where he made her a Presidential Ambassador for Global Entrepreneurship. If you’re wondering what a Presidential Ambassador for Global Entrepreneurship does, it’s stuff like this PSA:
So, what’s the overarching point here? Why would the Clintons and the Obama administration get so involved with Holmes? We don’t necessarily impugn their judgment on her company’s viability, inasmuch as almost nobody knew it was a fraud.
On the other hand, they didn’t really seem to care whether it was or not. Hillary Clinton’s campaign wanted to hold a campaign event at Theranos well after it became clear, thanks to The Wall Street Journal’s reporting, that the company was suspected at least of some very shady things.
The fact was that Elizabeth Holmes was a Democrat’s dream.
Here was a young, millennial woman CEO saying all the right things about breaking the glass ceiling and instituting “equality “in health care. So what if her product was promising things that seemed impossible? So what if her company was under investigation? After all, she just brushed it off as the ossified medical establishment coming after her company. She was great copy.
And so, in a way deeper than Theranos’ investors or board members did, they co-signed Holmes’ reputation as the next Steve Jobs. The great thing for the Democrat mind was that the next Jobs came in a package that echoed all of their political prejudices. Or, in a kind of corruption of philosophy and politics that’s worse — and deeper — than financial misdealing, was it that she was the next Steve Jobs because she echoed all of their political preferences?
We’ll probably never know the answer to that chicken-or-egg question. We do know one thing for sure, however:
If only the Clintons and Obama had waited a little while, they’d have figured out they were dealing not with a Steve Jobs but instead a Kenneth Lay.