How self-styled genius Elizabeth Holmes played out con game

She is young, charming, fearless, and ruthlessly focused.

These are the attributes that enabled Ms Elizabeth Holmes, 35, to create a now much-disgraced medical diagnostics start-up more 15 years ago.

In 2003, at the age of 19, Ms Holmes quit her chemical engineering degree course at Stanford University, California, in her second year to pursue a dream she believed would transform health testing in the world.

With the blessings of one of her professors, the young dreamer founded Real-Time-Cures, later renamed Theranos, which means “death” in Greek.

Drawing on her fears of needles, she came up with a revolutionary idea that would allow technology to test up to 240 different kinds of diseases using just a few droplets of blood, rather than whole vials.

Ms Holmes said the tests would detect medical conditions like cancer and high cholesterol.

The breakthrough was touted as yet further proof of the endless tech possibilities that Silicon Valley could produce.

WORK ETHIC

So revolutionary was the idea that Ms Holmes was quickly hailed as a genius.

She soon became a darling of global talk shops, once sharing the stage with former US President Bill Clinton and Jack Ma, the founder of Chinese online retail giant Alibaba.

Ms Holmes even styled herself as a female Steve Jobs, the legendary founder of Apple who died in 2011.

Copying Jobs, Ms Holmes started wearing black turtle-neck tops and avoided taking holidays, like her idol.

At one time, she was the youngest self-made female billionaire. In 2015, Forbes magazine valued the company at $9 billion (Sh900 billion) and estimated her net worth to be $4.5 billion (Sh450 billion). But a year later, the same magazine dropped her net worth to zero.

Ms Holmes blames her woes on negative media campaigns that followed a Wall Street Journal investigative piece in October 2015 that exposed her “invention”, not as a medical breakthrough, but as the biggest fraud in Silicon Valley, which she had cleverly perpetrated.

FAULTY TECH

The Wall Street Journal article revealed that Theranos could not do any of the things it claimed it could do: test blood less painfully, more efficiently, and at a significantly lower cost.

“Theranos also hasn’t disclosed publicly that it does the vast majority of its tests with traditional machines bought from companies like Siemens AG” as opposed to its own blood-testing machines named Edison, said the article.

The story raised concerns about the accuracy of the technology, which put patients at risk of having their conditions misdiagnosed.

“Some of the potassium results at Theranos were so high that patients would have to be dead for the results to be correct,” the article reported a former staff as saying.

Following the article, US regulators moved in to investigate the company’s operations, which confirmed that Theranos was a fraud.

Enchanted by Ms Holmes’ charm and intelligence, seasoned investors had poured millions of dollars into the company.

Venture capitalists like Larry Ellison, the founder of Oracle Corporation, and others, are believed to have sunk more than $1 billion (Sh100 billion) into the start-up.

SECRECY

However, there was one major weakness, which all these experienced investors seemed to have overlooked: the opacity surrounding the company’s operations.

Ms Holmes took investors’ money on condition that she wouldn't have to reveal how Theranos’ technology worked.

She would also have the final say on everything to do with the firm.

She asked anyone who visited the company’s headquarters in Palo Alto, California, to sign non-disclosure agreements before being allowed into the building, and had security guards escort visitors everywhere, even to the bathroom.

Perhaps the reason why they overlooked this major weakness was because of the clout of the people the company had attracted.

Theranos’ board included a retired navy admiral, three Cabinet secretaries, a Marine Corps general, and two former senators.

NO EXPERTS

Former US secretaries of State Henry Kissinger and George Shultz — men with sterling, larger-than-life reputations — were on Theranos’ board of directors and gave it a stamp of legitimacy.

Tellingly, not a single medical doctor, life sciences PhD holder, or biotech industry veteran was added to the Theranos board until 2016, after the scandal had broken.

In 2011, Ms Holmes hired her younger brother Christian. But, he had neither a medical nor science background and had only worked as an analyst in Washington, DC, after graduating from Duke University.

“Christian Holmes spent his early days at Theranos reading about sports online and recruiting his Duke fraternity brother to join the company,” according to Bad Blood, Secrets and Lies in a Silicon Valley Startup, a 2018 book by John Carreyrou, the Wall Street Journal reporter who exposed the fraud.

Shortly after Holmes dropped out of Stanford, she dated Ramesh “Sunny” Balwani, who was 20 years her senior, and had reportedly protected her from bullies at the university.

PROBE

She later appointed him the company’s president and chief operating officer, second to her in the pecking order.

But, they broke up in the spring of 2016 when Ms Holmes pushed him out of the company.

The Securities and Exchange Commission (SEC), the Department of Justice, and the Federal Bureau of Investigation began investigations into the company’s operations.

The Centers for Medicare & Medicaid Services said the company posed an “immediate jeopardy to patient health and safety”.

In 2016, the Department of Health and Human Services banned Theranos from blood-testing. In March 2018, SEC charged Theranos, Ms Holmes and Balwani with “massive fraud”.

PENALTY

Holmes agreed to give up financial and voting control of the firm, pay a $500,000 (Sh50 million) fine, and return 18.9 million shares of Theranos stock.

She is also not allowed to be a director or officer of a publicly traded company for 10 years. In September last year, the hollow Theranos empire finally dissolved, 15 years after it came into being.

The two were indicted by a grand jury in June, although they still deny any wrongdoing. Their trial date is scheduled for August next year.

If convicted, they could face prison sentences that would keep them behind bars for the rest of their lives, and fines totalling $2.75 million each.