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Ex-Theranos employees react to Elizabeth Holmes’ criminal charges

Ex-Theranos employees react to Elizabeth Holmes' criminal charges
Watch the two-hour “20/20” documentary, “The Dropout,” THIS FRIDAY, March 15, 2019, at 9 p.m. on ABC.

This is episode 6 of “The Dropout,” a six-episode ABC Radio podcast concerning the fall of Elizabeth Holmes’ startup Theranos. If you have not listened to episode 1, episode 2, episode 3, episode 4 and episode 5, we advise that you simply achieve this first.

By September 2018, Elizabeth Holmes’s company Theranos had dissolved and the once-celebrated Silicon Valley wunderkind had pleaded not guilty to federal criminal fraud charges.

A trial date has not been set yet, but when convicted, she might face many years in prison.

The news of Holmes’ downfall ricocheted all through the tight-knit group in Houston — a spot the Holmes family as soon as referred to as residence.

“We knew her, and the shock and sadness of watching it all play out has just been huge for the community,” Megan Long, a former classmate of Holmes, informed ABC News’ Rebecca Jarvis on “The Dropout” podcast.

Lengthy first met Holmes in 1995 once they began sixth grade collectively at St. John’s Faculty, a personal faculty in Houston where a few of the wealthiest households in Texas ship their youngsters.

“[People were saying], ‘Oh my god did you hear about Elizabeth?’ ‘Oh my God. Her company is dissolving.’ ‘Oh my gosh, she’s facing criminal charges.’ ‘Oh my God, I feel so bad for Elizabeth,” Long recalled.

Lengthy reached out to Jarvis after listening to the primary episode of “The Dropout.” She stated she needed individuals to hear concerning the well mannered, partaking Holmes she knew growing up.

Of all her reminiscences of Holmes, Lengthy stated there was one that basically stood out.

The women have been on the monitor workforce — Lengthy a sprinter and Holmes a distance runner. To today, Lengthy stated she still remembers who would all the time are available last place during races.

“Everyone would finish the race, and then all of a sudden you hear the announcer say, ‘Don’t cross the track, there’s still a runner on the track.’ That runner was Elizabeth,” Lengthy stated. “But sure enough she was not deterred by people laughing or people crossing the field, she was going to run that race and finish it, and she was determined to do it no matter what anybody said.”

Holmes’ willpower as a scholar appeared to mirror the perseverance she would later exhibit creating and main Theranos. Lengthy stated that “the bully” some former employees have described Holmes as “is not the Elizabeth that I knew growing up.”

St. John’s Faculty opened its doorways in 1946 and has a longstanding popularity for excellence and producing high achievers. Holmes was no exception. Long stated that throughout highschool, Holmes all the time appeared to transfer by means of life with a objective, much less fascinated by socializing, extra “intent on doing her work.”

Holmes opted to not attend faculty dances or interact with pals throughout free durations, Lengthy stated.

“She was always very disconnected from the larger group of girls or just kind of in her own world,” Long stated. “Elizabeth was either working on her dissertation or maybe she was learning her Mandarin or she was learning to program. … But she was always very intently pursuing something else.”

Long stated that the Holmes family stored to themselves. She remembers Holmes’ mother Noel as “pleasant and charming.” She recalled not often seeing Holmes’ father, Christian Holmes, at any faculty features or group occasions. However Lengthy stated Holmes shared one reality about her family tree.

“The only thing Elizabeth told me about her family is that … [actor] Lorenzo Lamas was her step-uncle because her grandfather married his mother, who was a Hollywood actress,” she stated.

After high school, Long says that she didn’t hear from Holmes, that Holmes would not return to Houston for any of the “mini-reunions” their class would have nor communicate with classmates. It wasn’t till Holmes appeared on the duvet of Forbes Magazine in 2014 that her highschool class discovered of her accomplishments.

“That was the first time that anybody had heard anything about Elizabeth since graduation. … I was so proud because, you know, this is Elizabeth that I grew up with. And I was shocked, because I was like, ‘Where have you been? Like we haven’t heard from you, we haven’t seen you.'”

It wasn’t the one new factor that Long discovered about Holmes. She stated she was stunned by Holmes’ voice through the interviews she saw.

“[In high school] her voice was always going up and down in terms of the pitch, of high and low. So it was very nasally and it would vacillate with high and low, so when she would talk to you it would go up and down,” Long stated. “It wasn’t a very clear pitch as to whether it was distinctly high or distinctly low. So when I’ve seen videos of her, her voice was really low. I was like, ‘Wow her voice got really deep.'”

In accordance to Long, in high school, Holmes was nice and reserved, considerably detached, with a household connection to the cleaning soap star Lorenzo Lamas — not the individual Long stated is the lady the general public is aware of at the moment.

“It’s a very big shock to the St. John’s Community and big sadness in our hearts that this is how it all played out,” she stated.

Medical and efficiency psychologist Dr. Jonathan Fader, who steadily works with CEOs, professional athletes and entrepreneurs, stated when individuals fall into disturbing situations it’s attainable for individuals to do issues that might be thought-about out of their character.

“It’s not impossible that, in my mind, any of us when exposed to certain situations could make poor choices,” he advised Jarvis. “I’ll say it’s unlikely that someone who doesn’t have the wiring to do it at all would make those poor choices, but I’m sure it is possible.”

Fader has not evaluated Holmes but stated typically successful leaders may be blinded by their ambitions and lack self-awareness.

“One of the things that we see in leaders is they tend to be in some way somewhat narcissistic,” Fader stated. “An excellent leader is someone who’s able to really have a high level of self-confidence, and there is a very thin line between self-confidence and arrogance.”

“It’s a fine line for being able to ignore things that are important to other people, like feelings or consequences,” he added, versus “doing it so much that you’re putting yourself or other people at risk.”

Fader says typically success at a young age does breed confidence however also can hinder somebody from creating other leadership expertise, similar to “empathy, social skills, the ability to be self-aware and self regulate.”

Lengthy stated it’s still troublesome to make sense of how her former childhood classmate received this far and now could possibly be going to prison.

“Sometimes people have to learn lessons in life, and it’s hard if those lessons are really difficult,” Long stated. “This is how her cards have been dealt, and I wish her the best and I hope that it all works out.”

Holmes is charged with two counts of conspiracy to commit wire fraud and nine counts of wire fraud. According to the indictment from the U.S. Department of Justice, the charges are a result of allegations that Holmes engaged in a multi-million-dollar scheme to defraud buyers, and a separate scheme to defraud docs and sufferers.

If convicted, Holmes might face a maximum sentence of 20 years in prison and a advantageous of $250,000 for each rely of wire fraud and for every conspiracy rely.

“I think depending on how the trial goes and depending on how strong the evidence is and depending on whether or not she testifies, I would be surprised if she got less than 10 years, but I’ve seen in cases like this that are very substantial,” Preet Bharara, former U.S. Lawyer for the Southern District of New York and host of NPR’s “Stay Tuned with Preet,” informed Jarvis.

Bharara has researched the Holmes case and spent years litigating high profile criminal and civil instances. He says that the proof towards her “seems overwhelming.”

“I think she will be convicted, and I think her best bet is to plead, given what I know about the case, and how she might be perceived by the jury,” Bharara stated.

Bharara stated that it is going to be essential for Holmes to show that she was making an attempt to make the Theranos know-how work as she promised.

“Unlike some other fraudsters that my office prosecuted, like Bernie Madoff for example, Bernie Madoff was a fraud through and through … there was never a thought in his head that later I’ll make some money back another way and I’ll pay everyone back. It was a true Ponzi scheme. I’m not saying that carries the day for her at all, but she’s in a slightly different circumstance,” Bharara stated.

However Bharara does not essentially assume that alone shall be enough for Holmes to beat the prosecution. He stated if she will present constructive intent to accomplish something revolutionary it’s going to only be a “minor point in her favor.”

“You usually don’t make precise and specific allegations of the type in this indictment unless you can back it up,” he stated. “People forget this, motive is not really relevant to guilt. … You have to prove that the person intended to do it, but doesn’t matter if the reason was power or fame or greed. It doesn’t matter.”

And whereas Holmes might have had noble intentions, Bharara stated he expects she can be held accountable.

“You really can’t toy with people and their health and their emotions that way,” he stated. “You can see jurors becoming very angry at how she raised people’s hopes falsely.”

Former Theranos president and COO Ramesh “Sunny” Balwani, who also was Holmes’s boyfriend of many years, is dealing with the same federal criminal charges, however Bharara stated he could possibly be in a better place than Holmes.

Balwani’s lawyer Jeff Coopersmith informed Jarvis on “The Dropout” that Balwani doesn’t feel that he was “duped by Elizabeth Holmes” however relatively “believed in Elizabeth Holmes and her vision for the company. He tried to execute that plan with her to make it a success.”

Coopersmith stated Theranos was a “business failure” and “not fraud.”

But Bharara stated it isn’t unusual to see individuals change their defense.

“Even though right now Sunny and Elizabeth Holmes seem to be in sync with each other, that can change,” he stated. “Former boyfriends and girlfriends flip on each other.”

Throughout her deposition with the Securities and Change Commission, one federal entity bringing charges towards Holmes and Balwani, Holmes claimed ignorance to the ongoings at Theranos. She stated “don’t know” or “can’t remember” greater than 660 occasions.

Bharara stated that sort of defense for a CEO might be “problematic.” Holmes introduced herself as knowledgeable and complicated. She was also the one one that repeatedly spoke on behalf of the corporate publicly.

“She was involved deeply, strategically, substantively in every aspect of the business and how the prototypes worked or didn’t work,” Bharara stated. “She personally sought out the investors, she personally sought out people who would be on the board … for her, being incredibly smart and being incredibly educated and incredibly sophisticated is harmful.”

Bharara stated he would advise Holmes to plead guilty.

“The good lawyer says, ‘Look, you’re still a fairly young person. You have a whole life ahead of you. Everyone gets a second chance in America, hopefully. And you want to minimize the amount of time that you were denied your freedom, and here’s how powerful their case is, here are the defenses we could make,'” he stated. “I think you have to have a conversation like that because trials are tough.”

If convicted, Bharara believes it’s highly possible Holmes will face vital prison time.

“Elizabeth Holmes and her erstwhile boyfriend, Sunny, are only guilty if you can prove beyond a reasonable doubt that they intended to lie, that they intended to mislead,” he stated.

The legal fate of Holmes and Balwani won’t be recognized within the imminent future. There are greater than 16 million pages of documents in the case, and processing these was delayed earlier this yr because of the federal authorities shutdown. Both Holmes and Balwani are scheduled to appear in courtroom in San Francisco on April 22 for a status listening to.

In the meantime, Holmes has been dwelling in San Francisco. Former Theranos senior software program engineer Michael Craig says he crossed paths together with her over Martin Luther King Jr. weekend this yr whereas he and he wife have been having cocktails at a bar in Sausalito, California.

Craig stated that it was “surreal” because he by no means thought that he would run into his former boss again.

“She was dressed in like a dark hoodie and jeans and didn’t look to have any makeup on,” he stated. “She looked very young and a little bit slight, her posture was a little slumped over and she was staring right at us. And then she got up and came over, and we stood up, and I was completely taken by surprise.”

The last time Craig had spoken to Holmes was in 2017, his remaining day at Theranos. He’d been let go as a part of a company restructuring.

“She came over and gave us both a big hug and started asking about us and introduced her friend as her fiance and we shook hands, and it was just really weird,” he stated.

Holmes’s fiance is an MIT graduate whose household owns a successful hospitality company. He studied economics and works in know-how in San Francisco. He’s eight years youthful than Holmes.

“He reminded me a lot of the Duke boys that were at Theranos,” Craig stated. “Short cropped hair, handsome guy, pretty, you know, outgoing.”

Craig stated he was caught off guard, when he stated Holmes brought up Theranos casually, ignoring the truth that she was dealing with federal charges. He stated she by no means acknowledged that she was dealing with attainable prison time nor that she had allegedly lied to so many people, including him.

“There was no apology or anything like that,” Craig stated. “There was no stability extended in anything she said. I just thought that was upsetting that this is somebody who claimed to have integrity and to be promoting transparency and the reality is, neither one of those is true was true.”

He felt that the leader he as soon as revered was gone.

“This is the woman who had been on all these magazine covers — she used to walk around with such an air of confidence and certainty — she seemed a little bit worn down but she didn’t seem like somebody who had done anything wrong,” Craig stated.

Craig stated he and his wife made an excuse to depart and that he was shaken from the encounter. He’d dedicated 5 years to Theranos and absolutely believed in Holmes and the mission of the company. Seeing Holmes again brought up a variety of feelings.

“This is someone I almost worshiped here as like a guru of technology and business, and then to have that glass shatter of that illusion held up of her was traumatic,” Craig stated. “I just started to realize that there’s a lot of stuff I haven’t dealt with in terms of the impact that that whole experience has had on me.”

Craig stated if he might ask Holmes one question he would need to know whether “it was intentional” or did she “just screw it up.” He stated he suspects each are true to a point.

“It is wanting something so badly that you’re just going to do whatever means necessary. Take whatever actions you needed … because you’re so convinced you’re going to get there in the long run,” he stated.

Questions nonetheless linger for most of the individuals who obtained caught up in Holmes’ world, like Ana Arriola, the product designer who left Steve Jobs’ Apple to work at Theranos in the early days of the company.

“Steve [Jobs] really coined ‘the reality of the distortion field'” she stated. “That’s when said individual believes implicitly that what they are saying is emphatically the truth, that everyone else believes it to be the truth.”

Avie Tevanian, Steve Jobs’ former right hand at Apple who initially invested $1.5 million into Theranos and for a time served on its board, wonders if they all fell, just a bit bit, into Holmes’s distortion subject along the best way.

“We had a situation here that created what’s called FOMO, fear of missing out,” Tevanian stated. “Everybody before you has bet on this … and then you combine that with this incredibly compelling story. You’ve got this really smart female CEO … who’s going to make herself super rich and who’s going to do a wonderful thing for the world. Right? It is a great story. You want it to work. We all want that to work.”

Tevanian stated the “FOMO culture” is inherit to Silicon Valley.

“It’s almost a legitimate strategy to invest behind other successful investors just because they’ll have the momentum,” he stated.

In accordance to medical and efficiency psychologist Dr. Jonathan Fader, a groupthink mentality is even part of human nature.

“We’ll do anything that we can to get away from uncertainty. … And this is evolutionary,” Fader stated. “We’re relieved when we have a narrative or a story that we can buy … the best leaders can take even a poor message and turn around and massage it and dress it up in a way that really speaks to people.”

This is very true, he stated, when the individual promoting that story seems to be as exceptional as Holmes.

“If you have a compelling, charismatic person who can talk in a way that can pull at the underlying values that people have and can make them feel safe and that we’re headed in the right direction,” he stated. “Even a message that lacks data or is somewhat flawed can be accepted.”

Lots of Theranos’ high-profile buyers and board members have been dazzled by Holmes’ narrative, accepting “trade secrets” for lack of proof or concrete proof that Theranos know-how truly worked and existed the best way it was being bought to them.

Only when a then-25-year-old whistleblower, Tyler Shultz, began to increase considerations, ask questions and finally take action by filing a grievance and talking to a Wall Road Journal reporter did Theranos’ seemingly revolutionary claims start to disintegrate.

Shultz, whose grandfather, George Shultz was on Theranos’ board of directors and a mentor to Holmes, stated he risked his profession and family relationships to converse out due to his concern for individuals’s lives.

When Tyler Shultz got here ahead in 2015, he stated his grandfather, a former secretary of state, sided with Holmes and requested him to again down, however he refused.

“I think that at the end of the day, everyone was concerned that we were not giving people the right results,” Shultz stated in a 2017 deposition for a lawsuit filed towards Theranos by buyers, obtained by ABC News and featured on “The Dropout.”

Tyler Shultz, who left Theranos in 2013, has since co-founded his own medical system firm, Flux Biosciences, in San Francisco.

His grandfather ultimately changed his opinion.

In a press release to ABC News relating to this report, George Shultz stated: “The members of our family work to be loyal and supportive to one another and to the best of America’s values. Most have inspired others to listen to their better angels; and some have shown tremendous courage and integrity when faced with difficult decisions or situations. Tyler’s handling of the troubling practices he identified at Theranos is an example. He did not shrink from what he saw as his responsibility to the truth and patient safety, even when he felt personally threatened and believed that I had placed allegiance to the company over allegiance to higher values and our family. I have learned — from my experiences beginning in World War II, in private industry, and in the various public service positions, I have been privileged to fill — that the people in the field are closest to the issues and are the best sources of wisdom whenever a problem arises. That was certainly the case here. Tyler navigated a very complex situation in ways that made me proud. He has been an example for the entire family, for which all of us are grateful. I want to recognize and congratulate Tyler for his great moral character.”

Erika Cheung, a former Theranos employee, filed the grievance with the Facilities for Medicare and Medicaid Providers concerning the issues with high quality management and proficiency testing she witnessed at the firm, which finally led to Theranos’ labs being shut down.

She has also moved on together with her life. She now works for a enterprise capital personal fairness firm in Hong Kong and stated she’s dedicated to rising the entrepreneurial ecosystem.

“I hope that people don’t get completely discouraged and think that everyone who is in the healthcare industry and the biotech industry is somehow out to get them and to hurt them. There are a lot of good people in this industry that really, really want to do good,” Cheung informed Jarvis on “The Dropout.”

She additionally encourages individuals “to be a little bit skeptical, a little bit critical of things that are really hyped up.”

It is precisely how Stanford Professor Dr. Phyllis Gardner was when Holmes originally approached her about an concept for a microfluidic patch when she was a freshman. Gardner turned one of the earliest skeptics of Holmes.

“I was not impressed with her knowledge, nor her ability to grasp complex information, [even though] a lot of people thought that she was brilliant,” Gardner informed Jarvis.

Gardner, who continues to train drugs at Stanford, hopes future generations of students will focus their power on learning over monetary achieve.

“Without sounding too critical, it would be better if students would focus on service, humanities, arts and other things to broaden their minds rather than just focusing on becoming a multimillionaire by starting your company,” she stated.

Gardner, like so many different ladies, stated she was dissatisfied that Holmes, a rising female entrepreneur, appeared like someone different young ladies might have seemed up to.

“It bothers me that a woman was not successful. It bothers me that the women wanted to idolize her and that she fell. It bothers me that students thought she was great, and it bothers me about the patients. So I get disturbed,” Gardner stated.

A type of ladies additionally disenchanted by Holmes is Arriola, who was certainly one of Theranos’ early employees but left before the corporate moved into business blood testing. She has since moved on to turn out to be a basic manager and associate at Microsoft but echoed Gardner’s sentiment.

“It hurts me to know that so many women, some of the female entrepreneurs, in the world believed in her and saw her as this world-changing individual, and all along I knew she was ethically corrupt,” Arriola stated on “The Dropout.” “Was Elizabeth a sociopath? I think history speaks for itself.”

However Arriola hasn’t given up hope that there’ll groundbreaking blood testing know-how in the future.

“Someday it will become reality — just not with Elizabeth,” she stated.

Joseph Fuisz, an inventor, entrepreneur and lawyer, was a Holmes family neighbor once they lived in Washington, D.C., through the late ’80s and early ’90s. He thinks there’s a notably unhappy irony to the fact that Gardner, whom he regards as one of the crucial sensible scientists of our time, is in some methods the very groundbreaking female healthcare pioneer that he stated Holmes just pretended to be.

“Phyllis, while having kids and practicing medicine, was [a] chief scientific officer of ALZA [once a pharmaceutical and medical systems company], which was bought by Johnson & Johnson for $9 billion. They basically did all the original time-release technology. I mean, if you take a time-release tablet today, [there is a] very good chance it’s from the technology that Phyllis Gardner worked on,” Fuisz stated.

Fuisz thinks that Holmes was the kind of person who the general public needed.

“The press wanted youth and they wanted this sort of blonde hair, et cetera. And so they elevated Elizabeth. And Phyllis right away saw through the fallacy of what she was attempting to do with the technology … but I always found it ironic and sad in a way, because to me, in a way, the press is building up Elizabeth for trying to be what Phyllis actually was,” he stated.

To this present day, neither Holmes, Balwani nor Theranos have admitted any wrongdoing. Holmes and her counsel did not respond to repeated requests for remark.

Reid Kathrein, who represented buyers in a lawsuit towards Theranos, stated Theranos must be held answerable for what he calls egregious misdeeds.

“This is not a little thing,” he stated. “Not only did they fool the investors, they fooled the media, they fooled patients they fooled doctors.”

Coopersmith, Balwani’s lawyer, is optimistic concerning the upcoming trial.

“I’m very confident that when the jury hears the whole story, you’re going to see an acquittal — in this case acquittals,” Coopersmith informed Jarvis.

He also stated that Balwani is concentrated on the longer term.

“He’s a very energetic, really brilliant person who has plans and dreams like all of us. He wants to continue to develop software,” Coopersmith stated. “I don’t know whether it be in health care. He wants to continue the entrepreneurship that he’s shown in the past.”

Today, Holmes resides in San Francisco and sometimes seen strolling her canine, Balto, a Siberian Husky she named after a well-known sled dog who transported life-saving drugs throughout Alaska throughout a diphtheria outbreak within the 1920s.

She might again be the final runner on the monitor, refusing to give up.

According to sources, she’s already planning a brand new firm. It’d even resemble Theranos. As she advised a packed house at a Forbes conference three-and-a-half years in the past: “You will get knocked down over and over and over and over again, and you win by getting back up. … I would start this company over 10,000 times if I had to.”

“The Dropout” is a six-part collection on the rise and fall of former Silicon Valley darling Elizabeth Holmes and her firm Theranos. It’s written and produced by Jarvis, Taylor Dunn and Victoria Thompson. Pay attention to “The Dropout” at no cost on Apple Podcasts, Google Podcasts, iHeartRadio, Spotify, Stitcher, TuneIn, the ABC News app, or your favorite podcast participant.

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