Elizabeth Holmes

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Elizabeth Holmes
Elizabeth Holmes 2014 (cropped).jpg
Elizabeth Holmes backstage at TechCrunch Disrupt San Francisco 2014
Born Elizabeth Anne Holmes
(1984-02-03) February 3, 1984 (age 34)
Washington, D.C., U.S.
Residence Los Altos Hills, California, U.S.
Nationality American
Alma mater Stanford University (withdrew)[1]
Occupation Health-technology entrepreneur
Years active 2003–2018
Net worth As of June 2016, USD $0[2]
Title Founder and ex-CEO of Theranos
Parent(s) Christian Holmes IV
Noel Anne Daoust

Elizabeth Anne Holmes (/hmz/; born February 3, 1984) is the founder and former CEO of Theranos, a privately held company known for its false claims to have devised revolutionary blood tests that used very small amounts of blood.[3][4] She is under indictment by the United States Department of Justice for wire fraud.[5] In 2015, Forbes named Holmes as the youngest self-made female billionaire in the world due to a $9 billion valuation of Theranos.[6] The next year Forbes revised the value of her interest in Theranos to zero dollars, given an updated $800 million valuation of Theranos and the fact that many of Theranos' investors hold preferred shares and so would be paid before Holmes (who holds common stock) in a liquidation event.[2]

In 2016, after a series of journalistic and regulatory investigations that questioned the veracity of Holmes's claims, federal prosecutors began criminal investigations for potentially misleading investors and the government about Theranos's blood-testing technology. Following the revelation of potential fraud, Fortune named Holmes one of the "World's Most Disappointing Leaders".[7] In 2016, the Centers for Medicare and Medicaid Services (CMS) banned Holmes from owning, operating, or directing a diagnostic lab for a period of two years.[8] In December 2017, Theranos settled a lawsuit brought by the State of Arizona alleging that the company had sold 1.5 million blood tests to Arizonans while concealing or misrepresenting important facts about those tests. The company agreed to pay $200,000 in civil fines, and refund the cost of the tests to Arizona consumers.[9]

In March 2018, the U.S. Securities and Exchange Commission sued Holmes and Theranos, accusing them of fraudulently raising more than $700 million from investors through false or exaggerated claims. In exchange for settling the charges, Holmes agreed to pay a $500,000 fine, return 18.9 million shares, relinquish her voting control of Theranos, and be barred from serving as an officer or director of a public company for ten years.[10][11][12] At its height, Theranos had more than 800 employees; by April 2018, it had laid off the vast majority of its workforce and had fewer than two dozen employees remaining.[13]

In June 2018, a federal grand jury indicted Holmes and former Theranos COO Ramesh Balwani on nine counts of wire fraud and two counts of conspiracy to commit wire fraud.[14] Prosecutors allege that Holmes and Balwani engaged in two criminal schemes, one to defraud investors, the other to defraud doctors and patients.[14] After the indictment, Theranos announced that Holmes would resign as CEO; she retains her position as chairwoman of the board.[15]

Early life[edit]

Holmes was born in February 1984 in Washington, D.C.[16] Holmes' father, Christian Rasmus Holmes IV, worked in the United States, Africa, and China as part of government agencies such as USAID.[1] Her mother, Noel Anne Daoust, worked as a Congressional committee staffer.[17] Her great-grandfather, Christian Rasmus Holmes, was a Danish physician who married Bettie Fleischmann, the wealthy daughter of Charles Louis Fleischmann, founder of Fleischmann’s Yeast [18]

She attended St. John's School in Houston and was recognized for her "tireless optimism and a particularly warm smile".[16] During high school, Holmes was interested in computer programming and started her first business selling C++ compilers to Chinese universities.[19] In 2001, Holmes applied to Stanford University and was named a President's Scholar, which came with a stipend to use on a research project. She studied chemical engineering and used the stipend to work in a lab with Ph.D. candidates and Channing Robertson, dean at the engineering school.[17]

After the end of her freshman year, Holmes worked in a lab at the Genome Institute of Singapore on testing for severe acute respiratory syndrome (SARS) through the collection of blood samples with syringes.[19] She filed her first patent on a wearable drug-delivery patch in 2003.[20][21] In March 2004, she dropped out of Stanford's School of Engineering and used her tuition money as seed funding for a consumer healthcare technology company.[17][1]

Theranos[edit]

Founding of Theranos[edit]

Holmes founded the company in Palo Alto, California as Real-Time Cures to "democratize healthcare."[19][22] Her goal was to make health information accessible to all people at any time so that risk of disease and health conditions could be detected early on.[19][23][24] Holmes describes her fear of needles as one of her motivations for founding Theranos.[23][25] When Holmes initially pitched the idea to reap "vast amounts of data from a few droplets of blood derived from the tip of a finger" to several of her professors at Stanford including Phyllis Gardner, most of them said that it was "virtually impossible to do so with any real efficacy". However, Holmes succeeded in getting Robertson to back her idea.[26]

In April 2004, she incorporated the company as Theranos (a portmanteau of "therapy" and "diagnosis")[27] and rented the basement of a group college house.[17] At that time, Holmes hired her first employee and rented lab space.[28] Robertson became the company's first board member and introduced Holmes to venture capitalists.[17]

Funding and expansion[edit]

By December 2004, she had raised $6 million to fund Theranos.[17] The company's first revenue came from contracts Holmes established with pharmaceutical companies to conduct testing and other clinical trials.[28] By the end of 2010, Holmes had more than $92 million in venture capital for Theranos.[20] In July 2011, Holmes was introduced to former Secretary of State George Shultz. After a two-hour meeting, he joined the Theranos board of directors.[29] She was recognized for forming "the most illustrious board in U.S. corporate history" over the next three years.[30] Holmes operated Theranos in stealth mode without press releases or a company website until September 2013 when the company announced a partnership with Walgreens to make in-store blood sample collection centers.[31][32]

Media attention increased in 2014 as she was on the cover of Fortune, Forbes, T: The New York Times Style Magazine and Inc.[33] Forbes recognized Holmes as the world's youngest self-made female billionaire and ranked her #110 on the Forbes 400 in 2014. Theranos was valued at $9 billion with more than $400 million in venture capital.[17][34] By the end of 2014, her name appeared on 18 U.S. patents and 66 foreign patents.[21]

During 2015, Holmes established agreements with Cleveland Clinic, Capital BlueCross and AmeriHealth Caritas to use Theranos technology.[20]

False claims, SEC settlement, and decline of company[edit]

The Wall Street Journal reported in October 2015 that the Edison blood testing device by Theranos might provide inaccurate results.[35] Holmes denied the claims and said the company would publish data on the accuracy of its tests.[36][37]

In January 2016, the Centers for Medicare and Medicaid Services (CMS) sent a warning letter to Theranos after inspecting its Newark, California, laboratory.[38] CMS regulators proposed a two-year ban on Holmes from owning or operating a blood lab after the company had not fixed problems within its California lab in March 2016.[39] On The Today Show, Holmes said that she was "devastated we did not catch and fix these issues faster" and that the lab would be rebuilt with help from a new scientific and medical advisory board.[40] In July 2016, the CMS banned Holmes from owning, operating, or directing a blood-testing service for a period of two years. (The company appealed that decision to a U.S. Department of Health and Human Services appeals board.)[25][41] Shortly thereafter, Walgreens ended its relationship with Theranos and closed its in-store blood collection centers. The FDA also ordered the company to cease using its Capillary Tube Nanotainer device.[42]

Other reported ongoing actions include civil and criminal investigations by the U.S. Securities and Exchange Commission and the U.S. Attorney's Office for the Northern District of California, an unspecified FBI investigation, and two class action fraud lawsuits. Holmes is reportedly standing by all of her company's claims and has denied any wrongdoing.[25]

On May 16, 2017, approximately 99 percent of Theranos shareholders reached an agreement with the company to dismiss all current and potential litigation in exchange for shares of preferred stock. Holmes released a portion of her equity to offset any dilution of stock value to non-participating shareholders.[43][44]

On March 14, 2018, Holmes settled a SEC lawsuit.[45] The charges of fraud included claiming the company's technology was being used by the U.S. Department of Defense in combat situations despite never having been used (Defense Secretary Jim Mattis pushed for use of the technology although it was never implemented).[46] Another false claim included claiming a $100 million revenue stream in 2014 that was actually $100,000.[47] The terms of the settlement included surrendering voting control of Theranos, a ban on holding an officer position in a public company for 10 years, and a $500,000 fine.[48]

At its height, Theranos had more than 800 employees.[13] It fired 340 staff members in October 2016, and an additional 155 employees in January 2017.[49] By April 2018, it had laid off the vast majority of its workforce and had fewer than two dozen employees remaining.[13] In April 2018, Theranos filed a WARN Act notice with the State of California announcing its plans to permanently lay off 105 employees.[50]

Criminal charges[edit]

On June 15, 2018, following an investigation by the U.S. Attorney's Office in San Francisco that lasted more than two years, a federal grand jury indicted Holmes and former Theranos COO and president Ramesh "Sunny" Balwani on nine counts of wire fraud and two counts of conspiracy to commit wire fraud. Prosecutors allege that Holmes and Balwani engaged in two criminal schemes, one to defraud investors, the other to defraud doctors and patients.[14][5] After the indictment was issued, Holmes stepped down as CEO of Theranos, but remained chair of the board.[15]

The case is proceeding in the U.S. District Court in San Jose. Holmes and Balwani pleaded not guilty.[51]

Promotional activities[edit]

Holmes partnered with Carlos Slim Helú in June 2015 to improve blood testing in Mexico.[52] In October 2015, she announced #IronSisters to help women in science, technology, engineering and mathematics (STEM) careers.[53] She helped to draft and pass a law in Arizona to let people obtain and pay for lab tests without requiring insurance or healthcare provider approval.[54]

Recognition[edit]

Holmes was named one of Time magazine's Most Influential People in the World in 2015.[55] Holmes received the "Under 30 Doers" Award from Forbes and ranked on its 2015 list of the "Most Powerful Women".[56][57] She was also named "Woman of the Year" by Glamour.[58] Holmes was awarded the 2015 Horatio Alger Award, being the youngest recipient in its history.[59][60] She had also previously been named Fortune's "Businessperson of the Year" and "40 Under 40" lists.[61][62]

Following several journalistic and criminal investigations and civil suits regarding Theranos' business practices, she was charged with "massive fraud" by the Securities and Exchange Commission.[46] In 2016, Fortune named Holmes one of the "World's Most Disappointing Leaders".[7]

Personal life[edit]

Elizabeth Holmes listens as Deputy Secretary of Defense Ash Carter speaks at Stanford University, April 17, 2013.

Prior to the March 2018 settlement, Holmes held a 50 percent stock ownership in Theranos.[19] Forbes listed her as one of "America's Richest Self-Made Women" in 2015 with a net worth of $4.5 billion.[34] In June 2016, Forbes released an updated valuation of $800 million for Theranos, which made Holmes’s stake essentially worthless, because other investors owned preferred shares and would have been paid before Holmes, who owned only common stock.[2] Holmes reportedly owes a $25 million debt to Theranos in connection with exercising options. She did not receive any company cash from the arrangement, nor did she sell any of her shares, including those associated with the debt.[63][64][65]

WSJ reports that Ms Holmes was romantically involved for several years, beginning 2005, with Ramesh “Sunny” Balwani, an Indian-born Silicon Valley technology entrepreneur who also was Theranos' Chief Operating Officer between 2009 until she fired him in 2016.[66]

Bad Blood: book and movie[edit]

In May 2018 author John Carreyrou released his book Bad Blood: Secrets and Lies in a Silicon Valley Startup. A movie based on the book is in development with Jennifer Lawrence in the role of Holmes and to be directed by Adam McKay.[67][68]

See also[edit]

References[edit]

  1. ^ a b c Crane, Rachel (October 16, 2014). "She's America's youngest female billionaire – and a dropout". CNNMoney. Retrieved March 22, 2015. 
  2. ^ a b c Herper, Matthew (June 1, 2016). "From $4.5 Billion To Nothing: Forbes Revises Estimated Net Worth Of Theranos Founder Elizabeth Holmes". Forbes. Retrieved January 6, 2017. 
  3. ^ Levine, Matt (14 March 2018). "The Blood Unicorn Theranos Was Just a Fairy Tale". Bloomberg View. Retrieved 14 March 2018. 
  4. ^ Abelson, Reed (24 April 2016). "Theranos's Fate Rests With a Founder Who Answers Only to Herself". New York Times. Retrieved 30 April 2016. 
  5. ^ a b Carreyrou, John (June 15, 2018). "U.S. Files Criminal Charges Against Theranos's Elizabeth Holmes, Ramesh Balwani", Wall Street Journal.
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  8. ^ Carlos Tejada, Theranos Founder, Elizabeth Holmes, Is Barred From Running Lab for 2 Years, New York Times (July 8, 2016).
  9. ^ Conner, Katie (2017-12-14). "Thousands of Arizonans will get settlement money after using Theranos services". KNXV. Retrieved 2018-03-16. 
  10. ^ Robinson, Matt; Spalding, Rebecca (2018-03-14). "Blood, Fraud and Money Led to Theranos CEO's Fall From Grace". Bloomberg.com. Retrieved 2018-03-15. 
  11. ^ "Theranos, CEO Holmes, and Former President Balwani Charged With Massive Fraud" (Press release). Securities and Exchange Commission. Retrieved 2018-03-15. 
  12. ^ Ramsey, Lydia (June 15, 2018). "SEC Charges Theranos Founder Elizabeth Holmes With 'Massive Fraud'}, Inc.
  13. ^ a b c John Carreyrou (April 10, 2018). "Theranos Lays Off Most of Its Remaining Workforce", Wall Street Journal
  14. ^ a b c Johnson, Carolyn Y. (June 15, 2018). "Elizabeth Holmes, founder of blood-testing company Theranos, indicted on wire fraud charges". Washington Post. ISSN 0190-8286. 
  15. ^ a b Theranos founder Elizabeth Holmes steps down as CEO, Reuters (June 15, 2018).
  16. ^ a b Abelson, Reed; Creswe, Julie (19 December 2015). "Theranos Founder Faces a Test of Technology, and Reputation". New York Times. Retrieved 1 November 2016. 
  17. ^ a b c d e f g Auletta, Ken (December 15, 2014). "One Woman's Drive to Revolutionize Medical Testing". The New Yorker. Retrieved 2015-10-19. 
  18. ^ {{Cite web | title = Theranos Founder Faces a Test of Technology, and Reputation| author = Abelson, Reed and Julie Creswell | work = The New York Times | date = December 19, 2015 | accessdate = 2018-07-10 | url = https://mobile.nytimes.com/2015/12/20/business/theranos-founder-faces-a-test-of-technology-and-reputation.html
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  26. ^ Bilton, Nick. "How Elizabeth Holmes's House of Cards Came Tumbling Down". Vanity Fair. Retrieved May 20, 2018. 
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  45. ^ Ho, Catherine (March 14, 2018)."Theranos founder to pay $500,000 to settle 'massive fraud' charges", San Francisco Chronicle
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  49. ^ Vincent, James (January 9, 2017). "Theranos starts 2017 by firing 40 percent of its staff", The Verge
  50. ^ "Worker Adjustment and Retraining Notification (WARN) Report" (PDF). Employment Development Department, State of California. 2018-05-10. Retrieved 2018-05-18. 
  51. ^ Mole, Beth (June 15, 2018). "Disgraced Theranos founder Elizabeth Holmes indicted on criminal charges", Ars Technica
  52. ^ Estevez, Dolia (22 June 2015). "With Carlos Slim, Billionaire Elizabeth Holmes Brings Innovative Blood Testing Method To Mexico". Forbes. Retrieved 24 October 2016. 
  53. ^ Lev-Ram, Michal (12 October 2015). "Theranos' Elizabeth Holmes calls on women to help each other". Fortune. Retrieved 24 October 2016. 
  54. ^ della Cava, Marco (2 July 2015). "Now no doctor's note needed for blood test in Arizona". USA Today. Retrieved 24 October 2016. 
  55. ^ Kissinger, Henry A. (16 April 2015). "The 100 Most Influential People: Elizabeth Holmes". TIME. Retrieved 11 June 2016. 
  56. ^ Hedgecock, Sarah. "Elizabeth Holmes On Using Business To Change The World". Forbes. 
  57. ^ "The World's Most Powerful Women 2015: 19 Newcomers". Forbes. 2015. Retrieved 11 June 2016. 
  58. ^ Fenn, Donna (October 29, 2015). "Elizabeth Holmes Wants You to Have Control of Your Health Info". Glamour Magazine. Retrieved 31 May 2016. 
  59. ^ Parloff, Roger. "Theranos' Elizabeth Holmes: Young entrepreneurs need "a mission"". Fortune. Retrieved 31 May 2016. 
  60. ^ "2015 Horatio Alger Award Winner Elizabeth Holmes". Horatio Alger Association of Distinguished Americans. Retrieved May 31, 2016. 
  61. ^ "14. Elizabeth Holmes". Fortune. 2014. Retrieved 11 June 2016. 
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  63. ^ Weaver, Christopher (April 5, 2017). "Theranos Founder Elizabeth Holmes Owes About $25 Million to Blood-Testing Startup". Wall Street Journal. Retrieved January 25, 2018. 
  64. ^ Shen, Lucinda (6 April 2017). "Theranos Founder Elizabeth Holmes Reportedly Owes Her Startup $25 Million". Fortune. Retrieved 10 April 2017. 
  65. ^ Balakrishnan, Anita (5 April 2017). "Founder Elizabeth Holmes reportedly owes Theranos about $25 million". CNBC. Retrieved 10 April 2017. 
  66. ^ Carreyrou, John (19 May 2018). "Theranos Inc.'s Partners in Blood". Wall Street Journal. Retrieved 19 May 2018. 
  67. ^ Cooper, Daniel (2018-03-14). "SEC charges Theranos and CEO Elizabeth Holmes with 'massive fraud". Engadget. Retrieved 2018-03-15. 
  68. ^ Robertson, Jamie (2018-03-15). "Bad blood: the rise and fall of Theranos and Elizabeth Holmes". BBC News. Retrieved 2018-03-15. 

External links[edit]