The Verdict Is In on Elizabeth Holmes

Silicon Valley is debating the implications of the conviction of Elizabeth Holmes.Credit…Nick Otto/Agence France-Presse — Getty Images

Four charges of fraud

Elizabeth Holmes, the founder of the failed blood testing start-up Theranos, was found guilty of fraud yesterday, in a high-profile case that came to symbolize the perils of Silicon Valley hype and hubris.

The case was not open-and-shut. Jurors, after a 15-week trial, returned a mixed verdict, finding Holmes guilty on four of 11 charges. All of the counts that she was convicted of related to defrauding investors. She was found not guilty of four counts of defrauding patients, and jurors were unable to agree on three counts related to financial fraud.

Holmes is likely to spend time in prison, with each count carrying a maximum sentence of 20 years, which could be served concurrently. A sentencing date is expected to be set next week at a hearing about the three hung charges. Holmes can appeal the conviction, her sentence or both.

She is currently on probation and exited the courtroom in San Jose, Calif. via a side door. She is unlikely to receive the maximum sentence because she has no criminal record, but she could face a long time behind bars because of the amount of money she raised — some $945 million in investments in Theranos were eventually wiped out.

American courts are notoriously lenient on white-collar criminals, and such cases are rare in Silicon Valley. The tech news site The Information argued that there was no point imprisoning Holmes because investors would never back her again and the U.S. already incarcerates too many people. On the other hand, a light sentence would stand in contrast to the harshness that many less privileged defendants face, while a tough sentence could act as a deterrent to others to cut out fraud, which can be a byproduct of Silicon Valley’s “fake it till you make it” philosophy.

And the fact that Holmes was found guilty of defrauding investors, and not customers, may send a message about the state of financial regulation and enforcement, which since the financial crisis has been criticized by some as too lenient.

More on the verdict:

  • It signals the end of an era for the tech industry, The Times’s David Streitfeld writes: “In Silicon Valley, where the line between talk and achievement is often vague, there is finally a limit to faking it.”

  • The tech world can’t avoid its association with Holmes, The Times’s Erin Griffith adds: “Theranos and its leader were very much products of Silicon Valley.”

  • “The Svengali Defense didn’t work,” tweeted the reporter John Carreyrou, whose investigation of Theranos for The Wall Street Journal led to Holmes’s downfall.

  • “Guilty. Good.” tweeted John Lilly, a veteran venture capitalist.


Evergrande shares reopen higher. After trading was halted yesterday, the embattled Chinese real estate developer said today that its contracted sales fell nearly 39 percent last year. Missing was any update on the company’s financial restructuring efforts.

OPEC and its allies are set to raise oil production. The cartel of petroleum-producing countries and partners like Russia are expected to announce today that they will modestly increase output by about 400,000 barrels a day. That’s in part because the group sees a smaller-than-expected global oil surplus.

Apple hits the $3 trillion mark. The iPhone maker became the first public company to reach that stratospheric valuation, after hitting $2 trillion just 16 months ago. The company’s in-demand products and shrewd use of cash (in part to buy back its shares) have propelled its stock price higher.

Tesla opens a showroom in China’s Xinjiang. The move came despite many Western countries’ shying away from the region after accusing Beijing of repressing Muslim ethnic minorities there. But Tesla relies heavily on China for sales growth.

So-so performance dims hedge funds’ allure. The industry reported an average gain of 8.7 percent for most of last year, badly trailing the S&P 500. (Some firms, like D.E. Shaw and Bill Ackman’s Pershing Square, reported far stronger results.) That, coupled with investor concerns about high fees, has made it harder for funds to attract new capital.

Delaying 5G’s takeoff

The nation’s largest wireless companies, reversing their stance, said yesterday that they would delay a planned expansion of 5G technology. Verizon and AT&T said the service would provide many more customers with superfast connections, but airline officials warned that 5G could risk safety and make a spate of canceled and delayed flights worse. The Transportation Department and the Federal Aviation Administration asked last week for the companies to delay the release, which Verizon and AT&T initially rejected.

What’s the problem? 5G uses a neighboring frequency to altimeters, devices that show pilots on takeoffs and landings how far they are from the ground. The concern is that wireless 5G traffic will bump into signals being sent by altimeters, giving pilots inaccurate altitude readings — or none at all. To prevent that, the agency had warned it may be forced to divert aircraft away from airports where planes could face interference.

Experts say airlines are most likely overstating the risk. Pilots rely on altimeters only in dense fog and other weather conditions that produce low visibility and not on most landings. And modern jetliners have altimeters that would not be disrupted by neighboring frequencies. So, it’s the airlines that fly smaller or older planes that would be affected the most.“I can’t imagine we would see massive flight disruptions,” Tim Farrar, a wireless spectrum expert and industry consultant, told DealBook.

A compromise could be in the works. The transportation agency has hinted that it is likely to exempt newer planes from 5G-related restrictions, and the wireless industry may be willing to help pay to make older planes 5G compliant. Farrar estimates that this would cost a few hundred million dollars, which isn’t much considering that wireless providers paid nearly $100 billion to acquire 5G spectrum.

More spectrum fights are on the way. While the Federal Communications Commission doles out wireless frequencies, industry regulators like the F.A.A. get a lot of say in how those frequencies are used. When there is a conflict, regulators are not required to come up with a joint solution. “There isn’t a year without a dozen spectrum fights,” said Jon Peha, a Carnegie Mellon professor and a former F.C.C. official. “It will continue until the underlying broken process is fixed.”

“It is the compound effect of the Covid disruptions and the stimulus package at the same time. The firms were always greedy.”

— Thomas Philippon, an economist at New York University who studies corporate concentration, says he believes unique economic conditions resulting from the pandemic have led to high inflation. The White House has blamed consolidation and a lack of competition in the beef industry for rising food prices, joining a chorus of criticism from Democrats.

Nir Bar Dea, left, and Mark Bertolini will now lead Bridgewater as co-chief executives.Credit…From left: Bridgewater; Cole Wilson for The New York Times

Bridgewater names new chiefs

Bridgewater Associates, the world’s biggest hedge fund, named two new C.E.O.s yesterday after David McCormick, its current chief, said he would step down to consider a run for the U.S. Senate.

Meet Nir Bar Dea and Mark Bertolini. Bar Dea, 40, is Bridgewater’s deputy C.E.O. and a former Israeli military major who was in charge of the firm’s pandemic planning; Bertolini, 65, is the former chief of the insurer Aetna and a Bridgewater board member. Their unconventional backgrounds for leaders of a hedge fund reflect the firm’s unusual culture, including a commitment to “radical transparency.” Ray Dalio, Bridgewater’s outspoken founder, will stay on as co-chief investment officer.

They will succeed McCormick, a former U.S. Army captain, McKinsey consultant and official in the George W. Bush administration. He joined Bridgewater in 2009 — Dalio told employees yesterday that he initially gave him a “50 percent chance of working out” — and eventually rose to the firm’s top spot. “Dave took Bridgewater from where it was to where it is,” Dalio said. “That was no easy job.”

McCormick’s new challenge may be tougher. The conservative Republican will be entering a crowded field for the Pennsylvania Senate seat, which includes the reality TV star Dr. Mehmet Oz. His advisers reportedly include former Trump administration officials like Hope Hicks and Stephen Miller.

Testing times

The tools presented to combat the coronavirus crisis have often led to political strife and aggravated existing divides. First it was masks, then vaccines and now tests. As the Biden administration pushes to help keep the U.S. economy open despite a surge in cases, coronavirus tests will play an increasingly important role. For businesses, this presents a new set of challenges:

  • Accuracy: Officials at the C.D.C. have suggested that rapid tests are not terribly effective at diagnosing infectiousness. But while these tests may not always identify infections in their earliest days, they can flag people who have high viral loads and are thus most likely to be transmitting the virus.

  • Supply: The Biden administration has promised 500 million more tests, but that may take time to fulfill. This might not be a problem for big companies, which have been stockpiling tests, but might be for smaller firms trying to get workers back in offices.

  • Logistics: Will companies monitor employees taking tests or adopt the honor code? How will they record and track the results? Who will pay for all this?

  • Politics: Amid testing shortages in Florida, the state’s surgeon general said he wanted to “unwind” the “testing psychology.” The declaration was criticized by medical experts but foreshadows more political clashes over how to manage the virus, particularly given high numbers of mild or asymptomatic cases produced by the Omicron variant.

More pandemic news:

  • Schools were returning to normal. Then Omicron upended them again.

  • Omicron’s spread poses an unwelcome political conundrum just as election season begins, writes the newly relaunched On Politics newsletter.

  • The humble wristband could play a role in getting employees safely back to their desks.



  • The sports e-commerce company Fanatics agreed to buy Topps’ trading cards business for about $500 million. (CNBC)

  • David Bowie’s estate agreed to sell the rock star’s songwriting catalog to Warner Music for $250 million. (NYT)

  • The white-shoe law firm Sullivan & Cromwell named Robert Giuffra and Scott Miller as its new co-chairs, succeeding Joseph Shenker. (WSJ)


  • Facebook removed a post by Representative Marjorie Taylor Greene a day after Twitter permanently suspended the Georgia Republican’s personal account for spreading misinformation. (WSJ)

  • New York State’s attorney general subpoenaed Donald Trump Jr. and Ivanka Trump as part of an investigation into the Trump family’s business practices. (NYT)

  • The E.U. is considering financial punishments for Hungary over the illiberal policies of the country’s prime minister, Viktor Orban. (NYT)

Best of the rest

  • New documents reveal that a woman who is among Jeffrey Epstein’s most vocal accusers settled a lawsuit against the financier for $500,000 in 2009. (NYT)

  • A prototype electric car from Mercedes can reportedly drive 621 miles on a single charge. (FT)

  • The WeWork co-founder Adam Neumann has quietly become a major residential landlord. (WSJ)

  • Sorry, old-school BlackBerry fans: Your phones will stop working properly today. (NYT)

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