Nevertheless, the verdict is a stark rebuke of the defense, which attempted to portray Holmes as a visionary leader who fell victim to subordinates who misled her and investors who misunderstood her.
Trial strategists will debate for months the wisdom of the tactical choices made by Holmes' defense team, including her decision to
take the stand, her allegations of
abuse, and her
concession, for example, that she altered a document shown to investors to include the logos of pharmaceutical companies that had not endorsed Theranos' products.
While those decisions by the defense are certainly worthy of debate, there are several key takeaways from the verdict.
First, good intentions are not a shield from criminal liability.
Holmes' lawyers argued that she set out to change the world of biotechnology and that all her conduct was aimed at realizing that goal. According to this line of reasoning, any misrepresentations that occurred along the way were not unlawful because Holmes' overriding purpose was not to harm anyone, but to keep Theranos going so that it could deliver the revolutionary results she promised. But this argument misses the crucial point that one cannot legally deceive investors even as a means to a laudable end.
The law books are filled with criminal cases involving businesses that started out as legitimate — consider
Enron or
WorldCom — but turned
fraudulent when
executives were unwilling to acknowledge changed circumstances and hoped that they could tread water long enough to turn things around. (Even
Bernie Madoff claimed that he intended no harm when he started what became the world's largest
Ponzi scheme and thought he would eventually be able to dig his way out.) Thus, having pure intentions at the outset, and multiple motivations throughout, is not a defense.
It's never investors' fault
Second, investors' lack of due diligence is immaterial. The evidence introduced at trial suggested that several of the
investors named as victims failed to independently scrutinize many of Theranos' assertions, and in some cases rushed their decisions because of a fear of missing out. Experienced biotech investors, meanwhile, have cited numerous red flags as reasons they declined to do business with Theranos, such as the absence on the company's
board of any directors with relevant experience in the field.
Those who chose to invest may have egg on their faces, but their negligence does not absolve Holmes of fraud. Executives may not take advantage of gullible investors, even those that are supposedly sophisticated. Moreover, the onus is not on investors to ferret out the half-truths in executives' representations.
Wrong is wrong
Third, "everybody does it" is not a defense either.
The Holmes trial has been portrayed by some as a referendum on Silicon Valley's "fake it 'til you make it" ethos, with questions raised about why Holmes (as a rare female founder) has been allegedly singled out for prosecution. (Never mind that former Theranos COO Ramesh "Sunny" Balwani also has been charged.) As I have
previously argued, it is unlikely that the charges against Holmes reflect business as usual in Silicon Valley. Holmes elided the distinction between reality and optimistic projections in a particularly egregious manner.
But even if Holmes' actions were typical, that would not render them lawful. Some of the parents charged in the
college admissions scandal undoubtedly believed that they were merely keeping up with other affluent families, but they too were convicted of felonies. At the end of the day, wrong is wrong, even if others are engaged in similar misconduct.
None of these takeaways break new ground. The Holmes verdict is consistent with well-established legal principles that have been applied in fraud cases for decades. But sometimes a high-profile trial can usefully reaffirm and publicize such principles. Given the
Department of Justice's recent statements announcing its renewed focus on individual accountability for corporate crime, perhaps the Holmes verdict comes at just the right time to do precisely that.