In the wake of Theranos founder Elizabeth Holmes’ this week losing her appeal of her felony fraud conviction, a former U.S. Justice Department prosecutor who played a key role in putting the technology entrepreneur in prison has a warning for Silicon Valley entrepreneurs: Don’t be like Holmes.
“The takeaways are fairly apparent,” said John Bostic, now a lawyer for a prominent Bay Area law firm, who at the end of Holmes’ trial called her a CEO “so afraid of failure, that she was willing to do anything.”
Holmes, 41, was convicted in January 2022 on four counts of felony fraud, for defrauding investors of hundreds of millions of dollars through her now-defunct Palo Alto blood-testing startup. Jurors heard she falsely suggested to investors that her technology was used on military helicopters, and she admitted on the witness stand that she had pilfered pharmaceutical company logos and applied them to internal Theranos documents shared with investors in what prosecutors alleged was a bid to boost her company’s credibility. She was sentenced to more than 11 years in prison, with a current release date in March 2032.
Bostic, 42, now a partner in the Palo Alto headquarters of global law firm Cooley, works on white-collar defense and investigations. He met with this news organization Tuesday to discuss Holmes’ failed appeal, and the criminal case and four-month trial that led up to it. His comments have been edited for length and clarity.
Q: Why did Holmes’ appeal fail?A: In the course of a trial like this, so many disputes come up between the parties over legal interpretation questions, or factual accuracy, or the admissibility of evidence. The court is of course making decisions throughout, acting as an umpire, calling balls and strikes. That means that there will always be something to argue about in front of an appeals court. We on the government team and everyone else in that room worked hard to make it a fair trial.
Q: What lessons would you say Holmes’ case holds for Silicon Valley entrepreneurs and the tech industry?
A: There can be a temptation to fake it until you make it — that’s a saying that has been associated with this case. And especially in the environment of startups in Silicon Valley, which is so competitive, where so many startups fail, I think there is an incentive for founders to try to speed things along by potentially being imprecise or overly optimistic with how they represent their companies. The Theranos case is a reminder obviously that there is a line that can’t be crossed there, and that it’s really important to be cautious, and careful and honest in communications about new technology, (and) the accomplishments of the company.
Q: Did the fact that she wasn’t shown to be motivated by greed make the prosecution harder?
A: From the government’s perspective and from the law’s perspective, a defendant’s reason for committing fraud doesn’t factor into the analysis, whether it’s for themselves or to benefit someone else, or as in this case to benefit a company, and prop up a company, or increase a company’s chance of success.
Q: What was Holmes’ most compelling evidence in her defense?A: I thought the defense did a great job of showing her dedication to the company and how hard she and others worked toward the company’s success. However, I think that ultimately did not affect the outcome because the allegation was not that this was a sham company but just that there were lies told in connection with the company and what it could do and what it had accomplished.
Q: What do you see as the strongest evidence against Holmes?A: In a fraud case, the critical thing is aways evidence about what the defendant intended. It can be difficult to prove what was inside someone’s head. There was evidence that Holmes knew some things that she was saying were not true, and there was also some evidence of document altering that I think was very easy for the jury to understand.
Q: When did you first hear of Elizabeth Holmes?A: When the Wall Street Journal article came out in October 2015. That was the first negative coverage of Holmes and Theranos … showing that some things potentially had been misrepresented in connection with the company. The week that I joined the (Justice Department) was the week that article came out.
Q: Did you expect the case would land on your desk?
A: I had no reason at that time to think that I would end up ultimately working on this investigation that would turn into a prosecution. But I was certainly interested in it from the time I first read about it on a personal level and then, of course, through the lens of a prosecutor as well because it pointed to possible fraud.
Q: How did you end up on the case?A: I was a good fit for that case for a couple reasons, including that I have a science background. I was a molecular biology major. As you saw in the trial, this case involved some really technical issues involving these (blood tests), and their validity and their statistical performance, the kinds of tests that different devices could do. It gave me a bit of a head start, and I think made it easier for me to convey some of those concepts to the jury.
Q: Was there a turning point in the trial that set Holmes on a trajectory to a guilty verdict?A: I’ve never seen this trial as having a single star witness or a single pivotal moment or piece of evidence that everything else turns on. The government’s investigation collected tens of millions of pages of documentary evidence. Dozens of people, maybe hundreds, were interviewed in connection with the investigation. The trial … lasted several months. I think it was the weight of the evidence overall that did the work and not any one particular piece.
Q: Were you surprised that she took the stand?A: I wasn’t surprised. Because fraud cases are so dependent on the jury understanding what was in the defendant’s mind when they did what they did, sometimes there’s no substitute for a defendant taking the stand and giving their side of the story. It’s a high-stakes moment. It’s a time when the jury and judge are on extra alert to learn what they can from what’s happening on the witness stand.