Elizabeth Holmes has been convicted over the Theranos fraud – but Silicon Valley will never learn

Greed, fear and desire are all alive and well in California. Tech entrepreneurs with a good sales pitch will always be able to part fools from their money, writes James Moore

Theranos founder Elizabeth Holmes on trial for fraud (AP)

Silicon Valley has done its best to try and disassociate itself from Elizabeth Holmes and Theranos.

It was a healthcare company really, less a tech company. Backers included Rupert Murdoch, the family of Donald Trump’s education secretary Betsy DeVos, the Cox family – owners of Cox Enterprises, a US conglomerate – none of them tech specialists. Those that were (the smart ones) passed on the “opportunity”.

But while plenty were left unmoved by Holmes’ pitch – technology that would revolutionise diagnostic testing with just the prick of the finger and create the next Apple in the process – there were plenty in the Valley who said sign me up!

Holmes was also able to call upon the credibility of the likes of Larry Ellison, a co-founder of Oracle, and Don Lucas, a Silicon Valley venture capitalist, to buttress her own credibility.

This was a story made in California, where Theranos rode the wave of a culture underpinned by greed, desire and especially fear. Fear of missing out on the next big thing; the next Google, or Apple, or Amazon, or Facebook. The greed and desire to get in via the ground floor in the hopes of seeing £1 turn into £10, then turn into £100, then a £1,000, then £10,000, and so on.

And Theranos did that. It climbed all the way up to $9bn (£6.6bn). And then it fell all the way down to nothing. Fake it until you make it, so they say, and Holmes played the part, with her black polo neck jumpers evoking Steve Jobs, and her business magazine cover stories, her glossy ads and her status as the first woman to enjoy billionaire status in tech toyland.

It didn’t last because Theranos was never able to make it – despite its fancy dan board stocked with political heavyweights and sundry big names. The Wall Street Journal smelled something, and was able to stand it up. And then all hell broke loose.

Holmes will likely have a long time to reflect on it all. She’s going to trade private jets for the austerity of a private cell – if she’s lucky. Probably not for the maximum 20 years she could face – this was a first offence – but perhaps for several of them at least. That is assuming a pending appeal is unsuccessful, with Holmes denying the charges against her.

She may lament her luck. There aren’t many in her position who end up getting time in prison. Most of her peers who make promises they can’t deliver on are able pick themselves up, dust themselves off and then, if they can, they start again, bloodied but unbowed. They mostly go unnoticed by the wider public. They mostly go unpunished.

Frauds of the type Holmes has been convicted of – defrauding investors – are devilishly difficult to prosecute. Defence lawyers are adept at blowing smoke at juries to the extent that they become too confused on the details to possibly convict. And the victims often aren't the sort of people likely to engender much sympathy. This is not a case of Mr and Mrs Main Street relieved of their pensions. This is rich investors losing money they often can afford to lose.

Holmes faced 11 charges and was convicted on only four of them, three counts of wire fraud and one of conspiracy to commit wire fraud, by lying to investors to raise money for Theranos. She secured not guilty verdicts on four more, relating to defrauding patients who used Theranos kit. The jury was deadlocked on a further three involving investors.

Prosecutors could return to the well with those, but why bother? In this sort of case even a partial victory represents a slam dunk, and a major feather in the cap.

It is a victory that matters. It isn’t unknown for pension funds of the type Mr and Mrs Main Street rely on for their retirement to invest in start-ups, or in funds which back start-ups. And theft committed in the boardroom is still theft. It ultimately does none of us any good for it to go unpunished.

Whether this case will change anything, however, is open to question. Tech whizz kids with sexy ideas and even sexier sales patter will still be invited into conference rooms, virtual or not, to make their pitches. The details of their products will still be kept vague, just as they were at Theranos, because of patents – and the competition – and the need for commercial confidentiality, so we can’t tell you too much. Just trust us. It’ll be great. Give us your cash, because we’ll do this, and this and this and then we’ll all get rich.

And the investors will pony up because no one wants to miss out on the next big thing.

There is another Theranos trial coming, that of Ramesh Balwani, Holmes’ former partner, whom she claimed was abusive and sought to pin the blame for the companies’ failure on. The former COO has denied both that and denies the charges against him.

But even a second conviction won’t change the rules of this game, or the way it’s played. Even America’s politicians baring their claws and sharpening the teeth of regulators probably won’t change it.

Count on this: there will be another, similar, courtroom rumble, and then another. Similarly fun to watch? Maybe. But not particularly edifying.