Yes, The Elizabeth Holmes Trial Is Sexist… Just Not In The Way You Think

For those of us steeped in Silicon Valley tech culture, the trial of Elizabeth Holmes, founder of failed blood-testing start-up Theranos, is a major event. It’s basically OJ for tech nerds. White collar criminal trials are rare to begin with; throw in a high-profile scandal (already eliciting various books, podcasts, and tv shows), with a compelling young woman at its center, and it’s literally a standing-room-only affair, as curious Bay Area denizens line up hours early to snag a scarce courtroom seat.

The government’s allegations seem particularly damning. You have not just the standard-issue securities fraud, false promises made to dupe eager investors; but potentially dangerous medical misinformation given to patients who had their blood tested by the company’s not-ready-for-prime-time technology. Yet despite the disturbing claims, some observers have suggested that the government’s targeting of Holmes for a rare criminal prosecution is indicative of the inherent sexism in the tech world. Former Venture Capitalist Ellen Pao, in a widely-circulated New York Times op-ed piece, critiqued the injustice of Holmes being thrust into the spotlight while so many male entrepreneurs ostensibly guilty of comparable misconduct walk free.

Pao is right about sexism in tech; she’s just wrong about how this case plays into it.

The suggestion that the government singled out Holmes as a woman entrepreneur is, on its face, nonsense. For one thing, the Securities and Exchange Commission and Department of Justice charged Holmes’ former business partner (and ex-boyfriend) Ramesh “Sunny” Balwani for the same offenses. More importantly, Theranos presented a surefire case for government attention. As noted above, the case involves not just allegations of securities fraud — a complicated matter to put before a jury under the best of circumstances — but far more troubling (and jury-friendly) allegations of flawed medical tests. It’s one thing for a software company to mislead investors with bogus claims about its sales figures; sending Walgreens customers unreliable blood test results is another matter entirely.

[In fairness, I should note that, as the former Director of the SEC’s San Francisco Regional Office, I personally know some of the government lawyers involved in the case; additionally, after leaving the SEC to work in the private sector, I represented several investors who lost money in Theranos and who testified in connection with the federal investigation.]

To be sure, Holmes’ personal celebrity played some role in drawing heightened regulatory scrutiny. With limited resources, the government can only bring so many cases, and prosecuting a high-profile defendant gets a lot more attention (providing, at least in theory, a broader deterrent effect for others in the industry). And being a woman crashing the tech-bro party, smiling from an endless array of magazine covers in her Steve Jobsian black turtlenecks, clearly contributed to the hype. But having generated and wholly embraced all this attention in the first place, Holmes can hardly complain about her fame coming back to bite her when the public adoration turns out to have been badly misplaced.

The main argument made by Pao and others seems to be that, sure, Holmes may have bent some rules, but what about all the male executives out there (Pao cites Tesla’s Elon Musk and Facebook’s Mark Zuckerberg, among others) who have escaped accountability for their corporate malfeasance? But it’s difficult to compare the facts of the Theranos case — laid out neatly in the SEC complaint and DOJ indictment — with other uncharged matters; it’s apples and oranges. At most, the observation drives home the valid point that the government needs to be more aggressive in pursuing white collar crime, period. Pao is certainly correct that the Zuckerbergs of the world benefit from the old boys’ network, but Theranos seems particularly unhelpful in making that case. Far from being denied the benefits of fraternity, Holmes, as a twenty-something Stanford drop-out, tapped into tech legends Don Lucas and Larry Ellison as mentors; recruited Henry Kissinger and Jim Mattis for her board; and was free to sic combative litigator David Boies on any Theranos employees who threatened to get in her way.

Acknowledging the truism that many powerful men accused of misconduct walk free tells us nothing about whether women are disproportionately targeted. In fact, I’d say the precise opposite is true. As someone who personally conducted or supervised hundreds of SEC investigations during a nearly 16-year career with the agency — in addition to representing countless other individuals caught up in such investigations during my many years in the defense bar — I can say that the number of male defendants far outstrips female defendants. This is admittedly not a scientific study; but as someone well-versed in securities fraud cases from the past few decades, I’m comfortable that this assessment would hold up to quantitative analysis.

Oh, sure, there are some counter-examples. The stock option backdating cases of the 2000s, one of the more far-reaching financial scandals to impact the tech world, netted a few women from the executive suites. And one of the largest insider trading cases I ever worked on resulted in civil and criminal charges against the wife of a Big Four accounting firm partner who repeatedly tipped others about M&A transactions her husband was working on. But for the most part, high-profile cases against women are few and far between.

And therein lies the real sexism. The government’s decision to bring an obvious case against Elizabeth Holmes isn’t evidence of sexism in tech; it’s the rarity of Elizabeth Holmes-like cases that’s the real affront. And this is because, for all the progress being made in gender equality, women still face discriminatory challenges in reaching the upper echelons of the business world. Women make up a shamefully small percentage of public company executives — for example, only 6% of S&P 500 company CEOs are women. In 2021! Major insider trading conspiracies involving investment banks and hedge funds rarely implicate women largely because there are so few women with routine access to valuable inside information at those firms. (About 22% of senior leadership roles in financial services firms are held by women.)

And without the same opportunities to rise to senior positions, women simply have fewer chances to engage in serious misconduct. We’ll know that we have done a better job addressing sexism in corporate America when more women are charged with securities fraud, not fewer. We’ll have achieved equality not because the government has gone after Mark Zuckerberg (as much as many people would welcome that), but because a woman CEO facing off against the Justice Department is no longer such a spectacle that we’re lining up at the courthouse to watch.

And yes, it’s a little weird to argue that more women committing fraud will be a positive development. But at the very least, a larger number of women defendants in high-profile white-collar cases would at least indicate that women are finally being given the same opportunities to achieve success as men — including, sadly, the opportunity to cheat that arises in such environments.

And who knows — when that day comes, perhaps things will change; maybe women will bring a higher standard of ethics into the C Suite and the boardroom than their male counterparts have done. Perhaps the corporate misdeeds cited by Pao won’t be more equitably spread out, but will simply decline. One can hope.

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Marc Fagel

Marc Fagel

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Marc is a writing instructor and retired securities lawyer, and author of the rock music memoir Jittery White Guy Music. Visit him at http://www.fagel.com.