Elizabeth Holmes'​ Defense a Wild One and Short Sighted

Elizabeth Holmes has decided to throw a Hail Mary pass.

The legal team for the Theranos Inc. founder and chief executive officer, in response to an indictment on federal wire fraud charges in June 2018 for allegedly carrying out a con to defraud investors, doctors and patients, is working a wild, creative strategy in a brazen effort to create a massive ruse to mitigate court and financial punishment for the crimes.

Holmes’ legal team has decided on pursuing a “mental disease” defense, reports Bloomberg writer Joel Rosenblatt.

The idea behind the strategy is to shift some segment of blame from Holmes to her co-defendant, Ramesh “Sunny” Balwani, who was the president and chief operating officer for Theranos and Holmes’ former romantic partner.

Reportedly, Holmes will be videotaped (against her wishes) and the plan is to utilize testimony from an expert on psychosocial consequences of trauma, with a focus on violence against women. That expert, Mindy Mechanic, Ph.D., is a well-known clinical psychologist at California State University at Fullerton.

The defense seems, on the surface, to be a surreal, desperate act. Whether it can be successful and will be and to what extent are important questions.

“‘Mental disease’ is really an insanity defense,” says Nora V. Demleitner, a Roy L. Steinheimer Jr. Professor of Law at Washington and Lee University.

It’s not the simplest work a legal team can choose for their client.

“The hurdles to meet legal criteria are incredibly high under federal law,” Demleitner says. “The burden is on her to show that she suffered from a mental disease or defect and because of the mental disease she didn’t know the nature or quality of the act she committed or that she didn’t know the act was wrong.”

At first glance, this seems like an unreachable goal, foolish and high-wire act plan of action and response, one that is unlikely to be found credible and helpful.

“It’s very difficult for a defendant to prove insanity in federal court,” says Patrick Boyle, an investment management professional, professor at King’s College London and Queen Mary University of London and producer of Patrick Boyle on Finance on YouTube. ”The statute says that a defendant can be found not guilty by showing that at the time of the offense, the defendant, as a result of a severe mental disease or defect, was unable to appreciate the nature and quality or the wrongfulness of their acts. The federal version of the insanity defense breaks mental state into two parts, whether she knew what she was doing, and whether she knew it was wrong.”

That definition and criteria would seem to work against Holmes and not for her in any sense.

“It is difficult to think how the first part could apply to Holmes. She was running a multi-billion dollar company engaging with employees, investors and the press and without a doubt knew that she was doing these things (fraudulent acts),” Boyle says.

This is also called, Demleitner says, the right-wrong test and that makes it quite the challenge with the attorney-client decision and undertaking.

“Needless to say that standard is incredibly high and defendants rarely raise the defense and even more rarely win on it,” Demleitner says.

The nuance Holmes’ legal team may pursue is tricky and could either result in them being labeled genius or reckless.

“The second part allows for acquittal of someone who doesn’t know what they are doing is morally wrong. This is possibly the angle her lawyers will take,” Boyle says. “Her lawyers are apparently going to bring in a trauma expert and might argue that a traumatic experience in her past caused her to believe that her actions were morally acceptable.”

This is far from a high probability of success treatment.

“The problem with this defense is that there is lots of evidence that Holmes tried to conceal, not only the fact that the blood testing devices didn’t work, but also the fact that she was lying,” Boyle says. “A defendant who has tried to hide their crimes must have known that they were doing something wrong and if she knew she was doing something wrong, she wasn’t legally insane under the federal standard.”

This begs the question about the goal and ideal outcome for Holmes’ defense as well as what might be considered an acceptable outcome.

“It is more likely that the defense may serve to mitigate the crimes with which she is charged to a lesser mens rea offense, from an intentional to a negligent crime, for example,” Demleitner says. “That would decrease the sentence exposure substantially.”

There it is for the general public to see, the method to the madness; protection and mitigation by best available means, regardless of appearances and media and public response. The odds of a more favorable legal outcome is also increased by the authority vested in a judge.

“Even if the defense fails, the judge can consider the circumstances at sentencing. The guidelines include a departure standard that allows consideration of ‘mental and emotional conditions’ and also courts can now consider broad sentencing goals — a variance sentence,” Demleitner says.

While this pursuit makes sense when it comes to a person doing all that they can to fight for the quality of their future, it also communicates a questionable level of character that will feed the disgust, anger and confirmation bias about Holmes.

Could Holmes instead consider focusing on punishment mitigation and show improved character, focusing on a future opportunities when she is released from prison? The sole pursuit currently seems to be short term instead of a balance between the ‘now’ and long term. This thinking and behavior presents a significant problem.

It is easy for investors, past supporters, media and the public to assume Holmes is not learning anything from her impulses, moral and ethical transgressions and alleged criminal wrongdoing.

Holmes courageously stepping forward to communicate truthfully, with humility and remorse would be shocking yet not impossible, even with more than a few analysts and writers’ claims that she is a sociopath. She could choose to express how she is deserving of criticism, societal scorn and legal consequences, all which would be a sign of development and wisdom. It would, in some small way, eventually allow for reputation rebuilding and rising from the ashes.

“I do think it’s a cultural issue that people are not willing to admit mistakes,” Julia Rohrer, a personality psychologist at the Max Planck Institute for Human Development, has written.

That is the Holmes as the media has reported and victims of her have painfully learned. If one believes in a growth mindset, maybe Holmes can personally develop through that default shortcoming and weakness.

“Every time you confront something painful, you are at a potentially important juncture in your life — you have the opportunity to choose healthy and painful truth or unhealthy but comfortable delusion,” Ray Dalio has written.

Michael Toebe is a specialist for reputation, professional relationships communication and wiser crisis management, serving individuals and organizations. He helps people successfully analyze and respond to reputation crisis. He has written published advisory for Chief Executive, Corporate Board Member, New York Law Journal, Training Industry, Corporate Compliance Insights and Physicians Practice. He also writes and publishes Red Diamonds Essays.

This article was first published at Red Diamonds Essays, on the Medium platform, on Sept. 29, 2020.