In Silicon Valley, Criminal Prosecutors See No Evil

SAN FRANCISCO — The coronavirus pandemic has helped Silicon Valley companies in many ways, from bringing them hordes of new customers to weakening the competition to juicing the bottom line.

Here’s a less obvious benefit: the threat of criminal prosecution has nearly disappeared.

That fact is obscured by the case against Elizabeth Holmes, the founder of the defunct blood-testing company Theranos and the most prominent executive to face criminal fraud charges in the history of Silicon Valley. Her trial, with opening statements set to begin on Wednesday, raises issues of deception, gender, transparency, out-of-control hype and the sartorial influence of the Apple co-founder Steve Jobs, whose style Ms. Holmes mimicked.

But behind the spectacle is the reality that criminal prosecutions in Silicon Valley are a rarity. Even a guilty verdict against Ms. Holmes is unlikely to change that.

Federal prosecutors in Northern California took on only 57 white-collar crime cases in the 2020 fiscal year, down from 94 in 2019, according to researchers. Although 2021 is likely to show a rebound, the total will still be far below the heyday of prosecutorial action in 1995, when 350 cases were brought.

As Silicon Valley has mushroomed from an obscure specialty industry to the wealthiest and most influential collection of companies in history, prosecutors have occasionally promised more attention to it. And there have been brief spikes in cases. They never last.

Nationally, there has been a long-term trend away from white-collar prosecutions. The shift was accelerated by the Sept. 11 attacks, which reallocated investigative resources to the fight against terrorism. But the drop in Northern California was nearly twice as steep from 1995 to 2019 as it was in the Southern District of New York, which has jurisdiction over Wall Street, according to data from the Transactional Records Access Clearinghouse at Syracuse University.

A spokesman for Stephanie Hinds, the acting U.S. attorney for the Northern District of California, the office that is prosecuting Ms. Holmes’s case, declined to comment.

Who’s Who in the Elizabeth Holmes Trial

Who’s Who in the Elizabeth Holmes Trial

Elizabeth Holmes, the disgraced founder of the blood testing start-up Theranos, stands trial soon for two counts of conspiracy to commit wire fraud and 10 counts of wire fraud.

Here are some of the key figures in the case →

Who’s Who in the Elizabeth Holmes Trial

Holmes founded Theranos in 2003 as a 19-year-old Stanford dropout. She raised $700 million from investors and was crowned the world’s youngest billionaire, but has been accused of lying about how well Theranos’s technology worked. She has pleaded not guilty.

Who’s Who in the Elizabeth Holmes Trial

Ramesh Balwani, known as Sunny, was Theranos’s president and chief operating officer from 2009 through 2016 and was in a romantic relationship with Holmes. He has also been accused of fraud and may stand trial next year. He has pleaded not guilty.

Who’s Who in the Elizabeth Holmes Trial

David Boies, a prominent litigator, represented Theranos as its attorney and served on its board.

He tried to shut down whistleblowers and reporters who questioned the company’s business practices.

Who’s Who in the Elizabeth Holmes Trial

The journalist John Carreyrou wrote stories exposing fraudulent practices at Theranos.

His coverage for The Wall Street Journal helped lead to the implosion of Theranos.

Who’s Who in the Elizabeth Holmes Trial

Tyler Shultz and Erika Cheung are former Theranos employees and were whistle-blowers. They worked at the start-up in 2013 and 2014.

Shultz is a grandson of George Shultz, a former Secretary of State who was on the Theranos board.

Who’s Who in the Elizabeth Holmes Trial

James Mattis, a retired four-star general, was a member of Theranos’s board of directors.

He went on to serve as President Donald J. Trump’s secretary of defense.

Who’s Who in the Elizabeth Holmes Trial

Edward Davila, a federal judge for the Northern District of California, will oversee the case.

Kevin Downey, a partner at the Washington law firm Williams & Connolly, is the lead attorney for Holmes.

Robert Leach, an assistant United States attorney for the Northern District of California, will lead the prosecution for the government, along with other prosecutors from the U.S. attorney’s office.

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