Why “Pharma Bro” and “The Next Steve Jobs” Got Different Treatment for Their “Massive Fraud”
By Joe Jarvis - March 29, 2018

The justice system is far from blind. And that is the point.

The people in control exercise power by deciding when the rule of law is applied, and when it’s suspended.

The other day we discussed how some people get 25 years in prison for driving while intoxicated, while others–law enforcement–only get probation for full-blown rape of a prisoner.

But the government also gets to manipulate justice when it comes to white collar crimes.

Take a recent example of two people who defrauded investors. Both committed real crimes that harmed others. One of them is hated by the media while the other was a media darling.

I am talking about Martin Shkreli and Elizabeth Holmes.

“The Most Hated Man in America”

The media likes to refer to Shkreli as “pharma bro.” He rose to infamy a couple years ago when he acquired the rights to an AIDs drug and raised the price by 5,000 percent. He is easy to hate and has a face made for radio.

Shkreli defrauded investors by lying about the success of a hedge fund and funneling money from another business to make it appear that the hedge fund was doing well. He was convicted of defrauding investors of $10 million, and sentenced to seven years in prison. He must also forfeit $7 million.

[H]is crimes are serious and it is important to send a message that such fraud should be not tolerated, [the judge] said. “White collar offenders like Mr. Shkreli use their intelligence and acumen to elude detection,” she said.

“The Next Steve Jobs”

In stark contrast to the “most hated man in America,” is Elizabeth Holmes.

Holmes started the Silicon Valley “Unicorn” company Theranos which promised to revolutionize bloodwork. Holmes claimed she created technology that streamlined and improved current methods of analyzing blood, and that just a small drop could now give stellar analytical results.

The media hailed Holmes as the second coming of Steve Jobs. She was “leading the class” in Forbes Freshmen 400 in 2014.

[S]he was on the cover of an edition of T: The New York Times Style Magazine, and she [was] also on the cover of [an] issue of Inc. She has been on the cover of Forbes and Fortune, and she was named one of Time’s “100 Most Influential People” of 2015. She got a lengthy write-up in the New Yorker [in 2014], and Wired has called the implications of her work “mind-blowing.”

Secretary of Defense James Mattis is on the Board of Directors for Theranos. Joe Biden once went to Theranos facilities for a media event.

And in 2016, after The Wall Street Journal exposed some serious credibility issues with Holmes and Theranos, Hillary Clinton participated in a fundraiser with Holmes and Theranos.

The Huffington Post offered a critique at the time:

And once you’ve made it into this coterie of elites, it becomes all too easy to forgive them for their occasional transgressions. The failures of Theranos don’t stick to Holmes (indeed, the media continued to fawn over Holmes after the Wall Street Journal blew up her spot). If anything, these setbacks are temporary embarrassments on the way to success. Class recognizes class.

But it turns out the Wall Street Journal had just nicked the tip of the iceberg. Two weeks ago, the SEC announced charges against Holmes for Fraud.

Washington D.C., March 14, 2018 — The Securities and Exchange Commission today charged Silicon Valley-based private company Theranos Inc., its founder and CEO Elizabeth Holmes, and its former President Ramesh “Sunny” Balwani with raising more than $700 million from investors through an elaborate, years-long fraud in which they exaggerated or made false statements about the company’s technology, business, and financial performance.  Theranos and Holmes have agreed to resolve the charges against them.

The Difference

So Shkreli and Holmes did basically the same thing, except that Homes defrauded investors of about 70 times as much money.

You might expect her to get 70 times the sentence that Shkreli got, based on the scope of her crime. After all, the judge in the Shkreli case made a point that white collar criminals must be made an example of.

So did Elizabeth Holmes get fined $490 million? Will she be spending decades in prison?

Nope. She settled the charges with the SEC for $500,000. Yes, a half million dollar fine, less than one percent of the amount she tricked people into investing.

She cannot hold an executive position in any public company for ten years, and she must return some of her Theranos stock. Of course, the civil lawsuits are just beginning as well…

But she will not spend a day in jail, or even on probation.

And once you’ve made it into this coterie of elites, it becomes all too easy to forgive them for their occasional transgressions.

Punishing Holmes for her crimes would be like an indictment against the media elites who fawned over her, and the politicians who cozied up.

But Shkreli is the perfect whipping boy for corporate fraud.

Justice isn’t blind. Elites protect their own.

Sure, both of these fraudsters were charged. But only one of them received any sort of proportional punishment.

The ability to mete out subjective punishment is a terrifyingly immense power.

Tagged with: , , , , , ,