Elizabeth Holmes Trial Coincides with Rise in Wire Fraud Prosecutions
On June 14, 2018, Elizabeth Holmes and Ramesh "Sunny" Balwani were indicted in the Northern District of California for wire fraud (18 USC 1343[1]) and conspiracy to commit wire fraud (18 USC 1349[2]) in their respective roles at the Theranos Corporation. [3]
Since the start of trial of Elizabeth Holmes began recently,[4] the trial has been seen as emblematic of larger problems among tech startups. The New York Times reported that the trial could be seen as a "referendum on the swashbuckling 'fake it till you make it' culture of Silicon Valley." [5] However, the federal prosecutor in the case described the trial not as exceptional, but as a part of routine white-collar crime enforcement; he said "this is a case about fraud, about lying and cheating to get money" and "it's a crime on Main Street, and it's a crime in Silicon Valley."[6]
Indeed, both 18 USC 1343 and 18 USC 1349 are common charges under the Department of Justice's category of "white-collar crime." In fact, so far this fiscal year, according to case-by-case Justice Department records, wire fraud is the single most common lead charge in white-collar prosecutions accounting for 22 percent of all prosecutions. The FBI describes white-collar crime as "synonymous with the full range of frauds committed by business and government professionals" and "characterized by deceit, concealment, or violation of trust" primarily for financial gain.[7] A federal wire fraud charge can be brought when fraud was perpetrated using electronic communication across state lines.
While there has been a long term decline in the prosecution of white-collar crime, the prosecution of wire fraud by the federal government has been growing. The latest available data from the Justice Department show that during the first eleven months of FY 2021 the government reported 1,084 new prosecutions for these matters. If this activity continues at the same pace, the annual total of prosecutions will be 1,183 for this fiscal year. This estimate represents a 25.2 percent jump over the past fiscal year when the number of prosecutions totaled 945. And over the past twenty years, prosecutions have grown by 90.2 percent. See Figure 1.
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The comparisons of the number of defendants charged with white-collar crime offenses generally versus the specific offense of wire fraud at Syracuse University are based on case-by-case government records analyzed and obtained by the Transactional Records Access Clearinghouse (TRAC) at Syracuse University under the Freedom of Information Act (FOIA) after lengthy successful litigation against the U.S. Department of Justice.
Footnotes
[1] Details about this charge can be found on the Legal Information Institute at the Cornell Law School here: https://www.law.cornell.edu/uscode/text/18/1343.
[2] Details about this charge can be found on the Legal Information Institute at the Cornell Law School here: https://www.law.cornell.edu/uscode/text/18/1349. It covers a wider class of conspiracies and not just conspiracies involving wire fraud.
[3] The original announcement from the Department of Justice about the indictment is available here: https://www.justice.gov/usao-ndca/pr/theranos-founder-and-former-chief-operating-officer-charged-alleged-wire-fraud-schemes. The unsealed indictment is available here: https://www.justice.gov/usao-ndca/page/file/1135066/download. The two cases were later separated into two distinct trials.
[4] Official announcements about court hearings can be found on the Department of Justice's website here: https://www.justice.gov/usao-ndca/us-v-elizabeth-holmes-et-al.
[5] The United States v. Elizabeth Holmes. https://www.nytimes.com/2021/09/16/podcasts/the-daily/elizabeth-holmes-trial-theranos-silicon-valley.html
[6] Prosecutors Call Theranos Ex-CEO Elizabeth Holmes A Liar And A Cheat As Trial Opens. https://www.npr.org/2021/09/08/1035035043/prosecutors-call-theranos-ex-ceo-elizabeth-holmes-a-liar-and-a-cheat-as-trial-op.
[7] The FBI's description of white-collar crime can be found here: https://www.fbi.gov/investigate/white-collar-crime.