In the midst of the pandemic, the government gave unemployment benefits to the incarcerated, the imaginary and the dead. It sent money to “farms” that turned out to be front yards. It paid people who were on the government’s “Do Not Pay List.” It gave loans to 342 people who said their name was “N/A.”
As the coronavirus shuttered businesses and forced people out of work, the federal government sent a flood of relief money into programs aimed at helping the newly unemployed and bolstering the economy. That included $3.1 trillion that former President Donald J. Trump approved in 2020, followed by a $1.9 trillion package signed into law in 2021 by President Biden.
But those dollars came with few strings and minimal oversight. The result: one of the largest frauds in American history, with billions of dollars stolen by thousands of people, including at least one amateur who boasted of his criminal activity on YouTube.
39,000 investigations going. About 50 agents in a Small Business Administration office are sorting through two million potentially fraudulent loan applications.
Officials already concede that the sheer number of cases means that some small-dollar thefts may never be prosecuted. This month, Mr. Biden signed bills extending the statute of limitations for some pandemic-related fraud to 10 years from five, a move aimed at giving the government more time to pursue cases. “My message to those cheats out there is this: You can’t hide. We’re going to find you,” Mr. Biden said during the signing at the White House.
$5 trillion in relief money in three separate legislative packages — an enormous sum that is credited with reducing poverty and saving the country from a prolonged, painful recession.
But investigators say that Congress, in its haste to get money out the door, devised all three packages with the same flaw: relying on the honor system.
For example, an expanded unemployment benefit gave workers an extra $600 per week in federal jobless funds on top of what they received from their state. The program was funded by the federal government but administered by states, which often had loose rules around qualifying. Applicants did not need to provide proof they had lost income because of Covid-19; they simply had to swear it was true.
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A similar we’ll-take-your-word-for-it approach was used in two loan programs run by the Small Business Administration.
Paycheck Protection Program, in which the government guaranteed loans made by private lenders, and the Economic Injury Disaster Loan program, in which the government itself gave out loans and smaller advance grants that did not have to be repaid. In both, the government trusted businesses to self-certify that they met key requirements.
using the email address of a burrito shop.
In the Paycheck Protection Program, private banks were supposed to help with the screening, since in theory they were dealing with customers they already knew. But that left out many small businesses, and the government allowed online lenders to enter the program. This year, University of Texas researchers found that some of those “fintech” lenders appeared less diligent about catching fraud.
turning fraud into a franchise — helping other people cook up fake businesses in order to get loans from the Economic Injury Disaster program.
Andrea Ayers advised one client to tell the government she ran a baking business from home, although she was not a baker, prosecutors said.
YouTube videos, where scammers offered to help for a cut of the proceeds. Some used the money on necessities, like mortgage bills or car payments. But many seemed to act out of opportunism and greed, splurging on a yacht, a mansion, a $38,000 Rolex or a $57,000 Pokémon trading card.
responsible for selling the card.
music video on YouTube, bragging in detail about how he had gotten rich by submitting false unemployment claims. His song was called “EDD,” after California’s Employment Development Department, which paid the benefits.
first reported by The Washington Post. In the Economic Injury Disaster Loan program, a watchdog found that $58 billion had been paid to companies that shared the same addresses, phone numbers, bank accounts or other data as other applicants — a sign of potential fraud.
“It’s clear there’s tens of billions in fraud,” said Michael Horowitz, the chairman of the Pandemic Response Accountability Committee, which includes 21 agency inspectors general working on fraud cases. “Would it surprise me if it exceeded $100 billion? No.”
The effort to catch fraudsters began as soon as the money started flowing, and the first person was charged with benefit fraud in May 2020. But investigators were quickly deluged with tips at a scale they had never dealt with before. The Small Business Administration’s fraud hotline — which had previously received 800 calls a year — got 148,000 in the first year of the pandemic. The Small Business Administration sent its inspector general two million loan applications to check for potential identity theft. At the Labor Department, the inspector general’s office has 39,000 cases of suspected unemployment fraud, a 1,000 percent increase from prepandemic levels.
But prosecutors face a key disadvantage: While fraud takes minutes, investigations take months and prosecutions take even longer.
pleaded guilty to mail fraud last month. His lawyers declined to comment.
first weeks of the pandemic, when the government gave out 5.8 million advance grants worth $19.7 billion in just over 100 days. In that program, fraud was easy to pull off, according to a government watchdog, which cited numerous loans given to businesses that were ineligible for funding.
Mr. Ware said he recently limited his agents to working 10 cases at a time, telling them: “You’re killing yourself. I have to protect you from you.”
told The New York Times in November.
“It’s a honey trap,” he added. “Richard Ayvazyan fell into that trap.” Mr. Ayvazyan was sentenced to 17 years in prison for participating in a ring that sought $20 million in fraudulent loans.
In the case of Mr. Oudomsine, the Pokémon card buyer, his lawyers argued in March that a judge should be lenient in deciding his sentence because the fraud had taken hardly any time at all.
“It is an event without significant planning, of limited duration,” said Brian Jarrard, who was Mr. Oudomsine’s lawyer at the time.
That did not work.
Judge Dudley H. Bowen Jr. of U.S. District Court sentenced Mr. Oudomsine to three years in prison, more than prosecutors had asked for, to “demonstrate to the world that this is the consequence” of fraud, according to a transcript of the sentencing.
Now, Mr. Oudomsine is appealing, with a new lawyer and a new argument. Deterrence, the new lawyer argues, is moot here because the pandemic-relief programs are over.
“There’s no way to deter someone from doing it, when there’s no way they can do it any longer,” said the lawyer, Devin Rafus.
Biden administration officials say they are trying to prepare for the next disaster, seeking to build a system that would quickly check applications for signs of identity theft.
“Criminal syndicates are going to look for weak links at moments of crisis to attack us,” said Gene Sperling, the White House coordinator for pandemic aid. He said the White House now aims to build a continuing system that would detect identity theft quickly in applications for aid: “The right time to start building a stronger system to prevent identity theft is now, not in the middle of the next serious crisis.”
In the meantime, the arrests go on.
Last week, prosecutors charged a correctional officer at a federal prison in Atlanta with defrauding the Paycheck Protection Program, saying she had received two loans totaling $38,200 in 2020 and 2021. The officer, Harrescia Hopkins, has pleaded not guilty. Her lawyer did not respond to a request for comment.
“You can’t have a system where crime pays,” said Mr. Horowitz, of the federal Pandemic Response Accountability Committee. “It undercuts the entire system of justice. It undercuts people’s faith in these programs, in their government. You can’t have that.”
SAN JOSE, Calif. — Ramesh Balwani, a former top executive at Theranos, was found guilty on Thursday of 12 counts of fraud, in a verdict that was more severe than that of his co-conspirator, Elizabeth Holmes, and that solidified the failed blood-testing start-up as the ultimate Silicon Valley cautionary tale.
Mr. Balwani and Ms. Holmes, who together pushed Theranos to soaring heights with a promise to revolutionize health care, are the most prominent tech executives to be charged with and convicted of fraud in a generation. A jury of five men and seven women took 32 hours to produce a verdict, convicting Mr. Balwani, known as Sunny, of all 10 counts of wire fraud and two counts of conspiracy to commit wire fraud.
In January, Ms. Holmes was convicted of four counts of fraud and acquitted of four counts of fraud. Three other charges were dismissed after the jury could not reach a consensus. She has appealed the verdict, and Mr. Balwani is expected to do the same.
developed a voracious appetite for messy start-up rise-and-fall stories, such as WeWork’s disastrous first attempt to go public and the trickery of Ozy Media. But Theranos was the only one to result in criminal charges. The consequences its executives have faced are likely to send a message to entrepreneurs who exaggerate in the name of innovation.
arguing that Ms. Holmes — as the chief executive and founder of Theranos — was in charge, and by arguing that he had believed in Theranos’s mission and technology.
closing argument. “He worked tirelessly, year after year, to make the company a success.”
Mr. Balwani had two major strikes against him in his defense, said Michael Weinstein, a former Justice Department prosecutor who is the chair of white-collar litigation at Cole Schotz. One was Mr. Balwani’s age, which made him unable to credibly claim youthful naïveté as a defense, as Ms. Holmes had done.
“Holmes could come off as a bit naïve, and they tried to sell that,” Mr. Weinstein said. But Mr. Balwani “came off as more of an experienced technology executive.”
Further, since Mr. Balwani went to trial after Ms. Holmes, prosecutors essentially got a do-over and honed their case. “The streamlined presentation, the streamlined evidence, the streamlined narrative — all was beneficial for the government in the end,” he said.
Evidence from the trial, including text messages, emails and testimony from 24 witnesses, showed that Mr. Balwani had been deeply involved in nearly every aspect of Theranos’s business and aware of its problems. He led its lab, created its financial projections, presided over personnel issues and attended many pitch meetings with investors.
“Mr. Balwani wants you to think he is a victim,” Jeffrey Schenk, an assistant U.S. attorney and a lead prosecutor in the case, said in his closing argument. “Mr. Balwani is not the victim — he’s the perpetrator of the fraud.”
harsh awakening for the tech industry, as stock prices have tanked amid rising interest rates, ballooning inflation and economic uncertainty. Investors, burned by the sell-off, have stopped chasing high-risk, money-losing start-ups, prompting many Silicon Valley companies to cut staff and slow their aggressive plans for expansion. The humbling moment has many predicting the end of a decade-long boom for tech start-ups.
Ms. Holmes accused Mr. Balwani of emotional and sexual abuse, but those accusations were not permitted as evidence in his trial.
“The story of Theranos is a tragedy,” Mr. Schenk, the prosecutor, said in his closing argument.
Another Wells Fargo customer, Julia Gibson, lost $2,500 to a similar scam in October. After she reported the fraud to the bank, it gave her a provisional credit for the lost cash. But in January, the bank abruptly rescinded the credit, sending her balance to zero and incurring overdraft fees. The bank had decided the loss wasn’t fraudulent.
“What was so frustrating about this whole thing was that the customer service rep I talked to told me so many people had been experiencing this,” Ms. Gibson said.
In their appeals to Wells Fargo, Mr. Faunce and Ms. Gibson cited the consumer bureau’s rules about fraudulent losses, but the bank repeatedly rebuffed them.
“There are certain indicators that we look for in the investigation to let us know that there has indeed been fraud on the account,” Wells Fargo wrote to Mr. Faunce on Feb. 23. “During the investigation, we were not able to find any of those indicators present and denied the claim.”
After The Times contacted the bank, it refunded Ms. Gibson.
“We are committed to following all regulations governing transactions,” said Jim Seitz, a bank spokesman. “We are actively working to raise awareness of common scams to help prevent these heartbreaking incidents.” He declined to discuss specific customer cases.
Other victims of fraud trying to recoup their money from banks have had better luck when citing the law.
Ken Page-Romer, a psychotherapist and author who lives in Long Beach, N.Y., had $19,500 taken from his account in November after he received spoofed text alerts and calls that appeared to come from Citigroup phone numbers. The bank initially denied his claims. At the urging of his husband, Gregory, a financial adviser, Mr. Page-Romer wrote the bank a letter citing Regulation E, and sent copies to the police and banking regulators. Citi soon returned his stolen money.
SAN JOSE, Calif. — In 2016, start-up founders sang, “Theranos doesn’t represent, we are better,” in a holiday video created by the venture capital firm First Round Capital.
Over the next few years, several columnists wrote that Silicon Valley shouldn’t be blamed for Theranos.
Last month, Keith Rabois, a venture capitalist, said on Twitter that articles connecting Theranos with Silicon Valley culture contained “more fabrication than anything ever uttered by Trump.”
The technorati in Silicon Valley and beyond have long tried to separate themselves from Theranos, the blood testing start-up in Palo Alto, Calif., that was exposed for lying about its abilities. But the fraud trial of the company’s founder, Elizabeth Holmes, has shown that just as Bernard Madoff was a creature of Wall Street and Enron represented the get-rich-quick excesses of the 1990s, Theranos and its leader were very much products of Silicon Valley.
a jury found the entrepreneur guilty of four of 11 counts of fraud, starkly underlined her participation in Silicon Valley’s culture.
Ms. Holmes, 37, used the mentorship and credibility of tech industry big shots like Larry Ellison, a co-founder of Oracle, and Don Lucas, a Silicon Valley venture capitalist, to raise money from others. She lived in Atherton, Calif., amid Silicon Valley’s elite and was welcomed into their circles.
She also used the start-up playbook of hype, exclusivity and a “fear of missing out” to win over later investors. She embodied start-up hustle culture by optimizing her life for the maximum amount of work. She dismissed the “haters” and anything that interfered with her vision of a better world. She parroted mission-driven technobabble. She even dressed like Steve Jobs.
No industry wants to be judged only by its worst actors. And many venture capitalists who heard Ms. Holmes’s impossibly lofty claims didn’t fall for them. But if anyone in Silicon Valley was suspicious of her proclamations, none spoke publicly about it until after things went south.
said in a hearing in May before the trial began.
At its best, Silicon Valley is optimistic. At its worst, it is so naïve it believes its own hogwash. Throughout her trial, Ms. Holmes’s lawyers argued she was simply a wide-eyed believer. Any statements that weren’t entirely truthful, they said, were about the future. It was what investors wanted to hear, they said.
“They weren’t interested in today or tomorrow or next month,” Ms. Holmes testified. “They were interested in what kind of change we could make.”
Soon after Theranos got started in 2003, Ms. Holmes used her vision of the future to win over investors and advisers like Mr. Ellison and Mr. Lucas. Mr. Lucas, who was chairman of Theranos’s board until 2013, was involved with more than 20 investment vehicles that backed Theranos. Those included his son’s venture firm, Lucas Venture Group; another vehicle, PEER Venture Partners; and trusts and foundations associated with members of his family.
Bad Blood,” a book by John Carreyrou, a former Wall Street Journal reporter.
Brian Grossman, an investor at the heath care-focused hedge fund PFM Health Sciences, learned about Theranos through Thomas Laffont, a co-founder of Coatue Management, a prominent investment fund with a San Francisco presence. In an email that was part of the court filings, Mr. Laffont gushed that Theranos had “one of the most impressive boards I’ve ever seen” and said Mr. Grossman’s firm should let him know “ASAP” if it was interested in an introduction.
Coatue did not respond to a request for comment and PFM Health Sciences declined to comment.
embraced by many in the tech industry. “This is what happens when you work to change things,” she said in a TV interview. “First they think you’re crazy, then they fight you, and then all of a sudden you change the world.”
In the years since Theranos collapsed, more tech start-ups have followed its strategy of looking outside the small network of Sand Hill Road venture capital firms for funding. Start-ups are raising more money at higher valuations, and deal-making has accelerated. Mutual funds, hedge funds, family offices, private equity funds and megafunds like SoftBank’s Vision Fund have rushed to back them.
Mr. Salehizadehsaid Silicon Valley’s shift to a focus on fund-raising over all else was one reason he had left to set up a private equity firm on the East Coast. The big money brought more glitz to tech start-ups, he said, but it had little basis in business fundamentals.
“You’re always left feeling like either you’re an idiot or you’re brilliant,” he said. “It’s a tough way to be an investor.”
During the third month of the fraud trial of Elizabeth Holmes, the founder of the blood testing start-up Theranos, Judge Edward J. Davila, who is presiding, called the proceedings “a movable feast.”
We were about as far away from Hemingway’s Paris as I could fathom. The judge was most likely not talking about eating and drinking his way through 1920s France; the phrase “movable feast” also describes an event with a flexible date. But the image put the lack of glamour of covering this trial into relief.
Reporting on the tech industry and its immense wealth and power sometimes affords a glimpse into opulence: a dinner at a European palace, for example, or a crypto yacht party. But during this trial, I spent much of my time sitting on the carpeted floor of the courtroom’s hallway, downing snack bars and writing stories on my laptop.
Four months of covering Elizabeth Holmes’s fraud trial, now in its second week of jury deliberations, has turned me into a nocturnal, sidewalk-dwelling human-shaped snack bar.
fans of white-collar crime” who simply want to see history unfold.
Understand the Elizabeth Holmes Trial
Jury deliberations are underway in the fraud trial of Elizabeth Holmes, the founder of the blood testing start-up Theranos.
One morning outside the courthouse, a group of spectators pretended to sell black turtlenecks — Ms. Holmes’s uniform during Theranos’s rise — as a bit of performance art. They were scolded by court security guards for soliciting on federal property. Another time a woman yelled “You’re a good mom!” to Ms. Holmes as she entered the building. She was scolded by Judge Davila for potentially influencing the jury, whose members use the same door as the public.
Snagging a seat means getting there early. Each day since Ms. Holmes took the stand in late November, I jolt out of my hotel bed around 3 a.m. in a panic. I get ready, then hustle past a San Jose Christmas market that, just hours earlier, was buzzing with lights, people and festivities.
Then I join the group of journalists and spectators gathering outside the courthouse to receive a number, denoting our place in line — entry into the courtroom is first come first served — and sit on the cold sidewalk in the dark, waiting for 5 a.m., when the nearby Starbucks opens. Around 6:20 a.m., the gates to the courthouse unlock and we form a proper line. Around 8 a.m., Ms. Holmes arrives. An hour after that, I take my seat in the courtroom. (A few times, I’ve been relegated to a small overflow room, which also fills up fast.)
prompted the judge to warn journalists to type quietly.) There were tarot cards on one day and a panettone on another. The most critical gear is snacks.
When court is in session I sit in the gallery, hunched over my laptop, barely moving except for my fingers. But my brain is in five places at once, tap-dancing, spinning, back-flipping, walking a tightrope and doing the worm. I’m trying to take fast and accurate notes (quietly) while also sending instant messages to my Times editor, Pui-Wing Tam, (quietly), sending tweets (quietly), posting live updates on the trial for The Times (quietly), emailing outside sources for quotes (quietly) and writing my story in time for our East Coast deadline.
Not every day in court has been as newsworthy as when the defendant took the stand, so our coverage ranges from high-level weekly summaries to minute-by-minute live updates. Big witnesses, like James Mattis, a Theranos board member and former defense secretary, get their own story, as do big themes, like Theranos’s use of the media or the lack of investor due diligence. Our reporting fellow, Erin Woo, has been critical to our coverage. We write background summaries in advance so we can file quickly after adding quotes and analysis from the day’s events.
There are no windows in the courtroom, and by the time we leave the building more than 12 hours after arriving, the sun is going down. Then we do it all again.
SAN JOSE, Calif. — For the past 11 weeks, prosecutors revealed emails from desperate investors. They held up falsified documents side by side with the originals. They called dozens of witnesses who lobbed accusations of deceit and evasiveness.
And on Friday, the person whom prosecutors have been making their case against — Elizabeth Holmes, the founder of the failed blood testing start-up Theranos — took the stand to defend herself. She faces 11 counts of defrauding investors over Theranos’s technology and business in a case that has been billed as a referendum on Silicon Valley’s start-up culture. She has pleaded not guilty.
tech industry’s hubris and the last decade’s culture of grift — began her testimony by answering a series of questions about Theranos. She delved into her background and how she began the Silicon Valley start-up, which had promised to revolutionize health care by using just a drop of blood from patients to deduce their illnesses.
trial finally began in September, prosecutors called former investors, partners and Theranos employees to testify. Jim Mattis, the retired four-star Marine Corps general and former defense secretary, who was a Theranos director, took the stand, as did a former Theranos lab director who endured six grueling days of questioning. In one surreal moment, a forensics expert recited text messages between Ms. Holmes and Ramesh Balwani, her boyfriend at the time and business partner at Theranos, who is known as Sunny.
This week, Alan Eisenman, an early investor in Theranos, testified that Ms. Holmes cut him off and threatened him when he asked her for more information about the company. Yet even after that treatment, Mr. Eisenman poured more money into the start-up, believing its seemingly fast-growing business would deliver riches to backers like him.
When asked about his understanding of the value of his Theranos stock today, Mr. Eisenman said: “It’s not an understanding, it’s a conclusion. It’s worth zero.”
a series of validation reports that Ms. Holmes sent to potential investors and partners that made it look as though pharmaceutical companies including Pfizer and Schering-Plough had endorsed Theranos’s technology. Representatives from each company testified that they had not endorsed Theranos’s blood test and were surprised to see their companies’ logos added to the report.
testified that the start-up faked demonstrations of its machines for potential investors, hid technology failures and threw out abnormal blood test results.
Mr. Mattis testified that he was not aware of any contracts between Theranos and the military to put its machines on medevac helicopters or on the battlefield, as Ms. Holmes had frequently told investors.
testimony from Roger Parloff, the journalist who wrote a magazine cover story about Ms. Holmes, helping propel her to acclaim. Mr. Parloff’s article was sent to numerous investors as part of Ms. Holmes’s pitch.
Yet notably absent from the courtroom were some of the most prominent witnesses on the prosecution’s list. Ms. Holmes’s rise was aided by her association with business titans such as the media mogul Rupert Murdoch, elder statesmen such as Henry Kissinger and Adm. Gary Roughead, and the lawyer David Boies. Theranos was felled, in part, by whistle-blowers such as Tyler Shultz, a grandson of George Shultz, the former secretary of state, who sat on Theranos’s board. None of them testified.
Also absent was Mr. Balwani, who was charged with fraud alongside Ms. Holmes and faces trial next year. His role as a fiery defender of Theranos who went after anyone who questioned the company has been in the background of much of the testimony.
At nearly every turn, Ms. Holmes’s lawyers sought to limit testimony and evidence. They attacked the credibility of investors, using legal disclaimers to show that investors knew they were gambling on a young start-up. The lawyers also poked holes in investors’ limited due diligence on Theranos’s claims. At one point, they directed Erika Cheung, a key whistle-blower who worked in Theranos’s lab, to read the entire organizational chart of the people employed in lab to show she played a small role in the overall operation.
she said in one of the videos. “Anything that happens in this company is my responsibility.”
SAN JOSE, Calif. — In 2014, Dan Mosley, a lawyer and power broker among wealthy families, asked the entrepreneur Elizabeth Holmes for audited financial statements of Theranos, her blood testing start-up. Theranos never produced any, but Mr. Mosley invested $6 million in the company anyway — and wrote Ms. Holmes a gushing thank-you email for the opportunity.
Bryan Tolbert, an investor at Hall Group, said his firm invested $5 million in Theranos in 2013, even though it did not have a detailed grasp of the start-up’s technologies or its work with pharmaceutical companies and the military.
And Lisa Peterson, who handles investments for Michigan’s wealthy DeVos family, said she did not visit any of Theranos’s testing centers in Walgreens stores, call any Walgreens executives or hire any outside experts in science, regulations or legal matters to verify the start-up’s claims. In 2014, the DeVos family invested $100 million into the company.
The humiliating details of bad investments like Theranos are rarely displayed so prominently to the public. But they have been laid bare in recent weeks at the trial of Ms. Holmes, 37, who faces a dozen counts of wire fraud and conspiracy to commit wire fraud; she has pleaded not guilty. She and Theranos fell from grace — with investor money evaporating and the company shutting down in 2018 — after claims about its blood-testing technology were shown to be false.
frenzied state of record-breaking fund-raising.
With so many new investors flocking to start-ups, due diligence is sometimes so minimal that it is used as a punchline, investors said. An overheated market “definitely creates an environment for people to make more inflated claims” and may even tempt them to lie, said Shirish Nadkarni, a longtime entrepreneur, investor and author.
During its lifetime, Theranos exemplified that dynamic. The company raised $945 million from famous venture capitalists including Tim Draper, Donald Lucas and Dixon Doll; wealthy heirs to the founders of Amway, Walmart and Cox Communications; and powerful tech and media moguls such as Larry Ellison and Rupert Murdoch.
Understand the Elizabeth Holmes Trial
Elizabeth Holmes, the founder of the blood testing start-up Theranos, is currently standing trial for two counts of conspiracy to commit wire fraud and 10 counts of wire fraud.
And as investors have testified at Ms. Holmes’s trial, a central tension has emerged around due diligence. Could these investors have avoided disaster if they had simply done better research on Theranos? Or were they doomed because their research was based on lies?
added pharmaceutical company logos to validation reports indicating the pharmaceutical firms had endorsed its technology when they hadn’t, according to evidence and testimony. Theranos also claimed in late 2014 that it would bring in $140 million in revenue that year when it had none, according to evidence and testimony. The start-up also faked demos of its blood-testing machines to investors, witnesses have testified.
Wade Miquelon, the former chief financial officer of Walgreens, to admit that he didn’t know if his company had ever gotten one of Theranos’s devices in its offices for testing before entering into a partnership. The lawyers also got Mr. Mosley to concede he never directly asked Ms. Holmes whether a pharmaceutical company had written the validation report.
The strategy has sometimes veered into condescension. That was evident last week when Lance Wade, a lawyer for Ms. Holmes, asked Ms. Peterson, an investment professional, if she was familiar with the concept of due diligence.
“You understand that’s a typical thing to do in investing?” he said.
The investors have pushed back, explaining that they were acting on false information supplied by Ms. Holmes.
“You’re trying to measure our sophistication as an investor when we weren’t given complete information,” Ms. Peterson said. Mr. Wade asked the judge to strike the comment from the record.
Still, testimony from pharmaceutical company executives who interacted with Theranos showed it was possible to see through at least some of Ms. Holmes’s grandiose claims.
Constance Cullen, a former director at Schering Plough, said this week that she was responsible for evaluating Theranos’s technology in 2009. She said she came away “dissatisfied” with Ms. Holmes’s answers to her technical questions, calling them “cagey” and indirect. She said she stopped responding to emails from Ms. Holmes.
Shane Weber, a director at Pfizer, looked into Theranos in 2008 and concluded that the company’s responses to his technical questions were “oblique, deflective or evasive,” according to a memo used as evidence. He recommended Pfizer cease working with Theranos.
But investors were less probing, especially when Ms. Holmes appealed to their egos. Her persona as a visionary, bolstered by magazine cover stories and personal eccentricities, created a sense that backing Theranos was an exclusive and elite opportunity.
In testimony and evidence, Ms. Holmes was shown to have guarded information about the business, calling it a trade secret. She told investors she sought out wealthy families who would not want to see a return on their investment anytime soon, making those that she picked feel special with formal invitations. And she controlled the company tightly with “supervoting” shares worth 100 times the power of other shares.
“She has a firm grasp on the company, let there be no mistake,” Christopher Lucas, a Theranos investor, said on a call with other investors that was recorded and played in court. “She would have the right to cast out investors.”
Mr. Lucas’s firm, Black Diamond Ventures, invested around $7 million into Theranos, despite not getting access to its financial information or examining all of its corporate records. This was unusual, Mr. Lucas testified on Thursday, but Ms. Holmes told him the information was sensitive because a leak could “give competitors a chance to crush the company.”
That secrecy extended to due diligence. Ms. Peterson testified that she was scared Ms. Holmes would cut her firm out of the deal if they dug deeper into the details of Theranos’s business.
“We were very careful not to circumvent things and upset Elizabeth,” she said. “If we did too much, we wouldn’t be invited back to invest.”
Mr. Nadkarni, the longtime investor, said such behavior sounded familiar. He said he had observed a loosening of diligence in deals he’s been involved with over the last year.
It hasn’t led to many problems while times were good, he said, but “if something happens to the economy, then everyone is going to be toast.”
Mr. Célestin said he also had a radio station called Model FM, which he started in a rural region but which grew to the point that he installed it in a suburb of Port-au-Prince, the capital. The station does have a small, discreet office in the suburb of Petionville, with no signs. On the two occasions when The Times visited, the office was closed, or a single person was there who could provide no information about the station — not even an advertising rate sheet.
Mr. Célestin said he also owned a gas company called PetroGaz-Haiti, but by his own description, it appeared to violate legal prohibitions against profiting from state funds. While politicians are permitted to own businesses, the Constitution forbids them from having contracts with the state, which Mr. Célestin said he had had for four years through the company.
With outrage brewing, the Haitian government’s Anti-Corruption Unit launched an investigation into the purchase of the Célestin home in Canada in February. The Royal Canadian Mounted Police, the national police force, said it could not disclose whether it was also investigating the transaction. But under Canadian regulations, the purchase should have raised a red flag, said Garry Clement, the former head of an R.C.M.P. unit that investigates money laundering.
As a senator, Mr. Célestin is considered a “politically exposed person” under Canadian money-laundering regulations, which means financial institutions are required to perform due diligence to determine the source of any transferred funds greater than $100,000. These rules would also apply to Mrs. Célestin as the wife of a “P.E.P.,” Mr. Clement explained.
Mr. Célestin said everything about the purchase was above board. “If I wasn’t clean, I would have had a lot of trouble with the banks in Miami,” he added, saying that he routinely transferred between $20 million and $30 million to Turkey to buy iron for what he described as one of his import businesses. “I would be scared if my money wasn’t clean.”
But Mr. Célestin and his lawyer in Montreal, Alexandre Bergevin, declined to answer follow-up questions or provide the names of his import company or his farm. His wife, a counselor at the Haitian consulate in Montreal since 2019, did not respond to a request for comment.
A web search for “vehicle mileage correction” revealed a number of enterprises that offer rollback services. The companies, at least superficially, discourage illegal tampering, but that doesn’t mean they won’t do it. The website of one says, “We require that all customers seeking mileage correction services have a legitimate reason for concern, as it is illegal to alter your car’s mileage and not disclose that information to potential buyers.”
The mileage adjustment costs $120 on one site. The instrument cluster must be removed and shipped to the supplier, which alters the reading and sends it back.
Odometer mileage can also be altered with a tool that plugs into the OBD2 port — a connector that enables mechanics to read service codes reporting failed components.
To determine how difficult it might be to trim vehicle miles, I bought a $120 odometer rollback tool — the least expensive of those offered on eBay — to give it a try.
The device was for G.M. vehicles, so I tested it on a 2014 Equinox. The tool is meant solely for altering an odometer’s reading — once powered up, it goes right to a screen that says “Cluster Calibrate.”
The tool correctly read the mileage as 78,624 kilometers, or roughly 48,855 miles, but two attempts to reset the odometer were unsuccessful. Tampering may be relatively easy, but it apparently requires a quality device. After the test, we disabled and discarded the tool, as advised by a law enforcement official.
There are ways to help detect odometer tampering, although they’re not foolproof. For example, a check for excessive wear on the car’s frequently touched parts can provide clues to true mileage. The pedals are good indicators: Be suspicious if those in a car showing moderate mileage, say 45,000, show extreme wear or, because pedals can be changed, no wear. Either might indicate something awry. Also look at the inside of door handles, the steering wheel, armrests and anything else that is touched regularly.
CÓRDOBA, Spain — Carlos Alburquerque isn’t your typical rehab candidate. He’s a 75-year-old grandfather living in Córdoba, a city in southern Spain. He was a town notary before he retired in 2015. He hasn’t touched drugs or alcohol in years.
But his isn’t your typical rehab program: It’s an 11-month boot camp to reform corrupt Spanish officials and “reinsert” them into mainstream society.
“Repairing the damage is what is left for me in this life,” said Mr. Alburquerque, who is serving a four-year prison sentence for stealing around 400,000 euros, nearly a half a million dollars, in his work drawing up contracts and deeds.
Over the course of 32 sessions in an austere conference room in Córdoba’s penitentiary, Mr. Alburquerque will be monitored by a team of psychiatrists. He will sit in a circle with other convicted officials for group therapy sessions with titles like “personal abilities” and “values.” He is, in some ways, the guinea pig of an experiment meant to answer an age-old question: Buried deep in the soul of a swindler like Mr. Alburquerque, might there be an honest man?
raft of bribes for government contracts were discovered logged in a notebook belonging to the ruling party’s treasurer. The scandal helped topple the party from power in 2018. There was the “Palau Case,” in which the president of a Catalan music hall defrauded it of 23 million euros, using the proceeds for home renovations and lavish vacations, among other extravagances.
In the rocky coastal region of Galicia, police once nabbed a ring of corrupt town officials in a sting called “Operation Pokémon.” Why it was named after a Japanese video game was never clear — but some speculated it was because of the large number of officials involved. (There are hundreds of Pokémon characters.)
On a recent afternoon, Ángel Luis Ortiz, a former judge who now runs Spain’s prisons, let out a long sigh as he looked out from his office into downtown Madrid during a conversation about Spain’s struggles with public embezzlement. The boom-bust cycles of Spain’s economy had led it to a long history of fraudsters and betrayals of public trust, he said.
ranks Spain just below France, and above Italy). It was Spain’s will to rehabilitate the offenders that set it apart from the rest, Mr. Ortiz said — an offer which now extends to some 2,044 white-collar criminals in Spanish prisons.
Nine prisons are running programs so far, which began in March. Prisoners don’t get reduced sentences for joining, but officials say participating is looked on favorably when it comes time to request parole.
Who qualifies? It’s a veritable Who’s Who of Spain.
There’s the king’s brother-in-law, Iñaki Urdangarin, the handsome Olympic handball player and former Spanish duke who is serving a fraud sentence of almost six years, and is participating in the program. Francisco Correa, a businessman nabbed in the Gürtel Case is also enrolled. (Though Spaniards know him better for his nickname, “Don Vito,” a reference to “The Godfather” trilogy.)
Yet for all the volunteers, Mr. Ortiz still thinks his biggest challenge may be convincing Spain’s corrupt officials that there actually might be something wrong with them.
“They are people with money and power — and we are struggling against this idea that they can get away with anything and don’t actually need the help,” he said.
For that, the government turned to Sergio Ruiz, a prison psychiatrist in the southern city of Seville who helped design the program. Dr. Ruiz said that in addition to getting participants to recognize their flaws in group therapy, inmates would eventually be asked to participate in “restorative justice” sessions where they would ask for forgiveness from their victims.
Dr. Ruiz explained he had been surprised at the outset when he searched the scientific literature and found almost nothing on rehabilitating white collar criminals. Psychiatrists had studied murderers ad nauseam, Dr. Ruiz explained. But few had ever bothered to get inside the mind of the shady functionary who swindled the public garbage fund.
So Dr. Ruiz decided to run a study of his own. He asked for volunteers from three groups — white collar prisoners, violent criminals and a “control” group of ordinary Spaniards — and surveyed each on their values and beliefs.
The results surprised everyone, he said.
“We think of these people as ruthless, but that’s not how it is,” Dr. Ruiz said of white collar criminals. “They have the same system of values as any ordinary citizen.”
Instead, Dr. Ruiz said, corrupt minds have a unique capacity to create exceptions to their own rules, what cognitive psychologists sometimes call “moral disengagement.” They have intricate ways of explaining away their misdeeds as somehow benefiting others rather than themselves.
And Dr. Ruiz found dangerous levels of two other traits in the fraudsters.
“Egocentrism and narcissism,” he said.
At first glance, Mr. Alburquerque, the corrupt notary in Córdoba who volunteered to be rehabilitated, doesn’t appear to have much of either. He’s mild-mannered and speaks in hushed tones even in the loud hubbub of the penitentiary. It’s hard to imagine that he pocketed nearly a half-million dollars before he was caught.
“Here, one has to take responsibility,” he said, admitting he had been wrong.
But there’s more to the story, Mr. Alburquerque said.
While sums of money may have disappeared under his watch, he had always made sure his employees were highly paid, unlike many other notary offices, he said. He had even attempted to return much of the fraud money before he was caught. Anyone in Córdoba could attest to the fact that he was a key member of the city, he added.
“I have an advantage over other mortals, but not all, in that I can sleep five hours less than others,” he said of his work ethic. “Always what I’ve done is worked and studied.”
They are words that Yolanda González Pérez, the prison warden, says she’s heard before from other white collar criminals who haven’t fully accepted their crimes.
“They tell themselves ‘I’m not as much of a criminal as the others are,’” she said.
But Mr. Ortiz, the director of the Spanish prison system, isn’t worried. He’s ready to roll up his sleeves with Mr. Alburquerque and other participants who might be willing to rethink their old ways.
Maybe a breakthrough will come early on, when according to a summary of the rehabilitation manual, psychiatrists will begin the process of “therapeutic alliance” to form a bond with the corrupt officials.
Or later on in week five, when the inmates “will finally take on the subject of developing humility and empathy.”
It takes patience to change someone, Mr. Ortiz said.
“We can be working months in these sessions,” he said. “We just keep at it with the prisoners and we’ll see when the fruit is ripe.”