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In 2018, Ms. Elizabeth Holmes and Mr. Ramesh Balwani, her onetime business and romantic partner, were indicted with 12 counts of wire fraud and conspiracy to commit wire fraud. According to federal prosecutors, Ms. Holmes and Mr. Balwani misrepresented the abilities of Theranos’s technology and the company’s business performance to investors. Both have pleaded not guilty. Ms. Holmes’s trial, in federal court in San Jose, Calif., began just a month after she gave birth to a son, but more than three years after Theranos was dissolved and six years after The Wall Street Journal first exposed problems with the start-up’s blood tests. The trial is expected to last 13 weeks and potentially feature as witnesses high-profile ex-board members and investors such as former Secretary of State Henry Kissinger and the media mogul Rupert Murdoch. If convicted, Ms. Holmes, 37, faces up to 20 years in prison. Mr. Balwani’s trial is slated to start in January.

1. a. Find what role Ms. Holmes played for Theranos, her company. How could she have
found Theranos? What was the most appealing incentive that their shareholders decide
to invest in Theranos? Why were Ms. Holmes and Mr. Balwani indicted? (State your
sources of information at the end of your answer.)

b. Did Theranos have agency problems, which might be caused by different incentive between
shareholders and the managerial? Why or why not? Justify your answer by providing
evidence and state the sources of the evidence.