The Fraud Examiner

Equal Opportunity Fraudsters

Jennifer Liebman                       
Research Editor, Association of Certified Fraud Examiners                                 

After high-profile CEOs Martin Shkreli and Elizabeth Holmes got their comeuppance for securities fraud in March 2018, the Washington Post and New York Times published stories examining the disparities in their punishments. Shkreli, the pharmaceutical exec, has so far received the harsher of the two sentences: seven years in prison and forfeiture of his funds from defrauding his hedge fund investors. Holmes, who founded the blood-testing startup, Theranos, along with her company’s president, was fined $500,000 by the U.S. Securities and Exchange Commission (SEC) for duping her company’s investors. The SEC also ordered her to give up voting control of her company and barred her from heading a public company for 10 years. Currently, no criminal charges have been filed against Holmes.

Both CEOs are in their mid-30s and received considerable media attention at young ages — albeit in different ways. The New York Times and Washington Post writers contend that Holmes’ and Shkreli’s public images might explain the contrast in their consequences. Shkreli, aka “Pharma Bro,” rose to infamy for inflating the price of a life-saving medication, smirking his way through a trial and displaying a Gordon Gekko-like drive for money. He earned public scorn and was punished accordingly. In contrast, Holmes received glowing press coverage. She had an irresistible backstory — she dropped out of Stanford at 19 and became the youngest female billionaire. Holmes even received the Horatio Alger award for her “remarkable achievements accomplished through honesty, hard work and self-reliance,” all while allegedly deceiving her investors into believing that Theranos could perform comprehensive medical tests with just a drop of blood, that the U.S. Defense Department used the technology, and that revenue far exceeded what it was bringing in. As the New York Times reports, the magnitude of Theranos’ fraud is far greater than Shkreli’s. The SEC complaint charges that from 2013 to 2015, Theranos used false claims to raise more than $700 million from investors. Shkreli netted slightly more than $10 million with his fraud.

While public image might be an important aspect in their cases, John C. Coffee, Jr., a law professor at Columbia University, adds another interesting factor to the mix — gender. Coffee remarked to the New York Times, “Typically, you get more sympathy from the criminal justice system if you’re an attractive young woman than a brash, arrogant young male.” The case of the two CEOs provides an opportunity to take a closer look at the relationship between gender and fraud and the types of frauds that men and women (in particular) tend to commit.

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