The high-profile criminal trial begins this week of disgraced Theranos founder Elizabeth Holmes. While opening arguments in the San Jose courtroom won't begin until after Labor Day, jury selection begins on Tuesday, August 31.
It's been three years since Holmes and her onetime boyfriend Ramesh “Sunny” Balwani — who also served as Theranos' president — were indicted on 12 counts of fraud and conspiracy to commit wire fraud. The charges stemmed from their actions and statements while leading the company through multiple funding rounds, and claims they made about Theranos's blood-testing technology that turned out to be untrue.
Now, Holmes will face trial first, with Balwani's trial not expected to happen until next year. And over the weekend we learned from unsealed court documents that Holmes's defense attorneys plan to argue that Holmes was under the sway of Balwani throughout her tenure as CEO of Theranos, and to shift blame for the fraud over to him. The filing suggested that Holmes may take the stand in her own defense, and she is "likely to testify herself to the reasons why she believed, relied on, and deferred to Mr. Balwani."
Balwani's attorneys have already issued a statement denouncing the abuse claims, saying that they are "deeply offensive to Mr. Balwani, devastating personally to him, and highly and unfairly prejudicial to his defense of this case."
And shifting blame away from Holmes could be an uphill battle for the defense — in a suit brought by investors that was previously settled, former Wells Fargo CEO Dick Kovacevich, who served on the Theranos board, said in a sworn deposition that "Ultimately, Elizabeth made the decisions."
But we can expect vigorous arguments made that Holmes was merely the public face of the company, who was deceived along with investors by claims made by Balwani and others about the technology underpinning Theranos's business. As the New York Times puts it, "the central question will be whether Ms. Holmes was a deceptive schemer driven by greed and power, or a naïf who believed her own lies and was manipulated by Mr. Balwani."
The trial is sure to make plenty of headlines over the three or four months that it lasts, with the witness list including some very famous names. As the Chronicle reports, witnesses may include media mogul Rupert Murdoch, who invested in the company, and former board members like Henry Kissinger, the former U.S. secretary of state under presidents Nixon and Ford.
As NPR reports, witnesses for the prosecution will also include patients who fell victim to Theranos's faulty blood tests, including some who received false positives in HIV tests, and one woman who was falsely told she had miscarried her baby when she was still pregnant.
Originally, Holmes and Balwani were going to be tried together, but in one pre-trial victory, the defense successfully argued that Holmes should be tried separately, because of the abuse allegations.
One expert, UC Davis psychiatry professor Jason Roof, tells the Wall Street Journal that the abuse angle may backfire. "Given the complexity of a white collar crime over the span of a great deal of years, making the case that a person throughout each of those dealings was unable to understand the nature and quality of what they were doing is going to be difficult," Roof says.
Holmes's attorneys also succeeded in getting the trial delayed due to Holmes's recent pregnancy — this trial was supposed to begin in July, but that was when Holmes was due to give birth, which she did on July 10. Holmes married husband Billy Evans, heir to the Evans Hotel Group, in secret in 2019.
Last fall, her attorneys tried six different ways to get the case thrown out before trial, but a judge rejected all six — including one angle in which Holmes's team claimed, "incorrect blood tests are a fact of life."
Holmes founded Theranos shortly after dropping out of Stanford in 2003 at the age of 19, and it would be 10 years before the company gained national attention and loads of investor money — with Holmes playing the part of young founder prodigy, complete with affected voice and Steve Jobs-ian black turtlenecks.
Inklings of trouble at the company began in late 2015 when journalist John Carreyou began publishing a series of exposés in the Wall Street Journal in which Theranos employees admitted that the company's "Edison" blood-testing machine might not actually work. They also revealed that of the 240 blood tests Theranos was offering to customers, only 15 were routinely being done on the company's own machines.
What followed was a spectacular flameout for both Holmes and Theranos, as the company went from a $9 billion valuation to a cautionary tale of chicanery in Silicon Valley, with Holmes' own fortune disappearing in the process.
A movie based on Carreyou's book Bad Blood remains in development, with director Adam McKay (The Big Short) and actor Jennifer Lawrence attached.
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