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Theranos founder Elizabeth Holmes’ defense paints her as a ‘naive’ but ambitious CEO in fraud trial opening statement

September 12, 2021
Life sciences

A week after proceedings kicked off with jury selection for the trial of former Theranos founder and CEO Elizabeth Holmes, arguments began Wednesday with opening statements from each side.

Holmes has been charged by the U.S. Department of Justice with nine counts of wire fraud and two counts of conspiracy to commit wire fraud, which altogether carries a maximum sentence of 20 years in prison, plus a fine of at least $250,000 per guilty verdict. She has pleaded not guilty to all charges.

The charges stem from accusations that Holmes, who started Theranos at the age of 19, defrauded investors, partners and patients by claiming that the startup had developed a benchtop system capable of testing for hundreds of health conditions and illnesses from just a few drops of blood—when, in fact, the technology didn’t exist.

At the crux of the trial is the question of Holmes’ intent in perpetuating that claim: whether she knowingly lied to rake in millions from investors and partners in a dogged pursuit of fame and fortune, or was merely an overly ambitious leader whose lack of experience ultimately resulted in the crash and burn of a startup once valued at $10 billion.

The prosecution, of course, is sticking to the first of those two possibilities. In his 45-minute opening statement, U.S. Attorney Robert Leach promised to show jurors “email after email” demonstrating that Holmes had been completely looped in on all of the issues with Theranos’ blood-testing technology, yet still continued to promise significant financial returns to investors and forge diagnostic partnerships with Walgreens and Safeway.

“Out of time and out of money, Elizabeth Holmes decided to lie,” Leach said, per the Wall Street Journal.

He went on to accuse Holmes and Ramesh “Sunny” Balwani—the former chief operating officer of Theranos, as well as Holmes’ clandestine boyfriend throughout much of the company’s reign in Silicon Valley—of finagling positive media coverage in order to further convince investors to pour millions more into Theranos’ coffers.

The pair even went so far as to forge “exemplary reports” claiming to be from pharmaceutical companies like Pfizer praising the company’s technology to win over support, Leach said, according to the Washington Post.

All of this was part of what the prosecution has painted as Holmes and Balwani’s alleged scheme to become globally recognized billionaires.

“This is a case about fraud, about lying and cheating to get money,” Leach said, per The Verge’s Elizabeth Lopatto. “That’s a crime on Main Street and a crime in Silicon Valley.”

In return, the defense’s opening statement, which stretched across several hours, focused on describing Holmes as a pioneering leader who shared the “fake it ‘til you make it” mentality typical of other Silicon Valley startups but, due to her lack of experience, “naively underestimated” some of the challenges that arose in Theranos’ path to scientific viability.

“Failure is not a crime,” Holmes’ attorney Lance Wade said, the Post reports. “Trying your hardest and coming up short is not a crime. By the time this trial is over, you will see that the villain the government just presented is actually a living, breathing human being who did her very best each and every day.”

Holmes was further hindered, according to Wade, by her relationship with Balwani. As previously revealed in unsealed court documents, Holmes may testify that Balwani was controlling and manipulative toward his then-partner, leaving her in a state of mind that made her vulnerable to missteps and poor judgment. (Balwani has denied these allegations.)

Though Wade didn’t touch on the abuse claims, he hinted at “another side” to Holmes and Balwani’s relationship. He also pinned much of the blame for Theranos’ scientific and regulatory failures on Balwani’s role overseeing the company’s labs, saying that “trusting and relying on Mr. Balwani as [Holmes’] primary adviser was one of her mistakes,” per NPR’s Bobby Allyn.

Despite those setbacks, Holmes was committed to her role at the helm of Theranos, Wade said, working around the clock every day for over a decade to revolutionize blood testing. He pointed out that she never accepted any offer to sell the company—supporting the defense’s portrait of her as a startup founder driven by its health-focused mission rather than money or celebrity.

As for the investors who lost millions of dollars: They were well aware of the risks that come with investing in a startup with goals as lofty as Theranos’, Wade said, according to the New York Times’ Erin Griffith.

The trial is expected to stretch on for about four months, during which time the defense has indicated that it may continue to position Holmes as an unwitting victim of Balwani’s scheming and alleged abuse.

A potential list of witnesses who could be called throughout the trial include Holmes; investors and supporters like Henry Kissinger and Rupert Murdoch; patients who claim to have received misdiagnoses of miscarriage, HIV and more from Theranos’ technology; and even John Carreyrou, who wrote the series of Wall Street Journal exposés that sounded the alarm on the company’s false claims.

After Holmes’ trial is complete, Balwani’s is slated to begin in January 2022. He’ll be tried for the same 11 charges as his former colleague and ex-girlfriend and, like Holmes, has also pled not guilty to all counts.

by Andrea Park


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