SAN FRANCISCO – After four years of constant delay and childbirth, Elizabeth Holmes, founder of blood-testing start-up Theranos, will face trial for fraud, presenting a story about hubris, ambition and deception in Silicon Valley.
Jury selection begins Tuesday in federal court in San Jose, California, followed by open debate next week. Ms Holmes, whose trial is expected to last three to four months, is fighting 12 counts of fraud and conspiracy to commit wire fraud over false statements she has made about blood tests and the Theranos business.
In 2018, the Justice Department indicted both her and her business partner and one-time boyfriend, Ramesh Balwani, known as Sunny, with charges. Balwani’s trial will begin early next year. Both pleaded not guilty.
Holmes’ case has been likened to an allegory of Silicon Valley’s “fake it until you make it” culture, which has helped propel startups in the region to wealth and prosperity. unpredictable economic power. It is the same spirit that has allowed tough enemies and unethical hustlers to flourish, often with little consequence, calling into question Silicon Valley’s grip on society.
But the final trial will be on an individual. And the central question will be whether Mrs Holmes is a con man driven by greed and power, or a naive person who believes her own lies and is manipulated by Mr. Balwani.
The case revolved around Ms. Holmes learning of problems with Theranos’ blood-testing equipment. Her lawyers could argue that she was just the public face of the startup while Mr. Balwani and others handled the technology, legal experts said. They could make the case that the sophisticated investors backing Holmes should have done better research on Theranos. And they could say that Ms. Holmes was simply following Silicon Valley’s exaggerated standards in the service of an ambitious mission.
Last year, Judge Edward Davila of the U.S. District Court for the Northern District of California agreed to separate the case of Ms. Holmes and Mr. Balwani. The move is unusual for such cases and allows the couple to blame each other without the ability to react, legal experts said.
In sealed court filings from 2020 made public over the weekend, Ms Holmes said her relationship with Mr Balwani had “a pattern of coercive abuse and control”. The filing said Ms Holmes’s attorneys were able to refer expert testimony about her mental state and the effects of the alleged abuse. Mr. Balwani’s attorneys denied the allegations in a filing. If convicted, Ms Holmes, 37, faces up to 20 years in prison. While famous startup founders from Uber’s Travis Kalanick to WeWork’s Adam Neumann have all experienced rapid setbacks because of ethics scandals, Ms Holmes could be one of the few. actually go to jail for that.
“Usually this type of fraud goes undetected,” said Alex Gibney, director of “The Inventor,” a documentary about Theranos. “Lots of other people fake it until they make it, but that never justify not charging when someone has committed fraud.”
Ms Holmes’s lawyers did not respond to a request for comment. An attorney for Mr. Balwani, 56, declined to comment, as did a representative of the US attorney’s office for the Northern District of California, which is prosecuting the case.
A glimpse of the trial will be the attraction of the public with the scandalous details of the TV series Theranos.
Over the years, Mrs. Holmes has established herself in the public eye with her unusually deep voice, gaze, and black turtleneck uniform that are meant to be reminiscent of Steve Jobs. She installed bulletproof glass in her office and traveled by jet or private driver with a security detail. In 2019, she is said to have married William Evans, a hotel heiress. She gave birth to their son in July.
Her high profile poses a challenge in finding jurors who have not yet made a point on her or the case. Jury members filled out a 28-page questionnaire outlining their media consumption, medical experiences and whether they had heard of Ms Holmes or had seen the TED talk hers. About half of the more than 200 potential jurors consumed media related to the case, according to court filings last week.
It is not clear if Mrs Holmes will come to her defense. As CEO and president of Theranos, she is persuasive and inspiring. She fiercely defends Theranos and dismisses any criticism as a sign that the company is changing the world.
But if Ms Holmes stands her ground, prosecutors could use past statements to damage her reputation. During a Securities and Exchange Commission dismissal in 2017, she answered questions by saying “I don’t know” at least 600 times.
“It’s going to be hard for her to say, ‘I remember it like this,'” when she says, ‘I don’t know,’ said John C. Coffee Jr., a professor at Columbia Law School. related to the case. “It’s the most damaging evidence against her.”
By the time the US indicted Ms Holmes in 2018, the once high-flying Theranos was dead.
Holmes founded the startup at the age of 19 in 2003 and left Stanford shortly after. She hired Balwani in 2009 and raised over $700 million from investors, valuing Theranos at $9 billion. Palo Alto, California, the company has entered into agreements with Walgreens and Safeway to provide blood testing services in their stores. It also attracted dignitaries, senators and generals – including George Shultz, Henry Kissinger, William Frist and James Mattis – to its board.
“We’ve reinvented the traditional lab infrastructure,” Ms. Holmes said at a 2014 conference. “It eliminated the need for people to have a needle stuck in their arm.”
Then, in 2015, The Wall Street Journal published a series of presentations calling the effectiveness of Theranos machines into question.
“She was a scam,” said Dr. Phyllis Gardner, a Stanford professor of medicine who was an early Theranos skeptic. “She harmed a lot of patients. She took everyone’s money out of theirs. “
Closer scrutiny from regulators and investors has exposed more issues and allegations of fraud, leading to civil fraud charges from the Securities & Exchange Commission and a lawsuit. lawsuits from investors and Walgreens.
By 2016, Forbes had lowered its estimate of Holmes’ net worth from $4.5 billion to zero. In 2018, she settled with the SEC and investors. That same year, Theranos closed.
The Justice Department indictment, also issued that year, accuses Holmes and Mr. Balwani of telling investors that Theranos’ blood-testing machine could quickly perform a full range of clinical tests using using fingerstick blood samples, even though both know what these tests are. limited, unreliable and slow. Ms. Holmes and Mr. Balwani also exaggerated Theranos’ business dealings and told investors the company would generate $1 billion in revenue by 2015, when it made only a few hundred thousand dollars, the indictment said.
Ms Holmes’s lawyers have since repeatedly pushed for a postponement of the trial. They sought to exclude evidence and block witnesses. And they disputed other details, such as whether Ms Holmes had to wear a mask during the proceedings.
Several allegations of fraud on behalf of doctors and patients, who were already covered by insurance to pay for the tests, were dropped from last year’s case. But Theranos patients with inaccurate test results were allowed to testify.
The list of potential witnesses more than 200 people including many big names have entered the orbit of Theranos. Among them: Rupert Murdoch, the media mogul who has invested in startups; David Boies, the star attorney representing Mrs. Holmes and sitting on the board of Theranos; and Mr. Kissinger, Mr. Frist and Mr. Mattis.
Attorneys in the case have also countered the exaggeration and lengthening of facts in the Silicon Valley fundraising. To keep the focus on Theranos, prosecutors tried to prevent Ms Holmes’s lawyers from arguing that it was common practice for startups to exaggerate their claims to attract investments. But Judge Davila has said that the court will allow general comment on the subject.
“Fake it until you make it – you don’t do that in medical devices,” Dr. Gardner said. “They are very tightly regulated. They had to be completely accurate and not harm anyone, and it did. “