Theranos Founder Elizabeth Holmes Chose Fraud Instead Of Admitting She’d Failed, Prosecutors Said In Closing Arguments At Her Trial

An attorney for Holmes argued the government is not telling the whole story, saying, “At the end of the day, when all the evidence flows together, it isn’t so bad.”

Peter Dasilva / Reuters

Elizabeth Holmes and her partner Billy Evans leave the federal courthouse in San Jose on Sept. 8, 2021.

SAN JOSE, California — Prosecutors urged jurors on Thursday to be skeptical of claims Elizabeth Holmes made on the witness stand during her federal fraud trial, arguing that she could be misleading them just as she allegedly lied to keep the money flowing at her blood-testing company Theranos.

“She chose fraud over business failure,” Assistant US Attorney Jeffrey Schenk said during closing arguments. “She chose to be dishonest with her investors and with patients. That choice was not only callous, it was criminal.”

Holmes, 37, is accused of intentionally defrauding investors and patients by making misleading and false statements about the capabilities of her blood-testing technology, the company’s work with the military and pharmaceutical giants, and the accuracy of its test results. She is charged with nine counts of wire fraud and two counts of conspiracy to commit wire fraud (a 10th wire fraud count was dropped after the judge barred a patient’s testimony due to an error by prosecutors). Each count carries a sentence of up to 20 years in prison if she is convicted. Closing arguments are expected to continue on Friday.

Vicki Behringer / Reuters

Holmes testifies during cross-examination by federal prosecutor Robert Leach on Nov. 30, 2021, in this courtroom sketch.

Prosecutors have alleged that Holmes conspired with her ex-boyfriend Ramesh “Sunny” Balwani, who was Theranos’s president and chief operating officer, to defraud investors as well as patients and doctors who used the company’s laboratory services. Balwani is facing the same charges as Holmes and is set to go on trial next month.

Once hailed as the next Steve Jobs, Holmes had sought to revolutionize medicine with Theranos’s proprietary machine, which she claimed could run hundreds of tests on just a few drops of blood. The device was supposedly faster, cheaper, and more accurate than all other blood-testing lab equipment on the market and promised to bring critical diagnostics into drugstores, homes, and even battlefields. But as a Wall Street Journal investigation revealed in 2015, in reality, the machine could run only a small number of the tests, and its results were rife with inaccuracies. Instead, Theranos relied on commercially available machines to run the majority of its tests, diluting the drops of blood to increase volume for some tests and using much larger samples drawn from patients’ arms for others.

Over the course of 11 weeks, prosecutors presented emails, text messages, documents, audio recordings, and video clips of Holmes speaking in interviews, along with testimony from former employees, investors, doctors, and patients to make the case that she was painfully aware of problems with the company’s technology and yet deliberately — and repeatedly — lied to get money in the door.

During closing arguments, Schenk broke down the testimony and evidence that the government presented at the trial, detailing the specific emails, text messages, documents, and audio recordings the jury could use to satisfy every component of each charge, like that Holmes was privy to the alleged scheme and intentionally defrauded by knowingly sharing false information.

“You can conclude that there is no witness who testified in this case that has more bias, [is] more interested in the outcome of the proceedings than the defendant herself,” Schenk told the jurors Thursday.

Mike Blake / Reuters

Holmes in 2015

In her defense, Holmes’ legal team portrayed the former CEO as a businessperson who worked diligently for years to make lab testing cheaper and more accessible. She took the stand for seven days. Despite admitting that she had made several mistakes along the way — and ultimately failed to disrupt healthcare as she set out to do — Holmes testified that she believed her company’s technology worked.

“That was fundamental and central to her thinking when she [went] out to make public statements,” Holmes’ attorney Kevin Downey said during closing arguments. He added that Holmes was told that Theranos’s technology would someday “be capable of performing any blood test.”

At times, her testimony contradicted the government’s evidence, what other witnesses shared with the jury, and her own previous statements. For instance, several witnesses — including former Safeway CEO Steven Burd and Lisa Peterson, who handles investments for the DeVos family — testified that Holmes had told them or led them to believe Theranos’s devices were being used by the military. But the company’s equipment was never deployed in medical helicopters or on the battlefield, Holmes confirmed, even as she disputed that she had ever told anyone that.

"My testimony is, I don't think I said that," Holmes told the jury when asked about the claim during cross-examination, the Journal reported.

Holmes also admitted that she gave journalist Roger Parloff inaccurate information for his 2014 Fortune magazine cover story titled “This CEO Is Out for Blood,” which prosecutors alleged she had used to attract investors. When Holmes claimed that she didn’t remember sending the article to investors, Leach showed her and the jury a June 12, 2014, email in which she sent shareholders a link to the story.

“I think I could have handled those communications differently,” Holmes said, according to CNBC.

And in one of the most stunning admissions she made on the stand, Holmes said she personally added the logos of drug companies Pfizer and Schering-Plough to reports shared with potential business partners and investors without the pharmaceutical giants’ permission. Prosecutors alleged that Holmes doctored the reports to give the false impression that the companies had endorsed Theranos’s devices.

"This work was done in partnership with those companies, and I was trying to convey that," she testified, according to the Journal. Holmes denied that she was trying to suggest that the companies had signed off on Theranos’s work. "I wish I had done it differently,” she said.

Downey tried to downplay the snafu in closing arguments Thursday, arguing that the government’s focus on the logos was a distraction and that the full story paints a different picture of the former CEO’s state of mind.

Downey said that the drug company witnesses who testified about the reports did not convey any “negative feedback” to Holmes and that when sharing the reports with potential investors, she provided them with contact information so that they could speak with the pharmaceutical partners about Theranos’s work.

“Ms. Holmes has no intent to deceive people or hide from people things that are going on in those relationships contrary to the government's assertions,” Downey said.

He added that while the prosecution suggested that Pfizer stopped working with Theranos after that report, representatives for the company continued conversations with Holmes’ company into 2015. Downey also noted that the government failed to mention that Theranos had successful partnerships with several other pharmaceutical companies, like AstraZeneca.

“The picture can change quite a good deal as a result of waiting for the full story and looking through the full material,” Downey said. He argued that at times prosecutors had presented an event that “looks bad,” but added, “At the end of the day, when all the evidence flows together, it isn’t so bad.”

But Robert Weisberg, a criminal law professor at Stanford, told BuzzFeed News that Holmes’ admission that she added the logos of drug companies to Theranos reports without their permission was an important moment in the trial, calling her explanation “absurd.”

“It’s almost as if she was really saying, ‘I didn't mean it to mean what it obviously meant,’” Weisberg said. “That's simply not credible.”

Justin Sullivan / Getty Images

Theranos founder and former CEO Elizabeth Holmes goes through a security checkpoint as she arrives at the Robert F. Peckham Federal Building on Dec. 16, 2021 in San Jose, California.

Reporters in the courtroom described Holmes as mostly calm, confident, and at times smiling while she testified. It was only when she shared that she had been raped as a student at Stanford University and detailed her relationship with Balwani, who was nearly 20 years her senior, that she became emotional. Through tears, she said that he had often criticized her, controlled her daily schedule and what she ate, isolated her from her family and friends, and forced her to have sex with him when she didn’t want to.

“He told me I didn’t know what I was doing in business, that my convictions were wrong, that he was astonished at my mediocrity, that if I followed my instincts I was going to fail and that I needed to kill the person I was to become what he called ‘a new Elizabeth’ that could be a successful entrepreneur,” Holmes said, according to CNBC.

Still, Holmes testified that Balwani did not have control over her communications and interactions with investors, journalists, and business partners, reinforcing prosecutors’ argument — and the image she put forth to the public — that she was ultimately in control of what happened at Theranos.

When asked by one of her attorneys what impact her relationship with Balwani had on her work at Theranos, Holmes testified that she didn’t know.

“He impacted everything about who I was, and I don't fully understand that,” she said, according to the Journal.

Balwani’s attorneys have denied her allegations, saying in court papers that the accusations are "devastating personally to him.”

Downey has not yet addressed Holmes’ testimony about abuse or the impact it may have had on her during her time as CEO, but the defense’s closing arguments are ongoing.

Court documents unsealed in August indicated that she might use her claims of abuse in her defense. Along with Holmes' own testimony, her attorneys also considered introducing evidence from a clinical psychologist regarding “a mental condition bearing on guilt.” According to the documents, the expert on “interpersonal violence” could have testified to whether her relationship with Balwani “was consistent with intimate partner abuse," a dynamic that can affect “its victims’ agency.”

But Holmes’ legal team opted not to call the expert to the witness stand, leaving the jury with only the former CEO’s testimony on the issue.

On Thursday, Schenk took a moment to address Holmes’ testimony about her relationship with Balwani, telling jurors that this case was not about whether Holmes was a victim of abuse.

“If you return a verdict of guilty, you are not saying we the jury do not believe Ms. Holmes’ claims of abuse. If you return a verdict of not guilty, you are not saying we the jury believe Ms. Holmes' claims of abuse,” he said. “The case is about false statements made to investors and false statements made to patients.”