SAN JOSE, California — With her black turtlenecks and wide-eyed stare, for years Elizabeth Holmes cartoonishly embodied the image of the Silicon Valley founder whose big ideas could change the world. But following the spectacular and public breakdown of her blood-testing company Theranos, lawyers at Holmes’ federal fraud trial on Wednesday attempted to tell a different story: Was she actually a liar and cheat, grasping for money and fame? Or simply a woman who tried hard and failed?
Attorneys for the Department of Justice and defense lawyers for Holmes presented those two pictures in their opening statements to a jury of five women and seven men. Over the course of the next several months, they will hear testimony from former Theranos employees, investors, patients, and others to determine whether Holmes, the former Theranos CEO who was once hailed as the next Steve Jobs, intentionally misled and lied to investors and patients about the capabilities of her company’s blood-testing technology.
“This is a case about fraud, about lying and cheating to get money,” Assistant US Attorney Robert Leach told the jury.
Holmes, 37, is charged with 10 counts of wire fraud and two counts of conspiracy to commit wire fraud. Each count carries a maximum sentence of up to 20 years in prison if she is convicted.
Prosecutors allege that Holmes conspired with her ex-boyfriend Ramesh “Sunny” Balwani, who was Theranos’s president and chief operating officer, to carry out the scheme. The pair knew the company’s blood tests produced unreliable results yet still sold them, prosecutors said, and then committed wire fraud by electronically sending those results to patients and doctors across state lines. Balwani is facing the same set of charges as Holmes and will undergo a separate trial next year.
In the defense’s statement, Holmes’ attorney Lance Wade portrayed the former CEO as a businessperson who “worked herself to the bone” for years to achieve a noble and worthwhile goal: to make lab testing cheaper and more accessible. She did not succeed, but that doesn’t make her a criminal, Wade said.
“Now, in the end, Theranos failed. And Ms. Holmes walked away with nothing,” Wade said. “But failure is not a crime.”
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 company’s device was supposedly faster, cheaper, and more accurate than all other blood-testing lab equipment on the market and could revolutionize medicine by bringing 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 used 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.
“The evidence will show the defendant told her investors she developed a miniature blood analyzer that could do virtually any test. It could not,” Leach said. “It never did more than 12 tests in the clinical laboratory, and it did them badly.”
Court documents have shown that Holmes might accuse Balwani of mentally and sexually abusing her, thereby clouding her judgment during the time she allegedly committed fraud. On Wednesday, Wade did not make those accusations directly, but instead told the jury that Holmes made a mistake in trusting and relying on Balwani, who was nearly 20 years her senior, as her “primary adviser.”
“Mr. Balwani encouraged her to leave school and pursue her idea,” Wade said. “And you’ll hear that he pursued a personal relationship with her as well. In this case, you’ll learn that certain aspects of that relationship had a big impact on Ms. Holmes.”
Wade added that Holmes has moved on and is now living with her partner, hotel heir Billy Evans, and their new baby in the Bay Area. And while witnesses may testify about their knowledge of her previous relationship with Balwani, “there was another side to it that most people never saw,” he said.
Yet when things got difficult, Holmes lied again and again, prosecutors said. Leach described how at multiple points when the company was in need of money, Holmes made a series of misrepresentations about a variety of issues, including the capabilities of the company’s technology, their work with the military and pharmaceutical giants, and the accuracy of their test results. He alleged this was in order to get investors to take out their checkbooks.
“Out of time and out of money, Elizabeth Holmes decided to lie,” Leach said.
But Wade said Holmes “did not go to work every day intending to lie, cheat, and steal,” and emphasized that while at one point her stock in the company was worth billions, she never cashed out.
“She was all in on Theranos,” he said, adding that she was “motivated by its mission, not money.”