For a time, Holmes had been hailed as a visionary. A Stanford University dropout, she founded Theranos in 2003 at the age of 19 with the noble mission of revolutionizing blood testing. Inspired by her overt fear of needles, Theranos de Holmes promised patients the ability to test for diseases like cancer and diabetes with just a few drops of blood.
She entered into a retail partnership with Walgreens in 2013 and attracted a powerful board of political titans, including former Secretaries of State Henry Kissinger and George Shultz, as well as the Four-Star General and future Secretary of State. Defense James Mattis. As the company’s valuation skyrocketed, hitting $ 9 billion at one point, so did its profile and net worth. She has been hailed on the covers of magazines as the richest self-taught woman and “the next Steve Jobs”, an image she helped cultivate by dressing the role.
Then it all fell apart. A damning Wall Street Journal investigation in October 2015 called into question the capabilities of the company’s proprietary blood testing machine, Edison, and Theranos’ testing methods. Theranos was then sued by investors for fraud, had his blood test license revoked by the US government, settled “massive fraud” charges with the Securities and Exchange Commission, and finally dissolved the company in September 2018. .
Former Holmes and Theranos COO, Ramesh “Sunny” Balwani, who had a romantic relationship while working together, are accused of engaging in a multi-million dollar scheme to defraud investors from 2010 to 2015, as well as a scheme to defraud doctors and patients who paid for his blood testing services from 2013 to 2016. Both have pleaded not guilty and could face up to 20 years in prison as well as a fine of 250 $ 000, plus restitution for each count of wire fraud and each count of conspiracy.
The Justice Department says that while the company never made an effort to develop technology that could run a full range of clinical tests on its Edison machines with a few drops of blood taken by finger prick and stored in what she called a “nantainer,” he nonetheless presented himself and his devices as capable.
Legal experts say that at the heart of the lawsuit there will be questions about what Holmes knew, when she knew it and if she intended to cheat. “Either she had a device that could never work or it couldn’t work yet. The latter situation is a more murky situation, ”said Nancy Gertner, former US federal judge and lecturer at Harvard Law School.
“The hardest thing to prove is intention,” said Thomas Joo, a UC Davis law school professor who specializes in corporate governance and white-collar crime. “Did she intentionally lie to deceive people?” ”
It is unclear what the precise strategy of the defense will be, but Holmes’ lawyers have paved the way for Holmes to potentially point the finger at Balwani. The two managed to be tried separately, and recently unsealed court documents reveal why: Holmes plans to accuse Balwani of psychological, emotional and sexual abuse, detailing the tactics he allegedly used to exert control over her and her. psychological impact of these abuses. According to one file, Balwani “categorically denies” the allegations.
In a file from Balwani’s attorneys, they acknowledge Holmes’ intention to present evidence that Balwani verbally denigrated her, controlled what she ate, how she dressed and who she interacted with, “essentially dominating her and erasing his ability to make decisions ”. The file describes the allegations as “deeply offensive to Mr. Balwani” and “devastating for him personally”.
Before new revelations of documents that had previously been sealed, Holmes’ attorneys had indicated last year that they planned to present evidence “concerning an illness or mental defect or any other mental condition of the accused relating to … the question of guilt, according to a file. They indicated their intention to use the testimony of a clinical psychologist whose work focuses on the psychosocial consequences of violence, trauma and victimization.
In response, federal prosecutors were given the opportunity to have Holmes examined by two experts – a psychologist and a psychiatrist – for two consecutive days for up to 14 hours.
An attorney for Holmes did not respond to a request for comment for this story.
The court dismissed some defenses in response to the government’s request to do so. For example, Holmes cannot claim that the government was “influenced by ‘coordinating’ with journalists or competitors,” but she can discuss “the details, thoroughness or good faith of the criminal investigation.” .
The court also rejected the idea of using naivety or being gullible as a defense, according to a court order. The government expressed concerns that Holmes would argue that it was conducting its business in a manner that was in line with the broader practice of Silicon Valley startups of pressuring their companies to raise funds and that it was distinguished, according to the ordinance. The court said in the order that Holmes had sworn not to argue that she had been singled out and that would allow a “fair general comment” on the marketing of startups.
According to Gertner, there may be some use of a “puff” defense – or the attempt to pass statements off as corporate optimism or hyperbole – that often occurs in cases where a company is accused of lying to investors, according to Gertner. If so, jurors will ultimately have to decide whether there is a “substantial distance” between what was said and what was true, she said.
A who’s who of potential witnesses
The prosecution filed a proposed witness list of nearly 280 people, which includes some of Holmes’ best-known associates.
Among others: media mogul Rupert Murdoch, who would once have been the company’s biggest investor with more than $ 100 million; David Boies, the eminent lawyer who represented Harvey Weinstein, and was an investor, board member and legal advocate for Holmes and Theranos for a time; as well as Mattis and Kissinger.
About 11 patients who say they were affected by Theranos’ inaccurate test results, as well as nine doctors whose patients received inaccurate tests, are also expected to testify, according to the court order. A woman on the list has previously said she was wrongly diagnosed as having miscarried.
“Certainly, the more sympathetic the witness, the more likely he is to connect with jurors. High level witnesses with very high net values are unlikely to generate sympathy from jurors if they have lost money in fraud, ”said George Demos, a former SEC attorney and law professor. assistant at UC Davis School of Law.
Holmes sought to exclude the patient’s testimony, citing a lack of evidence on what caused the inaccurate results. Notably, access to the database that Theranos used to house all patient test results and quality control data, which was subpoenaed by the Justice Department, will not be cited in the trial. because it was inaccessible. After Theranos handed over the database in July 2018 with a password – but not the private key needed to access the encrypted database – it dismantled the physical server hosting the database and stored it, according to another court order.
Patients testifying will not be able to speak of “any physical, financial or emotional harm they may have suffered,” the court ruled.
Will Elizabeth Holmes speak?
During the company’s heyday, Holmes received a great deal of fascination and media attention, glorifying her and her efforts. In its fall, that spotlight has not gone out – documentaries, an upcoming limited series, and a feature film slated to at least two podcasts dedicated to the coverage of the trial.
Whether or not Holmes will speak remains an open question and one that will likely not be decided for some time.
“Most criminal defense attorneys would tell a client not to, but the client is the boss,” Joo said. “She can have a very, very strong belief in her innocence. She can insist on the advice of the lawyers she wants to testify, ”he said, adding that in the case of a mental illness defense there might be a tendency to ask her to speak. so that the jury can hear it directly.
According to the newly unsealed documents, Holmes is “likely” to testify herself about the abuse she allegedly suffered from Balwani.
“If the jury believes her and finds a likeable figure for her (and if the expert testimony further supports her claims of a mental defect), the defense may well change the outcome of the trial in her favor,” Miriam Baer, Law professor at Brooklyn Law School, told CNN Business. “On the other hand, if the jury doesn’t believe her – or if the prosecutor succeeds in damaging her credibility – the defense could make her worse. “