Theranos CEO’s Lavish Lifestyle Ruled Fair Game for Trial

Theranos Inc. founder Elizabeth Holmes’s appetite for fame and fortune can be presented to jurors as a motive for her alleged fraud, a judge ruled.

At her criminal trial set to start in late August, prosecutors have said they want to describe Holmes’s travel on private jets, stays in luxury hotels and her reliance on multiple assistants, one of whom took care of home decorating, clothes, jewelry and grocery shopping.

The government wants to showcase the former chief executive officer’s status –- as well as her association with celebrities, dignitaries and other wealthy and powerful people –-- as evidence that she had a financial incentive to commit fraud.

U.S. District Judge Edward Davila, who is winnowing the evidence and testimony jurors will consider, agreed – with some limitations. The judge said in a ruling late Saturday he’ll allow prosecutors to demonstrate that Holmes enjoyed a lifestyle comparable to other technology CEOs.

Theranos CEO’s Lavish Lifestyle Ruled Fair Game for Trial

“This includes salary, travel, celebrity, and other perks and benefits commensurate with the position,” Davila wrote. “Each time Holmes made an extravagant purchase, it is reasonable to infer that she knew her fraudulent activity allowed her to pay for those items.”

But Davila tempered his ruling by prohibiting prosecutors from referring to specific purchases, brands of clothing, hotels and other personal items because, he said, the information risks biasing jurors. The judge said he’s aiming to eliminate improper “appeals to class prejudice.”

One legal expert said the ruling seems fair.

”People should not be punished merely for being wealthy, just as they should not be punished merely for being poor, but if someone profited from a crime, then the fruits of their crime is fair game to show their guilt and motive,” said Barbara McQuade, a former U.S. Attorney who teaches at the University of Michigan law school.

Holmes’s criminal trial in San Jose, California, has been repeatedly delayed because of the pandemic and, more recently, her pregnancy. Arguments that were presented to the judge earlier this month, and Davila’s rulings on them Saturday, reveal both sides’ strategies and make the trial tangible.

Holmes, 37, reigned briefly as the world’s youngest female self-made billionaire before her blood-testing startup once valued at $9 billion unraveled.

Holmes’s lawyers argued that prosecutors want to use her wealth and spending to “inflame” the jury and the subject should be off-limits. Her lifestyle was commensurate with many other CEOs, and doesn’t speak to whether she committed fraud to obtain or maintain it, they’ve argued in court filings.

“The real value of the evidence to the government is to paint a misleading picture of Ms. Holmes as a woman who prioritized fashion, a luxurious lifestyle, and fame, and to invite a referendum on startup and corporate culture,” they said in the filing.

The government disagreed.

“Theranos’s stock -- both literal and figurative -- soared as a result of” Holmes’s fraud, prosecutors said in a court filing. “The evidence at trial will show that these benefits were meaningful to the defendant, who closely monitored daily news to cultivate her image.”

Holmes’s lawyers, Kevin Downey and Lance Wade, didn’t immediately respond to emails seeking comment on the ruling.

The case is U.S. v. Holmes, 18-cr-00258, U.S. District Court, Northern District of California (San Jose).

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