Theranos Founder Holmes Back on the Witness Stand in Fraud Trial
Theranos Founder Holmes Back on the Witness Stand in Fraud Trial
(Bloomberg) -- Elizabeth Holmes was back on the witness stand Tuesday at her criminal fraud trial in San Jose, California, as a federal prosecutor resumed cross-examination of the Theranos Inc. founder following a one-week recess.
Holmes, 37, spent four days answering questions from her defense lawyer, culminating on Nov. 29 in a tearful description of a decade of alleged abuse by her former boyfriend, Ramesh “Sunny” Balwani, who was her second-in-command at Theranos. Holmes also said she’d been raped while a student at Stanford.
Prosecutors spent 10 weeks laying out the case against her, claiming the startup she founded was built on lie after lie. Theranos, which peaked at a valuation of $9 billion, collapsed in 2018. Holmes is accused of deceiving investors, board members and companies about the capabilities of Theranos blood-testing devices. She faces as long as 20 years in prison if convicted.
Key Developments:
Blaming Balwani (6:30 p.m. NY)
Elizabeth Holmes, under questioning by her attorney, said she wasn’t aware of problems with her Theranos Inc. blood-testing system until a federal audit in 2015 of the company’s lab operations, which were run by her second-in-command Ramesh “Sunny” Balwani.
Until the audit revealed serious problems with the labs -- including that they posed a danger to patients relying on the blood tests -- Balwani had insisted the Theranos lab “was one of the best labs in the world,” she said.
Holmes said Balwani was the one who developed the financial forecasts for Theranos that she conveyed to investors and the public. Prosecutors said the company she founded was built on lies she told about Theranos testing devices, which were never able to successfully conduct hundreds of tests on just a drop of blood as she’d predicted.
For board meetings and presentations to investors, Holmes said she relied on Theranos scientists and engineers for technological details and on Balwani for the company’s financial results and forecasts.
Scientist’s Suicide (5:15 p.m. NY)
Holmes was probed by a prosecutor over her testimony that she had good reason to believe Theranos technology was performing well based on reports she’d received from one of the earliest scientists at the startup.
Prosecutor Bob Leach was trying to show that the scientist, Ian Gibbons, was projecting that the blood-testing machines were on a path toward improvement, but that Holmes’s descriptions of the capabilities of the devices to investors and business partners during the company’s early years wasn’t tethered to reality.
Leach got Holmes to acknowledge that key take-aways in a progress report by Gibbons were written in the future tense. He then asked about proficiencies yet to be determined and she replied, “I understood that this was the beginning” and that “there was still work to be done.”
The prosecutor didn’t question Holmes about one of the grimmest chapters in the Theranos saga -- when Gibbons committed suicide in 2013 while under mounting pressure at the company.
Instead, Leach asked Holmes if she recalled Theranos trying to discredit Gibbons when the Wall Street Journal sought to question his widow, Rochelle, in 2015. She denied it.
Holmes Revisits Fortune Profile (2 p.m. NY)
Holmes said she wishes she’d taken a different approach to the magazine cover story that made her famous in 2014 when confronted on the witness stand with multiple inaccuracies in the story about the capability of Theranos technology.
The startup founder was asked by prosecutor Bob Leach whether it was true when the article by Roger Parloff was published in Fortune that the startup was able to run 200 different blood tests -- and was ramping up to offer more than 1,000 tests -- all without the need for a syringe and without relying on analyzers by other companies.
“I don’t think it is now,” Holmes testified.
Holmes couldn’t recall that she had disseminated the flattering story to potential investors, but Leach reminded her that it was included in promotional binders and a Power Point presentation.
Holmes told the jury she wasn’t worried that readers would get an inaccurate perception -- even though she didn’t disclose to Parloff that Theranos was using commercial analyzers that it modified to run certain tests.
But she also said, “I think I could’ve handled communications” with Parloff differently.
Theranos and the Military (1 p.m. NY)
Prosecutor Bob Leach returned Tuesday to the government’s allegation that Holmes lied to investors and business partners when she touted Theranos Inc. blood analyzers being used by the U.S. military, in helicopters and on the battlefield.
Leach reminded Holmes that several witnesses have testified she and Theranos President Ramesh “Sunny” Balwani told them that the startup’s analyzers had been adopted or deployed by the military. The prosecutor then asked if she stands by her own testimony that she never told anyone that the devices were installed on medevac helicopters.
“Again, I don’t think I did,” she said.
Leach also reviewed Holmes’s testimony when she was questioned by the U.S. Securities and Exchange Commission about Theranos machines and U.S. Special Operations Command.
“My memory is that we sent them two of them but I don’t think they actually used them in deployment,” Holmes told the SEC.
The prosecutor got Holmes to acknowledge that Balwani -- who she has blamed for misleading her on some aspects of company operations -- never told her the devices were used in helicopters or on the battlefield.
Cross-Examination Resumes (12:45 p.m. NY)
After a weeklong court recess, testimony resumed Tuesday with Holmes back on the witness stand to be questioned by federal prosecutor Bob Leach.
The trial of Holmes, once dubbed the world’s youngest female self-made billionaire, is nearing a close after almost 13 weeks. Opening arguments in the case began in early September. Three members of the jury were later dismissed and replaced with alternates, and the panel now includes eight men and four women.
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