Ex-Theranos CEO Elizabeth Holmes’ federal fraud trial began yesterday with federal prosecutors claiming she lied and cheated to get money.
The prosecutors alleged on opening day that Holmes was manipulative and knowingly defrauded investors and patients through false and misleading claims.
“This is a case about fraud, about lying and cheating to get money. It’s a crime on Main Street, and it’s a crime in Silicon Valley,” said Assistant U.S. Attorney Robert Leach.
Holmes’ defense lawyers rebutted with a description of her that reflected someone who was a young, hardworking startup executive who really believed the Theranos technology could work and believed in the mission of the company, reports NPR. They claimed that she “overly trusted” lab directors and placed “blind faith” in the No. 2 executive of the company, former president and chief operating officer Sunny Balwani.
Holmes’ defense lawyer Lance Wade went on to claim that Holmes made mistakes, “but mistakes are not crimes.”
“Theranos failed for a lot of reasons, but it failed in part because it made mistakes,” he said. “Ms. Holmes made mistakes, but mistakes are not crimes. A failed business does not make a CEO a criminal.”
Federal prosecutors also introduced a report that was supposedly written by Pfizer to back their claims of deceit. The report, written on official Pfizer letterhead, claimed that the blood analyzing technology showed “superior performance,” NPR reports.
The prosecutors claimed that Pfizer did not authorize the report, and Holmes distributed it to investors who eventually invested millions of dollars.
“Out of time and out of money, Elizabeth Holmes decided to lie,” Leach said.
According to court documents unsealed earlier this week, prosecutors plan to call Pfizer officials to the witness stand. The assistant U.S. attorneys prosecuting the case also filed a proposed witness list of nearly 280 people, including former Theranos board members Henry Kissinger and James Mattis. Also potentially facing the witness stand is Rupert Murdoch, who is among the company’s lengthy list of high-profile investors, which includes the family of late Walmart founder Sam Walton, former U.S. Education Secretary Betsy DeVos and her family, and many more.
Federal prosecutors listed other ways that Holmes set out to defraud investors by claiming that the technology was being used by the U.S. military in the field and that the technology would have more than $140 million in revenue by the end of 2014.
“The scheme brought her fame. It brought her honor, and it brought her adoration,” Leach said. “She was touted as the next Steve Jobs. But under the facade of Theranos’ success, there were significant problems brewing.”
Holmes and her defense attorneys are still planning to present claims that Balwani, who is her former romantic partner, abused her emotionally and psychologically. Balwani has denied the allegations. Holmes’ attorneys have said in court papers that she could take the witness stand to describe her romantic relationship with the former company president Balwani.
“There was another side of Ms. Holmes’ relationship with Mr. Balwani that the public never saw,” Wade said.
Holmes and Theranos were once believed to be the next shining stars of Silicon Valley. Holmes claimed her company would revolutionize blood testing with technology that could analyze tiny amounts of blood and inked retail partnerships with Walgreens and Safeway. Forbes in 2015 recognized Holmes as America’s richest self-made woman based on Theranos’ multibillion-dollar valuation at the time.
Investigative reporting soon dismantled Holmes’ technological claims, raising questions about whether she and others misled investors. The downward spiral culminated in the 2018 shutdown of the company, with the U.S. Securities and Exchange Commission criminally charging Holmes and Balwani for what it described as a “massive fraud.”
Holmes faces 10 counts of wire fraud and two counts of conspiracy to commit wire fraud over allegations that she knowingly misled investors by claiming Theranos technology could revolutionize blood testing. She has pleaded not guilty to all charges.
Balwani’s trial is expected to follow the Holmes trial.
Read more Elizabeth Holmes trial updates here:
Jurors selected in Elizabeth Holmes’ Theranos fraud trial: start date set
Jury selection for Elizabeth Holmes fraud trial begins today