Elizabeth Holmes: Villain or underdog? Theranos trial opens with diverging portraits of fallen CEO
Prosecutors and defense attorneys sketched dueling portraits of fallen Silicon Valley star Elizabeth Holmes as her trial got underway Wednesday, alternatively describing her as a greedy villain who faked her way to the top and as a passionate underdog who spent years trying to shake up the healthcare industry.
The two sides are now expected to spend the next three months trying to sway a 12-person jury impaneled to hear the evidence in a case airing allegations that Holmes used her startup, Theranos, as a scheme to realize her dreams of becoming rich and as famous as one of her role models, late Apple co-founder Steve Jobs.
Once hailed as a billionaire on paper, Holmes is now facing a sentence as long as 20 years if convicted of the felony charges.
Holmes’ rise and fall has already been the subject of documentaries, books and podcasts, feeding the fervor that has built up around a trial that has been delayed twice since she was indicted nearly three years ago. With only about 75 spots available for the media and general public to observe the proceedings, people began to line up outside the San Jose courthouse before 5 a.m. Wednesday.
After the jury was seated and U.S. District Judge Edward Davila gave his preliminary instructions, federal prosecutor Robert Leach wasted little time vilifying Holmes.
He cast Holmes in a dark light, depicting her as a conniving entrepreneur who duped investors, customers and patients for years, even though she knew Theranos was nearly bankrupt and its much-hyped blood-testing technology was a flop.
“This case is about fraud, about lying and cheating to get money,” Leach said during his roughly 45-minute opening statement.
He said the evidence would show that Theranos was already in deep trouble as far back as 2009, about six years after Holmes founded the Palo Alto company. At that point, Leach said, Holmes resorted to a pattern of lying and hyperbole in an effort to fool major media outlets, wealthy investors such as media mogul Rupert Murdoch, well-connected Theranos board members such as former U.S. Secretaries of State George Shultz and Henry Kissinger, and customers such as Walgreens.
Some of the most damning evidence may be presented by a former top finance officer at Theranos who will testify that the company had only $650,000 in revenue from 2011 through 2014, Leach said. Yet Holmes was telling investors and other people that Theranos would generate $140 million in revenue in 2014, he said.
Holmes, 37, is also accused of promising that Theranos would be able to quickly test small vials of blood in a small company-designed machine named after the famed inventor Thomas Edison. Leach said the samples were actually sent out to outside parties for testing using standard-issue machines he described as “big” and “clunky.”
Theranos eventually failed in 2018, a few years after a series of explosive stories in the Wall Street Journal exposed serious flaws in its technology and spurred regulatory investigations that shut down the testing.
The fraud committed by Holmes “is a fraud on Main Street and it’s a fraud in Silicon Valley,” Leach told the jury.
Holmes’ defense team countered with a more heroic narrative describing her as a tireless worker who poured more than 15 years of her life into the pursuit of a faster, cheaper and less invasive way to test blood samples and screen for disease.
Defense attorney Lance Wade argued that Holmes was simply trying to wrest control of the blood-testing technology market from two dominant laboratories, Quest Diagnostics and Labcorp. “She did her best day in and day out to make Theranos successful,” Wade said of Holmes as he began a roughly 90-minute presentation.
Although she didn’t succeed, Wade insisted that Holmes never stopped believing she was on the verge of a breakthrough that would realize her ambitions. Many investors thought she would too, one of the reasons that Theranos once was valued at $9 billion — with half that amount belonging to Holmes.
“Failure is not a crime,” Wade said. “Trying your hardest is not a crime. A failed business does not make a CEO a criminal.”
In court documents unsealed just before the trial started, Holmes’ lawyers also disclosed that she may take the witness stand to assert that some of her statements and actions while running Theranos were the result of “intimate partner abuse” inflicted by the company’s chief operating officer and her secret lover, Ramesh “Sunny” Balwani.
Without going into specifics, Wade told the jury that she believed she was bringing in “the best businessman she knew” when she hired Balwani but now realizes it was one of her biggest mistakes.
“You will learn that Mr. Balwani did not take well to people who disagreed with him,” Wade said while asserting that Balwani’s tempestuous behavior caused many Theranos employees to leave the company.
Balwani also was responsible for overseeing the Theranos lab that the government alleges provided misleading results of blood tests that endangered some people’s lives, Wade noted.
“If what government is trying to show is that Theranos’ clinical lab was well run from 2013 to 2016, we will likely agree with what they have to say,” Wade said. “Poor operations in the lab was one of Theranos’ biggest failures, but it wasn’t fraud.”
Balwani faces multiple fraud charges in a separate trial scheduled to begin next year. His attorney has denied Holmes’ allegations.
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