Prosecutors Push Elizabeth Holmes of Theranos to Take Responsibility

SAN JOSE, California – For four days, Elizabeth Holmes took the stand to blame others for the alleged fraud at her blood testing company, Theranos. On the fifth day, prosecutors tried to make one thing clear: she knew.

During more than five hours of cross-examination Tuesday, Robert Leach, the assistant federal prosecutor and lead prosecutor in the case, pointed to text messages, notes and emails with Ms. Holmes, and with her business partner and ex-boyfriend, Ramesh Balwani. – discuss issues with Theranos business and technology. Mr. Leach had a common refrain: no one kept anything from Mrs. Holmes. As CEO of Theranos, he argued, she was to blame.

“Anything that happens at the company was your responsibility at the end of the day?” Mr. Leach asked.

“This is how I felt,” Holmes said.

It was the culmination of three months of testimony and nearly four years of waiting since Ms. Holmes was indicted on charges of wire fraud and conspiracy to commit wire fraud in 2018. Prosecutors have shown juries evidence of counterfeit product demonstrations, falsified documents and communications with the aim of showing that Ms. Holmes knowingly misled investors, doctors, patients and the world about Theranos.

The outcome of your case has consequences for the tech industry at a time when fast-growing startups are accumulating wealth, power and cultural prestige. Few startup founders have been prosecuted for misleading investors as they strive to realize their far-reaching business ideas. If convicted, Ms. Holmes, 37, who has pleaded not guilty, faces up to 20 years in prison.

Theranos rose to a valuation of $ 9 billion in 2015, raising $ 945 million on Holmes’ promise that his blood test machines could perform hundreds of tests quickly and inexpensively using just a few drops of blood. He started the company in 2003 after dropping out of Stanford University.

But in reality, prosecutors have argued, Theranos machines could only perform a dozen tests and were unreliable. Instead, it secretly used commercially available Siemens machines. After that and other misrepresentations were exposed, Theranos voided two years of blood test results. It also settled lawsuits with investors and the Securities and Exchange Commission, which was eventually dissolved in 2018.

In her initial testimony, Ms. Holmes attempted to dismiss the fraud allegations as too simple and as a misunderstanding of her statements. He also claimed ignorance of many of Theranos’s problems, emphasizing his lack of experience and qualifications to run a scientific laboratory.

Under questioning on Tuesday, Ms. Holmes admitted to making mistakes. “There are a lot of things I wish I had done differently,” he said.

Theranos mishandled a 2015 exposé in The Wall Street Journal about problems with the company’s technology, he said.

“We totally screwed it up,” Holmes said. He also admitted to contacting Rupert Murdoch, the owner of The Journal who invested in Theranos, to have the story taken off.

Ms. Holmes said she also regretted the way Theranos treated Erika Cheung, an employee who raised concerns about the company’s laboratory practices. After Ms. Cheung left the company, Theranos hired a private investigator to track her down and present her with a legal threat.

“I’m sure I wish I had treated her differently and listened to her,” Holmes said.

The testimony followed dramatic revelations about Ms. Holmes’s relationship with Mr. Balwani. On Monday, she tearfully said that she had been raped as a student at Stanford and that Balwani had abused her emotionally and physically as a result of that experience.

She accused Balwani, 20 years her senior, of controlling what she ate, how she presented herself, and how much time she spent with her family. She said he forced her to have sex with him against her will and told her that she had to “kill herself” to be reborn as a successful entrepreneur.

It was the first time Holmes had told his version of the Theranos rise and fall story, which had been featured in podcasts, documentaries, and scripted series as a Silicon Valley tale of arrogance and worthiness. Her testimony complicated that narrative, shedding new light on the behind-the-scenes relationship between her and Mr. Balwani, which they had kept secret as her profile rose.

Ms. Holmes tried to link her relationship with Mr. Balwani to her fraud charges by claiming that he had an impact on “everything about who I was,” including Theranos. She said she fired him from the company and broke up with him after learning that the Theranos lab, which was overseen by Balwani, had major problems.

“There was no way he could save our company if he was there,” he said Tuesday.

Balwani has denied the assault allegations. He was indicted on fraud charges along with Ms. Holmes and will be tried separately next year. He has also pleaded not guilty.

During a long and detailed day of testimony, Mr. Leach delved into the relationship, using text messages between Ms. Holmes and Mr. Balwani as evidence. She asked Ms. Holmes to read the text messages that showed her exchange of affectionate comments with Mr. Balwani. The couple called each other “tiger” and “tigress” between talks about building Theranos.

“No one but you and I can build this business,” Balwani wrote in an exchange.

After each one, Mr. Leach asked Ms. Holmes to verify that she had just read an example of Mr. Balwani acting lovingly towards her. While reading the messages, Ms. Holmes cried for the second time on the stand.

Jill Hasday, a professor at the University of Minnesota School of Law who has written a book on dating violence and the law, said the prosecution’s tactic could work to undermine Holmes’s earlier testimony, depending on the understanding of the abuse by the jury.

“My instinct is that it can be effective, because people have a lot of misconceptions about intimate partner violence, among other things, that it is constant,” Ms Hasday said.

The trial, which is scheduled to end in December, resumes next week.

Erin woo contributed to reporting.

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