Elizabeth Holmes, once billionaire and CEO, is finally on trial

Elizabeth Holmes, once billionaire and CEO, is finally on trial

Billionaire Elizabeth Holmes, Founder and CEO of Theranos Inc., and Christian Holmes arrive at a State Dinner hosted by US President Barack Obama and US First Lady Michelle Obama in honor of Japanese Prime Minister Shinzo Abe at the House Blanche in Washington. , DC, United States, Tuesday April 28, 2015.

Andrew Harrer | Bloomberg | Getty Images

Almost ten years ago, Elizabeth Holmes was declared the Golden Girl of Silicon Valley and briefly crowned America’s youngest self-made billionaire woman.

This week, she will appear in Federal Court in San José with a very different image: a defendant accused of being a fraud.

Federal prosecutors for the Northern District of California have accused Holmes and Ramesh “Sunny” Balwani, the former president of Theranos and sometimes their romantic partner, of defrauding investors and patients. They each face two counts of conspiracy to commit wire fraud and 10 counts of wire fraud. Holmes and Balwani, who will be tried separately, have both pleaded not guilty.

Jury selection in Holmes’ trial will begin on Tuesday and is expected to take at least two days, a process that typically takes less than a day in low-profile cases. Opening statements are scheduled for September 8 and the trial is expected to last 13 weeks.

If convicted, Holmes faces up to 20 years in prison. Prosecutors say Holmes not only defrauded investors of hundreds of millions of dollars, but he also put thousands of lives at risk.

The rise and fall of Theranos

Holmes’ saga began when he dreamed of performing hundreds of lab tests from a finger prick with blood. She left Stanford at the age of 19 to found Theranos. Its goal was to make blood tests affordable, convenient and accessible to consumers.

The company has partnered with Walgreens and the Safeway grocery chain. Its board of directors included such figures as former US Secretaries of State Henry Kissinger and George Shultz, and former US Secretary of Defense James Mattis.

But in 2015, Holmes ‘vision was turned upside down after Wall Street Journal reporter John Carrerou published a series of damning reports highlighting the flaws and inaccuracies in Theranos’ technology.

The patients received false test results related to conditions such as HIV, cancer and abortion.

“She marketed a medical product that she knew didn’t work, her machine only passed a handful of tests that were of no use to them,” Carrerou said in an interview with CNBC last week. . .

In 2018, Holmes and Balwani were charged with “large scale fraud” by the Securities and Exchange Commission. This led to the dissolution of Theranos and Holmes settled with the SEC. She agreed to pay $ 500,000 without admitting or denying the charges. Balwani intends to fight the SEC charges.

investor

Holmes once had some of America’s most powerful and wealthy venture capitalists behind his healthcare startup Theranos.

Investors such as media mogul Rupert Murdoch, former Education Secretary Betsy DeVos, the Walton family of Walmart, the Cox family, Patriots owner Robert Kraft and Mexican investor Carlos Slim have become so infatuated with him that they poured millions into Theranos.

Some of those investors are expected to testify at Holmes’ trial. Not all major investors, who have invested $ 700 million over a decade, did not respond to CNBC’s request for comment. Prosecutors allege investors have been swayed by the hype and misrepresentation of blood testing technology.

“When a deal goes through, you don’t want to be on that list of investors anymore,” said Kevin O’Leary, ETF O’Shares chairman and CNBC money court judge.

O’Leary, who said about 20% of his investments failed, said nothing when asked what the repercussions were for Theranos investors.

“You can understand how embarrassing it is to get zero like that,” O’Leary said. “Obviously that means you haven’t done your due diligence, which all investors know to be wrong. When there is a really good deal, the thing that is immediately affected is the due diligence process. You are just wondering if you can join the deal.

According to the indictment, prosecutors said there were six wire transfers from unidentified investors, which they said were the result of fraudulent claims about what they were receiving in return.

“This is under intense scrutiny and investors will again be dragged into the press and humiliated for it,” O’Leary said. “I can guarantee you that won’t change anything. When it’s over, everything will happen, it will happen again. I do not guarantee that anything will change when it comes to investing in Silicon Valley.

A story of Silicon Valley

Instead of being Silicon Valley’s best example, Theranos has become a black eye for start-ups.

Perhaps one of Holmes’ defense strategies is to blame the Silicon Valley motto “pretend until you do.” Earlier this year, the judge ruled that Holmes’ defense team could rely on the hype and exaggeration of the startup’s founders to explain its actions.

“This is going to be a wake-up call for venture capitalists and young entrepreneurs in Silicon Valley,” Carrerou said. “If you go too far, if you push the boundaries and push the hype and exaggerate it to the point of lying, it becomes securities fraud. “

However, if she is found not guilty, some say it may encourage risk-taking.

“It will definitely take a guilty verdict to do the right thing and even a guilty verdict may not be enough in this case,” Carrero said.

mental health protection

Explosive new court documents uncovered just days before jury selection have shed light on how Holmes’ lawyers can put together a mental health defense. In the file, Holmes claims she was the victim of “a decade” of abuse by Balwani, whom she met when she was 18.

Documents reveal that she is considering claiming he committed psychological, emotional and sexual abuse. According to a file, Holmes accused Balwani of throwing sharp objects at Balwani, what she ate, when she slept, how she dressed and of monitoring her calls and texts. Balwani has denied the allegations.

The court record also revealed that Holmes was planning to take a stand in his defense, a move that many legal experts see as a risky one.

“It’s an uphill battle: Maybe Balwani had an impact on him because of his age or his previous success,” said NBC News legal analyst Danny Savelos. “But will she convince the jury that her influence tolerated her own conduct?” “

Today, her test being delayed several times, she is now the mother of a newborn baby. Holmes, once ubiquitous in the media, remains silent and ignores questions from reporters every time she walks in and out of the courthouse.

Everything would change if she actually spoke up to tell her side of the story.

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