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Fourteen weeks ago, prosecutors told jurors in the Elizabeth Holmes criminal fraud trial that they would hear “about fraud, about lying and cheating to get money.”
On Thursday, in a three-hour closing argument, prosecutor Jeffrey Schenk spelled out each of the lies that the government says Holmes, the founder and CEO of Palo Alto-based Theranos, told investors, patients and doctors about the company’s blood-testing technology.
Schenk began with the words, “In 2010 Elizabeth Holmes had a choice to make.” She could “watch Theranos slowly fail or make a different decision.”
Holmes, Schenk said, “chose to be dishonest” with investors and patients, because the company desperately needed more money to stay afloat.
He asked jurors to “imagine an honest pitch to investors” as Holmes continued to seek funding over the years: that “Theranos had been around for about a decade and only had a handful of tests (that could be done) on its device and those tests … still remained inaccurate and unreliable.”
The technology “had not been validated by pharmaceutical companies, Theranos “did not have a growing and expanding relationship with Walgreens,” the technology “was not on military helicopters” or “deployed in the battlefield” and patients were “welcome to use” the technology but “shouldn’t rely on” the results, Schenk said.
Schenk went on to recap the testimony of the 29 witnesses called by the government, reminding the jury that Theranos could only run four tests on its devices at the time patient testing began in Walgreens.
He pointed to extensive evidence as to other misstatements by Holmes about relationships with “Big Pharma” and the military, asking the jury to write down the references so that they could look at the documents during their deliberations.
As Schenk acknowledged, though, none of that evidence matters to a criminal wire fraud case unless the government can show that Holmes knew the statements she made were false and made them with the intent to deceive investors and patients.
That evidence, Schenk said, is found not only in the documents but in Holmes’ own statements. He played again a December 2013 recording made of a shareholders’ meeting by an investor without Holmes’ knowledge, in which she says in a deep-throated voice that Theranos had the ability to “do any lab test” traditionally ordered by doctors.
He reminded the jury of Holmes’ trial testimony that she did not understand the many problems in the company’s clinical lab until 2016, when the Centers for Medicare & Medicaid Services (CMS) issued a damning report.
Schenk then put up a text Holmes sent to her business and romantic partner Sunny Balwani during the actual audit, months earlier, saying that she “praying, literally, nonstop” that the audit would go well.
Touching delicately on Holmes’ testimony that she was mentally and physically abused by Balwani, Schenk told the jury that they do “not have to decide whether that abuse happened in order to reach a verdict.”
And then he asked the jury to return a verdict of “guilty on all counts.”
When it was the defense’s turn, Holmes’ attorney, Kevin Downey, took on two of most damaging pieces of evidence against his client: reports prepared by Theranos in an effort to work with pharmaceutical companies Pfizer Inc. and Schering-Plough Corporation and then altered to include those companies’ logos and look like independent validations of the Theranos technology.
Holmes admitted that she affixed the logos and that she sent the reports to Walgreens as part of the effort to get Theranos technology into Walgreens stores.
“There was nothing untoward” about the alterations, Downey said, pointing to evidence that Holmes “put investors in touch with Pfizer” whenever they asked.
Downey, too, then turned to the question of intent, telling the jury that if it finds “good faith” on the part of his client, they can’t find an intent to deceive. To find good faith, Downey urged, the jury should look at Holmes’ efforts to get the technology approved by the Food and Drug Administration, the interactions she had with many Theranos employees who were true believers in the company’s potential, and some “excellent” results early on from the “Edison” machines used to run the blood tests.
“This technology is effective,” Downey said Holmes was told, including by a Stanford study. Downey methodically chipped away at the other evidence of false statements. He pointed to a statement in a Fortune 2014 cover article on Holmes and Theranos, which said that the company could perform “over 1,000 tests” based on a fingerstick, was the reporter’s error, not Holmes.
Downey repeatedly referred to what Holmes “believed” or “thought,” as when he responded to evidence that she misled investors in December 2013 with glowing promises of an expanding relationship with Walgreens: “There simply is not evidence that Ms. Holmes thought in 2014 that there was not going to be a Walgreens contract.”
The closings were watched by a capacity crowd of reporters and spectators, some of whom stood outside in the rain at 3:30 a.m. to get their spots. Not surprisingly, there was a howl of protest from those watching the arguments on video in the overflow courtroom when Downey’s remarks were muted after he, for the first time in the trial, moved the podium in the courtroom to face the jury directly.
Downey will continue his closing argument on Friday morning, after which the prosecutor will have the chance to give a rebuttal.
