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Opening statements in Holmes trial give competing versions of Theranos claims

Founder of infamous blood testing company faces 20-year prison sentence, $3M in fines

Theranos's former offices at 1701 Page Mill Road in Palo Alto. In 2018, the blood testing startup dissolved months after its former CEO and chief operating officer were indicted in a multimillion-dollar scheme. Embarcadero Media file photo by Veronica Weber.

Prosecutors delivered a scathing opening statement in federal court Wednesday in the trial against Elizabeth Holmes, founder and CEO of the infamous blood testing company Theranos, describing their case as one "about fraud, about lying and cheating to get money."

Holmes is charged with 12 counts of wire fraud and conspiracy to commit wire fraud for an alleged multimillion-dollar scheme to defraud investors, doctors and patients. If convicted, Holmes faces up to 20 years in prison and $3 million in fines. Theranos, valued at $9 billion at its peak, dissolved in 2018.

Lead prosecutor Robert Leach told the jury of seven men and five women in federal court in San Jose that Theranos became increasingly desperate for funding as it struggled to develop a blood-testing technology.

"Out of time and out of money, the defendant decided to mislead," Leach said.

The government says it will show that Theranos' blood tests, supposedly able to detect cancer, diabetes, syphilis and other diseases based on a single finger prick, were instead done with machines that could be found in any other blood testing laboratory.

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Leach said the government will prove that Holmes "dazzled Walgreens and Safeway" with false claims and used a forged report from pharmaceutical giant Pfizer as a supposed endorsement of the technology, when in fact Pfizer "gave the opposite conclusions."

Leach said Holmes used glowing but ultimately misleading media coverage of her and Theranos to raise millions of dollars from investors.

Leach also told the jury about a series of witnesses who will testify that they took the Theranos test and received false results about cancers and pregnancies.

Defense lawyer Lance Wade argued that although Theranos failed, "failure is not a crime," describing Holmes as "believ(ing) with all of her being that (the Theranos technology) could transform health care."

He painted a picture of an idealistic young woman committed to creating a system of miniaturized lab tests who "decided to take a leap" and founded a company "to turn the idea into something real."

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Wade emphasized the outsized influence of Holmes' business partner and former love interest, Ramesh "Sunny" Balwani.

"Trusting and relying on Mr. Balwani as her adviser was one of her big mistakes," Wade said.

Balwani is also charged with wire fraud and will be tried separately.

Wade also pointed to Holmes' youth — age 20 when she brought in Balwani, who was 37 at the time — and her reliance on "a slew" of scientists, engineers, business people and law firms in building the company and dealing with regulators and the public.

Rejecting the claim that investors, who put in over $700 million, were defrauded, Wade described funders as "sophisticated people who hoped that Theranos would be the next big thing ... and decided to make a wager."

As for the doctors and patients that the government plans to call as witnesses to failed tests, Wade urged jurors to keep a tally in their notebooks and to tote that up against the 8 million Theranos tests that were administered while the company was still in business.

He predicted that the government will challenge about 20 of those results, or .0000025%. He also said the government would challenge only 23, or about 10%, of the lab tests (known as "assays") that Theranos performed and that it would be unable to link those tests to particular patients or sites.

The government then called as its first witness Denise Yam, an auditor who joined Theranos in 2006 as a corporate controller.

The trial was scheduled to continue Friday but has been postponed to Tuesday, Sept. 14. The delay was due to a juror who was potentially exposed to COVID-19 and was awaiting test results, according to multiple media reports.

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Opening statements in Holmes trial give competing versions of Theranos claims

Founder of infamous blood testing company faces 20-year prison sentence, $3M in fines

by /

Uploaded: Thu, Sep 9, 2021, 1:32 pm

Prosecutors delivered a scathing opening statement in federal court Wednesday in the trial against Elizabeth Holmes, founder and CEO of the infamous blood testing company Theranos, describing their case as one "about fraud, about lying and cheating to get money."

Holmes is charged with 12 counts of wire fraud and conspiracy to commit wire fraud for an alleged multimillion-dollar scheme to defraud investors, doctors and patients. If convicted, Holmes faces up to 20 years in prison and $3 million in fines. Theranos, valued at $9 billion at its peak, dissolved in 2018.

Lead prosecutor Robert Leach told the jury of seven men and five women in federal court in San Jose that Theranos became increasingly desperate for funding as it struggled to develop a blood-testing technology.

"Out of time and out of money, the defendant decided to mislead," Leach said.

The government says it will show that Theranos' blood tests, supposedly able to detect cancer, diabetes, syphilis and other diseases based on a single finger prick, were instead done with machines that could be found in any other blood testing laboratory.

Leach said the government will prove that Holmes "dazzled Walgreens and Safeway" with false claims and used a forged report from pharmaceutical giant Pfizer as a supposed endorsement of the technology, when in fact Pfizer "gave the opposite conclusions."

Leach said Holmes used glowing but ultimately misleading media coverage of her and Theranos to raise millions of dollars from investors.

Leach also told the jury about a series of witnesses who will testify that they took the Theranos test and received false results about cancers and pregnancies.

Defense lawyer Lance Wade argued that although Theranos failed, "failure is not a crime," describing Holmes as "believ(ing) with all of her being that (the Theranos technology) could transform health care."

He painted a picture of an idealistic young woman committed to creating a system of miniaturized lab tests who "decided to take a leap" and founded a company "to turn the idea into something real."

Wade emphasized the outsized influence of Holmes' business partner and former love interest, Ramesh "Sunny" Balwani.

"Trusting and relying on Mr. Balwani as her adviser was one of her big mistakes," Wade said.

Balwani is also charged with wire fraud and will be tried separately.

Wade also pointed to Holmes' youth — age 20 when she brought in Balwani, who was 37 at the time — and her reliance on "a slew" of scientists, engineers, business people and law firms in building the company and dealing with regulators and the public.

Rejecting the claim that investors, who put in over $700 million, were defrauded, Wade described funders as "sophisticated people who hoped that Theranos would be the next big thing ... and decided to make a wager."

As for the doctors and patients that the government plans to call as witnesses to failed tests, Wade urged jurors to keep a tally in their notebooks and to tote that up against the 8 million Theranos tests that were administered while the company was still in business.

He predicted that the government will challenge about 20 of those results, or .0000025%. He also said the government would challenge only 23, or about 10%, of the lab tests (known as "assays") that Theranos performed and that it would be unable to link those tests to particular patients or sites.

The government then called as its first witness Denise Yam, an auditor who joined Theranos in 2006 as a corporate controller.

The trial was scheduled to continue Friday but has been postponed to Tuesday, Sept. 14. The delay was due to a juror who was potentially exposed to COVID-19 and was awaiting test results, according to multiple media reports.

Comments

Martin
Registered user
Rex Manor
on Sep 9, 2021 at 6:46 pm
Martin, Rex Manor
Registered user
on Sep 9, 2021 at 6:46 pm

For anyone who wants to know more about Theranos, the startup shenanigans, and the human drama, I heartily recommend the book "Bad Blood: Secrets and Lies in a Silicon Valley Startup" by John Carreyrou. It was as captivating as any thriller, with the added bonus that it had all happened for real. Mr Carreyrou is a member of The Wall Street Journal's investigative reporting team and the person who uncovered the Theranos scandal.


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