Holmes testifies that Balwani ordered her to ‘become a new Elizabeth’ or risk failure

On her fourth day on the witness stand on Monday, Elizabeth Holmes described a yearslong abusive relationship with her business partner and alleged co-conspirator, Sunny Balwani.

Holmes, founder and CEO of the now-defunct blood-testing company Theranos, is fighting 11 counts of criminal wire fraud based on allegedly false and misleading statements to investors, doctors and patients about the company’s blood-testing methodology. A 12th charge of wire fraud, related to a Theranos patient identified only as “B.B.,” was dropped prior to Thanksgiving because the prosecution failed to include the patient’s test in a list of issues provided to the defense before trial.

Responding to questions from defense attorney Kevin Downey, a confident and well-prepared Holmes painted the vision she originally held for the company. People have a “fundamental right” to their own health information, she said, including the less expensive and faster tests that Theranos offered in Walgreens stores starting in 2013. We “wanted to help people who were scared of needles,” including children and the elderly, she testified.

Holmes testified that Theranos administered between 8 million and 12 million tests at Walgreens, a number meant to counter the relatively few patients called in the prosecution’s case to testify about the alarming and inaccurate results they received. Holmes said Theranos received praise from many patients using the technology, including anecdotal reports that the results were “more accurate” than traditional testing methods.

Holmes doubled down on an issue that has come up repeatedly in the trial — whether the technology was ever actually used by the military on patients in the field. She testified that the company had agreements in place with both the U.S. Central Command and the U.S. Special Operations Command that would have led to deployment of the technology in Afghanistan and other remote locations. When asked specifically whether she ever told investors or others that the technology was already being used on medevacs, Holmes said, “I don’t think I did,” contradicting the testimony of investor witnesses earlier in the trial. Asked whether she was disappointed that the Theranos technology never got to the point that it could be used for military purposes, Holmes said, “Very much so, but I continued to believe that we could see it through.”

On the key questions of when, whether and how she became aware that the blood-testing methods were flawed, Holmes deflected blame, saying that she relied on a series of lab directors, regulatory experts and scientists to decide what blood tests the company would actually offer via fingerstick and where the results would be analyzed. Balwani, she said, was in charge of “operational management,” while the lab director and other lab experts were in charge of the science.

In the late afternoon, Downey drew out the long-anticipated story of Holmes’ relationship with Balwani.

Holmes testified that she met Balwani when she was 18 years old, just out of high school, and he was 38. Holmes went on to Stanford but testified that she dropped out a year later after being raped.

“I wasn’t going to class,” she said. “Questioning how to process the experience,” she decided to “build a life by building this company.”

Holmes and Balwani became romantically involved in 2005, years before Balwani joined Theranos in 2009. Balwani, Holmes testified, told her “that I was safe, now that I had him.”

The relationship soon took a turn. According to Holmes, Balwani told her that “I didn’t know what I was doing in business, that my convictions were wrong, that he was astonished at my mediocrity, and that if I followed my instincts I would fail.” He told her that her only option was to “become a new Elizabeth” under his direction, which included instructions on what to eat for lunch and dinner and rules for a disciplined lifestyle. Handwritten notes of “non-negotiables” from Balwani included precise rules for Holmes to follow: “I show no excitement”; “I know the outcome of every encounter”; “I do not hesitate.”

The abuse extended to violence, Holmes said, her voice breaking. Balwani would become “so disappointed in my mediocrity” and “would become very angry with me.” Throughout their 11-year relationship, Holmes said, Balwani would “force me to have sex with him when I didn’t want to because he said he wanted me to know that he still loved me.”

A damning audit from the Centers for Medicare & Medicaid Services in late 2015 finally alerted Holmes to problems in the Theranos lab. Balwani, who Holmes said had assured her that the audit would go well, left the company. Holmes moved out of their joint residence. Holmes testified that she had thought “we had one of the best labs in the world” but “the findings in that inspection” were “fundamentally different” than what she believed.

She responded by hiring a new lab director, “bringing in as many experts as I could,” and hiring new board members.

The prosecution will begin its cross-examination of Holmes on Tuesday.