Business

Elizabeth Holmes begins her defense in fraud case




SAN JOSE, California – For the past 11 weeks, prosecutors have been revealing emails from desperate investors. They held up forged documents side by side with the originals. They called in dozens of witnesses who made accusations of deception and evasion.

And on Friday, the person against whom the prosecution has filed a lawsuit – Elizabeth Holmes, the founder of the failed blood test start-up Theranos – took a stand to defend herself. She is facing 11 cases of investor fraud over Theranos’ technology and business in a case that has been described as a referendum on Silicon Valley̵[ads1]7;s start-up culture. She has pleaded guilty.

Ms. Holmes – whose rise and fall captivated the public and which has been hailed as a symbol of the technology industry’s hubris and the culture of the last decade – began his testimony by answering a series of questions about Theranos. She delved into her background and how she started the Silicon Valley startup, which had promised to revolutionize health care by using just a drop of blood from patients to derive their disease.

Da Kevin Downey, Ms. Holmes’ lawyer, asked her if she had founded “technology that was capable of taking blood samples”, she replied in the affirmative.

Ms. Holmes took a stand after the prosecution revoked the case on Friday after weeks of testifying.

The prosecution had tried to paint Ms. Holmes as a liar who built Theranos for a start-up of 9 billion dollars, while she always knew that the blood tests did not work. They methodically outlined six main areas for her deception, including lies about Theranos’ work with military and pharmaceutical companies, its business results and the accuracy of the blood tests.

The stakes for the trial are high. If Ms. Holmes, 37, is convicted, she risks up to 20 years in prison for each count of fraud, and prosecutors may be encouraged to go after several start-ups that stretch the truth to obtain funding. An acquittal may send a message that startup companies in Silicon Valley, which have exploded in power and wealth over the past decade, are difficult to hold accountable.

“When the prosecution suspends the case, they basically say they have enough to ask the jury to convict the defendant right away,” said Andrey Spektor, attorney at Bryan Cave Leighton Paisner and a former New York federal prosecutor. eastern district.

Ms. Holmes, a dropout from Stanford University who founded Theranos in 2003 and raised $ 945 million from investors, was charged with fraud in 2018. Her case has been plagued by delays for years: first over the process, then the pandemic and finally, Ms. Holmes gives birth to a baby in August.

When the trial finally began in September, prosecutors called former investors, partners and Theranos employees to testify. Jim Mattis, the retired four-star Marine Corps general and former Secretary of Defense, who was Theranos director, took the stand, as did a former Theranos lab director who endured six arduous days of interrogation. In a surreal moment, a forensic expert recited text messages between Ms. Holmes and Ramesh Balwani, her then-boyfriend and business partner at Theranos, known as Sunny.

This week, Alan Eisenman, an early investor in Theranos, testified that Holmes cut him off and threatened him when he asked her for more information about the company. Still, even after that treatment, Mr. Eisenman poured more money into the startup, believing that the seemingly fast-growing business would deliver wealth to supporters like him.

Asked about his understanding of the value of the Theranos stock today, Mr. Eisenman said: “It is not an understanding, it is a conclusion. It’s worth zero. “

The prosecution’s most compelling evidence included a series of validation reports that Holmes sent to potential investors and partners that made it appear that pharmaceutical companies including Pfizer and Schering-Plow had supported Theranos’ technology. Representatives from each company testified that they had not approved Theranos ‘blood test and were surprised to see the companies’ logos added to the report.

Daniel Edlin, who worked at Theranos and was the fraternal brother of Holmes’ brother, Christian, testified that the start-up falsified demonstrations of his machines to potential investors, hid technology flaws and threw out abnormal blood test results.

Mr. Mattis testified that he was not aware of any contracts between Theranos and the military to put their machines on medevac helicopters or on the battlefield, as Holmes had often told investors.

Prosecutors closed their case with testimony from Roger Parloff, the journalist who wrote a magazine cover about Ms. Holmes, and helped her to be recognized. Mr. Parloff’s article was sent to a number of investors as part of Ms. Holmes’ pitch.

But especially absent from the courtroom were some of the most prominent witnesses on the prosecution’s list. Ms. Holmes’ rise was helped by her association with business titans such as media mogul Rupert Murdoch, senior statesmen such as Henry Kissinger and CEO Gary Roughead, and lawyer David Boies. Theranos was partly killed by whistleblowers such as Tyler Shultz, a grandson of George Shultz, the former Secretary of State, who sat on Theranos’ board. None of them testified.

Also absent was Mr. Balwani, who was charged with fraud along with Ms. Holmes and will stand trial next year. His role as a fervent defender of Theranos who went after everyone who asked questions about the company, has been in the background for much of the testimony.

At almost every turn, Holmes’ lawyers tried to limit testimony and evidence. They attacked investors’ credibility, and used legal disclaimers to show that investors knew they were gambling on a young start-up. Lawyers have also poked holes in investors ‘limited due diligence on Theranos’ claims. At one point, they asked Erika Cheung, an important whistleblower who worked in Theranos’ laboratory, to read the entire organization chart of the laboratory staff to show that she played a small role in the overall operation.

After the prosecution allowed the case to rest on Friday, Holmes’ lawyers immediately asked the judge for an acquittal and said that the evidence was insufficient. They also moved to drop certain charges, testimonies and evidence, and succeeded in eliminating one case of fraud.

Their first witnesses included Trent Middleton, an associate at the defense team who made reports summarizing facts about Theranos, such as the number of patents, investors, and total revenue. Ms. Holme’s lawyers also called Fabrizio Bonanni, a biotechnology director who became a member of Theranos’ board in 2016, and who described the efforts the startup made to improve the processes and guidelines after it came under fire.

Then Mrs. Holmes took a stand. Her lawyers may try to put the spotlight on her relationship with Mr. Balwani. The two dated in secret. In court documents, Holmes claimed he was emotionally abusive and controlling. Mr. Balwani’s lawyers have denied the allegations.

Her testimony may open her up to potentially damaging cross-examination by the prosecution or perjury.

“Most criminal defendants do not testify, especially in white-collar cases where the government has many challenges to overcome, such as proving intent, and sometimes even just proving that a crime has taken place,” Spektor said. Holmes’ case is different, he said, because the offense is clear and the evidence is fairly easy to understand.

Throughout the proceedings, Holmes had been silent in the courtroom and only whispered to the lawyers or family members. But the jury heard her strongly defend Theranos against allegations of fraud in video interviews played in court. It also heard her accept the guilt.

“I am the founder and CEO of this company,” she said in one of the videos. “Everything that happens in this company is my responsibility.”



Source link

Back to top button