Elizabeth Holmes Begins Her Defense in Fraud Trial

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SAN JOSE, California. Over the past 11 weeks, prosecutors have uncovered emails from desperate investors. They kept falsified documents next to the originals. They called dozens of witnesses who charged with deceit and evasion.

And on Friday, the person accused of … Elizabeth Holmes, the founder of the failed blood test startup Theranos, stood up to defend herself. She collides 11 cases of fraud with investors over Theranos’ technology and business in a case that was declared a referendum on Silicon Valley startup culture. She pleaded not guilty.

Miss Holmes, whose rise and fall fascinated the public and was considered a symbol technology industry arrogance and the last decade culture of fraud – began her testimony by answering a series of questions about Theranos. She delved deeper into her biography and how she founded a Silicon Valley startup that promised to revolutionize healthcare by using just a drop of patients’ blood to identify their illnesses.

When Kevin Downey, Mrs. Holmes’s attorney, asked her if she had founded “the technology that allows any blood test,” she said yes.

Ms Holmes took the position after the prosecution ended their case on Friday after several weeks of testimony.

Prosecutors tried to portray Ms Holmes as the liar who turned Theranos into a $ 9 billion startup while knowing all the time that his blood tests weren’t working. They methodically outlined six main areas of her deception, including lies about Theranos’ work with military and pharmaceutical companies, its business performance and the accuracy of blood tests.

The stakes are high. If Ms Holmes, 37, is found guilty, she faces up to 20 years in prison on each count of fraud, and prosecutors may muster the courage to look for new startups that spread the truth to raise funding. Justification can signal that Silicon Valley startups that have rapidly gained strength and wealth over the past decade are difficult to hold accountable.

“When prosecutors stop working, they basically say they have enough funds to ask the jury to convict on the spot,” said Andrei Spector, attorney for Bryan Cave Leighton Paisner and a former federal attorney for the Eastern District of New York.

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

When the trial finally began in September, prosecutors have called on former Theranos investors, partners and employees to testify. Jim Mattis, a retired four-star Marine Corps general and former secretary of defense who was the director of Theranos, took the position, as did the former director of the Theranos laboratory, who withstood six grueling days of interrogation. In one surreal moment, a medical examiner read text messages between Mrs. Holmes and Ramesh Balwani, her boyfriend at the time and a business partner in Theranos known as Sunny.

Alan Eisenman, an early investor in Theranos, said this week that Ms Holmes interrupted and threatened him when he asked her for more information about the company. However, even after this treatment, Mr. Eisenman invested more money in the startup, believing that his seemingly fast-growing business would bring wealth to sponsors like him.

Asked how he understands the value of his shares in Theranos today, Mr. Eisenman said, “This is not an understanding, this is a conclusion. It costs nothing. “

The most compelling evidence for the prosecution included: series of validation reports Holmes sent out to potential investors and partners that gave the impression that pharmaceutical companies including Pfizer and Schering-Plow had endorsed Theranos technology. Representatives for each company said they disapproved of Theranos blood test and were surprised to see their company logos added to the report.

Daniel Edlin, who worked at Theranos and was Miss Holmes’ sibling Christian, testified that the startup was faking a demo of its machines to potential investors, hiding technology glitches, and giving out abnormal blood test results.

Mr Mattis testified that he was not aware of any contracts between Theranos and the military to install her machines on helicopters for medical evacuation or on the battlefield, as Mrs. Holmes often told investors.

The prosecution has completed its version Roger Parloff’s testimony, a journalist who wrote an article about Miss Holmes for the cover of a magazine that helped her gain recognition. Mr. Parloff’s article was sent out to numerous investors as part of Mrs. Holmes’ proposal.

However, some of the most prominent witnesses on the prosecution’s list were conspicuously absent from the courtroom. Ms. Holmes’ rise was fueled by her connections with business titans such as media tycoon Rupert Murdoch, senior statesmen such as Henry Kissinger and Admiral Gary Roguehead, and lawyer David Boyes. The Theranos company was partially destroyed by informants such as Tyler Schultz, the grandson of George Schultz, a former secretary of state who served on Theranos board of directors. None of them testified.

Also absent was Mr. Balwani, who, along with Mrs. Holmes, was charged with fraud and was brought to trial the following year. His role as a fierce advocate for Theranos, harassing anyone who questioned the company, has been at the heart of much of the testimony.

At almost every step, Mrs. Holmes’s lawyers sought to limit testimony and evidence. They attacked investor confidence, using legal clauses to show that investors knew they were betting on a fledgling startup. Lawyers also identified gaps in the limited investor due diligence of Theranos claims. At one point, they asked Erica Chung, a key whistleblower who worked at Theranos lab, to read the entire organizational chart of the staff working in the lab to show that she played a minor role in the overall operation.

After prosecutors closed their case on Friday, Ms. Holmes’s lawyers immediately demanded an acquittal from the judge and said there was insufficient evidence. They also dropped some of the charges, testimony and evidence and managed to drop one charge of fraud.

Their first witnesses were Trent Middleton, an assistant attorney at the defense firm, who compiled reports summarizing facts about Theranos, such as patent counts, investors, and total income. Holmes’s lawyers also called Fabrizio Bonanni, the head of biotechnology, who joined Theranos board in 2016 and talked about the startup’s efforts to improve its processes and policies after it was criticized.

Then Miss Holmes took a position. Her lawyers may try to shed light on her relationship with Mr. Balwani. The two met in secret. In court records, Ms Holmes argued that he was emotionally abusive and bossy. Mr. Balwani’s lawyers denied the claims.

Her testimony could lead to potentially dangerous cross-examination by prosecutors 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 took place,” he said. -n Spector. Holmes’s case is different, he said, because the crime is clearly delineated and the evidence is fairly easy to understand.

Throughout the trial, Ms Holmes remained silent in the courtroom and whispered only to her lawyers or family members. But a jury heard her vigorously defended Theranos from fraud charges in a video interview played in court. He also heard her take the blame on herself.

“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.”

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