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Elizabeth Holmes’ lawyers say Theranos was a failure, not a fraud as trial opens

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Elizabeth Holmes at the federal building

Theranos founder Elizabeth Holmes arrives in federal court docket on Sept. 8 for opening arguments in her hotly anticipated trial. 


David Odisho/Bloomberg through Getty Pictures

In opening arguments of a trial set to final for months, Elizabeth Holmes’ protection attorneys argued the failure of well being care startup Theranos was as a consequence of “technical” shortcomings quite than deception on the a part of disgraced founder.

Holmes is charged with multiple counts of conspiracy and fraud over claims she made concerning the firm’s purportedly revolutionary blood-testing invention. Investigations revealed the know-how had severe issues. In a couple of quick years Theranos went from being valued at $9 billion to one of many decade’s extra infamous Silicon Valley tales.

Holmes’ lawyer Lance Wade informed jurors in a San Jose courtroom that the story of Theranos’ outstanding fall was “way more human and actual, and oftentimes… sophisticated and boring,” according to the Wall Street Journal

The trial, which is predicted to final for months, started Wednesday with opening arguments in a federal court docket presided over by US District Choose Edward Davila. A 12-member jury heard from the prosecution first, which argued that Holmes deceived traders. 

“Out of time, out of cash, Elizabeth Holmes determined to lie,” assistant US lawyer Robert Leach informed the jury.

Protection attorneys later countered that Theranos traders had been nicely conscious of the dangers concerned in backing the startup.

The courtroom drama has been over three years within the making, with Holmes initially charged in June 2018. The trial has been delayed a number of occasions by the COVID-19 pandemic and by the delivery of Holmes’ baby on July 10 of this yr. 

Here is what to find out about one of many largest trials of the last decade to date.


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What happened to Holmes and Theranos?

In 2003, Holmes dropped out of Stanford University at 19 to found Theranos with the goal of disrupting the blood-testing industry. The company said it was developing proprietary technology that required gathering a smaller amount of blood than a conventional intravenous draw and was more portable than traditional tests sent off to a lab.

Theranos began to see more mainstream attention in 2013 when it signed up Walgreens and Safeway as potential customers. At one point the startup was valued at more than $9 billion.

Holmes began to appear on the cover of various publications, including Fortune, sometimes drawing comparisons to Steve Jobs for her seeming powers of disruption and a penchant for high-necked black tops.

But the fortunes of both Holmes and Theranos began to change in 2015 when The Wall Street Journal took a deeper look into the company. The Journal reported that only a small portion of tests were being done with the company’s testing machine, named Edison, and that many tests were being done on other companies’ machines, using diluted blood samples. The accuracy of test results that patients received from Theranos was also called into question.

All this led to the charges filed against Holmes in 2018, a settlement with the Securities and Exchange Commission and the permanent shuttering of Theranos shortly thereafter.

A 2019 documentary, a book called Bad Blood: Secrets and Lies in a Silicon Valley Startup by Wall Street Journal reporter John Carreyrou and multiple podcasts about the company’s precipitous fall helped bring mainstream attention to the story.

Former Theranos employee and whistleblower Tyler Shultz spoke with CNET in 2020 about the whole saga.

What is Holmes charged with?

Holmes is formally charged with two counts of conspiracy to commit wire fraud and 10 counts of wire fraud.

“The charges stem from [Holmes’] allegedly misleading representations about [Theranos] and its medical testing know-how,” reads a statement from the US district court in Northern California

Primarily, Holmes is accused of mendacity to sufferers about how the corporate’s blood testing labored and the way efficient the checks had been. A number of the costs additionally relate to Holmes allegedly deceptive traders concerning the inner workings at Theranos and the way a lot income the corporate was anticipated to generate.

If convicted, Holmes may very well be sentenced to as much as 20 years in jail.

What’s Holmes’ facet of the story?

Although Holmes denied that the allegations made by the Journal’s authentic reporting had been true, she’s by no means informed her facet of the story from that time on in depth.

“That is what occurs if you work to vary issues,” Holmes stated on CNBC’s Mad Cash in 2015. “First they assume you are loopy, then they battle you, after which all the sudden you modify the world.”

The 37-year-old reportedly pursued a e book deal to get her story out. The e book by no means materialized, however a extensively acclaimed HBO documentary concerning the Theranos collapse, The Inventor: Out for Blood in Silicon Valley by director Alex Gibney, got here out in 2019. It did not painting Holmes in a flattering gentle and he or she did not cooperate with the filmmakers, so her tackle the occasions of the previous half-decade largely stays a thriller.

Holmes’ attorneys come from the high-powered Washington agency that defended President Invoice Clinton at his impeachment trial. One risk is they are going to argue she was following one thing just like the Silicon Valley “faux it until you make it” ethos and that she all the time believed within the long-term potential of the corporate and its know-how to finally ship on its guarantees.

According to The Wall Street Journal, Holmes’ attorneys have stated she might argue that “she believed any alleged misrepresentations had been true and accordingly that Theranos was a reliable enterprise producing worth for traders.”

There have been hints of this protection in opening statements on Wednesday, when Wade referred to the corporate’s know-how as “actual” and “modern.”

On Aug. 28, newly unsealed court docket filings prompt Holmes might search to defend herself by alleging she suffered psychological, sexual and emotional abuse by the hands of former Theranos president and onetime boyfriend Ramesh “Sunny” Balwani, and that due to submissiveness to him, she believed allegedly fraudulent statements she made had been true. 

This technique was all foreshadowed in arguments Wednesday by which Wade referred to Balwani’s mood and promised extra associated proof could be introduced throughout the trial. 

Legal professionals for Balwani known as abuse allegations “outrageous.” One of many filings, by attorneys for Holmes, stated she was more likely to testify.

We’ll quickly see whether or not Holmes in the end takes the stand to inform her facet of issues.

How can I watch the trial?

The trial formally started Tuesday, with opening arguments the next day. Choose Edward Davila is presiding. There will not be an internet feed of the trial, and tv cameras will not be allowed within the courtroom, so one of the best ways to observe the case might be through reporters within the room taking notes the old school manner.

In whole, over 200 potential witnesses have been recognized between the prosecution and the protection, so it is potential testimony will go on for weeks. 

Balwani faces comparable costs in a separate trial scheduled for subsequent yr.

Each Holmes and Balwani have pleaded not responsible.

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