Prosecutors Push Theranos’ Elizabeth Holmes To Take Responsibility

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SAN JOSE, Calif. — For four days, Elizabeth Holmes took the stand to blame others for the alleged fraud at her blood testing start-up, Theranos. On the fifth day, the prosecutors tried to make one thing clear: she knew.

During more than five hours of cross-examination on Tuesday, Robert Leach, the US assistant attorney general and lead prosecutor on the case, pointed to text messages, notes and emails with Ms. Holmes — and with her business partner and ex-boyfriend Ramesh Balwani — discuss issues with Theranos business and technology. Mr. Leach had a common refrain: no one hid anything from Mrs. Holmes. As chief executive of Theranos, he argued, she was to blame.

“Everything that happens at the company was ultimately your responsibility?” asked Mr. Leach.

“That’s how I felt,” said Mrs. Holmes.

It was the culmination of three months of witnessing and nearly four years of waiting since Mrs. Holmes was indicted on charges of wire fraud and conspiracy to commit wire fraud in 2018. Prosecutors have shown jurors evidence of falsified product demonstrations, falsified documents and communications with the aim of showing that Ms. Holmes was knowingly investing in investors, doctors, patients and the world. misled about Theranos.

The outcome of her case has implications for the tech industry at a time when fast-growing start-ups amass wealth, power and cultural cachet. Few start-up founders have been prosecuted for deceiving investors while striving to realize their long-standing business ideas. If convicted, Ms. Holmes, 37, who has pleaded not guilty, could face up to 20 years in prison.

Theranos rose to a valuation of $9 billion in 2015 and raised $945 million thanks to Ms. Holmes’ promise that his blood testing machines could perform hundreds of tests quickly and cheaply with just a few drops of blood. She started the company in 2003 after dropping out of Stanford University.

But in reality, prosecutors have argued, Theranos’ machines could only run a dozen tests, and they were unreliable. Instead, it secretly used commercially available machines from Siemens. After that and other misrepresentations were revealed, Theranos invalidated the two-year blood test results. It also settled lawsuits with investors and the Securities and Exchange Commission, which was eventually dissolved in 2018.

In her first testimony, Ms. Holmes tried to dismiss the fraud allegations as too simple and as a misunderstanding of her statements. She also pleaded ignorance about many of Theranos’s problems and emphasized her lack of experience and qualifications to run a science lab.

During a cross-examination on Tuesday, Ms. Holmes admitted making mistakes. “There are many things that I wish I had done differently,” she says.

Theranos mishandled a 2015 report in The Wall Street Journal about problems with the company’s technology, she said.

“We completely screwed up,” said Mrs. Holmes. She also admitted to contacting Rupert Murdoch, owner of The Journal who invested in Theranos, to quash the story.

Ms. Holmes said she also regretted the way Theranos treated Erika Cheung, an employee who raised concerns about the company’s lab practices. After Mrs. Cheung had left the company, Theranos hired a private investigator to track her down and serve her with a legal threat.

“I really wish we had treated her differently and listened to her,” said Ms Holmes.

The testimony followed dramatic revelations about Ms. Holmes’ relationship with Mr. Balwani. On Monday, she said tearfully that she had been raped as a student at Stanford and that Mr. Balwani had abused her emotionally and physically after that experience.

She accused Mr Balwani, who is twenty years her senior, of assuming what she ate, how she presented herself and how much time she spent with her family. She said he forced her to have sex with him against her will and told her she had to “commit suicide” to be reborn as a successful entrepreneur.

It was the first time Ms. Holmes told her side of the story of the rise and fall of Theranos, which had been held up in podcasts, documentaries, and script series as a tale of Silicon Valley arrogance and merit. Her testimony complicated that story and shed new light on the behind-the-scenes relationship between herself and Mr. Balwani, which they had kept a secret as her profile grew.

Ms Holmes tried to link her relationship with Mr Balwani to her allegations of fraud by stating that he influenced “everything about who I was”, including Theranos. She said she pushed him out of the company and broke up with him after learning that the Theranos lab, which Mr Balwani oversaw, was in serious trouble.

“There’s no way I could save our company if he was there,” she said on Tuesday.

mr. Balwani has denied allegations of assault. He was charged with fraud along with Ms. Holmes and will be tried separately next year. He has also pleaded not guilty.

During a long and detailed day of testimony, Mr. Leach hangs on the relationship, sending text messages between Mrs. Holmes and Mr. Balwani as evidence. He asked Ms. Holmes to read text messages indicating that she exchanged loving comments with Mr. Balwani. The pair referred to each other as “tiger” and “tigress” between pep talks about building Theranos.

“Nobody but you and I can build this business,” Mr Balwani wrote in one conversation.

After each, Mr. Leach asked Mrs. Holmes to verify that she had just read an example of Mr. Balwani acting lovingly towards her. As she read the messages, Mrs. Holmes wept a second time in the stands.

Jill Hasday, a professor at the University of Minnesota Law School who has written a book on intimate partner violence and the law, said the prosecution’s tactics could work to undermine Ms. Holmes’ previous testimony, depending on the jurors’ understanding. about abuse.

“My gut feeling is it can be effective because people have a lot of misconceptions about intimate partner violence, including that it’s constant,” Ms Hasday said.

The trial, which is expected to end in December, will resume next week.

Erin Woo reporting contributed.

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