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Authorities closes case in trial of Theranos founder Elizabeth Holmes

Elizabeth Holmes, the founder and former CEO of blood testing and life science company Theranos, arrives on August 31, 2021 for the first day of jury selection in her federal court fraud trial in San Jose, California.

Nick Otto | AFP | Getty Images

SAN JOSE, CALIF. – Prosecutors on Friday suspended their case against former Theranos CEO Elizabeth Holmes in her criminal fraud case after calling 29 witnesses in 11 weeks.

Ex-lab directors commented, as did former Secretary of Defense James Mattis, who was a member of the Theranos board of directors. The jury also heard testimony from patients, doctors, investors and business partners.

The last government witness on Thursday was journalist Roger Parloff, who wrote Fortune magazine in 2014 Cover story “This CEO Seeks Blood” about Holmes. Prosecutors alleged the Theranos founder used the article to woo investors who rushed into the blood testing company, eventually valuing it at $ 9 billion.

Holmes, 37, pleaded not guilty to 11 wire fraud and wire fraud conspiracies. One of the patient-related counts was dropped on Friday. The Stanford University dropout and former child prodigy from Silicon Valley could spend up to two decades in prison if convicted. She has denied any wrongdoing.

Now that the government has rested, the focus is shifting to Holmes’ defense, which is slated to begin immediately. The jury heard Holmes’ voice several times, including Thursday when conversations from Parloff’s recordings were played aloud.

But they haven’t heard directly from Holmes, and the central question now is whether they ever will.

“She’s a very risky person to testify,” said Danny Cevallos, an NBC News legal analyst who followed the case. “Yes, she is very smart. But there is a lot of evidence from the prosecutor that can be cross-examined that they are unlikely to have a good answer for. “

From the company’s founding in 2003 until its collapse 15 years later, Holmes was considered the undisputed leader of Theranos. However, in documents released before the trial began, the defense held Holmes’ ex-boyfriend and former business associate Ramesh “Sunny” Balwani responsible for a decade of abuse and control over her.

Sunny Balwani, former President and Chief Operating Officer of Theranos Inc., leaves federal court in San Jose, California on October 2, 2019.

Michael Kurz | Bloomberg | Getty Images

Defense attorneys continued this line of attack during the interrogation of witnesses, claiming that Holmes had blind faith in Balwani and too much faith in her laboratory managers.

Cevallos said the defense faces the challenge of showing that Holmes was not always responsible and that they did not deliberately mislead investors and patients.

“The defense has to grapple with really undisputed facts that Holmes was the boss and that this technology didn’t work,” said Cevallos. “It’s hard to sell. The government has emails, text messages and all kinds of documents. The government has shown that the money has stopped with Elizabeth Holmes. The defense will try to show she is only done with a few things but not with all of them. “

Balwani was also charged with fraud and will be tried at a later date.

A US assistant attorney said late Thursday after the jury left the courtroom that if the defense begins their case on Friday, they’ll likely have “a paralegal from the Williams & Connolly law firm to serve as the executive witness.”

“A Liar and a Deceiver”

For the past 11 weeks, prosecutors have portrayed Holmes as a manipulative fraudster who deceived patients and investors by making false claims about their company’s technology, which they said could perform a series of blood tests from a finger prick.

Robert Leach, a US assistant attorney, has repeatedly referred to Holmes as a “liar and a cheater”, first in his opening statements and then through first-hand testimony.

The most prominent witness was Mattis, who told the jury in September that, as a member of the Theranos board of directors, he had been misinformed about the capabilities of the company’s technology.

“Looking back now, I am disappointed with the transparency of Ms. Holmes,” said Mattis, adding that “we have been denied fundamental questions.” The retired four-star general said he invested $ 85,000 of his own money in the start-up.

There “came a point where I didn’t know what to believe about Theranos,” he said.

Several company insiders, including whistleblower and former lab assistant Erika Cheung, testified that Theranos devices couldn’t run more than 12 different tests, contradicting the company’s announcements. Holmes had advised potential investors and others that Theranos’ proprietary technology could perform 1,000 blood tests.

Prosecutors said Holmes also deceived investors by using unauthorized due diligence reports from leading drug companies such as Pfizer and Schering-Plow, whose company logos were on the documents.

Wade Miquelon, former Walgreens CFO, was one of many executives who received a report with the unauthorized logos. Walgreens, a key Theranos partner, has poured $ 140 million into the company to bring the blood testing equipment to its stores.

The partnership collapsed after Theranos repeatedly missed their deadlines. Walgreens sued the company in 2016 for alleged breach of contract.

The logo secret deepened when the jurors from Dr. Heard Shane Weber, a scientist at Pfizer who evaluated blood testing technology in 2008 and concluded the drug company shouldn’t make a deal with Theranos.

The jury was shown a Theranos report that Holmes had sent to Walgreens with the Pfizer logo on it. Weber testified that Pfizer never approved the use of the logo.

Pedestrians walk past a Walgreens store in San Francisco, California.

Justin Sullivan | Getty Images

There were many opportunities for Holmes to listen to their subordinates who constantly raised concerns. But prosecutors got the idea that Holmes ” fake it ’til you make it’ strategy cost lives.

Former lab director Adam Rosendorff, whose testimony took six days, told jurors that Holmes and Balwani ignored his repeated warnings that the technology just wasn’t working. Instead, he said that executives prioritize the company’s finances and public image over patient health.

Kingshuk Das, the company’s last lab manager, said he had also warned Holmes that the technology was unreliable. That said he canceled 50,000 to 60,000 tests that were taken with Theranos’ Edison blood test device and told Holmes that it “didn’t work to begin with”.

Both Rosendorff and Das said Holmes had rejected their concerns.

From billionaire to nothing

Holmes was once named America’s richest self-made woman by Forbes, with an estimated net worth of $ 4.5 billion in 2015. The next year Forbes lowered Holmes’ value to “nothing”.

At that point, the company had raised more than $ 940 million from investors.

The jury heard from a handful of these wealthy donors who said they had invested in the company on the basis of Holmes’ high promises. One of the witnesses was a representative of the family of former Education Minister Betsy DeVos. Bryan Tolbert, whose company invested $ 5 million, and Alan Eisenman, a Texas investor, also testified.

Finally, there was Brian Grossman, whose company PFM Health Sciences invested $ 96 million in Theranos. Grossman said he was deceived by Holmes, despite having extensively vetted the company and even had blood drawn from a Walgreens.

Grossman told the jury that Theranos claimed the technology had been validated by major pharmaceutical companies and the Department of Defense, which used it on the battlefield and in rescue helicopters.

“What better application for such a technology than in a military environment under harsh conditions, as one would expect from a place like Afghanistan or Iraq?” said Grossmann. Theranos said it had “just over $ 200 million in revenue from the Department of Defense,” he added.

None of this was true.

In fact, despite Holmes’ rosy financial outlook, the company has been bleeding hundreds of millions of dollars, according to a statement from former chief financial officer San Ho Spivey, also known as Danise Yam. By 2015, Theranos had lost more than $ 585 million, Yam told jurors.

Prosecutors also referred to a document handed out to investors that forecast revenue of $ 140 million in 2014 and $ 990 million in 2015. Yam said she did not prepare the document.

The jury heard additional statements from three patients. Each one contains alarming stories of inaccurate results after a Theranos test.

Erin Tompkins, one of those patients, said she panicked when her results showed she had tested positive for HIV antibodies. The test was wrong.

“I was pretty emotional back then,” said Tompkins.

SEE: The deposition bands from the Elizabeth Holmes process

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