Prosecutors on Wednesday called Theranos founder and CEO Elizabeth Holmes a liar and a fraud, while her lawyers argued that the company’s failure was not a crime.
“Out of time and money, Elizabeth Holmes decided to lie,” said Robert Leach, a US assistant attorney, as he presented the case that Theranos ran out of money in 2009 and knowingly misled investors to keep the company afloat .
Prosecutors said Holmes was not only the face of Theranos, the blood testing start-up she founded, but she oversaw everything about the company and “blinded” investors like Walgreens and Safeway with false claims.
“She owned it, she controlled it, the money stopped with her,” Leach said. “And as you will hear from insiders, she wasn’t an absent CEO, she was there all along. She sweated into the details. She was in charge.”
The long-awaited opening arguments were heard during a five-hour hearing. Holmes came to court along with her partner Billy Evans, her mother Noel Holmes and Evans’ father William Evans. She wore a gray skirt suit with a cream blouse and a light blue face mask. It was a very different picture than her signature black turtleneck during her heyday at Theranos.
The crowd outside was the largest since the criminal trial began last Tuesday. Among the audience were three women with blonde hair who mimicked Holmes’ signature look, dressed all in black and their hair tied in a bun. They were sitting in the courtroom next to Holmes’ family.
Elizabeth Holmes, the founder and former CEO of blood testing and life science company Theranos, arrives on the first day of her fraud trial in federal court in San Jose, California. September 8, 2021.
Nick Otto | AFP | Getty Images
In the courthouse, before the statements were opened, Holmes was seen hugging her mother. During the hearing, she sat among her lawyers, occasionally glancing at her family, who were seated directly behind her.
Evans, with whom Holmes shares a newborn child, was seen comforting Holmes’ mother during breaks and at one point putting his hand on her back as they spoke to the sketch artist in the courtroom. At least seven of Holmes’ friends and family were in the courtroom, which was mostly filled with media representatives in San Jose, where Holmes is battling a dozen charges of fraud and conspiracy.
Lance Wade, a Holmes attorney, argued that she “made mistakes, but mistakes are not crimes,” adding that “a failed business doesn’t turn a CEO into a criminal. Ms. Holmes didn’t go to work every day to lying, cheating and stealing. “
“Ms. Holmes went away without anything,” Wade told the jury of seven men and five women. “But failure is not a crime. Doing your best and falling short is not a crime.”
Prosecutors said Theranos only had $ 13 million in cash in 2013 and told jurors the company was burning $ 1 to 2 million a week. They claimed that Holmes and Balwani, Theranos executives and at times her boyfriend, raised hundreds of millions of dollars from investors by hyping the company’s technology in press interviews.
“The defendants’ fraudulent scheme made her a billionaire,” Leach said. “Once their stock in Theranos was worth billions. The plan brought her fame, honor and admiration. “
Holmes skyrocketed nearly a decade ago, featured on the front pages of Fortune and Forbes magazines, appeared on television news and was hailed as the next Steve Jobs whom prosecutors “admire”.
“She was touted as one of the most powerful women in business. She was wanted as one of the most famous CEOs in Silicon Valley and the world,” said Leach. “But under the facade of Theranos’ success, there were problems brewing.”
Defense attorneys told jurors that Theranos employed hundreds of people in Silicon Valley.
“It was real. It was innovative,” said Wade, adding that the well-known list of investors knows the risks of investing in a start-up.
“To invest in Theranos, you had to be a multimillionaire. In many cases, you were billionaires, some of the richest and most sophisticated people in the world,” said Wade. “They were demanding and knew what they were buying.”
Theranos raised more than $ 700 million from investors including media mogul Rupert Murdoch, former Education Secretary Betsy DeVos, and the Walmart Walton family. Some investors are expected to testify in the process.
Theranos founder Elizabeth Holmes appears in this court sketch in the Robert F. Peckham US Courthouse on September 8, 2021 to open arguments in her trial in San Jose, California, USA.
Vicki Behringer | Reuters
Her defense also pointed to Holmes’ relationship with Balwani, laying the groundwork for blaming him.
“You will hear that one of your mistakes was to trust and rely on Mr. Balwani as your primary advisor,” Wade said, telling the jury that the two met when Holmes was 18 and Balwani was 37.
“Sometimes he got angry, he would kick out. He didn’t always treat people kindly,” Wade said of Balwani. “You will learn how he pushed the limits of his treatment of some employees. You will have to await any evidence and then decide how you are to view this relationship fairly, overall.”
CNBC confirmed that Holmes and Evans lived in a house on the grounds of the fabled Green Gables estate in Silicon Valley during the trial. The 74-acre property is currently for sale for $ 135 million. During a hiatus in court, CNBC asked Evans’ father William Evans if he would pay the couple’s rent for the house. Evans was silent.
After five hours, Holmes left the courthouse, ignoring reporter questions while holding hands with her partner.