Fraud or failure? Two words that can define the trajectory of Elizabeth Holmes, 37, a former promise of biotechnology in Silicon Valley, in the United States. She, once called the “new Steve Jobs”, is on trial by a California state jury for the crime of electronic fraud and conspiracy. If convicted, she could face up to 20 years in prison. The trial is expected to last up to 13 weeks.
“This is a case of lying and cheating to get money,” accused Attorney General Robert Leach, during the opening of the arguments in the court in San Joseph, in the heart of Silicon Valley, this Wednesday (8). But according to Holmes’ defense attorney Lance Wade, she’s just another failed startup leader, not the “villain” prosecutors believe her to be.
Homes became a celebrity in the biotechnology business when he created the diagnostics company Therans in 2003, when he was 19 years old. Success came with the promise of cheap tests performed with just drops of blood with faster results than traditional labs. But after a few years and a few billions in the account, allegations of fraud started pouring in.
“THE Therans failed in part because he made mistakes, but mistakes are not crimes,” he said. Wade. The defense also alleged that Holmes suffered psychological abuse and was dominated by her partner and former partner, Ramesh “Sunny” Balwani, 56, which is judged separately. Balwani called the charges “outrageous.”
During jury selection last week, the defense asked several potential candidates whether they had suffered “abuse by someone close,” signaling that this will be part of the strategy to assist Holmes in the trial. But the prosecution must present health professionals to dismantle this thesis.
Meteoric success… and decline
In creating the Theranos diagnostics company, Holmes became a celebrity in the tech world—which is why he was even compared to Apple founder Steve Jobs. Market bigwigs like Henry Kissinger and Rupert Murdoch were some of those who invested in the startup.
But in 2015, an insider raised concerns about Theranos’ flagship, the Edison test device, and the American Wall Street Journal showed in a series of reports that the test results were unreliable. According to the publication, the company had been using commercially available machines, produced by other manufacturers, to enable most of its tests.
Lawsuits piled up, partners severed ties, and in 2016, US regulators banned Holmes from operating a blood testing service for two years. In 2018, Theranos declared bankruptcy.
In March of that year, she reached a settlement with the US courts after being accused of raising $700 million (R$3.6 billion, in current values) from investors fraudulently. Three months later, however, she was arrested along with her former partner Balwani, on criminal charges of electronic fraud and conspiracy. She was released on bail.
According to prosecutors, Holmes was lying to investors, doctors and patients to keep raising money. She came to accumulate a fortune estimated at 3.6 billion dollars, according to Forbes magazine in 2014. At that time, she was the youngest billionaire without having inherited her fortune.
“Holmes didn’t lie all his life, but he did”
According to the prosecution, Theranos did not start life as a fraud. But by 2009, Holmes was quickly running out of money, having trouble keeping up with the payroll, especially since relationships with pharmaceutical companies such as Pfizer and, Schering-Plough was not going well.
“Out of time and out of money, Elizabeth Holmes decided to lie,” said Attorney Leach. She would then have started looking for investments, presenting overestimated projections for the company.
One of the documents presented by the prosecution was an alleged memo by Pfizer endorsing Pfizer’s technology. Therans for investors — and which would not have been issued by the pharmaceutical company, which is yet to testify at trial.
The prosecution also presented some press publications that, according to Leach, were instrumental in attracting investors, but had some lies.
To help Holmes on the 1st day of the trial, the defense chose to show the businesswoman’s human side to the jury. Wade recounted in detail how she stored her belongings in the car after Theranos went down. Then, he went back in time and spoke of the trajectory of the 19-year-old girl who decided to leave college after patenting a device that performed tests and gave a result. Wade even said that trust Sunny Balwani it was one of the biggest mistakes made by Holmes.
According to the defense attorney, the startup’s founder believed that the tests were accurate and reliable, and she herself made use of them, in addition to recommending them to her family. Since Balwani oversaw the labs, and the lab directors are legally responsible for the safety and accuracy of the tests, the responsibility was not Holmes’s. Some of these executives will also testify at the trial.
Also according to the defense, only 20 patients and physicians who presented inaccurate results, who had mistaken diagnoses of HIV or cancer from defective tests—out of a total of 8 million tests performed—which represents 0.00025% of all tests. Wade did not mention the tests that were voided, which represent a significant portion.
What comes next?
The trial is just beginning. And, as with any court case, the outcome depends on the testimony and evidence that will be presented.
But one thing is certain: for the prosecution, it may be difficult to prove the bad intentions behind Holmes’ actions, as the defense is highlighting the businesswoman’s presumption of innocence and shifting the blame to partner Balwani.
The trial, which has been postponed several times because she had a child in July, is expected to last about 13 weeks. If Holmes decides to speak, his testimony will be most anticipated.
*With information from AFP and BBC.