Judge hears Sunny Balwani's request to remain free through appeal in Theranos case
SAN JOSE – A motion by convicted Theranos executive Ramesh "Sunny" Balwani to remain free until his appeal to a higher court is resolved was argued in federal court in San Jose on Friday.
Balwani was convicted of 12 counts of wire fraud and conspiracy based on his false statements to investors and patients about Theranos' malfunctioning blood-testing technology.
He is scheduled to surrender to federal custody to begin serving a 155-month prison term on March 15.
Data from the 9th Circuit Court of Appeals, which will hear Balwani's appeal, shows that the median time from the date an appeal is filed until it is decided on the merits is 15 months.
After a nearly two-hour hearing, U.S. District Judge Edward Davila took the matter under submission.
Balwani's lawyers have argued that continued bail pending appeal is appropriate because he has been "in perfect compliance" with his bail conditions so far. They also argue that Davila made "substantial" errors during trial that are likely to result in a complete reversal of Balwani's conviction.
Davila asked to hear argument on two of those alleged errors.
The first involves the admission of testimony by an investor, Bryan Tolbert of the Hall Group, as to misrepresentations made by Balwani's former lover and Theranos CEO Elizabeth Holmes during a December 2013 investor telephone call.
Tolbert testified that Holmes claimed in the call that Theranos tests were being used by the military.
However, a tape of that conversation, admitted in the Holmes trial but not the Balwani case, reflects only that she said there was "potential" for military use.
Although Holmes was convicted of four counts of wire fraud and conspiracy, the Holmes jury was unable to reach a verdict on the count involving the Hall Group investment.
But prosecutors, Balwani argued, deceived the jury in his trial by eliciting Tolbert's testimony about military use while knowing that the tape would not back him up.
Prosecutors hit back hard on that assertion, arguing that what happened in the Holmes case had no bearing on Balwani's case and that, even if he secured a reversal on the three counts related to the investor call, that result would not affect the other nine counts on which he stands convicted.
Davila also asked about Balwani's claim of error based on the admission of evidence that Theranos tests failed not only when run based on Theranos's own proprietary fingerstick technology but also when the company ran tests using conventional methods.
That charge, Balwani's lawyers say, was not part of the criminal indictment.
Prosecutors responded that the defense failed to object to the evidence of failed tests on conventional devices at trial and therefore won't be allowed to raise it on appeal.
They also again pointed out that even if Balwani secures a partial reversal from the higher court, he must still serve substantial prison time.
Holmes has filed her own motion to remain free on bail pending appeal. The hearing on that motion is set for March 17.
At Friday's hearing, the judge also heard arguments on the amount of restitution that Balwani must pay to victims of the Theranos fraud.
Prosecutors are seeking a restitution amount of nearly $900 million.
Balwani asked that no restitution be ordered on the theory that, when he left the company in May 2016, Theranos retained some value and had not yet gone belly-up.
Davila said he will rule on the amount of restitution to be paid by both Balwani and Holmes after Holmes' March 17 hearing.