Theranos Trial Update: Prosecutor Claims Elizabeth Holmes Guilty Of 'Lying and Cheating To Get Money'
SAN JOSE (CBS SF) -- Under the glare of the national media cameras, fallen Theranos founder Elizabeth Holmes walked stoically into the federal courthouse in San Jose Wednesday morning, ignoring a chorus of questions shouted by reporters at her as her long-awaited fraud trial finally got under way.
It was a much different kind of media attention for Holmes, who was once seen as a fast-rising star in Silicon Valley. The Stanford dropout was even heralded as the next Steve Jobs, leading several magazines to put her on their covers and helping her convince investors to give her billions.
In his opening statement, prosecutor Robert Leach told jurors the case is "about lying and cheating to get money."
"The defendant's fraudulent scheme made her a billionaire," he told jurors. "The scheme brought her fame, it brought her honor, and it brought her adoration. She had become, as she sought, one of the most celebrated CEOs in Silicon Valley and the world, but under the facade of Theranos' success, there were significant problems brewing."
Theranos eventually failed in 2018, a few years after a series of explosive stories in The Wall Street Journal exposed serious flaws in its technology and spurred regulatory investigations that shut down the testing.
The fraud committed by Holmes "is a fraud on Main Street and it's a fraud in Silicon Valley," Leach told the jury.
Defense attorney Lance Wade countered that failure was a characteristic of the start-up culture.
"Theranos failed for a lot of reasons," Wade told jurors. "It failed in part because it made mistakes. Mistakes are not crimes. A failed business does not make a CEO a criminal."
Wade argued that Holmes was simply trying to wrest control of the blood-testing technology market from two dominant laboratories, Quest Diagnostics and Labcorp.
"She did her best day in and day out to make Theranos successful," Wade said of Holmes during a roughly 90-minute presentation.
Holmes promised her revolutionary blood testing procedure would change the world. Federal prosecutors claim her tests were a sham, defrauding investors and delivering false results for patients. Stanford trial law expert David Sklansky told KPIX that the case comes down to a core issue.
"It's not a crime to believe your own hype," he said. "It's not a crime to be overconfident in your company. It is a crime to knowingly deceive people. And prosecutors will have to prove that that's what Elizabeth Holmes did."
Sklansky believes much will be revealed about the future course of the trial during the opening statements.
"This will be the opportunity for the lawyers to tell jurors what evidence they expect to present during the trial," he told KPIX 5 Morning News. "So we may hear what witnesses each side will call. We may hear whether Elizabeth Holmes will testify. And we may hear from for the first time what the full defense will be mounted for Elizabeth Holmes."
"We know from the pre-trial pleadings that it will have something to do with allegations of abuse from her co-defendant and former colleague at Theranos (President) Sunny Balwani. But we don't know exactly how that is going to play out."
The couple are no longer together -- Holmes has since married Billy Evans, a 27-year-old heir to Evans Hotels, and has had a child.
Meanwhile, Balwani faces a separate federal fraud trial that is set to begin on Jan. 11, 2022.
Sklansky said abuse claims are very rare in fraud cases.
"We are going to learn something interesting (in opening statements). What the nature of the claim is that Elizabeth Holmes is making regarding the effects of the abuse on her state of mind," he said. "We know she's not claiming insanity. We know that the argument is that because of the abuse she was suffering, she believed the truth of the representations that Theranos was making, but we don't know exactly what the claim is about how that happened."
A diverse jury of seven men and five women -- ranging in age from 19 to the 60s -- will hear the evidence. If they find Holmes guilty, she would face as much 20 years in prison.
Holmes, who was present for both days of questioning as well as when the jury was selected, was indicted more than three years ago on a dozen federal fraud and conspiracy charges over allegations she knowingly misled investors, patients, and doctors about the capabilities of her company's proprietary blood testing technology. She has pleaded not guilty.
The trial, which has been delayed several times due to the ongoing pandemic and further postponed due to the birth of Holmes' first child in July, is expected to last roughly 13 weeks.
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