The trial of the founder of Theranos, Elizabeth Holmes began on Wednesday in federal court in San Jose, California. Elizabeth who dropped out of Stanford University to establish the blood-testing start-up Theranos at age 19 and promote it to a $9 billion valuation and herself into the world’s youngest self-made female billionaire flamed out in disgrace after Theranos’s technology was discovered to have problems.
In 2018, Ms. Holmes and Ramesh Balwani, her onetime business and romantic partner were charged with 12 counts of wire fraud and conspiracy to commit wire fraud. According to federal prosecutors, the accused persons misrepresented the abilities of Theranos’s technology and the firm’s business performance to investors. Ms. Holmes and Mr. Balwani have pleaded not guilty.
The trial is resuming just a month after Ms. Holmes gave birth to her son, but more than three years after Theranos was dissolved and six years after The Wall Street Journal first publicized issues with the start-up’s blood tests.
This month’s trial also comes amid a pulp fiction backdrop, with allegations of abuse and control by Mr. Balwani, exposed in court documents uncovered just days prior to proceedings.
“This is a case about fraud, about lying and cheating to get money,” Assistant U.S. Attorney Robert Leach disclosed in opening arguments. Every time she faced an obstacle, she told a lie to get around it, he argued.
Leach narrated a timeline of events, exposing how Holmes dropped out of Stanford in 2003 to pursue her ambition. But the technology, microfluidics, was complicated and the firm struggled to match up to its potentials.
By 2009, the firm had managed to obtain a few contracts with pharmaceutical firms, but the work was drying up. The company was finding it hard to make payroll, Leach added, with Holmes on the phone with her financial adviser and bank to ensure checks cleared.
“Out of time and out of money, Elizabeth Holmes decided to lie,” Leach disclosed.
She made fraudulent claims to Walgreens and Safeway, he added, telling them Theranos’ Keurig-sized black box device could handle any blood test in real-time for less than the cost of traditional labs. When the technology didn’t work as believed, the firm changed to using outside testing labs for results – but even those were fake, he stated.
The defense made attempts to humanize Holmes, with attorney Lance Wade calling her “big ideas for changing the world” birthed at the dinner table with her parents, who had the “idea instilled in her to change the world for better.”
The trial is expected to span 13 weeks and possibly feature high-profile ex-board members and investors such as former Secretary of State Henry Kissinger and the media mogul Rupert Murdoch as witnesses.
Holmes is also on the witness list, but it is yet-to-be-known when and if she will be called to testify.
If found guilty and convicted, Ms. Holmes, 37, faces up to 20 years in prison. Mr. Balwani’s trial is expected to begin in January, 2022.