Theranos founder Elizabeth Holmes goes on trial for fraud

Elizabeth Holmes, founder of Theranos Inc., exits federal court in San Jose, Calif., on Aug. 31, 2021. MUST CREDIT: Bloomberg photo by David Paul Morris.

SAN JOSE, Calif. – Opening statements began Wednesday in the trial of Elizabeth Holmes, the blood-testing start-up founder who allegedly failed to deliver on promises of running hundreds of tests off just a finger prick of blood.

Holmes, 37, faces criminal charges in federal court here for allegedly defrauding investors and patients by misleading them about the success of her blood-testing company Theranos. Prosecutors will try to prove that Holmes knowingly made misleading statements about how well Theranos’ portable blood-testing lab worked, and how financially successful the company was.

Holmes has pleaded not guilty to the charges. The former entrepreneur started Theranos when she was 19 and a student at Stanford, eventually developing it to 800 employees before media investigations revealed a dysfunctional workplace and erratic technology.

Holmes’s defense team is expected to argue, at least in part, that the former CEO suffered abuse at the hands of her previous boyfriend, Sunny Balwani.

In court filings unsealed last month, it was revealed that Balwani had his trial separated from Holmes’s after arguing that her plans to allege intimate partner violence would mean he could not get a fair trial. Balwani, the former president of Theranos, is charged with the same crimes as Holmes.

Balwani’s legal team has disputed the allegations of abuse in court documents.

Holmes could argue that Balwani “verbally disparaged her and withdrew ‘affection if she displeased him’; controlled what she ate, how she dressed, how much money she could spend, who she could interact with – essentially dominating her and erasing her capacity to make decisions,” according to filings.Holmes was evaluated by a psychologist hired by her defense, and the government also received court permission to appoint a doctor to meet with her.

Holmes, who once graced the covers of Forbes and Fortune magazines, was held up as a role model to young women who were interested in the sciences and wanted to run their own company.

Theranos collapsed in September 2018, nearly three years after the Wall Street Journal began publishing investigations into the company’s operations, reporting that the company’s blood testing technology did not work as advertised.

In January 2016, the Centers for Medicare and Medicaid Services issued a report finding that “the deficient practices of the laboratory pose immediate jeopardy to patient health and safety.”

Theranos later agreed with CMS to stay out of the blood testing business for two years.

Just months before the company shuttered, Holmes and Balwani made a deal with the Securities and Exchange Commission to settle allegations of massive fraud. As part of the deal, Holmes would not be allowed to serve as an officer of a public company for 10 years.

In a 2018 email obtained by the Wall Street Journal, new Theranos chief executive David Taylor said the company had run out of money and options to secure more.

The trial is expected to last 13 weeks.

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