Jury selection within the criminal fraud trial of Elizabeth Holmes starts on Tuesday, the start of a highly anticipated legal showdown over one of the foremost spectacular Silicon Valley scandals in recent history. Federal prosecutors have charged Holmes and her former business partner and ex-boyfriend, Ramesh “Sunny” Balwani, with defrauding investors and patients of their blood-testing company Theranos, which Holmes and Balwani claimed would revolutionize laboratory medicine.
Patients who were wrongly diagnosed by Theranos tests are set to testify against Holmes. Some had been told they were HIV-positive. Another, who was pregnant at the time, was incorrectly told she had miscarried her baby. After the jury is chosen, opening arguments are slated to start out on Sept. 8. The trial in San Jose, Calif., is predicted to stretch on for four months.
In court documents unsealed Saturday, and first reported by NPR, Holmes’ legal team said she is very likely to require the witness box and accuse Balwani of manipulating and abusing her to such a degree that it affected her state of mind during the time of the alleged fraud. Both she and Balwani, who is going to be tried separately next year, have pleaded acquitted. If convicted, each faces a jail sentence of up to twenty years.
Holmes, who has since married the heir to a California hotel chain, Billy Evans, recently gave birth. The judge has said there’ll be arrangements allowing her to worry for her baby boy within the courthouse. A Stanford University dropout, Holmes dazzled Silicon Valley by founding Theranos at age 19. She promised its technology could screen patients for many diseases with just a finger prick of blood. Holmes cultivated a mystique that included a signature black turtleneck like Apple co-founder Steve Jobs, whom she greatly admired.
Big names from former President Clinton to former Secretary of State Kissinger to Mexican billionaire Carlos Slim believed within the company, helping it attract global investment and a valuation of quite $9 billion before its fall from grace in 2015. That’s when a series of stories within the Wall Street Journal showed that Theranos wasn’t using some new breakthrough equipment, as Holmes had claimed. Journalist John Carreyrou revealed that, instead, the corporate relied totally on traditional blood-processing machines. And Carreyrou’s reporting revealed a pattern of flaws and inaccuracies in patient results.
“There’s an expression that’s become synonymous with the business culture of Silicon Valley, which is, ‘Fake it until you create it,’ ” Carreyrou told NPR about Holmes. “She thought it had been okay to behave that way.” Walgreens stores in Arizona and California stopped allowing patients to urge Theranos tests. Plans to expand testing to the remainder of the state were scrapped. As Theranos became embattled, Holmes was defiant. “This is what happens once you work to vary things. First, they think you’re crazy, then they fight you, then all of a sudden you modify the planet,” Holmes told CNBC in 2018.
Federal prosecutors allege that she wasn’t a scientific genius but rather a huckster who knowingly shilled technology that gave flawed or downright incorrect results to patients and left investors holding the bag. Carreyrou, who has left The Journal and can be chronicling the trial during a podcast called Bad Blood: the ultimate Chapter, said the case could have far-reaching implications for tech startup culture.
“If she’s acquitted, the lesson that tons of entrepreneurs and VCs [venture capitalists] in Silicon Valley are getting to retain is that Holmes got away with it,” Carreyrou said. “If she’s convicted, I expect it to be a warning call in Silicon Valley to what proportion you’ll exaggerate, what proportion you’ll lie, what proportion you’ll experiment together with your products before you cross that bright line before you’ve got to travel to the prison.”