David Paul Morris/Bloomberg
At this point in her criminal trial, Theranos founder Elizabeth Holmes’ best chance for acquittal is for the jury to believe that she was a puppet being controlled by her boyfriend, company president Ramesh “Sunny” Balwani. Yesterday, the prosecution attempted to pick apart that defense.
In Holmes’ first several days on the stand, jurors heard about Balwani’s abusive behavior. He forced Holmes to have sex with him, prescribed her meals and schedule, and told her that she needed to “kill” herself to be reborn as an entrepreneur, Holmes testified. Balwani has denied the claims of abuse. When recounting various episodes, Holmes broke into tears several times. Based on her testimony and her contemporaneous notes submitted as evidence, it certainly sounds like it was a toxic relationship.
The question for the jury, though, is whether that influenced Holmes’ actions. Was she in control of Theranos? Did her relationship with Balwani make her oblivious to a fraudulent scheme? To be convicted of wire fraud, which Holmes has been charged with, a person’s participation must be both willful and knowing. Yesterday, the prosecution set out to make it clear that Holmes was both in control and aware that what she was doing was wrong.
Logos resurface
In one damning exchange, the prosecution returned to the Theranos reports that Holmes had doctored with pharmaceutical company logos. In earlier testimony, Holmes admitted to adding the logos herself, though she claimed her intentions were good. “This work was done in partnership with these companies, and I was trying to convey that,” she told the court.
But yesterday, the prosecution pressed her on the matter. Jurors saw contracts between Theranos and the pharmaceutical companies showing that the use of their logo was expressly forbidden without prior written authorization. Did she obtain that permission?
“I don’t know,” Holmes replied.
One report was actually authored by a drug company, GlaxoSmithKlein, though the original version didn’t contain the company’s logo, and the intended audience was clearly GSK and Theranos employees. Nonetheless, Holmes added a GSK logo and sent it to investors. But that’s not all—before she sent it to investors, someone at Theranos removed a line from the original saying that the “finger prick/blood draw procedure was difficult.” Was it Holmes?
“I don’t know,” she said.
The second damning exchange involved a legal review of Theranos’ marketing materials, including its website, in advance of the Walgreens rollout. Holmes was directly involved in the process, emails show.
“I haven’t quite worked my way through the whole website, but I’m worried,” an attorney emailed Holmes. “For example, every time you say ‘better’ without specifying what it is better than, you are making a comparative claim, at least to all market leaders. You must be able to substantiate these claims.”
Lawyers working on the review proposed a number of changes, including replacing “highest levels of accuracy” with “high levels of accuracy.” They also suggested to Holmes that her company provide evidence for certain claims. Many of those tweaks made it onto the website, but the original claims—including “highest levels of accuracy”—remained unchanged in materials she sent investors.
Holmes had been made aware that her exaggerated claims weren’t legally advisable, yet she continued to make them to investors.