Closing arguments began Thursday in the trial of Elizabeth Holmes, who faces as many as 20 years in prison if convicted of defrauding patients and investors in her failed blood-testing startup, Theranos.
In a four-hour closing argument, the prosecution pointed to numerous alleged misstatements about Theranos’ blood-testing technology, which Holmes had suggested could perform hundreds of diagnostic tests with a finger prick of blood. The prosecutor also cast off claims raised in her defense that she was abused by her onetime boyfriend and Theranos COO Ramesh “Sunny” Balwani.
“You shouldn’t find her guilty because of my words. You should find her guilty because of her words,” Assistant U.S. Attorney Jeff Schenk said, at the conclusion of arguments focused on recorded phone calls, emails, and texts, all projected on monitors stationed throughout the courtroom.
The defense, meanwhile, contended in closing arguments that began Thursday and will resume Friday that prosecutors failed to tell the whole story of Theranos.
‘A house of cards’
That story began when Holmes, now 37, dropped out of Stanford at 19 to launch Theranos, whose name came from a combination of the words “therapy” and “diagnosis.” In 2018, she and Balwani were indicted after Theranos imploded under regulatory scrutiny. She’s now defending 11 counts of fraud and conspiracy for allegedly misrepresenting the viability of Theranos’ blood-testing technology to investors and paying customers. Balwani faces the same charges and is scheduled to stand trial next year.
Throughout the closing argument, the prosecutor pointed to alleged misstatements and evidence he says showed that Holmes knew those statements weren’t true. He pointed to the words that Holmes used when talking with investors, in the solicitation documents she sent them, and in media interviews, board presentations, and communications with one time partner, Walgreens. The prosecutor’s own words suggested that Theranos was never actually a stable company.
“Theranos was a house of cards,” Schenk told jurors.
One potentially damning piece of evidence is Holmes’ own admission during her testimony that she added the logos of drug giants Pfizer and Schering-Plough to two Theranos reports. Schenk reminded jurors that investors testified that statements from Holmes led them to believe that Theranos’ blood-testing device had been deployed in U.S. military operations, specifically including battlefields in Afghanistan, and on board medevac helicopters.
“We’ve thus built a business around partnerships with pharmaceutical companies and contracts with the military wherein we could deploy our framework,” Holmes was heard saying on a call with investor Bryan Tolbert.
She admitted in her own testimony that Theranos hadn’t secured military contracts or field operations agreements.
Other untrue statements, Schenk said, came from Holmes’ interviews with media, particularly with former Fortune reporter Roger Parloff, who has contributed to Yahoo Finance, and whose 2014 cover story on Holmes titled “This CEO’s out for blood” helped elevate her profile. Parloff published a lengthy correction the next year. The prosecution played Parloff’s recorded interview with Holmes on Thursday to highlight her representations that Theranos’ was relying more heavily than it promoted on venous blood draws, rather than its hallmark finger sticks, in tests performed in its Walgreens stores.
At the same time, the prosecution said, Theranos was promoting that its technology could run “comprehensive blood tests from finger stick” and concealing inquiries from regulators. Holmes boasted to Fortune’s Parloff that the company could conduct 70 different tests from a finger stick sample and that it offered more than 200 common tests.
To emphasize what Holmes knew, and when she knew it, Schenk revisited email and text exchanges between Holmes and her co-defendant Ramesh “Sunny Balwani.” One exchange displayed Balwani’s concern that Walgreens was questioning the percentage of venipuncture tests performed in its retail stores.
“We can market our lab,” Holmes wrote in response to Balwani’s concern.
Schenk argued the suggestion to pivot showed Holmes intended to conceal its lacking technology while still capitalizing on the existing narrative around finger stick technology. In addition, he recounted testimony from former Theranos employees and their communications with Holmes expressing concerns about the reliability of certain Theranos tests.
In a start to the defense’s closing argument, the defense offered jurors reasons why they should view the government’s case as incomplete and count Theranos not as a house of cards, but as a promising startup.
“I ask you to wait and hear the whole story and go through the evidence with me,” defense lawyer Kevin Downey said. “The picture can change a good deal as a result of waiting for the full story and looking through the full material.”
Seven large national and multinational companies validated Theranos’ technology, some continuing talks with Theranos for years, Downey said. Most of them were never mentioned by the prosecution, he said before showing communications between the companies and Theranos.
Contrary to the prosecution’s claims, Downey said, Holmes wasn’t hiding her technology’s shortfalls. Holmes put investors in contact with pharmaceutical companies that had engaged with Theranos, including Novartis, GlaxoSmithKline, Pfizer, and Bristol Myers Squibb. Downey also said people inside Theranos believed the company’s technology was incredibly valuable.
The defense will continue making its case on Friday, after which prosecutors will have a final opportunity to address the jurors before they begin deliberations.
Alexis Keenan is a legal reporter for Yahoo Finance. Follow Alexis on Twitter @alexiskweed.