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Who is to blame for the implosion of Theranos, the ill-fated blood-testing startup that folded in 2018, and did it amount to fraud? That’s the question before 12 people today in San Jose, California, who will decide the fate of Elizabeth Holmes, the startup’s founder and ex-CEO.
Jurors spent the final two days of last week hearing closing arguments from prosecution and defense attorneys. The latter said nearly everyone but Holmes was responsible for one of the most high-profile failures of a startup in recent history, while the former said that Holmes should be held accountable for what happened.
Holmes faced a choice
“She chose to be dishonest,” assistant US attorney Jeffrey Schenk told jurors in his closing argument. There were at least three decision points, three cash crunches, at which Holmes could have chosen to let Theranos “slowly fade.” Instead, she chose “to go down the path of fraud.”
By the time of the alleged fraud, which spanned 2013–2015, according to the indictment, Holmes was anything but naïve, Schenk said. She knew exactly what she was doing. “The truth is, by the time investors invested in 2013 and 2014, she was nearly 30 and had been CEO for nearly a decade.”
Holmes, Schenk said, oversaw myriad parts of the company, ranging from public relations to legal, business development, regulatory affairs, and more. In the course of perpetrating the alleged fraud, he said she made numerous false statements—that Theranos’ devices performed better than they actually did, that they were being used on the battlefield, that they had been validated by pharmaceutical companies, and that the company was financially stable.
Each of Holmes’ investors latched on to one or another of her false claims, Schenk said. The DeVos family liked the fact that Theranos used smaller blood samples. Chris Lucas liked its use of automation. Texas investor Alan Eisenman, whose colorful antics lit up the courtroom, was drawn to Theranos’ supposed accuracy.
Schenk also attacked Holmes’ claims that trade secrets prevented her from disclosing facts that might have made investors put their money elsewhere. Holmes’ desire to protect Theranos’ trade secrets didn’t “give her permission to make false statements,” he said.
Schenk wrapped his closing argument by addressing the elephant in the room: Holmes’ allegations of abuse by her ex-boyfriend and former Theranos COO Ramesh “Sunny” Balwani. (Balwani has denied her claims.) If the jurors decide she’s guilty of fraud, it’s not the same as saying, “We the jury do not believe her claims of abuse,” Schenk said. On the other hand, if they say she’s not guilty, “your verdict doesn’t validate her claims of abuse. You do not need to decide if that abuse happened.”
Defense blames everyone but Holmes
One of the first things Holmes’ attorney, Kevin Downey, did was remind jurors what “beyond a reasonable doubt” means. Then he started trying to sow that doubt in their minds.
He said that Holmes didn’t have criminal intent, that she was transparent in some of her dealings. After all, she told the FDA that her company was using third-party machines, and she was willing to send one of their proprietary devices to Johns Hopkins scientists, who said the startup’s technology was “novel and sound.”
Downey also tried to blame others for Theranos’ failure and alleged fraud. Investors were either too lazy or unsophisticated to look for public data that would have addressed the concerns they raised in their testimony. Scientists, especially former lab director Adam Rosendorff, should share the blame because he approved many patient tests performed on Theranos’ proprietary devices. The lab, Downey said, “was not Ms. Holmes’ responsibility.”
Journalists were a party to Theranos’ failure, too, since they quoted people saying nice things about Holmes and the company. (Perhaps that was meant to suggest that Holmes used media reports—which she manipulated through selective disclosure—as a sort of moral compass telling her whether she was on the right track?)
And last but not least, Downey reminded the jury that Holmes tried to turn things around in 2016, alluding to but not explicitly mentioning Balwani’s departure both from the company and Holmes’ romantic life.
“Are those the actions of someone who had been engaged in a conspiracy to defraud people?” Downey concluded.
After closing arguments wrapped, Judge Edward Davila read the jury nearly 40 pages of instructions. Today, jurors are scheduled to return to the courthouse for deliberations.