The case of Elizabeth Holmes, founder of Theranos, convicted Monday on federal charges, has inspired books, podcasts, documentaries and, soon, feature films.
Now, get ready for the sequel: the criminal trial of former Theranos CEO Ramesh “Sunny” Balwani, Holmes’ mentor and ex-boyfriend, is expected to begin in March.
One San Jose, California, jury Holmes, 37, was found guilty of conspiracy to defraud Theranos investors and three counts of electronic fraud against three Theranos investors. But the panel acquitted her of conspiracy and fraud charges involving patient Theranos. The jury was unable to reach a unanimous verdict on three additional charges of electronic fraud against other Theranos investors, and U.S. District Judge Edward Davila ruled a mistake on those counts.
Balwani, 56, who worked with Holmes for nearly seven years at Theranos after befriending her when she was 18 and just graduated from high school, faces charge akin to what was in the Holmes case. He has pleaded not guilty.
University of Michigan Law professor Barbara McQuade, a former United States Attorney and NBC News legal analyst, said the mixed ruling in the Holmes trial means both prosecutors and defense in the Balwani case. may need to readjust their strategies for the upcoming trial. .
McQuade told CNBC’s “American Greed“that prosecutors will need to scrutinize their case when it comes to patient Theranos.
“Knowing that this jury has acquitted all of the patient’s charges, I think strategically they should find a more direct way to explain why it was part of the fraud, that they necessarily know that the patient will eventually be tricked. And that. Even though they don’t know the names of these patients, they do know that they exist in concept,” McQuade said.
She said prosecutors could even amend their indictment against Balwani, although that would almost certainly delay the trial. The government has not said whether it intends to change its strategy. Another hearing on the case is scheduled for Wednesday.
Balwani’s security team may face far more pressing questions than the government. In the end, while the jury acquitted Holmes of several counts, the jury found her on four counts. The most serious crime, online fraud, carries a maximum sentence of 20 years in prison.
“The jury bought the whole theory,” McQuade said. “And, so, another jury could do the same.”
In fact, she said, it’s not too late for Balwani to consider haggling over a plea bargain in exchange for a lighter sentence, though not as light as the fact that he pleaded guilty before Holmes’ trial and agreed to a contract. work.
“Can we plead guilty and be relieved to accept responsibility?” she speaks. “It’s definitely something that you have to see.”
Balwani’s attorney, Jeffrey Coopersmith, declined to comment for this story.
Under the bus
Balwani’s name appeared frequently during Holmes’ trial, especially during the seven days she stood on the witness stand. In sentimental testimonies, she claims Balwani, almost 20 years her senior, controls every aspect of her life from diet, clothes to voice.
“He told me I didn’t know what I was doing in business, that my beliefs were wrong, that he was amazed at my mediocrity,” Holmes said. testified. “And that I needed to kill the person I was in order to become what he called ‘the new Elizabeth’ who could become a successful businessman.”
Holmes also claims that Balwani sexually raped her.
In a court filing before testimony, Coopersmith wrote that Balwani found the allegations “deeply offensive” and “personally devastating.”
Just like Holmes tried to throw Balwani under the bus during her trial, expecting Balwani to return the favor, McQuade said.
“If you could point to an empty chair and say, ‘Oh, that’s all the other bad guy’ is,” McQuade said. “She did it to Balwani during her trial, and I expect Balwani to do it to Holmes in his trial.”
Balwani’s security team has given no indication so far that they can release the same intimate details about the pair’s relationship, but they may have plenty of other material to work with.
Text messages between the couple, introduced as evidence in Holmes’ trial and likely to appear again in Balwani’s, show Balwani repeatedly warning Holmes of problems at the company she works for. allegedly hid from investors, like a 2014 text message in which he told her that Theranos Lab was “a disaster zone af*cking.”
Balwani’s security team could attempt to use such evidence to show that he acted in good faith, and that it was Holmes and others at Theranos who dropped the ball.
“One thing he might say is, ‘I have no knowledge of the science, I’m just relying on scientists to tell me if the product works or not. My job is in marketing, sales, and accounting,” McQuade said.
Holmes herself testified that she was the supreme authority at Thernaos, admitting that she had the ability to shoot Balwani at any moment, but did not.
The two are said to be auditioning together for their roles at Theranos, the blood-testing startup that failed in 2018 following explosive revelations about its supposedly revolutionary technology. does not work as advertised. But after Holmes’ lawyers said they planned to level the abuse charges, Judge Davila, who will also preside over Balwani’s trial, agreed to separate their case.
“Such testimony would unfairly disadvantage Attorney Balwani, so he will be denied a fair trial unless his trial is cut off from the trial of Ms Holmes,” Davila wrote in a March 2020 order has been sealed ahead of Holmes’ trial in August.
A question of intention
While their cases may differ on the question of who is responsible for the problems at Theranos, there are also likely to be many common themes. Some pre-trial records show that, like Holmes, Balwani could argue that he did not intend to commit fraud, an element necessary for the government to prove the crime.
6, Balwani’s lawyers said they should be allowed to argue that he acted properly in his dealings with investors.
“Mr Balwani should be allowed to argue that he views the money he has collected from alleged victims as a genuine investment he intends to profit from,” the filing said.
Theranos, under Holmes and Balwani, has raised about $945 million from investors, many of whom are prominent figures including Rupert Murdoch, the family of former Education Secretary Betsy DeVos and Walton’s family Walmart reputation.
Balwani’s defense team has also sought to limit evidence regarding patients, including test results performed with non-Theranos diagnostic equipment.
“Evidence for accuracy and reliability of patient tests is irrelevant unless it concerns the accuracy and reliability of Theranos’ technology, not unmodified commercial technology. “, they wrote in their December 6 filing.
Prosecutors have argued that the use of third-party devices, which Theranos concealed from the public, was part of the fraud allegation.
Whistleblower redux
As they did in the Holmes trial, previous Theranos insiders will likely testify that Balwani is an integral part of a secretive corporate culture that strongly quells dissent in order to conceal it. problems with investors and patients.
Erika Cheung, a former Theranos lab associate, an indicted witness in Holmes’ case who was also considered a potential witness against Balwani, testified that when he first encountered the test results incorrect, she brought her concerns to Balwani.
“The response and reception I got from him was ‘What makes you think you’re qualified to make these calls, you’re a UC Berkeley grad, what do you know about the diagnosis? in the lab?'” testified.
In an interview with “American Greed,” Cheung said that one of her first hints of trouble at Theranos was when she started emailing colleagues about testing issues, and was pleasantly surprised when she gets a response from Balwani.
“Sunny will answer them anytime. He’s not cc’d. He’s not bcc,” she said. “Things we said in certain contexts will be repeated to us, just like things we would say to each other in private.”
Cheung eventually took her concerns outside of the company, sharing them with federal agents and with journalist John Carreyrou, who first revealed affairs at Theranos in the Wall Street Journal in 2016. 2015.
In a pre-trial motion filed on November 19, Balwani’s attorneys sought to strongly restrict Cheung’s testimony during the trial, arguing that he had “worked at Theranos for a total of six months in a junior position right after graduating from college,” Cheung was ineligible for selection on the alleged problems in the lab.
“These ‘observations’ required provable expertise in the field of laboratory testing, but Ms. Cheung lacked any such expertise,” the filing said, alleging that in testifying during the Holmes trial, “she repeatedly argued on complex scientific issues and industry standards. Without any relevant expertise or knowledge.”
Assuming Cheung takes a stance again in Balwani’s trial, his lawyers will know almost exactly what will happen, thanks to her testimony in the Holmes case. McQuade says that poses some risk to the government.
“You always want to minimize the number of times a witness testifies, just because most people, when they tell a story, will differ only slightly on the details,” she said. “A skilled defense attorney can cleverly use that distinction in cross-examination, to make witnesses look like they’re lying or sketchy about the details. And that’s sometimes could raise enough suspicion to get a jury acquitted.”
McQuade said the government’s ability to see details of the case during the Holmes trial – and know the verdict – gives Balwani an advantage that Balwani would not have had if the trial had gone ahead as originally requested by his attorney.
But she warned both sides in the Balwani case not to read too much into the verdict in the Holmes trial.
“You never want to study too well,” she says. “Just because one jury found her guilty doesn’t mean another jury will find another defendant guilty. I don’t think they should assume that the next jury will automatically find the same way.” .”
See how Silicon Valley superstar Elizabeth Holmes promised to change the fallen world. Watch ALL NEW, 200order episode “American Greed,” Wednesday, January 12 at 10 p.m. ET on CNBC.
