This could get bloody.
Opening statements are set to be delivered Wednesday in the trial of Elizabeth Holmes, the founder of defunct blood testing company Theranos who prosecutors say became the world’s youngest self-made female billionaire by lying to investors about her company’s technology.
The 37-year-old founder is facing two counts of conspiracy to commit wire fraud and 10 counts of wire fraud — and could be sent to jail for 20 years.
The trial comes after multiple delays due to the coronavirus pandemic and Holmes giving birth to a baby boy in July — and after a jury selection process that last week saw potential jurors quizzed about whether they knew Holmes from the book “Bad Blood” or the HBO documentary “The Inventor.”
Meanwhile, as she waits for trial, Holmes has been living with her partner William “Billy” Evans, a hotel heir, at a home on a 74-acre, $135 million estate outside Palo Alto, CNBC reported Tuesday.
The trial is expected to last for several weeks, with hearings set for Tuesdays, Wednesdays and Fridays.
Attorneys for the founder of Theranos — which was once valued north of $9 billion — have told the Northern California judge overseeing the case that the founder herself is “highly likely” to take the stand and defend herself. She is expected to accuse her ex-boyfriend and former Theranos executive Ramesh “Sonny” Balwani of abuse as part of her defense.
The trial may also see testimony from heavy hitters from the worlds of politics and media who were affiliated with Theranos — including former Secretary of State Henry Kissinger, former Secretary of Defense James Mattis and Rupert Murdoch, the owner of New York Post parent company News Corp. — court documents show. The two former US officials were board members of the company; Murdoch was an investor.
Holmes’ closely-watched trial is set to be a dramatic display of what happens when Silicon Valley’s founder-obsessed culture goes wrong.
Here’s what’s happened so far and what to expect.
What did Elizabeth Holmes and Theranos do?
In 2003, 19-year-old Elizabeth Holmes dropped out of Stanford University to found a blood testing company. She later named it Theranos — a combination of the words “therapy” and “diagnosis”
Holmes’ plan was to create creating a machine called an “Edison” that could quickly run dozens of tests for everything from diabetes to cancer based on a pinprick of blood. The convenience and speed of Edison devices, Holmes told potential investors, would disrupt the multibillion-dollar lab testing industry dominated by giants like Quest Diagnostics. It would save lives and make fortunes at the same time.
Theranos operated in secret for nearly a decade, building hushed hype among investors who drove its valuation to $1 billion by 2010 before the company even had a website.
By 2013, Holmes — known for wearing thick eye makeup and a Steve Jobs-esque black turtleneck — decided to take the company’s technology to the press, racking up fawning interviews and profiles while gracing the covers of magazines like Forbes, Fortune and the New York Times Style Magazine.
Politically-connected men like Kissinger, Mattis and former US Senators Sam Nunn and Bill Frist joined Theranos’ board as the company scored partnerships with Walgreens, Safeway and the Cleveland Clinic.
Bolstered by the favorable press and plugged-in board members, Theranos secured even bigger investments from powerful backers including $125 million from Murdoch and $100 million from the family of former education secretary Betsy DeVos. Other prominent investors included the Walmart-founding Walton family, New England Patriots owner Robert Kraft and Mexico’s richest man Carlos Slim, according to the Wall Street Journal.
By early 2015, Forbes had crowned Holmes the title of the world’s self-made female billionaire with a net worth of $4.5 billion.
How did Theranos unravel?
Theranos’ spell was broken starting in October 2015 when a series of reports in the Wall Street Journal showed that most tests the company was claiming to have conducted on Edison machines were actually being done on traditional lab equipment.
That day, Holmes went on CNBC’s “Mad Money” with Jim Cramer to rebuff the charges, claiming the paper was out to stifle innovation.
“First they call you crazy, then they fight you, then you change the world,” she said on CNBC, paraphrasing a quote that’s often misattributed to Mahatma Gandhi.
But the Journal’s revelations undermined everything Holmes had been claiming for years, and irate investors saw their once-lucrative stakes in the company crumble to zero-dollar valuations.
Theranos gradually bled employees and was officially defunct by 2018. That same year, the Securities and Exchange Commission officially charged Holmes with “massive fraud,” accusing the founder of taking more than $700 million from investors while lying about her company’s technology.
Holmes avoided admitting fault and dodged prison time in a separate settlement with the SEC, but now she is now separately facing the dozen fraud charges from federal prosecutors in Northern California.
What about Sunny Balwani and abuse allegations?
Another key Theranos figure is Ramesh “Sunny” Balwani, who served as president and chief operating officer of the company while also dating Holmes. The pair met when Holmes was 18 and Balwani was 37.
The couple broke up in 2016 as Theranos was unraveling — before Holmes met her now-husband, the hotel heir Billy Evans.
Like Holmes, Balwani has also been charged with fraud and is set to go to trial in a separate proceeding in January 2022.
A key aspect of Holmes’ defense will be accusing Balwani of subjecting her to a “decade-long campaign of psychological abuse,” court documents show.
Attorneys for Holmes said in court filings unsealed in August that they will introduce evidence showing that Balwani “controlled what [Holmes] ate, how she dressed, and how much money she could spend, who she could interact with – essentially dominating her and erasing her capacity to make decisions.”
The documents indicate that at least part of Holmes’ defense will rely on convincing the jury that her allegedly abusive relationship with Balwani impacted her state of mind, which led her to turn a blind eye to the shortcomings of her blood-testing startup.
Balwani has denied the claims, which his attorney called “deeply offensive” and “devastating personally” to the former Theranos executive.
Additional reporting by Will Feuer