SAN FRANCISCO — After four years, repeated delays and the birth of her baby, Elizabeth Holmes, the founder of the blood-testing startup Theranos, is set to stand trial for fraud, capping a saga of Silicon Valley hubris, ambition and deception.
Jury selection begins Tuesday in federal court in San Jose, California, followed by opening arguments next week. Holmes, whose trial is expected to last three to four months, is battling 12 counts of fraud and conspiracy to commit wire fraud over false claims she made about Theranos’ blood tests and business.
In 2018, the Justice Department indicted both her and her business partner and onetime boyfriend, Ramesh Balwani, known as Sunny, with the charges. Balwani’s trial will begin early next year. Both have pleaded not guilty.
Holmes’ case has been held up as a parable of Silicon Valley’s swashbuckling “fake it till you make it” culture, which has helped propel the region’s startups to unfathomable riches and economic power. That same spirit has also allowed grifters and unethical hustlers to flourish, often with little consequence, raising questions about Silicon Valley’s tightening grip on society.
But the trial will ultimately be about one individual. And the central question will be whether Holmes was a deceptive schemer driven by greed and power, or a naïf who believed her own lies and was manipulated by Balwani.
The case hinges on Holmes’ knowledge of the problems with Theranos’ blood-testing devices. Her lawyers could argue that she was merely the startup’s public face while Balwani and others handled the technology, legal experts said. They could make the case that the sophisticated investors who backed Holmes should have done better research on Theranos. And they could say that Holmes was simply following Silicon Valley’s norms of exaggeration in service of an ambitious mission.
Last year, Judge Edward Davila of U.S. District Court for the Northern District of California agreed to separate Holmes’ and Balwani’ cases. The move was unusual for such cases, legal experts said, and allows the pair to blame each other with no ability to respond.
In sealed court filings from 2020 that were made public over the weekend, Holmes said that her relationship with Balwani had a “pattern of abuse and coercive control.” The filings said Holmes’ lawyers might introduce expert testimony on her mental state and the effects of the alleged abuse. Balwani’s lawyers denied the accusations in a filing.
If convicted, Holmes, 37, faces up to 20 years in prison.
“All too often this kind of fraud doesn’t get prosecuted,” said Alex Gibney, director of “The Inventor,” a documentary about Theranos. “So many other people fake it till they make it, but that never justifies not bringing charges when someone has committed fraud.”
Holmes’ lawyers did not respond to a request for comment. A lawyer for Balwani, 56, declined to comment, as did a representative for the U.S. Attorney’s Office for the Northern District of California, which is prosecuting the case.
Looming large over the trial will be the public’s fascination with the scandalous details of the Theranos drama.
For years, Holmes cultivated her public image with an unusually deep voice, an intense stare and an uniform of black turtlenecks meant to evoke Steve Jobs. She installed bulletproof glass in her office and traveled by jet or chauffeur with a security detail. In 2019, she reportedly married William Evans, a hotel heir. She gave birth to their son in July.
Her high profile presents a challenge in finding jurors who have not formed opinions about her or the case. Jury members filled out a 28-page questionnaire outlining their media consumption, medical experiences and whether they have heard of Holmes or seen her TED Talk. Approximately half of the more than 200 potential jurors had consumed media related to the case, according to a court filing last week.
If Holmes takes the stand, prosecutors could use past statements to hurt her credibility. In a Securities and Exchange Commission deposition in 2017, she responded to questions by saying “I don’t know” at least 600 times.
“It will be hard for her to say, ‘I remember it this way,’ when she said ‘I don’t know’ so many times,” said John Coffee Jr., a professor at Columbia Law School who is not involved in the case. “That is the most damaging evidence against her.”
By the time Holmes was indicted in 2018, the once highflying Theranos was all but dead.
Holmes founded the startup at age 19 in 2003 and dropped out of Stanford soon after. She hired Balwani in 2009 and raised more than $700 million from investors, valuing Theranos at $9 billion. The Palo Alto, California, company struck deals with Walgreens and Safeway to offer its blood testing in their stores. It also attracted dignitaries, senators and generals — including George Shultz, Henry Kissinger, William Frist and James Mattis — to its board of directors.
Then in 2015, The Wall Street Journal published a series of exposés that called the effectiveness of the Theranos machines into question.
“She committed a fraud,” said Dr. Phyllis Gardner, a Stanford medical professor who was an early Theranos skeptic. “She harmed many patients. She bilked people out of their money.”
Increased scrutiny from regulators and investors revealed further problems and accusations of deception, leading to civil fraud charges from the Securities & Exchange Commission and a lawsuit from investors and Walgreens.
By 2016, Forbes had lowered its estimate of Holmes’ net worth from $4.5 billion to nothing. In 2018, she settled with the SEC and investors. That same year, Theranos shut down.
The Justice Department’s indictment, also issued that year, accused Holmes and Balwani of telling investors that Theranos’ blood testing machines could quickly perform a full range of clinical tests using a finger stick sample of blood, even though both knew the tests were limited, unreliable and slow. Holmes and Balwani also overstated Theranos’ business deals and told investors that the company would generate $1 billion in revenue in 2015, when it made only a few hundred thousand dollars, the indictment said.
The potential witness list of more than 200 people includes many big names who entered the Theranos orbit. Among them: Rupert Murdoch, the media mogul who invested in the startup; David Boies, the star lawyer who represented Holmes and sat on Theranos’ board; and Kissinger, Frist and Mattis.