Day 2 of Elizabeth Holmes’s Testimony in Trial: Live Updates

Erin Woo

ImageElizabeth Holmes, the founder and former chief executive of Theranos, left, with her mother Noel Holmes as they recently arrived at the Robert F. Peckham Federal Building in San Jose, Calif.
Credit…Justin Sullivan/Getty Images

Since the trial’s opening statements, the legal team for Elizabeth Holmes, the founder of the failed blood testing start-up Theranos, has made it clear how they plan to defend their client from charges of fraud.

First, they have said: Ms. Holmes was a hardworking entrepreneur who believed her claims that Theranos’s technology was revolutionary and whose failure was not a crime. Second: Other Theranos employees, executives and investors should have known better. And third: Ms. Holmes was manipulated by Ramesh Balwani, who is known as Sunny and who was formerly Theranos’s chief operating officer and Ms. Holmes’s boyfriend.

“She did her level best, day in, day out, to make Theranos successful, and she genuinely, deeply believed it would be successful,” Lance Wade, one of Ms. Holmes’s lawyers, said during opening statements.

Theranos, which had been hailed as a successful Silicon Valley start-up, collapsed in scandal and shut down in 2018 after the company’s technology was shown to not work.

Over the first 11 weeks of the trial, Ms. Holmes’s lawyers have repeatedly pushed the first two points of their defense. They have sought to undercut testimony from lab employees by pointing to their advanced degrees and comparing that to Ms. Holmes, who dropped out of Stanford University. They have also attacked investors’ credibility by detailing their lack of due diligence.

As Ms. Holmes, 37, takes the stand for a second day, she may point the finger at Mr. Balwani. In court filings, she has said that Mr. Balwani, 55, was emotionally abusive and controlling during their relationship. Mr. Balwani, who will stand trial next year, has denied the allegations. Both have pleaded not guilty.

Because Ms. Holmes and Mr. Balwani kept their relationship secret while they worked at Theranos, jurors have heard very little about their interactions. Ms. Holmes’s testimony will likely be jurors’ first real insight into the inner workings of the relationship.

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Ms. Holmes arrived hand-in-hand with her mother, Noel Holmes. She was also accompanied by her partner, Billy Evans, and various other members of her entourage, including two who arrived before 4 a.m. to wait in line with the rest of the public.

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Both the courtroom and an overflow room are packed with spectators who arrived well before dawn. The courtroom is quiet as reporters pull out their laptops and everyone waits for testimony to start.

Erin Woo

After waiting outside for hours, spectators have now filed into the courtroom for the second day of Elizabeth Holmes testifying in self-defense. (Because the proceedings are not live-streamed, standing in line is the only way to secure a spot inside.) Ms. Holmes, wearing a royal blue dress, has arrived at the courthouse, but is not yet in the courtroom. Neither are the judge nor jury.

Credit…Jim Wilson/The New York Times
Erin Woo

The government’s case against Elizabeth Holmes, the founder of Theranos, featured several key pieces of evidence that showed she intentionally deceived doctors, patients and investors in the blood testing start-up.

They included:

A fraudulent report

In 2010, Theranos created a 55-page report that prominently displayed the logos of the pharmaceutical companies Pfizer, Schering-Plough and GlaxoSmithKline. Investors such as Lisa Peterson, who manages investments for the wealthy DeVos family, and Walter Mosley, whose clients include the Walton family, testified that the report had helped persuade them to invest in Theranos.

The problem? Pfizer, Schering-Plough and GlaxoSmithKline had not prepared or signed off on the report. While prosecutors did not establish that Ms. Holmes created the report, witnesses like Daniel Edlin, a former Theranos senior product manager, testified that she had signed off on all investor material.

An investor letter

Theranos spent years discussing with the Department of Defense the possible deployment of its technology in the battlefield, but no partnership materialized.

Yet Ms. Holmes told potential investors in a letter that Theranos had signed contracts with the U.S. military — claims that helped persuade them to invest, the investors testified.

“We really relied on the fact that they had been doing work for pharma companies and the government for years,” Ms. Peterson said.

Internal emails

Emails between Theranos employees made up the bulk of the prosecution’s exhibits. Some of the emails showed when Theranos hid device failures, removed abnormal results from test reports and fudged demonstrations of its blood testing.

In one case, Mr. Edlin asked a colleague for advice on how to demonstrate Theranos’s technology for potential investors.

Michael Craig, a Theranos software engineer, recommended that Mr. Edlin use the demo app, a special setting on Theranos’s devices that said “running” or “processing” if an error had taken place, rather than display the mistake.

The app would hide failures from the client, Mr. Craig wrote in an email.

“Never a bad thing,” Mr. Edlin replied. “Let’s go with demo, thanks.”

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Credit…David Paul Morris/Bloomberg, via Getty Images

From the start, prosecutors have argued that Elizabeth Holmes intentionally deceived investors, doctors and patients as she sought investments and partnerships for Theranos, her once highflying blood testing start-up.

In opening statements on Sept. 8, Robert Leach, the assistant U.S. attorney who is the lead prosecutor in the case, laid out the government’s central thesis: that Ms. Holmes courted investors and commercial partners with false claims about her company’s technology and its relationships with pharmaceutical companies and the military.

“Out of time and out of money, Elizabeth Holmes decided to lie,” he repeatedly declared.

To make that case, prosecutors called 29 witnesses to the stand. They included eight former Theranos employees, six investors, three commercial partners, two doctors and three patients. From a star-studded list of nearly 200 people the government had listed as potential witnesses, the highest-profile person to appear was former Defense Secretary James Mattis, who had served on Theranos’s board.

Prosecutors presented evidence to show that Ms. Holmes perpetrated deceit, including that she knew of technology demonstrations that hid Theranos’s failures and was aware the company made false claims of working with the military. They also showed that Theranos had used a report with a pharmaceutical company’s logo to imply it had that company’s backing, even though the firm had not signed off on the report. Investors and partners testified that those claims had helped persuade them to give Theranos their business and money.

The prosecution also detailed the dysfunction within Theranos’s lab, which handled the blood tests. Theranos had trumpeted its claim that its tests could discern various illnesses in patients with just a drop of blood.

But Adam Rosendorff, one of Theranos’s former lab directors, spent six days on the stand explaining that the tests repeatedly produced inaccurate and irregular results. Other lab directors testified that they had essentially been figureheads; one spent just five to 10 hours at Theranos over his tenure.

Daniel Edlin, a former senior product manager and Holmes family friend, testified that Ms. Holmes had signed off on Theranos’s marketing and investor materials. He also said Ramesh Balwani, the chief operating officer and Ms. Holmes’s onetime boyfriend, who is known as Sunny, had deferred to her when the two of them disagreed.

“Generally, she was the C.E.O., so she had the final decision-making authority,” Mr. Edlin said.

Erin Griffith

Credit…Jim Wilson/The New York Times

[Follow live news updates on the fraud trial of Elizabeth Holmes.]

In 2018, the United States charged Elizabeth Holmes and her business partner, Ramesh “Sunny” Balwani, with nine counts of wire fraud and two counts of conspiracy to commit wire fraud.

The indictment accuses the pair of engaging in a “scheme, plan and artifice to defraud investors as to a material matter.”

In other words, they are accused of lying about Theranos’s business and technology to get money. The lies outlined in the indictment include claims Theranos made about its relationship with the military and the status of its partnership with Walgreens. Prosecutors also say that Theranos faked demonstrations of its technology and falsified validation reports from pharmaceutical companies and the financial health of its business.

Wire fraud is a felony that carries a maximum penalty of 20 years and potential fines. Theranos also paid a $500,000 fine to settle civil securities fraud charges with the Securities and Exchange Commission in 2018. It also settled multiple lawsuits with investors and partners before dissolving that year.

Since the criminal indictment, the cases of Ms. Holmes and Mr. Balwani have been separated. Mr. Balwani faces trial next year. Further, some of the charges against Ms. Holmes have been dropped and others added. As of today, Ms. Holmes faces 11 counts of fraud and conspiracy to commit fraud.

She has pleaded not guilty.

Erin Griffith

At the end of a grueling five days of testimony this week, the defense in the case of United States v. Elizabeth Holmes on Friday called Ms. Holmes, the founder of the failed blood testing start-up Theranos, to the stand.

A flutter of typing and murmuring washed over the gallery, which had been packed with spectators early in the day, before the audience dwindled as the weekend crept closer. Ms. Holmes has been charged with 11 counts of defrauding investors about what Theranos’s technology could do and about its business.

Ms. Holmes, 37, spent only an hour on the stand before the court closed for the day, so her testimony was truncated. What she discussed were the early days of Theranos and why she had set the company up — and she used the opportunity to present herself in her own terms after her emails, texts and other communications were dissected over the trial’s nearly three months of testimony.

Ms. Holmes’s lawyers have argued that she was merely a young, naïve, ambitious founder who relied too much on others who gave her bad advice. Her lawyers have also hammered on her lack of experience and expertise. But on Friday, she presented herself as an expert on her company’s technology.

She testified about the early days of Theranos, which started out as Realtime Cures in 2003. She testified about a patent she had created while a student at Stanford, which led her to drop out and work on the company full time. She also briefly discussed demonstrations of Theranos’s early technology and the early rounds of investment she raised to develop it.

Ms. Holmes’s lawyers indicated that her initial testimony is likely to take up Monday and Tuesday next week. That means that the prosecution’s cross-examination, which is expected to be lengthy, won’t begin until after Thanksgiving.

Ms. Holmes was the third witness to be called by her defense team.

Erin Woo

Elizabeth Holmes, the founder of the failed blood testing start-up Theranos, surrounded herself with a constellation of moguls, four-star generals, venture capitalists and others during her time running the company. Ultimately, Theranos was undone after whistle-blowers who were concerned that the company was lying about its technology spoke to the media and to regulators.

Here are some of the central figures in the rise and fall of Theranos and Ms. Holmes’s fraud trial.

Who’s Who in the Elizabeth Holmes Trial

Erin Woo

Erin Woo📍Reporting from San Jose, Calif.

Who’s Who in the Elizabeth Holmes Trial

Erin Woo

Erin Woo📍Reporting from San Jose, Calif.

Carlos Chavarria for The New York Times

Elizabeth Holmes, the disgraced founder of the blood testing start-up Theranos, stands trial for two counts of conspiracy to commit wire fraud and nine counts of wire fraud.

Here are some of the key figures in the case →

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Erin Woo

Credit…Carlos Chavarria for The New York Times

It’s Silicon Valley’s trial of the decade.

Since opening statements began on Sept. 8, Elizabeth Holmes, the founder of the failed blood testing start-up Theranos, has been standing trial in federal court in San Jose, Calif., for 11 counts of fraud (a 12th count was removed). If convicted, she faces up to 20 years in prison. She has pleaded not guilty.

Her case has captivated the public — and spawned books, documentaries and even a fan club for Ms. Holmes, 37 — because she was a young female entrepreneur in heavily male Silicon Valley and because she appeared to push the boundaries of start-up culture and hubris to the limit.

Her story initially seemed like the stuff dreams are made of. Ms. Holmes dropped out of Stanford University at 19 and founded Theranos, which promised to decipher people’s health problems with just a drop of their blood. The company raised $945 million from famous venture capitalists and from powerful tech and media moguls such as Larry Ellison and Rupert Murdoch. At its peak, Theranos was valued at $9 billion. Ms. Holmes was lauded as one of the youngest self-made female billionaires.

But it all came crashing down after a 2015 investigation from The Wall Street Journal found that Theranos’s blood-testing technology didn’t work. Theranos shut down in 2018.

Now Ms. Holmes is on trial over a central issue: Did she intentionally mislead doctors, patients and investors as she sought investments and partnerships?

The prosecution spent weeks arguing that Ms. Holmes purposely deceived investors and others while knowing that Theranos’s blood tests were often inaccurate and that the company relied on third-party commercial machines. In opening statements, Ms. Holmes’s lawyers asserted that she was simply a hardworking entrepreneur whose failure to achieve lofty aims did not constitute a crime.

Ms. Holmes vocally defended herself in the media after The Wall Street Journal’s revelations about Theranos. The jury — and public — will be eager to hear directly from her and to see whether she continues that stance or instead points fingers at others, such as her former business and romantic partner, Ramesh Balwani, who is known as Sunny.

The trial has played out inside a courtroom presided over by Judge Edward J. Davila of the U.S. District Court for the Northern District of California, with no live broadcast of the proceedings. Jury selection began on Aug. 31 and the case is scheduled to finish on Dec. 10.

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