Elizabeth Holmes 'deferred to' her COO-boyfriend when running Theranos, her lawyers argue

Court documents unsealed on Monday revealed new details of ex-Theranos CEO Elizabeth Holmes' defense strategy, in a closely watched criminal trial accusing her of using her blood-testing startup to defraud both patients and investors.

In the documents, Holmes contends that alleged abuse by her onetime boyfriend — former Theranos COO and president Ramesh “Sunny” Balwani, who also faces criminal charges — influenced her beliefs about the startup's operations and financial well being.

“During the period of the charged conspiracy, and throughout Ms. Holmes’ and Mr. Balwani’s relationship, she deferred to and relied on what she perceived to be Mr. Balwani’s business acumen,” an unsealed brief filed by Holmes’ attorneys states. “... She believed that what Mr. Balwani was telling her was true.”

Holmes’ attorneys argue that she should be permitted to introduce expert opinion testimony from Dr. Mindy Mechanic — a clinical psychologist who examined Holmes — about how the alleged abuse affected her mental state when she ran Theranos. Balwani has denied the abuse.

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Expert testimony is key to jury's findings on Holmes' mental state

The evidence could be key to the jury’s calculus over Holmes’ guilt or innocence given the government’s burden to prove beyond a reasonable doubt that she intentionally defrauded investors and patients. Even if Holmes made representations that were incorrect, her attorneys argue, she is entitled to acquittal if the jury finds she didn't intentionally make those misrepresentations.

Elizabeth Holmes (L), founder and former CEO of blood testing and life sciences company Theranos, leaves the courthouse with her husband Billy Evans after the first day of her fraud trial in San Jose, California on September 8, 2021. - California jurors tasked with deciding whether fallen biotech star Elizabeth Holmes is guilty of a stunning fraud or is herself a victim were set to hear opening arguments in her trial on September 8, 2021. Federal prosecutors in the heart of Silicon Valley have in their filings portrayed Holmes as a villain who swindled investors in the diagnostics company Theranos -- which she founded at age 19 -- with tests that did not work. (Photo by Nick Otto / AFP) (Photo by NICK OTTO/AFP via Getty Images)
Elizabeth Holmes (L), founder and former CEO of blood testing and life sciences company Theranos, leaves the courthouse with her partner Billy Evans after the first day of her fraud trial in San Jose, California on September 8, 2021.. (Photo by Nick Otto / AFP) (Photo by NICK OTTO/AFP via Getty Images)

In still heavily redacted documents, government attorneys sought to exclude the clinical psychologist's testimony, arguing in part that, under rules governing evidence concerning mens rea, or knowledge of wrongdoing, Holmes abandoned her right to introduce the evidence. Because Holmes does not plan to elicit testimony from Dr. Mechanic concerning her diagnoses as mental conditions that may have affected her guilt, prosecutors argued, the testimony should be prohibited.

In an order denying the government’s request, Judge Edward Davila said the defense team “made clear that the abusive context of [Holmes’] relationship with Balwani would help explain her good-faith belief in the allegedly fraudulent statements she made, thereby negating the Government’s proof that she had the requisite intent to defraud.”

For Holmes’ part, her attorneys sought to exclude opinion testimony from Dr. Renee Binder, a psychologist whom the government proposed in rebuttal to Dr. Mechanic.

Separately, Davila excluded certain opinions from Dr. Binder from the trial. The judge also ordered a hearing to assess the objectivity and reliability of the methods Binder used in reaching her conclusions on whether Holmes was a victim of intimate partner abuse, and if so, how the abuse impacted Holmes.

'Another side that nobody else saw'

In opening statements, Holmes' attorney Lance Wade referred to court documents claiming she suffered “a decade-long campaign of psychological abuse” by Balwani. “There was a side of that relationship that many people saw and will talk about," Wade said, leaving out the extent of the abuse alleged in the documents. "There was another side to it that nobody else saw.”

Holmes, now 37, launched the Silicon Valley startup in 2003 at just 19 years old, with a vision to overhaul diagnostic health care. Over more than a decade, the entrepreneur sold investors on the idea of developing an analyzer, the size of a desktop printer, that could run a suite of common tests on as little as a drop or two of blood taken from a patient's finger.

In 2018, a federal grand jury indicted Holmes and Balwani, charging them with wire fraud and conspiracy. The indictment claims the pair used Theranos to defraud investors and patients and misrepresented its technology from 2010 to 2015. They could each go to prison for up to 20 years if convicted.

Alexis Keenan is a legal reporter for Yahoo Finance and host of Yahoo Finance's original documentary film Valley of Hype: The Culture that Built Elizabeth Holmes. Follow Alexis on Twitter @alexiskweed.

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