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The blockbuster trial of Elizabeth Holmes, Theranos’ founder and former CEO, begins Wednesday in a tale that has spawned a book, a documentary, a miniseries and a coming movie — and put Silicon Valley itself on trial.
The elements of captivation for, of all things, a high-tech blood-testing startup are clear. It is rare for a CEO — let alone a former billionaire female CEO — to face trial and 20 years in jail. The case has already been marked by head-turning, last-minute revelations and allegations. And Holmes’ meteoric rise to black-turtlenecked cover girl and media darling is matched only by her catastrophic fall from grace.
At the heart of the matter are thousands of patients whom Holmes and Theranos are accused of defrauding: a mother misled about her pregnancy, a patient told to stop taking heart medication, and patients who received false HIV-positive results.
Holmes, along with Ramesh “Sunny” Balwani, a former boyfriend who became president of Theranos, face charges of 10 counts of wire fraud and two counts of conspiracy to commit wire fraud. Both have pleaded not guilty.
But ultimately, the case is about stories. Which one the jury believes will decide its outcome.
In 2003, Holmes, then 19, followed the contours of a well-worn path to Silicon Valley startup stardom, dropping out of Stanford to devote herself to a singular idea: to revolutionize blood testing by running a rapid battery of tests from a single finger prick.
Modeling herself after her hero, Apple co-founder Steve Jobs, she adopted a black turtleneck as her trademark attire, adopted a strict vegan diet and used a laserlike stare to mesmerize investors and burn through doubters of her quest to disrupt the gatekeepers, make the world better and make a lot of money while doing it.
“I would say Winston Churchill really knew what he was talking about when he said, ‘Never give in. Never give in. Never, never, never,’” Holmes told Glamour in 2015 in a typical example of the laudatory coverage she and her company got at the time. “And I would say that I am living proof that it’s true that if you can imagine it, you can achieve it.”
Along the way, Holmes tried to achieve her dreams by shortcutting the checks and balances designed to protect investors and patients. Theranos did not initially publish its “breakthrough” technology in peer-reviewed journals, nor did it share data with the scientific community. It also did not get approval from the Food and Drug Administration for its devices.
Instead, Holmes took her company’s story straight to the covers of glossy magazines, gave hype-building TED Talks, claimed that its devices were being deployed by the U.S. military on the battlefield and lobbied to change state laws to allow patients to get their blood tests directly, rather than through their doctors.
Rather than raise funds from the usual West Coast venture capital outfits — which demanded to see published peer-reviewed studies showing that her biotechnology worked — Holmes raked in more than $700 million from private investors and East Coast hedge funds, netting the company a valuation of $9 billion — and herself a fortune of around $4.5 billion, making her the world's youngest self-made female billionaire.
Holmes told investors that the company was on track to make $100 million in revenue in 2014, but it was really generating only about $100,000. The company built up an impressive roster of dignitaries and military advisers on its board of directors, including former Defense Secretary James Mattis and former Secretary of State Henry Kissinger. Publishing magnate Rupert Murdoch, Mexican billionaire Carlos Slim and former Education Secretary Betsy DeVos were among its investor pool.
But the technology had issues, which medical professionals and a series of investigative articles in The Wall Street Journal raised in 2015 and 2016. Reporter John Carreyrou broke the story that, although the company claimed that its blood-testing machines could do over 1,000 separate diagnostic tests, its key technology could actually perform only one finger-prick test. Skepticism also mounted in the medical community.
It all came to an end in June 2018, when the company was charged with fraud by the Securities and Exchange Commission and with wire fraud and conspiracy by the U.S. attorney for Northern California.
Prosecutors allege that “despite their knowledge of Theranos’s accuracy and reliability, Holmes and Balwani used interstate electronic wires to purchase advertisements intended to induce individuals to purchase Theranos blood tests,” according to the indictment, even though they knew the tests could yield “inaccurate and unreliable results” that had been improperly adjusted and generated from “improperly validated assays.”
Holmes' trial was originally scheduled to have started in August 2020, but it was delayed repeatedly by the coronavirus pandemic, the birth of her child in July and Holmes’ attorneys, who have sought to exclude evidence and argued successfully for her trial to be separated from Balwani’s.
According to recently unsealed court papers, Holmes will pin the blame on Balwani, arguing that he was an abusive partner who controlled her actions.
Holmes is prepared to describe how Balwani controlled how she ate and dressed and with whom she spoke, monitoring her calls, texts and emails, and to say he threw “hard, sharp objects” at her.
Balwani’s actions were the equivalent of “dominating her and erasing her capacity to make decisions,” including hampering her ability to “deceive her victims,” according to court papers.
Balwani’s attorneys wrote that the allegations are “salacious and inflammatory” and “deeply offensive to Mr. Balwani, devastating personally to him.”
As part of jury selection last week, a pool of 240 potential jurors had to answer a 28-page questionnaire that scrutinized their media consumption and how much they knew about the case. It also asked about their own medical histories. It did not include questions about sexual abuse or domestic violence, but some jurors were dismissed after they recalled experiences with domestic abuse. After three days, the jury pool was narrowed to seven men and five women.
The court has set aside time until December for the trial, which is expected to last the full four months, an indication that there will be many chapters and unfolding narrative threads to follow.