For a time, Holmes had been hailed as a visionary. A Stanford University dropout, she founded Theranos in 2003 at age 19 with the lofty mission of revolutionizing blood testing. Inspired by her stated fear of needles, Holmes’ Theranos promised patients the ability to test for conditions like cancer and diabetes with just a few drops of blood.
Here’s what you should know about the high-profile case.
The Department of Justice claims that, while the company never realized its efforts to develop technology capable of running a full range clinical tests on its Edison machines with a few drops of blood collected by finger stick and stored in what it called a “nanotainer,” it nonetheless promoted itself and its devices as capable.
Legal experts say central to the trial will be questions about what Holmes knew, when she knew it, and whether she intended to deceive. “Either she had a device that could never work, or that couldn’t work yet. The latter is a more murky situation,” said Nancy Gertner, a former US federal judge and senior lecturer at Harvard Law School.
“The most difficult thing to prove is intent,” said Thomas Joo, a professor at UC Davis School of Law who specializes in corporate governance and white collar crime. “Did she intentionally lie in order to trick people?”
In a filing from Balwani’s attorneys, they acknowledge Holmes’ plans to introduce evidence that Balwani verbally disparaged her, controlled what she ate, how she dressed, and who she interacted with, “essentially dominating her and erasing her capacity to make decisions.” The filing calls the allegations “deeply offensive to Mr. Balwani” and “devastating personally to him.”
In response, federal prosecutors were granted the ability to have Holmes examined by two experts — a psychologist and a psychiatrist — over two consecutive days for no more than 14 hours combined.
An attorney for Holmes did not respond to a request for comment for this story.
The court has ruled out certain defenses in response to the government’s request to do so. For example, Holmes can’t argue that the government was “influenced by ‘coordination’ with journalists or competitors,” but she can argue about the “details, thoroughness, or good faith of the criminal investigation.”
The court also dismissed the idea of using naivete or being gullible as a defense, according to a court order. The government expressed concerns Holmes would argue that she conducted business in a way that was in line with the broader Silicon Valley startup practice of hyping their businesses to raise funding and that she was singled out, according to the order. The court said in the order that Holmes has vowed not to argue she was singled out and that it will allow “general fair comment” on the marketing of startups.
There may be some use of a “puffery” defense — or the attempt to pass off statements as corporate optimism or hyperbole — which often comes up in cases where a company is accused of lying to investors, according to Gertner. If that’s the case, jurors will have to ultimately decide if there’s a “substantial distance” between what was claimed and what was true, she said.
A who’s who of potential witnesses
The prosecution filed a proposed witness list of nearly 280 people, which includes some of Holmes’ most well-known associates.
“Certainly the more sympathetic the witness is, the more likely they are to connect with jurors. High profile witnesses with very high net worths are not likely to generate sympathy from jurors if they lost money in a fraud,” said George Demos, a former SEC prosecutor and adjunct law professor at the UC Davis School of Law.
Holmes sought to have patient testimony excluded, citing a lack of evidence about what caused inaccurate results. Notably, access to the database Theranos used to house all patient test results and quality control data, which was subpoenaed by the Department of Justice, won’t be cited in the trial as it was inaccessible. After Theranos turned over the database in July 2018 with a password — but not the private key necessary to access the encrypted database — it dismantled the physical server housing the database and put it into storage, according to another court order.
Patients testifying won’t be able to speak to “any physical, financial, or emotional harm they may have experienced,” the court determined.
Will Elizabeth Holmes take the stand?
Whether or not Holmes will take the stand remains an open question and one that likely won’t be decided for some time.
“Most criminal defense lawyers would tell a client not to — but the client is the boss,” said Joo. “She may have a very, very strong belief in her innocence. She may insist over the lawyers’ advice that she wants to testify,” he said, adding that, in the case of a mental disease defense, there might be an inclination to have her take the stand so the jury hears from her directly.
According to the newly unsealed documents, Holmes is “likely” to testify herself about the abuse she allegedly experienced at the hands of Balwani .
“If the jury believes her and finds her a sympathetic figure (and if the expert testimony further supports her claims of a mental defect), the defense could well shift the trial’s outcome in her favor,” Miriam Baer, a law professor at Brooklyn Law School, told CNN Business. “On the other hand, if the jury disbelieves her — or if the prosecutor successfully damages her credibility — the defense could make her worse off.”