Nhat V. Meyer / Bay Area News Group via AP
SAN JOSE, California – Fallen Silicon Valley star Elizabeth Holmes, accused of confusing investors and patients into believing her startup Theranos had developed a blood test device that would reshape health care, took witness stand in her criminal fraud trial on Friday.
The surprising decision to get Holmes to testify so early came like a bomb and involves a significant risk. Federal prosecutors, who rested their months-long case earlier on Friday, have made it clear they are eager to grill Holmes under oath.
Prosecutors will not get that chance until Monday, when the trial will resume. Prosecutors called 29 witnesses to support their claim that Holmes endangered patients ‘lives, while also tricking investors and customers about Theranos’ technology. Among them was General James Mattis, a former U.S. Secretary of Defense and former board member of Theranos.
They also presented internal documents and sometimes nasty texts between Holmes and her former lover, Sunny Bulwani, who also served as Theranos’ chief operating officer. Throughout the prosecution’s case, Holmes sat upright in his chair, passive, even when former supporters testified about their concerns about Theranos.
This combination of compelling testimony and documentary evidence proved effective in convincing Holmes to tell his side of the story in court. On Friday, 10 men and four women listened to the jury, which will ultimately decide her fate. If Holmes is convicted, he – now 37 and the mother of a newborn son – could be sentenced to up to 20 years in prison.
Shortly after 3 p.m., Holmes slowly walked to the grandstand in front of a delighted courtroom filled with spectators and jurors, all wearing masks. She began her nearly hour-long testimony by recounting her early years as a student at Stanford University and her interest in disease detection, culminating in her decision to drop out of school as a 19-year-old and later found the startup known as Theranos.
As the company took shape, its vision took off. Eventually, Theranos developed a device, called the Edison, that could supposedly scan for hundreds of health problems with a few drops of blood. Existing tests generally require one vial of blood each, making it both slow and impractical to run more than a handful of patient tests at a time.
If it had worked as promised, Edison could have revolutionized health care by making it easier and cheaper to scan for early signs of illness and other health problems. Instead, jurors heard footage of Holmes bragging to investors about alleged breakthroughs that later turned out to be untrue.
Testimony and other evidence presented at the trial strongly suggest that Holmes misrepresented alleged deals with major pharmaceutical companies such as Pfizer and the U.S. military, while also concealing recurring problems with Edison.
But the Edison problems first became public knowledge Wall Street Journal released the first in a series of explosive articles in October 2015. A review by Centers for Medicare and Medicaid Services confirmed these issues the following year.
By that time, Holmes and Balwani had raised hundreds of millions of dollars from billionaire investors like media mogul Rupert Murdoch and the Walmart Walton family and made deals with Walgreens and Safeway to perform blood tests at their pharmacies. These investments at one point estimated Theranos at $ 9 billion, giving Holmes a fortune of $ 4.5 billion – on paper – in 2014.
Evidence presented during the trial also revealed that Holmes had distributed financial projections that encouraged privately owned Theranos to generate $ 140 million in revenue in 2014 and $ 990 million in revenue in 2015, while still having a profit. A copy of Theranos’ 2015 tax return, presented as part of the lawsuit, showed the company had revenue of less than $ 500,000 that year, while reporting accumulated losses of $ 585 million.
Ellen Kreitzberg, a law professor at Santa Clara University who has attended the trial, said she believed the government had made a strong case.
“There’s nothing fancy or sexy about this testimony,” she said. “The witnesses were very careful in their testimony. None of the witnesses seemed to nurture anger or resentment towards her. And therefore they were very powerful witnesses.”
Other witnesses summoned by the government previously included two Theranos laboratory directors, who repeatedly warned Holmes that the blood test technology was wildly unreliable. Prosecutors also questioned two part-time laboratory directors, including Balwani’s dermatologist, who only spent a few hours reviewing Theranos ‘blood test technology in late 2014 and most of 2015. As Holmes’ attorneys noted, part-time laboratory directors were licensed under state rules.
Other key witnesses included former Pfizer employees, former Safeway CEO Steve Burd, and a number of Theranos investors, including a representative of the family investment firm Betsy DeVos, the former Secretary of Education under President Donald Trump. The DeVos family ended up investing $ 100 million.