Elizabeth Holmes chose fraud over Theranos, prosecutors say

Elizabeth Holmes faces overwhelming evidence that she chose dishonesty and fraud to build up her blood-testing company Theranos Inc., a prosecutor told jurors at the close of her criminal trial.

Assistant U.S. Attorney Jeff Schenk argued Thursday that Holmes “had a choice to make” when Theranos was running out of money in 2013 and 2014 and she was begging a banker to clear a check to make payroll.

Instead of watching the startup “slowly fail,” she “made the decision to defraud her investors,” Schenk said. “She chose to be dishonest with investors and patients.”

Closing arguments in the trial that began in early September are the last chance for government and defense lawyers to sway the eight men and four women on the San Jose, California, jury before they begin deliberating. The jurors must decide whether the 37-year-old entrepreneur is guilty of fraud and conspiracy charges filed in 2018, the same year Theranos collapsed after previously reaching a valuation of $9 billion.

Lawyers for Holmes are set to make their closing arguments after the government finishes, either later Thursday or possibly Friday. She faces as long as 20 years in prison if convicted on charges that she deceived investors and patients about her company’s capabilities.

Schenk began his closing by reviewing for the jury the testimony presented over 10 weeks by more than two dozen government witnesses. That included highlights of the accounts provided by people like Erika Cheung, a former Theranos employee and whistle-blower who was also a source for former Wall Street Journal reporter John Carreyrou’s series of stories in 2015 that exposed the failings at Theranos that ultimately led to its downfall.

If Holmes had been honest about Theranos and its prospects, she wouldn’t have told investors that the company’s technology was endorsed by big pharmaceutical companies, or that its blood-testing devices were being used by the military, Schenk said.

‘Built on Fraud’

The foundation of the relationship between Theranos and Walgreens, which agreed to use the devices in its pharmacies, “was built on fraud,” Shenk said. She knew the relationship was “destined to fail because the technology can’t do what she says it can do,” Schenk said. It’s “really only a matter of time” until Walgreens realizes it’s been defrauded, he said.

Holmes testified in her defense for seven days, acknowledging she made errors and attempting to pin mismanagement of the startup’s finances and lab operations on her former boyfriend and Theranos President Ramesh “Sunny” Balwani, who she also accused of verbal and sexual abuse.

Balwani, who faces a separate trial on the same fraud charges in February, has pleaded not guilty and has denied the abuse allegations.

Holmes entered the courthouse as she has almost every day, holding hands with her mother. Inside, they embraced repeatedly. Holmes also hugged and got a pat on the back from her partner Billy Evans. The two had a baby boy in July.

The case is U.S. v. Holmes, 18-cr-00258, U.S. District Court, Northern District of California (San Jose).