The power of potential – this is a key theme for the defense in the Elizabeth Holmes federal trial. Her defense team claims she never intended to mislead anyone, and certainly not investors. Rather, as Holmes testified herself, she was focused on what the company could do in five years, 10 years, and beyond. An over-promising marketing campaign is not unusual but one especially troublesome detail is Holmes’ admission that she personally incorporated the Pfizer logo on materials in an attempt to make it appear she had their support. Holmes claimed she thought that past work with the pharmaceutical company justified using the logo on correspondence for a venture they did not endorse.
Wall Street Journal correspondent Sara Randazzo writes: “Former Pfizer scientist Shane Weber, a witness for the government, testified that he wrote a report in 2009 dismissing Theranos’s technology and told the startup that Pfizer had no interest in working with it. He also testified that Pfizer never gave Theranos permission to add its logo to a report that Ms. Holmes presented to investors as validation of the blood-testing company’s technology.”
Holmes has pleaded not guilty to 11 counts of fraud resulting from her false claims about the cutting edge blood-testing technology – she faces charges for defrauding patients and investors.
It may prove difficult for her defense team to contend with the stream of witnesses testifying for the prosecution as well as the taped telephone conversation where Holmes makes false claims about the technology.
“Silicon Valley startups are often perceived to be walking a line between exaggeration and deception in promoting their products. Federal prosecutors … must convince a jury that she didn’t believe her own hype.” Sara Radazzo, WSJ
Randazzo, who has been in the courtroom daily and viewed Holmes’ seven days on the stand, cited that Holmes appears to have a memory issue (which may very well be genuine) with regard to the full extent of some of her conversations with both investors and employees. In particular is a conversation about working with the Walgreens Boots Alliance.
The defense team claims that while Holmes was literally at the helm of the company, she made certain claims because she simply wasn’t involved enough to be aware of some stumbling blocks with the technology.
Also of note is Holmes’ claim of abuse in her relationship with Ramesh “Sunny” Balwani.
While Holmes does not accuse Balwani of directing her to provide specific false information to investors, she has been able to convey the extent to which he controlled her personal life, including what time she was to wake up, how much time she was to devote to meditation, who she could see, and what she was to eat (right down to the specific dressing on her quinoa and broccoli dinner).
Will this matter to the jury? Possibly, if the controlling relationship appears to have bled over into her personal life and impacted her judgments and perceptions. Holmes dropped out of Stamford University (hence, the podcast about her life entitled, “The Dropout”) and she testified that a sexual assault on campus is what led her to leave. However, the judge ruled that all testimony regarding this incident was not to be taken into consideration by the jury.
Holmes reached a settlement with the Securities Exchange Commission regarding civil charges without admitting or denying wrongdoing. She paid a fine of $500,000 and cannot hold a position as a director in a public company for ten years. Holmes, who is now mother to an infant, potentially faces 20 years in prison if convicted of the criminal charges against her.
Closing arguments began Thursday, December 16, 2021.
Sources
Theranos Founder Elizabeth Holmes’s Trial: Prosecutors Must Show Intent