Elizabeth Holmes' ex-boyfriend to stand trial in Theranos case

Elizabeth Holmes was a star entrepreneur whose trial for defrauding investors in her blood-testing startup has become one of Silicon Va...


Elizabeth Holmes was a star entrepreneur whose trial for defrauding investors in her blood-testing startup has become one of Silicon Valley’s biggest shows since the introduction of the iPhone. His condemnation January marked a rare moment in boastful tech history: a chief executive was held criminally liable for lying.

For a large part of his trialMrs. Holmes sought to blaming her assistant and former boyfriend, Ramesh Balwani, for what went wrong at his company, Theranos. Now Mr Balwani, known as Sunny, will have the opportunity to respond in his own fraud trial. Jury selection was scheduled to begin Wednesday in the same federal courtroom in San Jose, Calif., where Ms. Holmes’ fate was determined.

The first trial offered, and the second promises, an in-depth examination of an unusual relationship between a young woman and an older man. Ms. Holmes and Mr. Balwani had a secret romance that was also a professional alliance, an exciting promise to improve healthcare for millions that instead put patients at risk. Their blood tests didn’t work, even as they assumed that new and better technology would save them from their reckless claims.

Mr. Balwani, 57, is a former software executive who made his fortune in the late 1990s with the dot-com boom. He befriended Ms Holmes when they were studying in China the summer before his freshman year at Stanford University. Their romantic relationship eventually led to him joining Theranos in 2009 as President and Chief Operating Officer.

He was the opposite of a star, barely mentioned in the glossy covers about Mrs. Holmes and Theranos. Clearly, however, Mr Balwani and Ms Holmes, now 38, were a team that closely ran the start-up. Few people knew they were in a relationship.

“She was the Wizard of Oz, dazzling investors and the media, but he was the one working behind the curtain,” said Reed Kathrein, a San Francisco attorney who successfully sued Ms. Holmes and Theranos in 2016 at the name of investors. He said he was confident the prosecution would show that “he knew she was lying and never stopped it.”

“He knew everything,” Mr. Kathrein said.

Mr. Balwani’s trial will take place on familiar ground. He faces the same 12 charges Ms Holmes originally faced. (One charge was dropped after a procedural error by the government.) He pleaded not guilty.

Ms. Holmes was convicted of four counts of defrauding investors and acquitted of four counts of defrauding patients; the jury is deadlocked on the other three investor counts. She will be sentenced in the fall.

The consensus among legal experts following the case is that the government’s successful prosecution of Ms Holmes will give it a boost in the trial of Mr Balwani.

“The government has had the opportunity to go full circle, so it will have learned what worked and what didn’t,” said James Melendres, a former federal prosecutor who represents client companies.

Prosecutors, Mr. Balwani and his lawyers declined to comment. Through her lawyers, Ms Holmes declined to comment.

Although Ms. Holmes’ background has been widely documented, relatively little is known about Mr. Balwani, including why his name is Sunny.

An experienced IT executive, he was lucky enough to have his start-up taken over by a larger company just before the stock market crash of 2000, earning him around $40 million. He got divorced, went back to school to get an MBA and study computer science, and bought fancy cars. (His license plate, in a nod to Karl Marx, was DASKPTL.) When he joined Theranos, he invested millions of his own money in it, his lawyers said.

At Theranos, he had a reputation as a tough, demanding boss who grew increasingly paranoid that employees were stealing trade secrets that were supposed to revolutionize blood testing. In an incident recounted by journalist John Carreyrou, Mr Balwani called the police to chase after a departing worker, saying the former worker “stole property from his mind”.

Mr. Balwani’s lawyers should point to his lack of experience in biomedical devices, which was central to Theranos’ claims. Legal experts said he was unlikely to testify. He would probably be less sympathetic on the witness stand than Mrs. Holmes, a new mother who played his youth and arrived in court hand in hand with her mother and her partner.

“He doesn’t have those optics in his favor,” said Ann Kim, a former federal prosecutor who represents companies under government investigation.

When Ms Holmes spoke in her defence, she attempted to turn the tale of her dramatic fall on its head, presenting explosive allegations of abuse against Mr. Balwani. He denied the charges and text messages released during the trial depicted a more or less equal relationship, especially as the company came under pressure from whistleblowers and the media.

“All we have to answer to liars is ridiculous,” Ms Holmes fumed in a post. Mr Balwani vowed retaliation against their accusers: “We will also take legal action once this is behind us.”

At the heart of the government’s prosecution of the two defendants is the argument that they crossed the line of hype — as common in Silicon Valley as breathwork — into deception.

Ms. Holmes could conjure up an alternate reality with the effortless ease of his model, Apple co-founder Steve Jobs. Witnesses to her trial said she made people believe she was going to change the world. Investors have invested nearly $1 billion in Theranos.

Mr. Balwani, like most dull humanity, possessed no such gifts. There’s only one video of him online, but it’s indicative of his style.

In March 2014, when Theranos was rolling out its finger-prick blood testing system at Walgreens in Arizona, Mr. Balwani made a presentation on “Innovation in Healthcare” at the Arizona Senate Committee on Health and Human Services. He wasn’t originally supposed to – Mrs Holmes had to cancel – and didn’t look like he was having fun.

Mr Balwani told lawmakers the company was working on “something that we think is magic”. He spoke of one patient in particular, who “had no limbs”. When this man had to donate blood, the needle went into his neck. At the Theranos Clinic, however, “he had a small limb attached to the body” and “we were able to prick his finger.”

How a limbless individual suddenly gained a limb has not been explained. It was almost as if Mr. Balwani had challenged the senators to point out that Theranos was literally wishful thinking.

They do not have. Instead, they saluted him.

“I love bringing the free market into our health care system,” said State Senator Kelli Ward, a Republican, who indicated she was a family doctor.

(Senator Ward is now the state’s Republican Party chairman and was actively involved in efforts to overturn local election results in favor of President Trump. “It’s even clearer now that we need to allow the free market to work. “, she said in an email. )

Neither the prosecution nor the defense have filed their final list of witnesses for Mr. Balwani’s trial. In December, the attorneys filed their proposed questionnaires for potential jurors, including a preliminary list of witnesses.

A handful of potential witnesses in the Holmes trial were hit for obvious reasons, including Ms. Holmes’ mother, Noel, and former Secretary of State Henry Kissinger, a Theranos board member. Mindy Mechanic, the Holmes team’s expert witness on domestic abuse who ultimately did not speak, was also removed. Mr. Balwani’s legal team has appointed experts in forensic accounting, intellectual property and SQL databases.

A potential government witness would make headlines. It is, however, extremely unlikely that Ms Holmes will testify, although it could reduce her prison sentence.

“She seems likely to fight to the ends of the earth,” said Jen Kennedy Park, a white-collar defense attorney.

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Newsrust - US Top News: Elizabeth Holmes' ex-boyfriend to stand trial in Theranos case
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