The Elizabeth Holmes Trial is Finally Here

5 things to know as the Theranos founder makes her debut in court

“The company dominated news cycles from its inception in 2003 to its epic downfall beginning in 2015. Theranos, the blood-testing startup once valued at $9 billion, fell from grace after allegations came to light that its technology was a fraud.”

This is how I started my 2019 Fraud Magazine cover story about Theranos and Tyler Shultz, the whistleblower who helped uncover the fraud at the Silicon-valley technology company. And now, after delays due to Covid-19 pandemic-related complications and the birth of her first child, Elizabeth Holmes, the former founder and CEO of the now-defunct blood-testing startup, finally made her debut in court.

Like many others I was sucked into the drama of the story as I researched how Theranos fell from grace. Wall Street Journal investigative journalist John Carreyrou tells it best in his book, “Bad Blood: Secrets and Lies in a Silicon Valley Startup” and if you want play-by-play coverage of the trial, he will be detailing the spectacle in his podcast, “Bad Blood: The Final Chapter.”

While I may not have the same insider knowledge that Carreyrou does, I did sit down with Shultz for a couple hours in June 2019 to talk about how he unearthed the fraud at Theranos. I’m just as invested in the outcome of this trial as I would be with any other high-profile murder or fraud trial.

Here is a primer to get you caught up as the trial resumes in federal court in San Jose.

In 2003, Holmes, a 19-year-old former Stanford student, started a blood-testing company called Theranos. After raising more than $900 million from venture capitalists and private investors, Theranos would quickly rise to prominence, resulting in a $9 billion valuation at its peak in 2013 and 2014. Holmes, the company’s CEO, claimed Theranos’ technology would streamline blood-testing at a much lower cost than traditional analyses.

1. The blood-testing device: Theranos’ signature blood-testing machine, nicknamed “Edison” after the famous inventor, was designed to pull a few drops of blood via a finger prick stored in what Theranos coined a “nanotainer” — a vast change from the usual multiple test tubes of blood drawn from patients’ arms. Shultz told me in our 2019 interview that the Edison boxes were “pieces of crap” and that they weren’t achieving low enough “coefficient of variation” — how much each test varied from others. The experiments were simply discarded and repeated until the desired number was achieved.
2. Shultz’s whistleblower attempt: In 2014, Shultz contacted the New York State Department of Health because Theranos was running proficiency testing patient samples of blood on its devices and then on third-party equipment that it had purchased from Siemens. Sometimes, the results would differ by more than 300%. “That was concerning to me because we actually developed tests on the Theranos devices to match the Siemens’ device,” he said. “What was also scary was that we didn’t report the results from the Theranos devices. We only gave the New York State Department of Health results from the third-party equipment. Which didn’t make sense because we ran the patient samples on the Theranos devices.”
3. Intimidation and threats: In 2015, after connecting with Carreyrou, Shultz sent him an email exchange he’d had with Holmes and Theranos’ former president and COO, Ramesh “Sunny” Balwani. In April 2014, Shultz had emailed Holmes to point out poor scientific processes and quality control failures. After several days, he received a response from Balwani, which began: “We saw your email to Elizabeth. Before I get into specifics, let me share with you that had this email come from anyone else in the company, I would have already held them accountable for the arrogant and patronizing tone and reckless comments.” Shultz’s grandfather—former U.S. statesman George Shultz and a member of the Theranos board at the time—also attempted to convince his grandson to stand down.
4. The charges: Holmes, now 37, faces a total of 12 charges — two counts of conspiracy to commit wire fraud and 10 counts of wire fraud — for allegedly engaging in a multi-million dollar fraud scheme alongside Balwani. She faces up to 20 years in prison and a $250,000 fine for allegedly deceiving investors, doctors, and patients from 2010 to 2016. Holmes and Balwani have both pleaded not guilty and are standing trial separately (Balwani’s trial is set to begin January 2022).
5. Holmes’ possible defense: Holmes’ lawyers previously suggested they may seek a “mental disease” defense in her case. However, just before the start of the trial, unsealed court documents show she has claimed that she was psychologically, emotionally, and sexually abused by Balwani, who was her romantic partner at the time of the alleged abuse. Holmes’ lawyers said her “deference” to Balwani led her to believe allegedly false statements about parts of Theranos that he controlled, including a claim about a partnership with drugstore chain Walgreens. Balwani denied allegations of abuse in a 2019 court filing.

On Sept. 2 the court concluded jury selection and it includes five women and seven men. Holmes’ lawyers said in recently unsealed court filings that she will “likely” testify about the abuse she claims she experienced from Balwani.

How will this all play out? It remains to be seen. Prosecutors have filed a proposed witness list of 280 people, including 11 patients who say they were impacted by the company’s inaccurate test results. Experts say the trial is likely to last 13 weeks. I know I’ll be tuning in every step of the way. Will you?