One of Silicon Valley’s most notorious entrepreneurs, Elizabeth Holmes, is scheduled to stand trial on Aug. 31 to defend charges that she used her biotech startup, Theranos, to commit criminal fraud.
Holmes, 37, ever named youngest female self-made billionaire — and featured in Yahoo Finance’s new documentary “Valley of Hype,” streaming August 30 on Yahoo Finance — faces federal charges of wire fraud and conspiracy to commit wire fraud linked to the blood-testing company’s collapse.
The jury selection will begin on August 31, and the opening statements are scheduled for September 8.
A central question at the trial will be whether Holmes and her former romantic partner and co-defendant, ex-president and COO of Theranos, Ramesh “Sunny” Balwani, have been using Theranos to intentionally defraud private investors to support the venture, and intentionally patients. scammed to make purchases. unreliable blood tests.
Between 2013 and 2015, Theranos raised more than $700 million from private investors and accepted payments from patients who purchased the blood tests offered at certain Walgreens (WBA) stores in Arizona and California.
How much due diligence has actually been performed?
“But this wasn’t, and shouldn’t have been such ‘dumb money’ – it came from some very brilliant and talented people,” Margaret O’Mara, professor of history at the University of Washington and author of “The Code: Silicon Valley and America’s RemakeYahoo Finance said in a July interview.
under Theranos’ investors were some of the world’s wealthiest investors and some of the most important venture capital firms in Silicon Valley, some of whom may testify at Holmes’ trial.
Legendary investor Tim Draper, head of the venture capital firm Draper Fisher Jurvetson, was one of Holmes’ first investors. Other investors included ATA Ventures, hedge fund and investment management company Partner fund management, the Walton Family, the family of the former United States Secretary of Education Betsy DeVos, media mogul Rupert Murdochand Mexican business magnate Carlos Slim.
Theranos and other companies such as We work, O’Mara said, reflect the murky consequences that can come from a global financial system sunk in cash, even when backed by influential financial and political leaders.
“I’m interested in how the people who were both on the board of Theranos and invested in the company were persuaded to put their money and reputation on the line for this operation,” O’Mara said. “How much due diligence was actually carried out? Was the advice of financial analysts disregarded? How much was the deception of Holmes and Balwani, and how much was the irrational exuberance of advisers and investors?”
The former CEO and her co-defendant, Balwani, were indicted by a federal grand jury in 2018, but the trial was repeatedly delayed by the coronavirus pandemic and again by Holmes’ pregnancy. In 2020, the court granted a request to try the two defendants separately.
According to prosecutors, Holmes misrepresented to investors and patients that Theranos’ patented analyzer known as the TSPU, Edison or miniLab could perform a full range of accurate and reliable diagnostic tests using small blood samples drawn from a finger prick. .
In 2015, then-Wall Street Journal reporter, John Carreyrou publicly exposed for the first time that the device could not run as many tests as Theranos claimed. Although the company’s funding took it to a valuation of $9 billion and “unicorn” status, it fell under regulatory and legal pressure in 2018.
Holmes faces a maximum prison sentence of 20 years and pleaded not guilty to the charges.
Reed Kathrein, a lawyer who settled late-stage civil proceedings against Holmes on behalf of two minority investors, said that while prosecutors must prove the elements of the alleged crimes beyond reasonable doubt, the government and Holmes disagree on how high a bar should be set. his set.
The government, Kathrein said, “claims it only needs to show two simple elements of the conspiracy statute”, while Holmes wants “a lot more specificity”.
In Yahoo Finance’s “Valley of Hype,” Kathrein said that while the primary blame lies with Holmes and Balwani, he owes the dedication of the company’s first board member, Stanford University chemical engineering professor emeritus, Channing Robertson, and the dedication of Walgreens, who a $140 million deal to place Theranos’ blood tests in its drugstores.
“I don’t know what the hell was going on” [Robertson] … why he claims to be completely in the dark. And he’s the one who brought her around, gained her credibility, and got paid big every year,” Kathrein said in the film.
“I put the big blame on Walgreens,” he added. “But it’s more on the negligence side. I don’t believe Walgreens knew what was going on, but they should have known what was going on.”
‘A completely different process’
Social distancing precautions are expected to slow the pace of the already dragging process.
“It’s going to be a very different process in the COVID time frame, of course,” chairman Edward Davila said at a December hearing, stressing that people who get sick and have to wear proper face coverings in court should plan.
Holmes’ trial is expected to last four months, according to Holmes’ attorney, Lance Wade. Holmes’ defense team has not yet announced whether she will testify for her own defense.
The ex-CEO’s lawyers have repeatedly… expressed concern about the possibility of a media-tainted jury, asking which potential jurors had picked up on coverage of Holmes and Theranos’ demise, including Carreyrou’s reporting.
Balwani is expected to be tried in January 2022. According to Kathrein, the split benefits both defendants.
“The separation of the trials is a big help to both,” Kathrein said. “Elizabeth will be able to blame Sunny… And he can also say that Elizabeth knew everything since her trial will be over.”
Yahoo Finance reached out to Walgreens and former directors of Theranos to request an interview and commentary for the film. All refused with the exception of former board member Dan Warmenhoven.
Alexis Keenan is a legal reporter for Yahoo Finance. Follow Alexis on Twitter @alexiskweed.
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