Theranos Founder Elizabeth Holmes' Lawyers Claim 'Failure Is Not a Crime' as Fraud Trial Begins

Opening statements kicked off the federal fraud trial of Elizabeth Holmes on Wednesday, with prosecutors claiming the founder of blood-testing startup Theranos misled investors about the company’s ability to diagnose hundreds of medical conditions from a single drop of blood.

Prosecutors said Holmes lied about her company’s blood-testing technology for money, while the defense presented her as a naive businesswoman who failed to achieve her goals and placed her trust in the wrong person.

Holmes faces 10 counts of wire fraud and two counts of conspiracy to commit wire fraud and could face up to 20 years in prison and as much as a $3 million fine. She has pleaded not guilty and is expected to argue that domestic abuse, including a pattern of coercive control, by her former boyfriend and her second-in-command at the company, Ramesh “Sunny” Balwani, impaired her mental state at the time of the alleged crimes. Balwani has denied the accusations in court filings.

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Prosecutors spoke first at the San Jose courthouse, claiming Holmes deceived investors about the readiness and capabilities of Theranos’ technology. “This is a case about fraud and about lying and cheating to get money,” said lead prosecutor Robert Leach, an assistant U.S. attorney for the Northern District of California. “The scheme brought her fame, it brought her honor, and it brought her adoration.”

Leach alleged that Holmes sought out partnerships with pharmacies because the company was running out of money in 2009. The following year, he said, Holmes and Balwani solicited investments from Walgreens and Safeway based on the lie that Theranos’ testing machines worked, when they did not. “Theranos’ miniature blood analyzer could not run any blood test in real-time for less than the cost of traditional labs,” he said. “They never could.”

Holmes’ defense sought to position her as a well-intentioned but naive businesswoman who had genuinely tried to change healthcare for the better but failed. “Elizabeth Holmes did not go to work every day intending to lie, cheat and steal,” said Lance Wade, an attorney for Holmes. She had worked hard to make lab testing cheaper and easier, he argued, but had underestimated the challenges she faced.

“Failure is not a crime,” said Wade. “Trying your hardest and coming up short is not a crime. By the time this trial is over, you will see that the villain the government just presented is actually a living, breathing human being who did her very best each and every day. And she is innocent.”

Wade also addressed Holmes’ relationship with Balwani. “You’ll hear that trusting and relying on Mr. Balwani as her primary adviser was one of her mistakes,” he said. He said Balwani’s drive and high demands helped the company advance but that he had a temper and was known to “lash out.”

He then alluded to the allegations of abuse against Balwani. “Like with most personal relationships, there was another side to it that most people never saw,” he said. “You’ll have to wait for all of the evidence and then decide how to fairly view that relationship in full.”

The trial is expected to last 13 weeks.

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