Theranos' Holmes cross-examined over relationship with romantic and business partner

[December 01, 2021]  By Jody Godoy

SAN JOSE, Calif. (Reuters) -Theranos founder Elizabeth Holmes on Tuesday faced prosecutors' questions about her relationship with former romantic and business partner Ramesh "Sunny" Balwani, a day after Holmes said that he had been abusive and controlling.

Holmes, 37, testified on Monday that the decade-long relationship had a pervasive impact on her life during the time when prosecutors say she committed fraud.

During Holmes' emotional testimony, jurors saw a different side of the startup founder from the confident business executive that prosecutors say defrauded investors and patients. On Monday she said she poured herself into the blood-testing company she founded at age 19 after being raped at college. Then when she left for Theranos, Balwani had been sexually and verbally abusive and told her she would not succeed without following his advice, she said.

On Tuesday, before questioning Holmes on statements to investors that go to the core of the allegations against her, prosecutor Robert Leach examined the relationship with Balwani, who has denied abuse.

Leach had Holmes read aloud texts between her and Balwani that he said showed them expressing love for each other.

"I prayed from the bottom of my heart for you," Balwani wrote in one exchange in 2015, which Holmes read, appearing to brush away a tear.
 

Prosecutors say Holmes lied about the effectiveness of the technology at the now-defunct startup, claiming it could run diagnostic tests more quickly and accurately than traditional lab testing.

The former Silicon Valley executive has pleaded not guilty to nine counts of wire fraud and two counts of conspiracy.

Holmes testified last week that Balwani was in charge of certain aspects of the company, including financial projections that were shared with investors.

She said on Monday that she did not question him as she should have, because he had taught her "everything I thought I knew about business."

Prosecutor Leach on Tuesday also walked Holmes through text exchanges where Balwani, who was Theranos' chief operating officer, expressed opinions about problems at the company. Holmes agreed that Balwani had not hidden his views from her.

In court filings, Balwani, 56, has "categorically" denied abuse allegations, calling them "false and inflammatory." An attorney for Balwani did not reply to a request for comment on Monday.

Balwani, who is also charged with fraud and will stand trial separately, has pleaded not guilty.

Theranos founder Elizabeth Holmes leaves after attending her fraud trial at federal court in San Jose, California, U.S. November 22, 2021. REUTERS/Brittany Hosea-Small/File Photo

Once valued at $9 billion, Theranos vaulted Holmes to Silicon Valley stardom. The company collapsed after the Wall Street Journal published a series of articles starting in 2015 that suggested its devices were flawed and inaccurate. She was indicted in 2018.

Holmes admitted on Tuesday under cross-examination that she had been advised by lawyers that superlative descriptions of the Theranos' technology, such as that its methods resulted in the "highest levels of accuracy," should be toned down to avoid legal problems. But, Leach pointed out, months later, those same phrases were still used in investor presentations.

Leach also questioned Holmes about actions Theranos had taken in response to then-Wall Street Journal reporter John Carreyrou's news stories about Theranos' technology. Holmes said that the company's response to his reporting was a "disaster" and admitted trying to quash it.

Carreyrou, who was in the courtroom on Tuesday, authored "Bad Blood," which chronicles the rise of the company that Holmes started at age 19 and describes retaliation against former employees after they raised concerns about Theranos devices.

Holmes on Tuesday denied trying to retaliate against two of those employees. But she admitted that concerns expressed by former Theranos lab employee Erika Cheung, who was a witness for the prosecution, were later validated by a regulator's report on Theranos' operations.

"I sure as hell wish we had treated her differently and listened to her," she said of Cheung.

Holmes' cross examination is scheduled to resume on Dec. 7.

(Reporting by Jody Godoy in San Jose, Calif; Editing by Noeleen Walder, Grant McCool, Peter Cooney and Sandra Maler)

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