Theranos Fraud Trial, Part II: The Blame Game Continues

No more long lines or 2 a.m. stakeouts.

The gaggle of cameras is gone, save for the random iPhone or videocam. The handmade signs, do-it-yourself costumes, and fan-obsessed lookalikes have long since disappeared, too.

Even the most diehard true crime fanatics have abandoned their posts.

Alas, the circus outside the federal government building in downtown San Jose, Calif., has packed up and moved along, leaving almost no traces of the eccentric performers (and occasional bedlam) that entranced the world for several months last fall.

The 200 block of South First Street is quiet now, aside from the (usual) sounds of footsteps, car horns, first responder sirens, and cell phone conversations. The silence is equally as discernable inside the Robert F. Peckham Federal Courthouse, where a smattering of journalists sit like sentinels in a fifth-floor courtoom, waiting to report on the day’s proceedings. They barely acknowledge their next story subject when he walks into the courtroom, flanked by attorneys.

The scene at Ramesh “Sunny” Balwani’s federal wire fraud trial is a far cry from the chaotic atmosphere of his former business partner and longtime girlfriend, Elizabeth Holmes. The pair is accused of scamming patients and investors via Theranos, a blood testing company they helmed in the heart of Silicon Valley for more than a half-dozen years. Founded in 2003 by Holmes, the twosome raised more than $700 million from investors (former U.S Secretary of State Henry Kissinger, Oracle founder Larry Ellison, and media mogul Rupert Murdoch among them) by touting “revolutionary” blood testing technology that could quickly and cost-effectively detect more than 240 diseases from a single drop of blood.

That technology, however, was little more than a pipe dream. Theranos whistleblowers, an FDA investigation, and a Wall Street Journal expose revealed the truth behind the company’s proprietary innovation: It was all a sham.

Regulators found major inaccuracies in Theranos’s blood test results, and the Journal discovered the company hid those gaffes by substituting reports from blood draws run on off-the-shelf machines. Evidence in Holmes’s trial showed that Theranos used its proprietary finger-prick blood testing device (dubbed Edison) for just 12 types of patient tests, and those results were unreliable.

Theranos’s lies eventually caught up with Holmes and Balwani, as the U.S. government charged them with 11 felony counts of fraud in 2018 (the company dissolved the following year). Following a three-month trial last fall, a federal jury in January convicted Holmes of four counts of defrauding investors (three counts of wire fraud and one count of conspiracy to commit wire fraud). The 38-year-old faces a 20-year prison term at her September sentencing.

Balwani faces the same prison term if convicted. He has pleaded not guilty to the charges and denies conspiring with Holmes to defraud investors and patients. “Sunny Balwani did not start Theranos,” his attorney, Steve Cazares, told a 12-member jury at the start of Balwani’s trial in late March. “He did not control Theranos.”

Balwani, though, claims he did. In a text to Holmes (reported by NBC), Balwani wrote, “I am responsible for everything at Theranos.”

Everything. Every falsehood, every half-truth, every exaggerated claim.

That certainly explains Holmes’s defense: Balwani is to blame. For everything.

“Who was the most important advisor to you?” Holmes’s attorney Kevin Downey asked at the end of her trial last year.

“Sunny was,” Holmes replied.

Indeed, federal prosecutors have spent the last two months painting Balwani as a willing participant who often orchestrated the lies propagated by Theranos. He joined the firm as its president/chief operating officer (COO) in 2009 despite lacking professional experience in science and/or health. As COO, he was in charge of the company’s daily operations, and former employees have described his management style as intimidating at best.

”After Balwani joined the company, he and Elizabeth Holmes began making grandiose spectacular claims about Theranos’s capabilities and its accomplishments,” Assistant U.S. Attorney Robert Leach told the jury deciding Balwani’s fate. When those claims never materialized and Theranos began running out of money, Leach said the pair “decided to deceive and cheat.”

But which one instigated the deception? Was it Holmes, the Steve Jobs-like wannabe who once told the SEC she was “the ultimate decision-maker” for Theranos, or was it Balwani, a dedicated workaholic (“I worked six years day and night to help you…” he wrote in a text) and—according to Holmes—regularly doled out physical and emotional abuse?

“He told me that I didn’t know what I was doing in business, that my convictions were wrong, and if I followed my instincts, I was going to fail,” Holmes testified at her trial. “He impacted everything about who I was.”

Balwani vehemently denies the abuse allegations, calling them “false and inflammatory” in court documents. Moreover, many former Theranos employees and investors have described Holmes as visibly hands on, present, and in control of her company, with Balwani appearing to defer to her more often than not.

Truth or lies? The answer may never be known.