Elizabeth Holmes was a star entrepreneur whose trial for defrauding traders in her blood-testing start-up turned one of many largest Silicon Valley spectacles for the reason that introduction of the iPhone. Her conviction in January marked a uncommon second within the boastful historical past of know-how: A chief government was held criminally liable for mendacity.
For a lot of her trial, Ms. Holmes sought to blame her deputy and former boyfriend, Ramesh Balwani, for what went mistaken at her firm, Theranos. Now Mr. Balwani, who is thought as Sunny, could have the chance to reply in his personal fraud trial. Jury choice was scheduled to start on Wednesday in the identical federal courtroom in San Jose, Calif., the place Ms. Holmes’s destiny was decided.
The first trial supplied, and the second trial guarantees, an in depth examination of an uncommon relationship between a younger girl and an older man. Ms. Holmes and Mr. Balwani had a secret romance that was additionally knowledgeable alliance, an thrilling promise to enhance well being take care of thousands and thousands that as a substitute put sufferers in danger. Their blood testing didn’t work, even as they assumed new and higher know-how would rescue them from their reckless claims.
Mr. Balwani, 57, is a former software program government who made a fortune throughout the late Nineteen Nineties dot-com increase. He befriended Ms. Holmes once they have been learning in China the summer season earlier than her freshman yr at Stanford University. Their romantic relationship finally led him to be part of Theranos in 2009 as president and chief working officer.
He was the alternative of a star, barely talked about within the glowing cover stories about Ms. Holmes and Theranos. By all proof, nonetheless, Mr. Balwani and Ms. Holmes, now 38, have been a crew that dominated the start-up tightly. Few knew they have been in a relationship.
“She was the Wizard of Oz, dazzling the investors and media, but he was the one behind the curtain working the machinery,” mentioned Reed Kathrein, a San Francisco lawyer who efficiently sued Ms. Holmes and Theranos in 2016 on behalf of traders. He mentioned he was assured the prosecution would present that “he knew she was lying and never put a stop to it.”
“He knew everything,” Mr. Kathrein mentioned.
Mr. Balwani’s trial will go over acquainted floor. He faces the identical 12 prices that Ms. Holmes initially confronted. (One rely was dropped after a procedural error by the federal government.) He has pleaded not responsible.
Ms. Holmes was discovered responsible on 4 counts of defrauding traders and acquitted on 4 counts of defrauding sufferers; the jury deadlocked on the remaining three investor counts. She shall be sentenced within the fall.
The consensus amongst authorized consultants following the case is that the federal government’s profitable prosecution of Ms. Holmes will give it a lift in Mr. Balwani’s trial.
“The government has had the opportunity to do a full run, so they will have learned what worked and what didn’t,” mentioned James Melendres, a former federal prosecutor who represents company shoppers.
Prosecutors, Mr. Balwani and his attorneys declined to remark. Through her attorneys, Ms. Holmes declined to remark.
While Ms. Holmes’s background has been extensively documented, comparatively little is thought about Mr. Balwani, together with why he’s referred to as Sunny.
An skilled software program government, he had the nice luck to have his start-up bought by a bigger agency proper earlier than the 2000 inventory market crash, yielding him about $40 million. He obtained a divorce, went again to college to get an M.B.A. and examine laptop science, and purchased fancy vehicles. (His license plate, in a nod to Karl Marx, was DASKPTL.) When he joined Theranos, he invested thousands and thousands of his personal cash in it, his attorneys have mentioned.
At Theranos, he had a fame for being a harsh, demanding boss who turned more and more paranoid that staff would steal commerce secrets and techniques that might supposedly revolutionize blood testing. In an incident recounted by the journalist John Carreyrou, Mr. Balwani referred to as the police to chase after a departing worker, explaining that the previous employee “stole property in his mind.”
Mr. Balwani’s attorneys are anticipated to emphasize his lack of expertise in biomedical units, which have been on the coronary heart of Theranos’s claims. Legal consultants mentioned he was unlikely to testify. He’d probably be much less sympathetic on the witness stand than Ms. Holmes, a new mom who played up her youth and arrived in courtroom holding fingers along with her mom and her companion.
“He doesn’t have those optics in his favor,” mentioned Ann Kim, a former federal prosecutor who represents corporations present process authorities investigations.
When Ms. Holmes took the stand in her protection, she tried to upend the narrative round her spectacular downfall, introducing bombshell allegations of abuse in opposition to Mr. Balwani. He denied the accusations, and textual content messages launched throughout the trial depicted a relationship of kind of equals, particularly as the corporate got here beneath stress from whistle-blowers and the media.
“The whole thing that we have to respond to liars is ridiculous,” Ms. Holmes fumed in a single message. Mr. Balwani promised retaliation in opposition to their accusers: “We will also take legal action once this is behind us.”
At the center of the federal government pursuit of each defendants is the argument that they stepped over the road from hype — as widespread in Silicon Valley as respiration — into deceit.
Ms. Holmes might conjure up an alternate actuality with the easy ease of her role model, the Apple co-founder Steve Jobs. Witnesses in her trial testified that she had made folks consider she would change the world. Investors poured practically $1 billion into Theranos.
Mr. Balwani, like most of lifeless humanity, possessed no such presents. There is just one video of him on-line, however it’s revelatory of his model.
In March 2014, when Theranos was rolling out its finger-prick blood testing system in Walgreens in Arizona, Mr. Balwani gave a presentation on “Healthcare Innovation” to the Arizona Senate’s Health and Human Services Committee. He wasn’t initially supposed to do it — Ms. Holmes had to cancel — and didn’t appear to be he was having fun with himself.
Mr. Balwani instructed the legislators that the corporate was engaged on “something that we believe is magical.” He talked about one specific affected person, who “had no limbs.” When this man had to give blood, the needle went into his neck. At the Theranos clinic, nonetheless, “he had a small limb attached to his body” and “we were able to do a finger prick on him.”
How a limbless particular person abruptly gained a limb was not defined. It was virtually as if Mr. Balwani had dared the senators to level out that Theranos was actually magical considering.
They didn’t. Instead, they saluted him.
“I love bringing the free market to our health care system,” mentioned State Senator Kelli Ward, a Republican, who famous that she was a household physician.
(Senator Ward is now the chair of the State Republican Party and was energetic in efforts to overturn native election ends in favor of President Trump. “It’s even clearer now that we need to allow the free market to work,” she mentioned in an e mail.)
Neither the prosecution nor the protection has filed its last checklist of witnesses for Mr. Balwani’s trial. In December, the attorneys filed their proposed questionnaires for potential jurors, together with a preliminary witness checklist.
A handful of potential witnesses from the Holmes trial have been struck for apparent causes, together with Ms. Holmes’s mom, Noel, and former Secretary of State Henry Kissinger, a Theranos board member. Mindy Mechanic, the Holmes crew’s knowledgeable witness on home abuse who finally didn’t take the stand, was additionally eliminated. Mr. Balwani’s authorized crew named consultants on forensic accounting, mental property and SQL databases.
One potential witness for the federal government would make headlines. Ms. Holmes is, nonetheless, exceedingly unlikely to testify, even when doing so would possibly scale back her jail sentence.
“She seems likely to fight this to the end of the earth,” mentioned Jen Kennedy Park, a white-collar protection lawyer.