Elizabeth Holmes was a star entrepreneur whose trial for defrauding buyers in her blood-testing start-up grew to become certainly one of the greatest Silicon Valley spectacles since the introduction of the iPhone. Her conviction in January marked a uncommon second in the boastful historical past of expertise: A chief govt 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 named Sunny, could have the alternative to reply in his personal fraud trial. Jury choice was scheduled to start on Wednesday in the similar 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 lady and an older man. Ms. Holmes and Mr. Balwani had a secret romance that was additionally an expert alliance, an thrilling promise to enhance well being look after thousands and thousands that as an alternative put sufferers in danger. Their blood testing didn’t work, at the same time as they assumed new and higher expertise would rescue them from their reckless claims.
Mr. Balwani, 57, is a former software program govt who made a fortune throughout the late Nineties dot-com increase. He befriended Ms. Holmes after they have been finding out in China the summer time earlier than her freshman yr at Stanford University. Their romantic relationship ultimately led him to be a part of Theranos in 2009 as president and chief working officer.
He was the reverse of a star, barely talked about in the glowing cover stories about Ms. Holmes and Theranos. By all proof, nonetheless, Mr. Balwani and Ms. Holmes, now 38, have been a group 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 buyers. 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 similar 12 fees that Ms. Holmes initially confronted. (One rely was dropped after a procedural error by the authorities.) He has pleaded not responsible.
Ms. Holmes was discovered responsible on 4 counts of defrauding buyers and acquitted on 4 counts of defrauding sufferers; the jury deadlocked on the remaining three investor counts. She can be sentenced in the fall.
The consensus amongst authorized specialists following the case is that the authorities’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.
Elizabeth Holmes’s Epic Rise and Fall
The Theranos founder’s story, from a $9 billion valuation to a fraud conviction, has come to symbolize the pitfalls of Silicon Valley’s tradition.
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 understood about Mr. Balwani, together with why he’s referred to as Sunny.
An skilled software program govt, he had the good 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 bought a divorce, went again to faculty to get an M.B.A. and research pc science, and acquired 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 grew to become more and more paranoid that staff would steal commerce secrets and techniques that may 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 former employee “stole property in his mind.”
Mr. Balwani’s attorneys are anticipated to emphasize his lack of expertise in biomedical gadgets, which have been at the coronary heart of Theranos’s claims. Legal specialists mentioned he was unlikely to testify. He’d almost definitely be much less sympathetic on the witness stand than Ms. Holmes, a brand new mom who played up her youth and arrived in courtroom holding arms together with her mom and her accomplice.
“He doesn’t have those optics in his favor,” mentioned Ann Kim, a former federal prosecutor who represents firms 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 towards Mr. Balwani. He denied the accusations, and textual content messages launched throughout the trial depicted a relationship of roughly equals, particularly as the firm got here underneath 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 towards their accusers: “We will also take legal action once this is behind us.”
At the coronary heart of the authorities pursuit of each defendants is the argument that they stepped over the line from hype — as frequent in Silicon Valley as respiration — into deceit.
Ms. Holmes may 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 almost $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 advised the legislators that the firm was engaged on “something that we believe is magical.” He talked about one explicit 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 all of the sudden gained a limb was not defined. It was nearly as if Mr. Balwani had dared the senators to level out that Theranos was actually magical pondering.
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 lively 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 electronic mail.)
Neither the prosecution nor the protection has filed its ultimate 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 group’s professional witness on home abuse who finally didn’t take the stand, was additionally eliminated. Mr. Balwani’s authorized group named specialists on forensic accounting, mental property and SQL databases.
One potential witness for the authorities would make headlines. Ms. Holmes is, nonetheless, exceedingly unlikely to testify, even when doing so would possibly cut 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.