Fraud Trial Against Elizabeth Holmes Partner at Theranos Comes to an End

SAN JOSE, Calif. — In a harsh-worded closing argument, prosecutors said Tuesday that former Theranos COO Ramesh “Sunny” Balwani “was not a victim, he was the perpetrator of the fraud” in the company’s downfall, while his lawyer criticized the government’s case as inconsistent.

The closing remarks ended a three-month trial in which the government alleged that Balwani acted with his ex-girlfriend and business partner, Theranos founder Elizabeth Holmes, in a multimillion-dollar scheme to defraud investors and patients.

“Mr. Balwani had a choice to make,” said Assistant US Attorney Jeffrey Schenk. “He could watch Theranos go bankrupt, he could watch his girlfriend’s business collapse, or he could pursue it differently. Mr. Balwani at the time knew that Theranos was not generating money and would not generate any income by being honest with the people.”

In his final four-hour argument, Schenk relentlessly attacked Balwani’s credibility at Theranos and tied him to various parts of the deal.

“Together, with Elizabeth Holmes, they created two schemes,” Schenk said. “Two plans to defraud these groups of individuals. They decided to defraud investors in Theranos and defraud patients. And it’s because of those decisions that Mr. Balwani made that we’ve been together since March.”

Balwani, 56, faces ten counts of wire fraud and two counts of conspiracy to commit wire fraud. He, like Holmes, pleaded not guilty. Balwani joined Theranos in 2009, when the company was struggling financially. He intervened by providing a $13 million loan.

Six months later, Balwani became director of operations and president of Theranos and eventually took over the lab’s operations. Holmes and Balwani went to great lengths to keep their romance a secret from employees, investors and business partners.

At one point, Balwani’s stake was worth $500 million, according to his lawyers, and the software executive never sold a share. His personal and professional relationship with Holmes ended in 2016, just as Theranos began to unravel.

During closing arguments, Schenk ran the jury through all 24 government witnesses, summarizing their testimony while displaying her photo on the courtroom monitor.

The government’s case against Balwani was very similar to the case against Holmes, who was convicted in January of four counts of fraud and conspiracy to commit wire fraud against investors. As Holmes awaits sentencing in September, her lawyers have filed a motion asking the judge to overturn the verdict and acquit her.

Unlike Holmes, Balwani did not testify in his own defense. Balwani’s lawyers presented a much shorter case, calling two witnesses: an Arizona doctor who used Theranos blood analyzers and an information technical consultant who testified about a missing database that contained patient test results.

Schenk reminded jurors that Balwani told investors that Theranos would generate $1 billion in revenue by 2015 as a result of a deal with Walgreens.

“He knows he cheated on Walgreens in the business relationship,” Schenk said. “And it’s only a matter of time before that house of cards collapses.”

The drugstore chain was a key partner for Theranos, deploying wellness centers in 40 of its Arizona stores. “Having the relationship with Walgreens was helpful in recruiting investors,” Schenk said. Walgreens ended its partnership with the start-up in 2016.

Prosecutors claim that Balwani was responsible for the high financial projections that investors relied on. Schenk said that when investors questioned Theranos’ claims, Balwani often reassured them that the technology worked.

“Because what is fatal to fraud?” Schenk asked the jury. “The truth.”

The defense, which began its closing argument on Tuesday afternoon, tried to punch holes. “The government decided not to show the whole story because it was inconsistent with the narrative they wanted to tell,” said Jeffrey Coopersmith, Balwani’s attorney.

Coopersmith marked the all-star group of powerful board members and investors that Holmes attracted.

“She was brilliant and charismatic – she had to be,” Coopersmith said. “Mr. Balwani would have seen in Elizabeth Holmes the same thing those people saw. And you wonder why he was attracted to Theranos, why he was attracted to Mrs. Holmes.”

Coopersmith told the jury that Balwani “put his heart and soul into Theranos, worked tirelessly year after year to make the company a success”, later adding that “the government has not proved that Mr. Balwani tried to deceive or deceive anyone”.

Federal prosecutors will have the final word on their rebuttal. The jury is expected to begin deliberations later this week.

“Mr. Balwani wants you to think he’s a victim,” Schenk said. “That he had options and never exercised them, so he left money on the table. He also wants you to think he wasn’t high enough on the org chart to have meaningful conversations with investors and patients. But you know that’s not the truth. “

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