SAN JOSE — Former Theranos chief executive Elizabeth Holmes testified that her ex-romantic and business partner wanted to make her into a “new Elizabeth."
These descriptions of businessman Sunny Balwani’s allegedly controlling behavior marks the introduction of an argument the defense has long hinted at: that Homes’s history of abuse negatively affected her ability to make decisions, and is key to understanding what happened at the blood testing startup and why she should not be held at fault.
Holmes became teary-eyed on the stand as she described dropping out of Stanford, in part, because she had been raped. Shortly after, she said, she struck up a relationship Balwani, who would go on to become a Theranos executive.
Balwani had a specific idea of how to make her into a good entrepreneur, Holmes testified, including only eating certain foods, not sleeping much and having a “very disciplined and intense lifestyle.”
When she failed to live up to his expectations, Holmes said, Balwani would yell at her and sometimes force her to have sex with him when she didn’t want to because “he would say to me that he wanted me to know that he still loved me.”
Holmes is in her fourth day of testimony and is facing charges that she misled investors about her company’s technology. In documents filed before the trial began, Holmes’s lawyers indicated she would argue that Balwani abused her. In court documents, Balwani has denied the claims.
Before she testified about her relationship with Balwani, Holmes stuck to her defense that she was acting in good faith while she ran the start-up and said that she trusted her staff when they told her things were going well in the lab and with the business. When a whistleblower employee raised concerns, she took them seriously and had another employee address them, she said.
The blood-testing start-up said it could run hundreds of diagnostic tests from just a few drops of blood drawn from a patient’s fingertip. But in reality, prosecutors and government witnesses said over weeks of testimony, the device was used only for a limited number of tests and was often unreliable. Theranos raised about $900 million from investors, and Holmes rose to start-up stardom.
In Holmes’s first three days testifying, the disgraced founder said she believed what she told investors and business partners about the company’s portable blood-testing device. While admitting to some mistakes — such as adding pharmaceutical company logos to a report the start-up compiled — she has indicated that she trusted the employees who reported to her and that she thought she was acting in good faith.
Holmes is charged with 11 counts of wire fraud and conspiracy to commit wire fraud for allegedly misleading investors and patients about Theranos’s technology and financials. She has pleaded not guilty.
In one of the biggest trials in recent history here in Silicon Valley, Holmes‘s somewhat surprising decision to testify on her own behalf has prompted a new frenzy of interest in the spectacular blowup of the blood testing start-up. In 2015, the Wall Street Journal broke the news that some of the company’s technologies did not work as expected. From there, Theranos unraveled over the course of several years, dissolving in 2018. A documentary, book and podcast have since detailed what went wrong.
Holmes herself has helped drive that attention. A Stanford University dropout, she was one of a few young, female entrepreneurs to skyrocket to fame. She graced the covers of Fortune, Forbes and Inc, and did onstage interviews and a TedMed Talk sporting her signature low voice and confident body language. She frequently wore her hair in a bun and modeled her wardrobe in the style of Steve Jobs, with black turtlenecks.
Those hoping to attend the trial to hear her speak have been arriving before 4 a.m. to secure the limited number of seats in the courtroom. Holmes walks toward the crowd each morning, now sporting her softened look of wavy blonde hair and blue or green dresses and matching masks before proceeding through the metal detectors to enter the courtroom.
Prosecutors have alleged that the company relied on traditional lab machines to conduct tests and that the results of tests it did do on its own technology were erratic. All the while, prosecutors say, Holmes was presenting a false image of stability and success to investors and business partners.
Government prosecutors have the burden of proving that Holmes intended to defraud investors and patients. Holmes’s defense team is asking her questions that indicate she believed what she said was true — and therefore did not have the intent to defraud.
Holmes’s lawyers continued asking her questions Monday in support of her defense. Holmes testified that the company worked on a deal to conduct a study with the United States Central Command, which she said would involve testing Theranos devices in Afghanistan. But Theranos never ended up testing the device in Afghanistan because it couldn’t finish the work it needed to do on its devices during the timeline it agreed to, she said.
She said she was disappointed with that outcome but she “continued to believe that we would see it through.”
Theranos’s involvement with the U.S. military is a key point in the government’s case against Holmes, which alleges that Holmes told investors its technology was being used by the military when it really wasn’t.
Holmes also named several other Theranos employees who were in charge of the company’s clinical lab.
Before Holmes resumed testifying Monday, the judge heard arguments from lawyers about whether Holmes can present previous testimony from her former partner Sunny Balwani. The judge has not yet ruled on the issue.
Balwani was Holmes’s romantic and business partner for years, serving as Theranos’s president and chief operating officer. He was charged with the same counts as Holmes, but the two cases were separated after Holmes’s lawyers alleged in pretrial documents that Balwani had abused her.
Balwani, through a lawyer, has denied the allegations. The abuse allegations have not been raised during the trial, but at the end of her testimony last week, Holmes said that Balwani was in charge of preparing the financial projections given to Theranos’s board of directors.
Her testimony so far has indicated that her employees were giving her a positive picture of the company that she relayed to potential investors and partners.
Holmes’s lawyers said in a filing last week that Balwani’s lawyer told them he would invoke his Fifth Amendment rights and refuse to testify if called as a defense witness. Instead, the defense wants to present testimony that Balwani gave during a Securities and Exchange Commission investigation.
The SEC charged both Balwani and Holmes with massive fraud in 2018. Holmes settled the charges, but the SEC has a case pending against Balwani. That case has been paused while his criminal case proceeds. Balwani’s trial is scheduled for January.
In the partially redacted SEC testimony that defense lawyers want to present, Balwani said he took leading roles building the company’s financial modeling and working with retail partners, including Walgreens.
A lawyer for Balwani did not respond to a request for comment.
On the stand last week, Holmes admitted that Theranos was using modified third-party machines but said she didn’t tell outside partners because she was advised to protect trade secrets. She also said she was the one who added logos from two pharmaceutical companies to reports that Theranos sent to investors. Previous witnesses testified that made them think the reports were endorsed by the pharmaceutical companies, but representatives of the two companies denied that they approved the final reports.
Holmes said it was not her intention to make investors think the pharmaceutical companies had prepared the reports but said she now wished she had handled the matter differently.