Would you prefer to be a failure, or a fraud? These seem to be Holmes options, judging by the opening statements of Elizabeth Holmes' wire fraud trial.
Here's Robert Leach who is the assistant U.S. Attorney and is prosecuting Holmes' case: It is about fraud, lying, and cheating to obtain money, Leach states. This is a crime on Main Street, and in Silicon Valley. However, Lance Wade, Holmes attorney says that Holmes is just another failed founder: Theranos lost. Ms. Holmes was left with nothing. Failure is not a crime.
Elizabeth Holmes chose to lie because she was short of time and had no money.
The first witness was only just introduced when the trial's first day ended. We have many more witnesses, and a lot of documents ahead. My impression is that Holmes' intent to deceive is a key part of the case and will be a difficult task for the prosecution.
The government says that Theranos did not start his life as a fraud. That's a nice fact. Holmes ran out of money in 2009 and was quickly losing its funds. Worse, Holmes was running out of money with its pharma partners. Schering-Plough and Pfizer, two large drug companies, were having a rough time. Theranos was struggling to make payroll.
Leach stated that Elizabeth Holmes chose to lie because she was short of time and had no money.
Holmes began looking for investments and made the grandiose startup claims we are all used to from the tech sector. (Theranos was a healthcare company, but that didn't matter. Safeway was given revenue projections by Holmes, which overestimated the potential Theranos would achieve. Holmes also gave Walgreens an opinion that Pfizer had supported their technology. Leach's claims about a Pfizer memo which had been shown investors were shocking. It was, he claimed, forged. Pfizers letterhead may have been on the memo, but Pfizer did not put it there. Pfizer will likely be speaking to me about this.
Holmes' brother, who was hired by Holmes, said that Theranos' pregnancy tests were faulty
Leach also claimed that Holmes deceived investors about Theranos military relationship. Holmes claimed that Theranos mini analyzer was used in military helicopters and saved lives. However, its only relationship to the military was a small study that was conducted at the Army Burn center in Texas in 2010. Leach claims that Holmes deceived investors regarding the availability of the analyzer. Und! Holmes told investors that despite having no revenue in 2012 and 2013, he would make $140 million in 2014, despite not making any revenue. It was actually $150,000.
We'll be hearing from former Theranos employees, who tried to inform Holmes and Balwani about the problems with their analyzers. One of them was fired. The other was ignored. Holmes' brother, who she hired, informed her that Theranos pregnancy test had problems. She ignored him. Leach promised that the jury would be able to see emails after emails showing Holmes' awareness of the issues, but unlike the Pfizer memo we did not see any specific emails.
Elizabeth Holmes, the media persona, also made an appearance. Leach claims that Holmes raised money through favorable press coverage. Holmes said she approved the glowing WSJ article and then created a press release to attract investors. He also stated that the Fortune article was full of lies.
Leach stated that these pieces contain truths. Holmes had complete control over Theranos. Leach stated that Holmes was in complete control of Theranos. She was meticulous about the details. She was the one in charge.
Balwani was her primary advisor, and she made a mistake by trusting her.
The defense played for sympathy, even though the prosecution was very specific. Wade began by telling us about Holmes putting her belongings in her car after Theranos collapsed. He then took us back to Holmes' 19th birthday, when she dropped out of college. After patenting a miniature system that could perform tests and return a result, he told us about Holmes. Wade claims that Sunny Balwani, Holmes' co-defendant and being tried separately, encouraged her to quit. Wade claims that Balwani was her primary advisor and she made a mistake by trusting her.
Wade's story reveals that Holmes was a wide-eyed naif, and it wasn't her fault. Balwani was responsible in the clinical labs that were causing problems for patients. Financial modeling was also his job. Walgreens and Safeway forced Holmes to market herself. At the suggestion of a board member she hired Chiat Day marketing agency. (We did see an advertisement about Theranos cheap testing, but Elizabeth Holmes, Girl Genius was not mentioned much. Walgreens also pushed Holmes to agree to a phased approach for testing Theranos. This was not to fool it into believing it was using its own machines.
And the inaccuracy of results? Wade acknowledged that this can happen in any laboratory. Holmes was confident in the accuracy and reliability of the tests and she used them, as well as recommending them her family. Balwani was responsible for overseeing the labs. Holmes is not legally responsible for accurate and safe testing. I'm very curious to hear the testimony of some of these lab directors!
Wade claimed that even though two years of Theranos testing were thrown out Wade said that he would only be hearing from 20 patients or doctors who received bad results after 8 million tests were run. Wade did not mention the tests that were canceled. Wade stated that 20 of 8 million tests are inaccuracies. Wade even performed some fancy math for the jury, calculating that 0.00025 percent of all tests was his. This indicates that Theranoss' tests were very accurate, and that the prosecution cherry-picks but leaves out those void tests. This is a huge oversight!
Holmes is almost responsible for everything, if Wade is to believe
Wade also announced that Holmes had not sold any shares to prove that Holmes believed in Theranos. He said that she declined every opportunity to sell. He said that she could have made hundreds and millions of dollars but she was only in it to help the mission, not for money. It is not easy to sell shares in a private company, but it is possible. But I don't know what agreements she might have made about her ownership. Wade's omission of two years of test results being shitcanned has made me not buy much of Wade's products. Is there anything else he is leaving out?
Wade believes Holmes is almost responsible for everything, After all, she was young and had dropped out of college. Although she worked seven days a weeks at Theranos, she could not be held responsible for her dreams of success. Wade mentioned the allegations Holmes made against Balwani. He was known for his temper and ability to lash out. Holmes was not always kind. And although Wade did mention that Holmes was accused of abuse, it was clear that Holmes never explicitly argued that abuse was a factor. This is likely because Holmes taking the stand is risky. If the case hinges on the abuse allegations shell will have to testify about the abuse. Most people did not know that Holmes and Shell were in a relationship.
The trial is only beginning. A lot depends on the testimony and emails that we haven't seen yet. The story that each side is telling is clear. Although it might seem difficult for the prosecution to prove that Holmes was not a stupid figurehead, Wade worked hard on the presumption if innocence. Okay. Balwani is now the center of blame. The question remains: If the defense wants to claim this is just a story about failure due to navet then what was Elizabeth Holmes doing at Theranos, then? For fifteen years, she was apparently putting her back down at Theranos every day! Wade said she was only focusing on the tests and making poor decisions. But, surely, if that was all she was doing she could have taken some weekends off.