For months, Ramesh Balwani’s lawyers have tried to single him out from Elizabeth Holmes, his former girlfriend and business partner at bankrupt blood testing company Theranos.
Ms Holmes was found guilty of defrauding the start-up’s investors in January. Mr. Balwani is seeking a different outcome in his own fraud trial.
But on Tuesday, during closing arguments before Mr. Balwani’s jury, prosecutors linked him directly to Ms. Holmes and the years-long fraud at Theranos. Jeffrey Schenk, assistant US attorney and lead prosecutor in the case, posted a text message Mr Balwani sent to Ms Holmes in 2015 that was used as evidence in the trial.
“I am responsible for everything at Theranos,” Mr. Balwani wrote. “All were my decisions too.”
The text was an admission of guilt, Mr Schenk said, adding: ‘He acknowledges his role in the fraud.’
The presentation capped more than three months of testimony in Mr Balwani’s trial, which largely mirrored Ms Holmes’ last fall. She and Mr. Balwani, 57, were accused in 2018 of exaggerating Theranos’ blood-testing machine capabilities and business performance when, in fact, the products didn’t work and its business was struggling. The couple pleaded not guilty. Ms Holmes was found guilty on four of the 11 counts.
The trial of Mr Balwani, known as Sunny, lacked the fanfare of Ms Holmes’ case. It nonetheless serves as a coda to a waning era of start-up growth that often relied on hype and hyperbole. Ms. Holmes and Mr. Balwani are among the few high-tech executives to have been prosecuted for fraud.
Just as Ms. Holmes tried to blame others for Theranos’ deceptions, Mr. Balwani pointed the finger at her. Throughout the trial, his attorneys argued that many of Theranos’ blood tests worked. They said Ms. Holmes, not Mr. Balwani, controlled Theranos. And on Tuesday, they portrayed Mr. Balwani as a true supporter of Theranos vision and technology.
Mr. Balwani “has put his whole heart and soul into Theranos,” said Jeffrey Coopersmith, who represents him. “He worked tirelessly, year after year, to make the company a success.”
Ms Holmes, now 38, met Mr Balwani when she was 18. They started dating years later, after Ms Holmes founded Theranos. Mr. Balwani joined Theranos in 2009, became its chief operating officer, and eventually invested $4.6 million in the company and took charge of its lab. The couple kept their relationship a secret and lived together in a sprawling house they owned in Atherton, California.
In 2016, after Theranos was criticized for lying about its blood testing abilities, Mr Balwani left the company and parted ways with Ms Holmes. The pair were charged with fraud together, but Ms Holmes pleaded in papers to separate the cases and accused Mr Balwani of emotional and sexual abuse. His trial included dramatic testimony chronicling the charges. This subject was excluded from Mr. Balwani’s trial.
To convict Mr. Balwani, prosecutors must convince jurors that he intentionally lied to investors and patients about Theranos blood tests and business dealings.
Prosecutors have tried to pin the blame on Mr. Balwani for the financial projections Theranos showed investors and the state of its labs. The new witnesses included investors and executives who dealt directly with Mr Balwani, rather than Ms Holmes.
A projection, presented to investors in October 2014, showed that Theranos would bring in $140 million that year. In reality, the earnings were $150,000. The following year, Mr. Balwani predicted nearly $1 billion in revenue from presentations to investors. Theranos internal projections were much lower, according to the evidence, and the reality was $429,210.
Schenk said Theranos executives instructed its scientists to validate blood tests and start offering tests to the public only when it needed money from investors or customers. “Not when the science was ready,” he said.
A new witness, Patrick Mendenhall, who dealt directly with Mr. Balwani during an investment in Theranos, described the promises that turned out to be misleading or false.
Brian Grossman, an investor in the hedge fund PFM Health Sciences, who was also a witness in Ms. Holmes’ trial, said Mr. Balwani provided his team with financial projections that grossly exaggerated Theranos’ projected revenue.
“When Mr. Balwani communicates with an investor, it is for a purpose, and the purpose is to deceive him to get money,” Mr. Schenk said.
Prosecutors also pointed to Mr. Balwani’s role in running the Theranos lab, which the executive called a “disaster zone” in a 2014 text message. Mr. Balwani would also “suppress dissent” by intimidating or pushing back employees who have expressed concern about Theranos testing, such as Dr. Adam Rosendorff, a former lab director who testified in both lawsuits, Schenk said.
Mr Coopersmith, the defense lawyer, said the government had painted a “very misleading” picture of Mr Balwani’s time at Theranos and that it was unfair to show private texts out of context as evidence of a conspiracy.
The messages did not show Mr. Balwani telling anyone to commit fraud, Mr. Coopersmith said. “If there was a conspiracy, you’d think there would be all kinds of conspiratorial and sinister conversations going on, and there just isn’t,” he said.
Notable absentees from the witness stand were James Mattis, a former defense secretary and member of the Theranos board of directors, and Ms Holmes, who had both testified at Ms Holmes’ trial. Mr. Balwani did not testify in his defence.
If found guilty, Mr Balwani and Ms Holmes will be sentenced together in September.
Erin Woo contributed report.
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