At Theranos, Elizabeth Holmes was the boss. At least that’s what prosecutors in her ongoing fraud trial argued Tuesday.
Robert Leach, the lead prosecutor in the Holmes case, began his cross-examination of Holmes by questioning her on the control she had over the failed blood-testing startup.
As CEO and owner of 51% of Theranos’ shares — Holmes noted several times that she never sold any of her stake — Leach argued that Holmes had the power to hire and fire anyone in the company, including board members and Sunny Balwani, her once-boyfriend and second-in-command.
Holmes testified that she had ultimate control over Theranos, conceding to Leach that she gave Balwani the power to run its lab operations and finances, and could have taken that power away.
Both Holmes and Balwani are facing charges of defrauding investors and patients. Balwani has a separate trial scheduled for January.
Holmes agreed that she and Balwani were "jointly involved" on Theranos' regulatory strategy, and said they "could be" jointly involved in firing Theranos employees. When asked if there were times when she gave Balwani direction on what to do, Holmes replied, “ I'm sure there was.”
With the power she wielded, she sought to hide the company’s failings from its investors, prosecutors suggested. Holmes admitted that she did not listen to Erika Cheung, a former Theranos lab worker and whistleblower who brought problems with its lab operations to the attention of the Centers for Medicare and Medicaid Services. Holmes admitted that Cheung was right about certain issues, but at the time she didn’t think anything was wrong, so she ignored her.
“I sure as hell wished we treated her differently and listened to her,” Holmes said.
Holmes also said she bungled the company’s response to John Carreyrou’s Wall Street Journal exposé, in part by going directly to Journal owner Rupert Murdoch, a Theranos investor, to broker a meeting with Carreyrou and then-editor Gerard Baker. Murdoch had invested $125 million in Theranos.
“I couldn't say it more strongly: The way we handled the Wall Street Journal process was a disaster,” Ms. Holmes said in her testimony Tuesday. “We totally messed it up.”
Later in the day, Leach spent more than an hour reciting texts between Holmes and Balwani. Holmes began to cry reading texts between them where they called each other loving names, like “baby,” “beauty” and “gift.” The word “love” appeared 594 times in the 12,000 texts the prosecution had.
In other messages, Balwani criticized the company, expressing his concerns about media attention Holmes got, Theranos' methods of testing and claims on its website that it could perform all of its tests with a finger prick of blood. In one, he said he was upset to be associated with the "fucking mediocre quality of this piece of shit company."
Leach got Holmes to acknowledge that Balwani wasn’t hiding his opinions about Theranos from her, contradicting a key piece of her testimony from Monday in which she claimed to have a hands-off relationship with his responsibilities and rarely overruled his decisions.
Her case is scheduled to resume Tuesday at the federal courthouse in San Jose.
