Elizabeth Holmes had a choice.
That’s what Assistant U.S. Attorney Jeff Schenk argued in a federal courthouse in San Jose Thursday as the government’s fraud case against the former Theranos CEO drew to a close.
In closing arguments, Schenk said Holmes could have pitched investors the honest truth about Theranos: that it was never validated by pharmaceutical companies. That its devices were never used in medevacs or on the battlefield in Afghanistan. That its relationship with Walgreens was not healthy. That Theranos’ technology could only do a handful of tests after 10 years. That Theranos used modified third-party devices for most of its tests.
If she’d told patients the truth, Holmes would have had to admit that the tests that Theranos ran on its own devices often failed quality control checks, the prosecution argued. That it often took a venous draw, rather than a finger prick stick with a few drops, to get the blood.
Instead, the government claimed, Holmes made a choice to lie to investors and patients, a decision that was “not only callous, but also criminal,” Schenk told the jury.
The prosecution’s swan song capped testimony from 29 witnesses spanning four months. Holmes faces 11 counts of wire fraud and conspiracy to commit fraud against both investors and patients.
The government’s arguments focused on the idea that Holmes knew there were problems at the company and chose not to disclose them. Instead, Holmes’ role in the “scheme,” as the government alleges, was to keep the company alive by seeking infusions of funds, whether that was by attracting paying patients or continuing to recruit new investors.
Much of Holmes’ defense has been to point the finger at former Theranos COO Sunny Balwani, a trusted adviser and her long-term boyfriend who she says misled her. But the prosecution argued that the two worked in concert in a scheme to defraud.
Holmes’ role was to recruit investors and deliver false statements to them, whether it was directly through investor presentation or using articles in the media, like a Fortune magazine cover, Schenk said. Balwani’s alleged role was to run the lab and help deliver the investor presentations and false statements. These weren’t siloed responsibilities, the government contended, as it sought to show Holmes and Balwani keeping each other in the loop, often forwarding emails to each other when problems arose and deciding how to respond together.
Some moves were also entirely Holmes'. She admitted that she had added Pfizer’s logo to a report prepared by Theranos about their technology for the pharmaceutical company, and she did a similar move for a report featuring a Schering-Plough logo. When she sent the reports to Walgreens, she characterized them as “independent due diligence reports.”
The prosecution also replayed several audio clips to show that it was Holmes, and not Balwani, who tried to mislead the public. For example, in an interview, Fortune reporter Roger Parloff repeatedly asked why some patients would have had to do a venous blood draw instead of a finger prick at the Walgreens testing locations. Holmes’ excuse was that it was a scaling issue, or a problem of success — that Theranos had too many blood draws coming in so it was more efficient to collect using one larger container. The reality inside the lab was that Theranos could only run a handful of tests using the finger prick samples, Schenk said.
When it came to misleading patients, the government argued that the company’s advertising promising “faster,” “cheaper” and “more accurate” results was misleading, particularly around the issues of accuracy. Whistleblower Erika Cheung had described some of the quality control tests as “flipping a coin” on whether or not it would work. Theranos’ former lab director Adam Rosendorff had testified that the company “valued PR and fundraising over patient care” and that he’d raised concerns before the company launched in Walgreens.
The government also spent time trying to rebut arguments from the defense. On Holmes’ inexperience — she dropped out from Stanford to start Theranos — Schenk pointed out she had been running Theranos for nearly a decade and was closer to 30. And on the idea that many startups fail and failure is not a crime, he argued that Holmes lied because she didn’t want it to fail.
Schenk also praised witnesses who acted as whistleblowers, reporting Theranos’ actions to regulators and reporters like the Wall Street Journal’s John Carreyrou.
“The story of Theranos is in some ways a tragedy, but it is also a story of some people acting with remarkable integrity,” Schenk said, highlighting how employees like Cheung and Rosendorff spoke out.
One of the original Theranos whistleblowers, Tyler Shultz, watched the proceedings from the overflow room Thursday.