Fraud or mistakes? Opening trial arguments debate how much Elizabeth Holmes knew.

"Elizabeth Holmes did not go to work every day intending to lie, cheat and steal," her lawyers argued.

Elizabeth Holmes arriving to court with her defense team.

Holmes has pleaded not guilty to 12 counts of fraud and conspiracy to commit fraud.

Photo: Nick Otto/AFP via Getty Images

To the U.S. government, Elizabeth Holmes is a fraudster bent on lying and cheating to get money for her company while deceiving investors and the public on how little its lab work could actually do.

But Holmes' lawyers argue that she isn't a villainous CEO who purposefully deceived everyone. Rather, she's a young Silicon Valley founder who believed so much in her vision and product that she never sold a share and thought that the company's challenges could eventually be overcome.

"Elizabeth Holmes did not go to work every day intending to lie, cheat and steal," said Lance Wade, Holmes' attorney from Washington D.C.-based firm Williams & Connolly. "The government would have you believe her company, her entire life, is a fraud. That is wrong. That is not true."

The opening arguments, which lasted hours, kicked off the start of the high-profile trial of Theranos founder Holmes, who has pleaded not guilty to 12 counts of fraud and conspiracy to commit wire fraud. Spectators arrived at the courthouse in the middle of the night to claim one of the three dozen seats available in the courtroom to the public. Holmes' partner, Billy Evans, with whom she had a son in July, was in the courtroom in the first row.

"This is a case about fraud, about lying and cheating to get money. It's a crime on Main Street and it's a crime in Silicon Valley," said assistant U.S. attorney Robert Leach in the prosecution's opening statement.

A theme of the opening statement was how often Holmes found herself "out of time and out of money" with her company on the brink barely able to meet payroll. To gain funding and customers, the government argued that Holmes deceived investors and the public in six main categories: the miniLab device, military, pharmaceuticals, financials, the Walgreens rollout and the accuracy of tests. The government claimed, for example, that in one inaccurate test, a pregnant woman changed her medication after a test told her she was no longer pregnant.

The government also argued that Theranos overstated the device's capabilities to the public and to investors, like Walgreens and Safeway. The company had published a press release in 2013 stating that its blood-testing device could run any test on a few drops of blood, despite it still relying largely on commercial machines and vein draws.

The trial is also likely to analyze the media's role and the statements that Holmes made to journalists, which landed her on the cover of magazines like Forbes and Fortune. Leach asserted that Holmes used big magazine profiles as part of her lure to investors and as a way to deceive the public. "Her deceit of reporters was an important way that she executed her fraud," Leach said. (Ultimately, it was a WSJ report based off of Theranos whistleblowers that contributed to the company's downfall.)

The challenge for the government will be proving that Holmes had an intent to deceive investors and the public. Holmes' lawyers instead argued that she was a true believer and dedicated her life to it. Despite having opportunities to sell and make "hundreds of millions," her attorney Wade said that Holmes had never sold a share of her company so she wasn't even financially benefiting from the alleged fraud.

"Elizabeth Holmes worked herself to the bone for 15 years trying to make lab testing cheaper and more accessible. She poured her heart and her soul into that effort. Now in the end, Theranos failed. And Ms. Holmes walked away with nothing," Wade said at the start of the defense's opening remarks. "But failure is not a crime. Trying your hardest and coming up short is not a crime. And by the time this trial is over you will see that the villain that the government just presented is actually a living, breathing human being who did her very best each and every day."

Wade painted Holmes as a passionate Silicon Valley CEO who dropped out of Stanford at 19 to pursue a life-changing idea. Because of her age, he said, she surrounded herself with people who had the experience she lacked. For example, Holmes was not legally allowed to manage the lab because she didn't have qualifications, so she hired other lab directors to be in charge of the testing. As a result, her defense argued, she shouldn't be held accountable for the lab's problems when it was regulated by a lab director.

The other finger was pointed at Theranos COO Sunny Balwani, who is standing trial separately in early 2022. Wade said the board had encouraged her to hire someone with business experience, so she hired Balwani to oversee operations, which included financial modeling and the lab's operations.

Her lawyer tiptoed around Holmes' relationship with Balwani, who is also her ex-boyfriend. Before the trial started, the defense had said in filings that Holmes was a victim of an abusive relationship, and it was viewed as a potential defense for her in the case. (Balwani denies it.) Wade told the jury that they will "hear that trusting and relying on Mr. Balwani as her primary adviser was one of her mistakes" and claimed that Balwani was known for his hard-charging personality and having a temper.

Her defense also countered the narrative that Theranos had misled Walgreens when it didn't use its own machines in its store, but instead said that it was a phased plan all along. The first phase was supposed to use commercial testing machines before using the company's own, Wade said. But instead Theranos focused on the first phase and lost sight of other parts, another mistake the company made, he pointed out.

"Ms. Holmes made mistakes, but mistakes are not criminal," he said.

In the end, it will be up to the jury to decide whether Holmes intentionally and knowingly defrauded both investors and paying patients or is just a startup CEO who believed she could change the world, but made a series of mistakes as she got caught up in her own company's hype.


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