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.


He couldn’t go to the cabin, so he brought the cabin to his cubicle

"Building forts” has long been a passion of Lucas Mundt's. Now, his employer plans to give out $200 stipends for cubicle decor.

Lucas Mundt scoured Craigslist and Facebook Marketplace to complete his masterpiece.

Photo: Mike Beckham

It took a little work to get viral cubicle-decorator Lucas Mundt on the phone. On Monday, he was taking a half-day to help a friend fix his laminate floor. Tuesday, I caught him in the middle of an officewide Pop-A-Shot basketball tournament. His employer, the Oklahoma water bottle-maker Simple Modern, was getting rid of the arcade-style hoops game, and “glorious prizes and accolades” were on the line, Mundt said. (CEO Mike Beckham was eliminated in the first round, I heard from a source.)

Why did I want to talk with Mundt? His cubicle astonished nearly 300,000 Twitter users this week after Beckham tweeted out photos of it converted into what can only be described as a lakeside cabin motif. Using leftover laminate flooring that he found on Facebook Marketplace, Mundt created the appearance of a hardwood floor, and he carefully applied contact paper to give his cubicle walls, desk and file cabinet the look of a cozy cabin. The space heater that looks like a wood stove? Purely decorative: Mundt runs hot. The two fake mounted animal heads? They’re “kind of ironic,” said Mundt, who’s never gone hunting.

Keep Reading Show less
Allison Levitsky
Allison Levitsky is a reporter at Protocol covering workplace issues in tech. She previously covered big tech companies and the tech workforce for the Silicon Valley Business Journal. Allison grew up in the Bay Area and graduated from UC Berkeley.

COVID-19 accelerated what many CEOs and CTOs have struggled to do for the past decade: It forced organizations to be agile and adjust quickly to change. For all the talk about digital transformation over the past decade, when push came to shove, many organizations realized they had made far less progress than they thought.

Now with the genie of rapid change out of the bottle, we will never go back to accepting slow and steady progress from our organizations. To survive and thrive in times of disruption, you need to build a resilient, adaptable business with systems and processes that will keep you nimble for years to come. An essential part of business agility is responding to change by quickly developing new applications and adapting old ones. IT faces an unprecedented demand for new applications. According to IDC, by 2023, more than 500 million digital applications and services will be developed and deployed — the same number of apps that were developed in the last 40 years.[1]

Keep Reading Show less
Denise Broady, CMO, Appian
Denise oversees the Marketing and Communications organization where she is responsible for accelerating the marketing strategy and brand recognition across the globe. Denise has over 24+ years of experience as a change agent scaling businesses from startups, turnarounds and complex software companies. Prior to Appian, Denise worked at SAP, WorkForce Software, TopTier and Clarkston Group. She is also a two-time published author of “GRC for Dummies” and “Driven to Perform.” Denise holds a double degree in marketing and production and operations from Virginia Tech.

Ripple’s CEO won’t apologize for taking on the SEC

“The SEC declared war on Ripple. We’re defending ourselves.”

Ripple CEO Brad Garlinghouse isn’t apologizing for his company’s pugnacious stance with regulators.

Photo: Ripple

Ripple just bought back a huge chunk of its shares this week, which CEO Brad Garlinghouse touted as a sign of the crypto company’s momentum.

But he also used the opportunity to hit back at the agency that the crypto powerhouse considers its nemesis: the SEC.

Keep Reading Show less
Benjamin Pimentel

Benjamin Pimentel ( @benpimentel) covers crypto and fintech from San Francisco. He has reported on many of the biggest tech stories over the past 20 years for the San Francisco Chronicle, Dow Jones MarketWatch and Business Insider, from the dot-com crash, the rise of cloud computing, social networking and AI to the impact of the Great Recession and the COVID crisis on Silicon Valley and beyond. He can be reached at bpimentel@protocol.com or via Signal at (510)731-8429.

Boost 2

Can Matt Mullenweg save the internet?

He's turning Automattic into a different kind of tech giant. But can he take on the trillion-dollar walled gardens and give the internet back to the people?

Matt Mullenweg, CEO of Automattic and founder of WordPress, poses for Protocol at his home in Houston, Texas.
Photo: Arturo Olmos for Protocol

In the early days of the pandemic, Matt Mullenweg didn't move to a compound in Hawaii, bug out to a bunker in New Zealand or head to Miami and start shilling for crypto. No, in the early days of the pandemic, Mullenweg bought an RV. He drove it all over the country, bouncing between Houston and San Francisco and Jackson Hole with plenty of stops in national parks. In between, he started doing some tinkering.

The tinkering is a part-time gig: Most of Mullenweg’s time is spent as CEO of Automattic, one of the web’s largest platforms. It’s best known as the company that runs WordPress.com, the hosted version of the blogging platform that powers about 43% of the websites on the internet. Since WordPress is open-source software, no company technically owns it, but Automattic provides tools and services and oversees most of the WordPress-powered internet. It’s also the owner of the booming ecommerce platform WooCommerce, Day One, the analytics tool Parse.ly and the podcast app Pocket Casts. Oh, and Tumblr. And Simplenote. And many others. That makes Mullenweg one of the most powerful CEOs in tech, and one of the most important voices in the debate over the future of the internet.

Keep Reading Show less
David Pierce

David Pierce ( @pierce) is Protocol's editorial director. Prior to joining Protocol, he was a columnist at The Wall Street Journal, a senior writer with Wired, and deputy editor at The Verge. He owns all the phones.

The Twitter account Elon Musk would pay to delete

‘I’ve put a lot of work into it, and $5k is just really not enough.’

Elon Musk considers the Twitter account a security risk.

Photoillustration: Brendan Smialowski/AFP and Getty Images Plus; Protocol

“Can you take this down? It is a security risk.”

That’s how Elon Musk opened a conversation with 19-year-old Jack Sweeney over Twitter DM last fall. He was referencing a Twitter account, called @ElonJet, which tracks the movements of his private jet around the world.

Keep Reading Show less
Veronica Irwin

Veronica Irwin (@vronirwin) is a San Francisco-based reporter at Protocol, covering breaking news. Previously she was at the San Francisco Examiner, covering tech from a hyper-local angle. Before that, her byline was featured in SF Weekly, The Nation, Techworker, Ms. Magazine and The Frisc.


Intel must spend $100B in Ohio now to avoid spending more later

Forget the politics. Here’s why Intel’s new factories in Ohio are crucial to the company’s future and its hope of regaining the chip manufacturing leadership spot.

Intel is doubling down on its own contract manufacturing business for fabless chipmakers.

Photo: Walden Kirsch/Intel Corporation

Intel’s plans to invest up to $100 billion in a new group of chip factories outside Columbus, Ohio, will have a much greater impact on the future of its manufacturing division compared to any short-term political or supply-chain concerns it might solve.

To hear President Joe Biden, U.S. Commerce Secretary Gina Raimondo and Ohio Governor Mike DeWine tell it, the new factories — known as fabs in this world — are going to help fix inflation, make the U.S. more competitive, drive down the soaring cost of cars, ease the chip supply-chain shocks and improve U.S. national security. That’s a lot, even for one of the biggest projects in Intel’s storied history. It will be years before that capacity comes online, and whether a new chip factory in Ohio could actually solve any or all of those issues is debatable.

Keep Reading Show less
Max A. Cherney

Max A. Cherney is a Technology Reporter at Protocol covering the semiconductor industry. He has worked for Barron's magazine as a Technology Reporter, and its sister site MarketWatch. He is based in San Francisco.

Latest Stories