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Defense rests in Elizabeth Holmes-Theranos fraud trial

Theranos founder Elizabeth Holmes finished her testimony by denying that she ever misled investors or patients and her lawyers promptly rested their case, preferring to let her lengthy testimony stand as their best defense against fraud charges. 

SAN JOSE, Calif. (CN) — Disgraced Theranos founder Elizabeth Holmes' defense attorneys rested their case Wednesday morning and the government declined rebuttal, making closing arguments and deliberations the final steps in a criminal trial that began in early September. 

Holmes ended her redirect testimony with a flourish, saying she began Theranos with the intention of transforming health care for the better and was always focused on the future of the company she founded as a 19-year-old college dropout. 

“I would talk about what this company could do in five to ten years from now,” Holmes testified when asked what she wanted to convey to investors. “It was not about today or tomorrow, but we were interested in what kind of change we could make.”

On re-cross, Assistant U.S. Attorney Robert Leach asked if Holmes had a responsibility to accurately portray the current conditions of her company.

“Of course,” she said. 

By resting without calling additional witnesses, the defense essentially acknowledged this case will come down to the testimony of Holmes, her credibility with the jury and the lawyers' ability to frame her testimony in their overarching narrative. 

The defense has long argued that Holmes didn’t defraud anyone, including investors, but merely failed in her efforts to build Theranos into one of the world’s leading biotechnology companies. 

“Did you ever take steps to mislead investors?” Kevin Downey, Holmes’s lawyer, asked during redirect. 

“Of course not,” Holmes replied emphatically. 

Downey followed up: “Did you lead patients to believe your tests could provide accurate and reliable services when they could not?” And Holmes again replied, “Of course not." 

Holmes also told the jury she never sold a share of stock during her time as CEO of Theranos. If the jury believes Holmes is not lying under oath regarding her intentions as CEO of Theranos, she will likely walk away a free woman. 

The most damning evidence, ironically, came through Roger Parloff, a freelance journalist who wrote the cover story about Holmes and Theranos in 2014. It was during his testimony that the jury heard Holmes making claims about the portable blood testing analyzers that the evidence indicates were embellishments in the most generous framing. 

Holmes said those analyzers could perform hundreds of tests when in fact they could perform about a dozen with varying degrees of reliability. She said Theranos was not using third-party devices, but testimony revealed they were using traditional devices modified to accept smaller blood samples. 

Holmes said she was coy about revealing the use of third-party machines in order to protect her intellectual property. However, several of the investors also testified they felt misled by similar claims made by Holmes to them. 

But during her testimony Holmes came across as competent and earnest and genuine, as someone who believed in her company and someone who could earn the trust of investors looking to deploy money in a smart manner. 

The government has struggled to portray Holmes as a huckster that was interested in personal profit, particularly as the archetype of the Ponzi scheme architect is so well known to the American public. Holmes does not fit this archetype. 

She built her company, secured more than 100 patents — some of which are still being used — and appeared to genuinely try to make good on the healthy investments that were entrusted to her during her time at the helm of Theranos. 

Whether or not she made mistakes is not in question and her defense openly acknowledged she made several, particularly after she entered into contracts with Walgreens and Safeway and concentrated on running a blood analyzing laboratory rather than focusing on the research and development aspect of her product. 

The defense also foisted much of the blame on Holmes business partner Sunny Balwani, particularly for the financial malfeasance and the mistreatment of former employees including whistleblowers Erika Cheung and Tyler Schulz. Cheung, in particular, testified she was treated poorly by Balwani but had limited interactions with Holmes outside of her initial job interview. 

Federal prosecutors did get Holmes to acknowledge she wished she had done certain things differently, particularly as to her attempts to quash negative press and her embellishments in the Fortune article. 

But whether the jury will interpret those embellishments as peccadillos common in the Silicon Valley business environment or as fraudulent misrepresentations sought for personal gain will decide whether Holmes will walk away a free woman or serve up to as many as 20 years in federal prison. 

Toward the end of the day Wednesday, U.S. District Judge Edward Davila said closing arguments will begin Dec. 16 and likely go into the following day, with deliberations commencing Christmas week. 

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