Sunday, October 2, 2022 | Back issues
Courthouse News Service Courthouse News Service

Judge likely to deny Elizabeth Holmes’ bid for acquittal in Theranos fraud case

Holmes' attorneys argued the government hadn't offered evidence to prove its case, so the jury's verdict was "irrational."

SAN JOSE, Calif. (CN) —  A federal judge indicated Thursday he will likely deny a long-shot attempt for acquittal by disgraced Theranos founder and CEO Elizabeth Holmes, eight months after a jury convicted her on wire fraud charges.

Holmes founded the Silicon Valley-based company Theranos at 19, saying she aspired to make blood testing cheaper and more efficient. She claimed her startup, which raised $945 million from investors like Rupert Murdoch, developed technology capable of testing for conditions, including cancer and diabetes, using only a few drops of blood. Her company began to fall after a 2015 Wall Street Journal investigation revealed holes in its testing methods and technological capabilities.

The jury convicted Holmes on four counts of wire fraud but deadlocked on three other charges after a week of deliberation.

A Silicon Valley jury also found former Theranos executive Ramesh "Sunny" Balwani guilty on all 12 counts of fraud he faced, amid the collapse of the $9 billion blood testing company. Balwani was accused of teaming up with friend and onetime romantic partner Holmes to defraud investors. Their trials were split up after Holmes' legal team filed that she planned to make accusations about their relationship since 2002 in her defense. 

Holmes did not blame Balwani for the company’s problems. Instead, she gave a surprise testimony accusing him of sexual abuse. She is scheduled to be sentenced in September.

But this past May, Holmes asked U.S. District Judge Edward Davila to overturn the conviction and acquit her. At Thursday's acquittal hearing in San Jose, she sat quietly while her attorneys argued her case is worthy of an acquittal on the grounds that no rational juror would have found her guilty of conspiracy and wire fraud. Attorney Amy Saharia, a partner at Williams & Connolly, reminded the judge that an acquittal is not a call for a new trial, and serves as a “safety valve” where the defense can argue that the jury could not have rationally made their determination of a verdict. 

Saharia said the government did not present enough evidence to prove the allegations in the original indictment. She said they did not prove a conspiracy between Holmes and Balwani, using text messages and emails about the state of the company and whether they knew their technology was not working as represented to their investors. 

“There’s simply no evidence of an agreement or a meeting of minds between Ms. Holmes and Mr. Balwani,” she said. “There's no evidence in those text messages of a conspiracy to defraud inventors, with no message discussing lying to investors." She said the government pointed to the two co-managing the company and communicating about its operations, and the desire to keep it financially stable, to fill “holes in the evidence.”

Saharia also argued the government did not prove Holmes knew she was committing fraud regarding her technology’s capabilities. Even Holmes’ knowledge of acquiescence in another person’s crimes is not evidence of a conspiracy, “unless there is evidence of a meeting of minds," she said.

Davila asked whether all the pieces of different evidence presented to the jury as a whole could lead a reasonable juror to surmise guilt with all details considered. He pointed to text messages pointing to the condition and inadequacy of the Theranos lab and concerns about a person leaking information about what was happening inside the lab. To all of this evidence, Saharia said the defense maintains that there was not enough to prove the charges in the government’s indictment and believes the jury’s finding was “irrational.”

“There is no evidence that Ms. Holmes thought she was doing something wrong, that she was intending to fraud,” she said. 

Representing the U.S. government, prosecuting attorney Kelly Volkar said the defense had not met the requirements for arguing for a motion to acquit, which requires reviewing all evidence in a light most favorable to the prosecution. She said on those grounds, they do not have a case for now arguing the government did not have sufficient evidence to prove their allegations in Holmes’ indictment.

She said the government presented many pieces of evidence showing misrepresentations of the company, including that Holmes sent doctored pharmaceutical reports to companies like Walgreens and sent news articles with information she knew was false to investors. She said they proved the company was “underwater” in 2009 and that Holmes and Balwani misrepresented the financial state of the company later on to keep it afloat.

Volkar said her team proved the defendants were “two people who are lying to an investor about the state of their lab, the state of the technology, in order to get money.” 

“It’s not just that Balwani and Holmes were the most senior executives in the company,” Volkar said. “It’s not just that they had more than a decade-long romantic relationship, it's not just that they were in constant communication. What they were discussing and talking about showed that they knew information that they didn't share with investors. And it's all of that together that is sufficient evidence.”

Davila preliminarily denied Holmes' motion to acquit but said he will review all of the additional material before issuing a final order. 

“At this point, overall the court finds that looking at this through the lens most favorable to prosecutors, that the evidence does support the jury’s findings in this case,” Davila said. He told Saharia he saw enough evidence to show Holmes conspired with Balwani to keep their company going, despite the condition of the lab they were aware of and knowing false information about the company’s technology and finances was given to investors. 

He reminded the two that Holmes' trial lasted about four months, and the jury spent more than a week deliberating before reaching their verdict. 

“Preliminarily, a reasonable juror could find there was evidence of misrepresentation to investors that support the finding of guilt as to those (four) counts,” Davila said. 

Neither side responded to requests for comment by press time.

Read the Top 8

Sign up for the Top 8, a roundup of the day's top stories delivered directly to your inbox Monday through Friday.