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Elizabeth Holmes grilled by prosecution in Theranos fraud trial

Prosecutors asked Holmes about some of the longstanding facts of the case but were unable to corner her regarding dishonesty in her previous testimony. 

SAN JOSE, Calif. (CN) — Federal prosecutors took a surprisingly nonconfrontational approach in their cross-examination of Theranos founder Elizabeth Holmes on Tuesday, preferring a more oblique approach to undermining Holmes’ testimony in her ongoing fraud trial. 

Far from the theatrics and aggressive questioning that some anticipated, Assistant U.S. Attorney Robert Leach carefully and methodically walked Holmes through the well-established timeline as CEO at Theranos. Leach began with her efforts to quash an unfavorable story in The Wall Street Journal and culminated with her involvement in affixing a Pfizer logo to an internally produced document. 

The day ended with Holmes still on the stand and any kind of smoking-gun revelation about deceit during four days of testimony absent. Instead, Leach asked Holmes repeatedly about some of the well-worn aspects of the case regarding forged documents and how she responded to press coverage of the company. 

“You wanted to get ahead of it, didn’t you?” Leach asked about her efforts to undermine the reporting of John Carreyrou, who wrote a series of articles for The Wall Street Journal that uncovered accuracy issues with the portable blood testing machines at Theranos. 

“I don’t know what you mean by ahead of it,” Holmes replied, a characteristic exchange during cross-examination that featured attempts to ruffle Holmes and provide the jury with enough fodder to doubt her credibility.

“Why were you sending them after Erika Cheung?” Leach asked Holmes about enlisting a high-powered law firm to determine Carreyrou’s sources, referring to a one-time employee at Theranos.

“I followed up with her to stop her from disclosing trade secrets,” Holmes replied. 

Cheung was the main source for Carreyrou as he dug into accuracy issues with the various blood tests Theranos claimed it could run using a tiny sample of blood. 

“You chose to threaten her?” Leach asked. 

“No,” Holmes replied. 

“You chose to retaliate against her?” Leach riposted. 

“I don’t think so,” Holmes said. 

But in another characteristic move, Holmes did accept responsibility for what she characterized as the mishandling of the effort to counter the bad press generated by The Wall Street Journal's stories. 

“The way we handled the entire WSJ process was a disaster,” Holmes conceded. 

In an unusual move, the prosecution lingered on the romantic relationship between Balwani and Holmes, pointing out that Balwani often sent supportive and loving messages to Holmes. In recounting some of the intimate emails, Holmes became emotional, crying at certain points as she detailed the exchange of loving messages. 

“Love you,” Balwani wrote in one of the texts shared at trial. “I prayed from the bottom of my heart for you. I have never prayed this intensely in my life for anything or anyone. You will shine.”

Holmes began crying as she read the text. 

The risk for the prosecution is that sharing such emotional testimony further engenders empathy for Holmes in the minds of the jury — a risk already heightened because Holmes finished emotional testimony Monday in which she claimed she was sexually and emotionally abused by Balwani. Balwani and Holmes met right after she graduated from high school, and Balwani is 20 years her senior.

Leach appeared to be attempting to show that Balwani was not the monster portrayed in previous testimony to counter the defense strategy of foisting blame on Balwani as a controlling and abusive man. 

Leach shared several professional communications between Balwani and Holmes in which Balwani expressed concerns about substantive issues within Theranos. 

“He was open about that and not deceiving you?” Leach asked. 

“Yes,” Holmes replied.

Leach provided several examples of Balwani bringing up issues with the lab, but not the finances. 

Like many of the lines of questioning unveiled by Leach on Tuesday, it concluded rather open-ended, with the prosecution looking to establish basic facts rather than trying to pin Holmes down and reveal their strategy. 

Leach got Holmes to acknowledge she made more than $300,000 in 2014 and 2015. It’s an important point because Holmes’ attorneys have made much of the fact that Holmes never sold one of her shares, despite them being worth billions of dollars. 

But the prosecution managed to show that Holmes made large sums as CEO of Theranos from 2010 through 2016 and lived in a $16 million mansion in Atherton, a small community outside of Palo Alto where Theranos was headquartered. This is critical to the prosecution’s theory that Holmes misled investors and employees as a means of profiting personally. 

Holmes continued to express regret for the way she handled things, including the now infamous document that the CEO acknowledged sending to Walgreens with a Pfizer logo affixed to the top. 

Holmes said she felt comfortable affixing the logo because the document reflected work done in concert between both companies in 2009.

“I still think it was,” Holmes said when asked whether she thought at the time that it was an independent due diligence report. 

However, Holmes did say her process in this regard was not ideal.

“I wish I’d done it differently,” Holmes said. 

The answer holds to the defense’s strategy to acknowledge Holmes made mistakes due to her inexperience and reliance on Balwani. Holmes’ attorneys have argued that Balwani was in charge of the lab and the finances, which are the main sources of the fraud charges. Balwani faces trial on similar charges in January. 

Holmes' trial resumes Dec. 7. Her attorney Kevin Downey indicated the defense will rest soon after Holmes concludes her testimony,

The scuttlebutt at the courthouse indicates jury deliberations could begin by the end of next week. 

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