Ex-Theranos CEO Asks Judge to Toss Federal Fraud Case

(CN) – Disgraced former Theranos CEO Elizabeth Holmes returned to federal court in San Jose, California, Monday to continue her fight against fraud charges stemming from the marketing of a blood test kit that ended up being too good to be true.

Braving the phalanx of video cameras positioned outside of the building, Holmes and her lawyers came to court to argue all 11 counts of fraud should be dismissed. Holmes says the government’s case leans heavily on glittering generalities but is ultimately too vague and light on details to proceed.

Elizabeth Holmes, founder and CEO of now-defunct Theranos, speaks at the Fortune Global Forum in San Francisco on Nov. 2, 2015. (AP Photo/Jeff Chiu, File)

Sunny Balwani, ex-president of Theranos and Holmes’ former right-hand man and romantic partner, was also in court asking for the fraud counts to be thrown out.

The federal government says the pair deceived investors, customers and patients about the accuracy of their blood testing equipment, bilking as much as $700 million from people who bought a piece of the company.

But Amy Saharia, attorney for Holmes, said hundreds of the blood tests developed during Theranos’ brief time on the market were accurate and that the government has only identified about eight that didn’t work.

Furthermore, Saharia argued the fraud allegations hinge not on statements made by Holmes herself, but on claims made in marketing materials and on the Theranos website.

“We don’t know how to find these statements or what they even are,” Saharia said.

Saharia also argued the government has failed to show that any of the people who used the blood-testing device and received inaccurate results were actually harmed.

But federal prosecutor John Bostic said there is an abundance of evidence that Holmes and Balwani committed fraud. He noted the pair lied to investors and customers about the Food and Drug Administration approving the blood testing kits after they knew the devices were faulty.

“Claims about FDA approval were made to assure patients about the accuracy of the tests,” Bostic said during the hearing.

The prosecutor also insisted patients were harmed by inaccurate tests, particularly those who attempted to determine whether they were pregnant or HIV-positive.

“There is no version of this indictment that they would be happy with,” Bostic said.

U.S. District Judge Edward Davila, who often remains neutral and doesn’t show his hand during hearings, prodded the defense Monday, at one point asking Saharia if any statements put out by Theranos that claimed the devices worked constituted fraud.

Saharia such claims needed more specificity than what can be found in marketing materials to qualify as fraud.

Davila said he would take the matter under submission. If the motion to dismiss fails, Holmes and Balwani are slated to go on trial beginning Aug. 4.

Theranos was valued at $9 billion when the Wall Street Journal published a series of articles questioning whether the blood testing devices were on the level.

Holmes dropped out of Stanford to found the company and was hailed as a revolutionary in the medical diagnostics field, with most press coverage full of breathless praise about how patients would be able to receive all manner of diagnoses just by pricking their finger for a single drop of blood.

The company attracted major investors and board members including former Secretary of Defense Jim Mattis and former Secretary of State George Schultz. It was Schultz’s grandson Tyler who provided most of the inside information to Wall Street Journal reporter John Carreyrou, including that the company was using traditional testing machines to give the appearance its devices were working.

Holmes and Balwani continue to deny any wrongdoing.

In 2018, Holmes reached a settlement with the U.S. Securities and Exchange Commission that included a $500,000 fine, forfeiture of millions of Theranos shares and a bar on holding a leadership position in a public company for a decade. Balwani did not settle with the SEC and his case is pending.

If convicted on all 11 counts, Holmes and Balwani face up to 20 years in prison and $2.7 million in fines.

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