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Fraud trial of Sunny Balwani, right hand man of Elizabeth Holmes, kicks off

Balwani's attorneys said the government doesn't have a case because prosecutors never analyzed the Theranos testing data.

SAN JOSE, Calif. (CN) — Attorneys for Sunny Balwani, the former business partner and boyfriend of Theranos founder Elizabeth Holmes, said the government cannot prove their client engaged in fraud because it failed to properly analyze testing data before indicting Holmes and Balwani.

It represents a departure from the arguments made by Holmes’ attorneys, who said the onetime Silicon Valley star tried mightily to build the company she described to investors but simply fell short.

Stephen Cazares, who gave the opening statement for Balwani’s side, made many similar arguments, saying Balwani left the company in 2016 when its bank accounts were replete with hundreds of millions in investor money. But he went further in saying the government never really proved that the tests were actually unreliable because they didn’t look at and sort through the testing data.

"You will conclude the government cannot prove their allegations that Theranos diagnostic technology was not capable of consistently producing accurate and reliable results,” Cazares told the jury..

The opening arguments were heavily attended by local and national press. Despite a Covid scare ahead of opening arguments, members of the press packed into the courtroom along with jurors and their alternates and robust prosecution and defense teams with their respective array of attorneys.

Balwani wore a dark gray suit with a checkered tie and appeared quiet, but did take copious notes during opening arguments. This is a departure from Holmes, who sat quietly and straight at the defense table until the dramatic moment when she took the stand about halfway through her trial.

A jury convicted Holmes on four counts of fraud in January. There is some speculation that she may testify against Balwani, but most seasoned court watchers think her appearance is a long shot. Far from striking a deal with the government, many anticipate that she will appeal her conviction, perhaps after her team sees Balwani’s defense.

Balwani did not seek to deflect blame upon Holmes, but did say his decision-making capabilities at Theranos were limited during his time as president and chief operating officer. He joined the company in 2009, gave the company a $10 million loan, which he promptly received back and left the company in 2016 before the death spiral kicked into high gear.

"He did not start Theranos, he did not control Theranos and he did not have final decision-making authority at Theranos,” Cazares said of Balwani.

He also used Holmes’ defense tactics, insisting that he believed from the beginning that Theranos was a good company, predicated on a sound business idea, that needed more research and development to reach its goal of changing the healthcare industry in general and diagnostics specifically.

'Sunny believed in Theranos, he believed in its technology and he believed in its mission,” Cazares said.

But the prosecution said Balwani mostly believed in the mission until money started to run thin in about 2013, which is when the government says Holmes and Balwani conspired together to defraud investors to keep their foundering business afloat.

"The evidence will show that they ran the company together,” said U.S. Attorney Robert Leach. “You will see how they were partners in everything, including their crime."

Leach anticipated Balwani would deflect responsibility onto Holmes and promised he would show the jury text messages and provide testimony that attested how they were the leaders of the company and were in lockstep regarding their approach to its management and the solicitation of investor dollars.

Many of the same investors who testified against Holmes, including investors on behalf of the DeVos family, the Walton family and Rupert Murdoch, will likely testify in the Balwani trial too.

The trial is expected to last 13 weeks. It has gotten off to a slow start with technical glitches and the Covid scare, but both attorneys took their time in laying out how they are going to set about proving their case.

The government will have to address the testing data defense, which will be central to the defense and the defense will have to find a way to counteract the parade of jilted investors slated to take the stand in the coming days.

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