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Holmes defense makes last stand as fraud trial wraps

Attorneys for Elizabeth Holmes told the jury their client simply failed in building Theranos into the next great technology company but stopped short of fraud, while the prosecution said Holmes knowingly misled investors when she discovered her beloved company was hurtling toward insolvency. 

(CN) — Attorney Kevin Downey ended his lengthy closing argument by insisting disgraced Theranos founder Elizabeth Holmes never intended to defraud her investors or patients but instead worked diligently to build a technology she thought would change the world and simply failed. 

“You know how to use your experience and your common sense to evaluate a person’s intent,” Downey told the jury just past noon on Friday in the federal courthouse in San Jose. “At the first sign of trouble, crooks cash out, criminals cover up and rats flee a sinking ship.”

Downey noted Holmes never did any of these things. Instead, after she fired her former business partner Sunny Balwani in 2016 and brought on a new lab director who told her she needed to void thousands of tests, she agreed to void the tests and tried to reform the company. 

Downey emphasized that Holmes never sold a single share of stock, which appears to belie the government’s narrative that she engaged in a yearslong conspiracy to personally profit off of investors. 

The question of Holmes’s intent will be central to the juror’s deliberations as the government must prove that she willingly and knowingly defrauded investors and patients for the purpose of enrichment. 

Downey spent the better part of Friday punching holes in the government’s assertions.

“Did she intentionally make misrepresentations to people to induce them to invest in her company?” Downey asked at one point. “Evidence says she did not much less satisfy the necessity to get beyond a reasonable doubt.”

Downey said the government is trying to actually misrepresent the words of Elizabeth Holmes, who was often talking about the latest versions of Edison devices instead of a previous iteration of one of the portable blood analyzers. 

“In essence, this is the theory of their case,” Downey said. 

He argued that when Holmes told investors that Theranos could perform any test on their newly developed analyzers, she was describing a technological breakthrough that occurred in 2010. Also, the extent that Holmes demurred about disclosing the full scope of that technology was done to protect trade secrets. 

Downey also said the six investors who claim to have been defrauded did not base their investments on any of the supposed misrepresentations that Holmes made in various public statements including the famed Fortune magazine cover story that catapulted Holmes and her company into the public eye. 

The attorney also said those investors were sophisticated and signed off on papers that stipulated the speculative nature of Theranos and the fact that it was a private company that would not disclose every aspect of its operation. 

Downey told jurors the Fortune article also told readers that Holmes was wary of sharing too much information about the company for trade secret reasons, indicating that the former CEO was coy about certain operational aspects not because of criminal intent but to protect technological developments that were key to their competitive advantage. 

On rebuttal, U.S. Attorney John Bostic stressed the defense’s narrative about Holmes being a hardworking person and Theranos having several dedicated engineers and scientists belied Holmes' decision to lie to investors when she knew her company was on the brink of failure. 

“She wanted her company to be successful and the defense holds that out as a reason to doubt these charges,” Bostic said. “But that was the motive. She did this on behalf of the company and she  committed these crimes because she was so desparate for the company to succeed.”

Bostic warned the jury against letting sympathy for Holmes, who gave emotional testimony about sexual assault in her relationship with Balwani, intercede in their deliberations regarding the facts of the case. 

The prosecution also conceded that Holmes was a talented communicator and a hard worker, but said she chose to defraud investors after it became clear Theranos would not become the innovative company Holmes had hoped. 

“Because she made the choices to defraud and investors and because she conspired with Sunny Balwani to carry out those schemes you should return a verdict of guilty,” Bostic said. 

The jury will start deliberating Monday morning. Due to Christmas week and the court's schedule, if the jury does not come to a verdict by Tuesday it could be some time before Holmes finds out her fate. 

She faces 11 counts of wire fraud and conspiracy. If convicted, she could serve 20 years in prison. 

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