Fraud trial of Theranos founder Elizabeth Holmes set to begin

Elizabeth Holmes Photographer: Michael Short/Bloomberg

SAN JOSE, Calif., Sept 8 (Reuters) - Theranos founder Elizabeth Holmes goes on trial on Wednesday in federal court, with prosecutors poised to lay out fraud charges against the former Silicon Valley star accused of lying about her now-defunct blood-testing startup once valued at $9 billion.

By Jody Godoy

In one of the most closely watched trials of a U.S. corporate executive in years, Holmes, 37, is accused of making false claims about the company, including that its devices designed to draw a drop of blood from a finger prick could run a range of tests more quickly and accurately than conventional laboratory means.

A 12-member jury in San Jose, California, is set to hear opening arguments in the trial being presided over by U.S. District Judge Edward Davila, starting with the prosecution.

Holmes, who may take the witness stand during the trial, has pleaded not guilty to 10 counts of wire fraud and two counts of conspiracy. Former Theranos executive Ramesh “Sunny” Balwani, scheduled to be tried separately, has also pleaded not guilty.

Prosecutors have said Holmes and Balwani defrauded investors between 2010 and 2015 and deceived patients when the company began making its tests commercially available, including via a partnership with the Walgreens drugstore chain.

Court filings unsealed last month showed that Holmes, who had been in a romantic relationship with Balwani, has alleged that he abused her emotionally and psychologically. Balwani has denied the allegations.

Holmes’ attorneys have said in court papers she is “highly likely” to take the witness stand and testify about how the relationship affected her mental state. Defendants rarely testify at their own trials because it opens them up to potentially risky cross examination by prosecutors.

Legal experts expect her defense lawyers to raise questions about what Holmes knew and believed during the alleged scheme. To convict Holmes of fraud, prosecutors must prove her intent.

A Stanford University dropout who started Theranos in 2003 at age 19, Holmes once grabbed headlines with her vision of a small machine that could run blood tests in stores and homes.

The Wall Street Journal in 2015 reported that the Theranos devices were flawed and inaccurate, setting off a downward spiral for a company that had drawn investors including media mogul Rupert Murdoch and Oracle co-founder Larry Ellison.

The saga has become the subject of documentaries, podcasts and books. A TV miniseries and a Hollywood film based on Holmes’ story are in the works.

Holmes’ lawyers have sought to limit the evidence in the trial, largely unsuccessfully. The judge has ruled that jurors can hear about complaints from patients about allegedly faulty test results and about a critical U.S. government report following an inspection of a Theranos facility in 2016.

(Reporting by Jody Godoy; Editing by Will Dunham)


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