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Balwani and Holmes’ Personal Relationship Takes Center Stage in Criminal Trial, Fueling Continued Public Interest in Theranos Fraud Saga

Even as Balwani’s trial moves ahead, Hulu’s miniseries ‘The Dropout’ chronicles the pair’s romance and the company’s downfall while providing controversial subject matter for various media outlets

Unlike Theranos founder Elizabeth Holmes’ criminal trial for fraud which generated daily headlines across the nation, the related fraud trial of ex-Theranos COO Ramesh “Sunny” Balwani is not getting the same news coverage. Therefore, media have shifted their reporting to Balwani’s personal relationship with the Holmes, which is clearly having its moment in the media spotlight.

The release of the Hulu miniseries “The Dropout”—which chronicles Holmes’ failed attempt to revolutionize the clinical laboratory industry by developing a device capable of performing multiple clinical blood tests using a finger-stick of blood—created the initial media and TV-viewer buzz.

Now a diverse range of media, including Fortune, The New York Post, and The Guardian, are turning their attention to the former Theranos executives’ private relationship during the time when they were in charge at the failed medical laboratory company.

As “The Dropout” outlines, Holmes gained celebrity status after dropping out of Stanford University at age 19 and founding Theranos in 2003. Years later, when Theranos claimed its Edison blood-testing device could conduct hundreds of blood tests using a finger-prick of blood, the startup’s valuation soared to nearly $9 billion in 2014, making Holmes a billionaire based on her 50% stake in the company, Investopedia reported.

In “What Happened to Elizabeth Holmes and Sunny Balwani? Where the Shamed Theranos Execs are Today,” Fortune used the release of “The Dropout” to publish an update on Holmes and Balwani. The magazine notes Holmes’ family connections—she was a descendant of the founders of America’s first yeast company and the daughter of a former Enron executive and congressional aide—helped her early efforts at fundraising for Theranos.

Fortune also stated that Holmes’ “pedigreed background” enabled her to attract “luminaries” such as former Secretary of State Henry Kissinger and former CDC Director William Foege to the Theranos board and gained her access to high-profile investors.

Ramesh "Sunny" Balwani
In U.S. District Court Northern District of California, ex-Theranos president and COO Ramesh “Sunny” Balwani (above) faces charges for allegedly defrauding patients and investors about Theranos. His defense team has attempted to distance their client from the day-to-day decision-making in the clinical laboratory company, while prosecution witnesses are attempting to show Balwani not only invested money in the startup but orchestrated many of the company’s actions. Balwani has pleaded not guilty to all charges. (Photo copyright: David Paul Morris, Fortune.)

Theranos, Holmes Cloaked in Secrecy, according to Fortune

While Holmes sought the spotlight when promoting Theranos, Fortune maintains the company’s work culture and Holmes herself were clocked in secrecy. The article states Holmes hired bodyguards to serve as her chauffeurs, installed bulletproof glass in her office windows, and did not allow workers in separate departments to discuss projects with one another.

Balwani met Holmes in 2002 while both were studying in Beijing as part of a Mandarin language summer program. He was 37 and married at the time, while Holmes was an 18-year-old high school student. Balwani was attending an MBA program at the University of California, Berkeley, which he entered after selling his shares in software company Commerce One in 2000 for nearly $40 million.

While Balwani had no training in biological sciences or medical devices, Holmes named him president of Theranos in 2009. The pair dated for a dozen years, but they kept their relationship secret from Theranos workers and investors. During Holmes’ fraud trial, Dark Daily reported on their private text message exchanges and her claims against Balwani of “intimate partner abuse.” (See Dark Daily, “Text Messages Between Theranos Founder Elizabeth Holmes and Ex-Boyfriend Ramesh “Sunny” Balwani Grab Headlines in Early Days of Fraud Trial.”)

Their relationship reportedly ended in 2016.

The New York Post reported Balwani sold the upscale Silicon Valley home he previously shared with Holmes for $15.8 million this past January. The 6,800-square-foot, five-bedroom, seven-bathroom house in Atherton, Calif., is a one-acre property, which The Post states was purchased by the couple for $9 million in 2013. Balwani bought out Holmes’ 50% stake in 2018.

Aron Solomon, a Chief Legal Analyst for legal marketing firm Esquire Digital, is not surprised by the interest in all things Theranos-related.

“We are seeing a ton of interest following the Holmes trial, and I don’t think it’s going to go away,” he told The Guardian.

Potential Reason for Delay in Holmes’ Sentencing

Holmes was convicted in January on four counts of fraud, but she is not expected to be sentenced until September. Amanda Kramer, JD, a partner in the White Collar Defense and Investigations practice at Covington and Burling, LLP, and a former federal prosecutor, suggests that Holmes’ sentencing date may have been delayed until after Balwani’s trial due to the potential for new information to come to light.

“It’s not typical for a case to be sentenced eight months out, but this is not a typical case in many senses,” Kramer told NPR. “And some facts established in Balwani’s trial might prove to be relevant in Holmes’ sentencing.”

So, it appears clinical laboratory directors and pathologists may find more interesting insights about the problems at Theranos emerging from court testimony when it is time for Holmes to be sentenced and during the remaining days of Balwani’s trial. Stay tuned. Dark Daily will continue to bring you the relevant facts of the case.

Andrea Downing Peck

Related Information:

What Happened to Elizabeth Holmes and Sunny Balwani? Where the Shamed Theranos Execs Are Today

Theranos Merchandise on eBay Sparks Bloodlust Among Elizabeth Holmes Fans

Theranos: A Fallen Unicorn

Ex-Theranos Boss Sells California Home He Shared with Elizabeth Holmes

Former Theranos CEO Elizabeth Holmes to Be Sentenced on Sept. 26

Text Messages Between Theranos Founder Elizabeth Holmes and Ex-Boyfriend Ramesh “Sunny” Balwani Grab Headlines in Early Days of Fraud Trial

Ex-Theranos CEO Elizabeth Holmes Will Be Free on Bail Until September 26 Sentencing Hearing for Criminal Fraud Conviction

Start of ex-Theranos president and COO Sunny Balwani’s federal trial will be pushed to mid-March due to COVID-19 spike in California

Just when most clinical laboratory managers and pathologists thought the guilty verdict in the Elizabeth Holmes fraud case would bring an end to the saga, we learn her chapter in the Theranos story will instead extend another eight months to September when the former Silicon Valley CEO will be sentenced. However, a brand-new chapter will begin in March when the fraud trial of ex-Theranos president and COO Ramesh “Sunny” Balwani begins.

Holmes’ fraud trial concluded on January 3 with the jury convicting her on one count of conspiracy to defraud investors and three counts of wire fraud after seven days of deliberation and nearly four months of trial proceedings.

Holmes remains free on a $500,000 bond while awaiting sentencing.

Elizabeth Holmes

Elizabeth Holmes is seen above arriving at the US District courthouse in San Jose, Calif. On January 3, the former Theranos CEO was convicted on three counts of wire fraud and one count of conspiracy to defraud investors. US District Judge Edward Davila set Holmes’ sentencing date for September 26. Clinical laboratory directors and pathologists who have closely followed the trial will have to wait eight months for the conclusion of this chapter in the Theranos saga. (Photo copyright: The Guardian.)

“I would be utterly shocked if she wasn’t sentenced to some term of imprisonment,” Amanda Kramer, JD, a former federal prosecutor who is now a partner with New York-based Covington & Burling LLP, told NPR.

“What is the sentence that will deter others who have a failing business from making the choice to commit fraud, rather than owning up to the failings and losing their dream?” she added.

Holmes, 37, faces a possible prison sentence of 20 years in prison as well as a $250,000 fine and possible restitution. But some legal experts expect a much shorter prison sentence for the disgraced CEO, who has no prior criminal history and is a first-time mother of a son born last July.

While sentencing typically takes place within a few months of a verdict being reached in a federal criminal trial, US District Judge Edward Davila set 1:30 p.m. September 26, 2022, as the date for Holmes’ sentencing hearing, according to his order dated January 12.

The Mercury News reported the lengthy delay in sentencing may be due to the start of Balwani’s upcoming trial on identical fraud charges. The delay in Holmes’ sentencing will allow for Balwani’s trial to begin in mid-March after being pushed back one month due to a spike in COVID-19 cases in California, The Mercury News reported.

Judge Davila will preside over Balwani’s trial as well.

Jury Acquits Holmes on Patient-related Charges

Holmes was acquitted of conspiracy to defraud patients of the now-defunct blood-testing laboratory and the jury failed to reach a unanimous decision on three other wire fraud charges.

University of Michigan Law Professor Barbara McQuade, a former US Attorney and an NBC News Legal Analyst, told CNBC she expects prosecutors to rethink their strategy in the Balwani trial based on the jury’s acquittal of Holmes on conspiracy and fraud charges involving Theranos patients.

“Knowing that this jury acquitted on all of the patient counts, I think that strategically, they should look to find a more direct way to explain why that is part of the fraud, that they necessarily knew that ultimately patients would be defrauded. And that although they didn’t know these individual patients by name, they knew that they existed in concept,” McQuade said.

One of the jurors in the Holmes’ trial, Wayne Kaatz, told ABC News he and other jurors were dismayed by their inability to come to a unanimous consensus on the three of the charges. A mistrial was declared on those three counts.

“We were very saddened,” Kaatz said. “We thought we had failed.”

Did Holmes Charm the Jury?

When Holmes dropped out of Stanford at age 19 to form Theranos, her goal, she claimed during testimony, was to transform healthcare by creating a blood-testing device capable of performing hundreds of clinical laboratory tests using a finger-stick of blood. She became a Silicon Valley sensation because of her charisma and charm, which she used to sell her dream to big money investors such as Oracle co-founder Larry Ellison and former US Secretary of State George Shultz.

Kaatz acknowledged Holmes’ personality also impacted the jury.

“It’s tough to convict somebody, especially somebody so likable, with such a positive dream,” Kaatz explained to ABC News, noting, however, that he voted guilty on the three counts on which the jury could not agree. “[We] respected Elizabeth’s belief in her technology, in her dream. [We thought], ‘She still believes in it, and we still believe she believes in it.’”

In the light of Holmes’ conviction, McQuade suggested it would not be shocking to see Balwani consider a plea deal in exchange for a lighter sentence.

“Could we perhaps, enter a guilty plea and get a reduction for acceptance of responsibility?” she said. “It’s certainly something that you have to look at.”

And so, the saga continues. Clinical laboratory directors and pathologists who followed Holmes’ trial with rapt interest should prepare for a new set of twists and turns as Ramesh Balwani prepares to face his own day in court.

Andrea Downing Peck

Related Information:

Exclusive: Jury Speaks Out After Convicting Elizabeth Holmes

Elizabeth Holmes: Theranos Fraudster to Avoid Sentencing for at Least Eight Months

Theranos Ex-President’s Fraud Trial Delayed by COVID Surge

United States v. Elizabeth Holmes, et al.: 18-CR-00258-EJD

Former Theranos CEO Elizabeth Holmes to be Sentenced on Sept. 26

Elizabeth Holmes Verdict Complicates Upcoming Trial of Her Ex-Boyfriend and Former Theranos COO Sunny Balwani

Two Important Aspects for Clinical Laboratories to Consider Following Elizabeth Holmes’ Conviction

Theranos Ex-CEO Elizabeth Holmes Convicted on Three Counts of Wire Fraud and One Count of Conspiracy to Commit Fraud after Seven Days of Jury Deliberations

Theranos Whistleblower Tyler Shultz Celebrates Former CEO Elizabeth Holmes’ Guilty Verdict by Popping Champagne with Family Members