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Tale of Two Trials: Unlike Ex-Theranos CEO Elizabeth Holmes, COO/President Ramesh ‘Sunny’ Balwani Found Guilty of All Charges

Balwani’s lawyers opted not to have their client testify in his own defense and called only two witnesses, while Holmes’ defense team offered jurors the opportunity to hear her testimony

Elizabeth Holmes and Ramesh “Sunny” Balwani dreamed of revolutionizing the clinical laboratory blood-testing industry with their now defunct Theranos Edison device, which they claimed could perform multiple tests with a single finger prick of blood. Instead, they became the rare Silicon Valley executives to be convicted of fraud.

On July 7, ex-COO/President Balwani was convicted on all 12 counts of wire fraud and conspiracy charges in his federal fraud trial. Holmes, Theranos’ founder/CEO and former romantic partner to Balwani, avoided convictions six months ago in January on seven of the 11 counts she faced for her role in exaggerating the accuracy and reliability of the company’s Edison blood-testing device and providing false financial claims to investors.

“Once again, a jury has determined that the fraud at Theranos reached the level of criminal conspiracy,” said FBI Special Agent in Charge Sean Ragan in a press release posted on Twitter following the verdict. “The FBI has spent years investigating this investment fraud scheme with our partners at USPIS and the FDA Office of Criminal Investigations. Lies, deceit, and criminal actions cannot replace innovation and success.”

How did the trials differ? That’s the question many clinical laboratory directors and pathologists who followed Theranos’ legal saga may be asking, as well as how the Theranos trials reflect on their own duties under the Clinical Laboratory Improvement Amendments of 1988 (CLIA).

Ramesh “Sunny” Balwani
Ramesh “Sunny” Balwani (above center), former COO/President of Theranos, is shown leaving the federal courthouse in San Jose, Calif., on July 7 after he was found guilty on all 12 counts of fraud, a verdict more severe than ex-CEO and Theranos founder Elizabeth Holmes received in January for similar charges. Clinical laboratory directors and medical laboratory scientists have been closely monitoring both trails. (Photo copyright: Jim Wilson/The New York Times.)

Balwani’s Age and Experience May Have Worked Against Him

Michael Weinstein, JD, a former Justice Department prosecutor who is the Chair of White-collar Litigation at Cole Schotz, told The New York Times that Balwani’s age and his trial date—three months after Holmes’ conviction—worked against him. Balwani, 57, could not present himself as a young and inexperienced tech executive easily manipulated by those around him, as Holmes, 38, had attempted to do.

“Holmes could come off as a bit naïve, and [her defense team] tried to sell that,” Weinstein said of the former Stanford University dropout who founded Theranos in 2003 when she was 19.

In Holmes’ case the verdict was mixed, with jurors acquitting her of the patient fraud counts but unable to reach a decision on some of the investor fraud counts, Bloomberg reported.

Mr. Balwani, however, “came off as more of an experienced technology executive,” Weinstein added.

Weinstein pointed out that because the government’s case against Balwani mirrored its case against Holmes, prosecutors had time to refine their strategy before making a second appearance inside US District Court Judge Edward Davila’s San Jose courtroom.

“The streamlined presentation, the streamlined evidence, the streamlined narrative—all was beneficial for the government in the end,” he said.

Ever since opening arguments in March, Balwani’s legal team portrayed him to the jurors as a loyal partner who believed in Theranos’ technology and “put his money where his mouth is,” the Guardian noted.

Prosecutors, however, made the case that Balwani had a hands-on role in running the lab and was the source of Theranos’ overinflated financial projections.

Balwani invested about $15 million in the startup between 2009 and 2011 and never cashed in when his stake grew to $500 million. That money evaporated when Theranos collapsed.

In all, 24 witnesses testified against Balwani. He was ultimately convicted of all 12 counts he faced:

  • Two counts of conspiring with Holmes,
  • Six counts of defrauding investors, and
  • Four counts of patient fraud.

Major Differences in Trial Testimony

The Balwani trial made headlines due to COVID-19 pandemic related delays, but otherwise did not produce the news-generating moments that punctuated Holmes’ nearly four-month-long court appearance. Thirty-two witnesses appeared at the Holmes trial, including Secretary of Defense James Mattis, according to CNN.

Another significant difference in the two trials was that Holmes testified in her own defense. Holmes spent nearly 24 hours on the stand, CNN Business noted at that time, during which she cast the blame for Theranos’ failings on those around her, including Balwani.

In one of her trial’s most dramatic moments, a tearful Holmes accused Balwani of emotional and sexual abuse, including forcing her to have sex, which Dark Daily covered in “Balwani and Holmes’ Personal Relationship Takes Center Stage in Criminal Trial, Fueling Continued Public Interest in Theranos Fraud Saga.” Balwani denied those allegations.

ABC News Rebecca Jarvis, host and creator of the podcast “The Dropout,” believes Balwani’s decision not to testify worked against him.

“[The abuse claims] did not come up at his trial, but during [Holmes’] seven days of testimony, they were a big portion of what she talked about,” Jarvis said in an ABC NewsStart Here” podcast. “The biggest difference is that he didn’t take the stand to say, ‘I didn’t do this,’ or … raise his own objections to the claims against him.

“You think about a jury who is supposed to know nothing about any of [the defendant’s] backstory, and they’re shown these things like … case pictures of [Holmes] so much younger than [Balwani], supposedly having to rely on him for his expertise,” Jarvis added.

“You can imagine where the jury may have found that presentation more sympathetic than Sunny Balwani who had experience,” she said.

Text May Have Been Balwani’s Undoing

Balwani’s defense team called only two witnesses:

  • A naturopathic physician who used Theranos’ blood-testing lab, and
  • A technical consultant who Balwani’s legal team hired to assess the accessibility of patient data in Theranos’ Laboratory Information System (LIS), which the defense argued could have provided evidence of the accuracy of Theranos’ test results.

Attorney Jennifer Kennedy Park, JD, a partner at Cleary Gottlieb, told Yahoo Finance the LIS database may have played a role in the jury’s verdict as well.

“This verdict also signals the jurors did not buy Balwani’s highly speculative argument that the database Theranos lost in 2018 would have proven his innocence,” Park said.

In a statement to CNN Business, Balwani attorney Jeffrey Coopersmith, JD, of Orrick, Herrington and Sutcliffe, LLP, said the defense is exploring avenues to possibly fight the jury’s decision.

“We are obviously disappointed with the verdicts,” he said. “We plan to study and consider all of Mr. Balwani’s options including an appeal.”

Following the verdicts, Judge Davila raised Balwani’s bail to $750,000 and set a Nov. 15 sentencing date. Holmes is scheduled to be sentenced Sept. 26.

Balwani’s own words may have been his final undoing. During closing arguments, prosecutors again showed jurors a text message Balwani sent to Holmes in 2015, The New York Times reported.

“I am responsible for everything at Theranos,” he wrote. “All have been my decisions too.” 

Clinical laboratory directors and medical laboratory scientists will no doubt continue to monitor the fallout from these two extraordinary federal fraud trials. There’s still much to learn about CLIA-laboratory director responsibility and how the government plans to prevent future lab testing fraud from taking place.

Andrea Downing Peck

Related Information:

Tweet: FBI San Francisco

Theranos Trial: Legal Saga Reaches Final Chapter as Sunny Balwani Faces Verdict

No. 2 Theranos Executive Found Guilty of 12 Counts of Fraud

The Key Moments from Elizabeth Holmes’ Trial

Theranos Ex-President Balwani Found Guilty of Fraud

ABC: Start Here Podcast

Theranos: Elizabeth Holmes Co-Defendant Sunny Balwani Found Guilty of All 12 Counts

Former Theranos COO Is Guilty of Federal Fraud

Closing Statements Made in Trial of Sunny Balwani

Theranos Trial: Legal Saga Reaches Final Chapter as Sunny Balwani Faces Verdict

Former Theranos President’s Defense Rests in Criminal-Fraud Trial

Former Theranos Executive Sunny Balwani’s Fraud Trial Heads to Jury

On-demand Video Service Hulu Gets Underway on TV Miniseries Documenting Rise and Fall of Former Theranos CEO Elizabeth Holmes

Six-episode show is based on popular ABC Radio podcast “The Dropout,” which focused on the three-year investigation that brought down clinical laboratory test developer Theranos

While former Theranos CEO Elizabeth Holmes awaits the start of her August 31 criminal fraud trial in a federal court in Northern California, one streaming video service is lining up a star-studded cast to tell the story of the Silicon Valley executive’s fall from grace and the demise of her clinical laboratory blood-testing company.

This six-part series is being produced by Hulu, an on-demand video streaming service offering live and on-demand content. Back in 2019, it announced that it would produce the “The Dropout,” a limited series chronicling Holmes’ rise and fall from Founder and CEO of $9 billion tech company Theranos to criminal defendant.

Hulu says the series will launch this fall, so pathologists and medical laboratory managers have time to set their recorders to capture what may be a compelling story of hubris that took investors and the news media on a wild ride. The Theranos publicity machine was so effective that many hospital CEOs went to their clinical laboratory administrators and told them to delay equipment purchases because Theranos would be able to do the same medical laboratory tests at just pennies on the existing lab-cost dollar.

Holmes’ carefully-crafted public image as Theranos’ CEO drew comparisons to the late Apple CEO Steve Jobs, Business Insider noted. This has made her a popular topic not only among clinical laboratory scientists but also Hollywood moviemakers.

“The Dropout” took its inspiration from the ABC Audio podcast of the same name, hosted by ABC Chief Business, Technology and Economics correspondent Rebecca Jarvis. The ABC Audio podcast’s description provides a glimpse into the direction the miniseries will take.

“Money. Romance. Tragedy. Deception. The story of Elizabeth Holmes and Theranos is an unbelievable tale of ambition and fame gone terribly wrong. How did the world’s youngest self-made female billionaire lose it all in the blink of an eye? How did the woman once heralded as ‘the next Steve Jobs’ find herself facing criminal charges—to which she pleaded not guilty—and up to 20 years in jail? How did her technology, meant to revolutionize healthcare, potentially put millions of patients at risk? And how did so many smart people get it so wrong along the way?” the ABC Audio website states.

The Hulu series originally was to star “Saturday Night Live” cast member Kate McKinnon as Holmes but was recast with Amanda Seyfried in the starring role. According to Variety, the series will include a notable lineup of guest stars including:

Naveen Andrews will play former Theranos President and COO Ramesh Balwani, whose own criminal fraud trial is expected to begin early next year.

A release date for the limited series has not yet been announced, Town and Country reported.

Elizabeth Holmes

Elizabeth Holmes (above), former CEO of now defunct company Theranos, faces 11 counts of fraud for alleged false claims that the clinical laboratory testing company had created a revolutionary finger-prick technology capable of performing a wide range of clinical laboratory tests. Among the charges are two counts of conspiracy to commit wire fraud and nine counts of wire fraud, for which Holmes could serve up to 20 years in jail if found guilty of all charges, according to court documents. She has pleaded not guilty. (Photo copyright: The Wall Street Journal.)

The ‘Real World’ Wall Street Journal Investigation of Theranos and Holmes

Dark Daily has reported extensively on the Holmes/Theranos saga, including the recent development that Holmes’ repeatedly-delayed trial would be pushed back from mid-July to August 31 because Holmes is due to give birth in July.

Theranos’ alleged deceptions first were brought to light in a series of 2015 investigative reports in The Wall Street Journal (WSJ). Then-WSJ investigative reporter John Carreyrou alleged Theranos had not disclosed publicly that the vast majority of its tests were not being done with proprietary technology, but instead with traditional machines purchased from Siemens AG and other companies.

Carreyrou’s reporting became the basis for his bestselling book, “Bad Blood: Secrets and Lies in a Silicon Valley Startup,” which led to “The Inventor: Out for Blood in Silicon Valley,” a 2019 HBO documentary film.

And for those looking for even more drama centered around the Theranos saga, a feature film starring Jennifer Lawrence as Elizabeth Holmes, titled, “Bad Blood,” remains “in development” according to People magazine. Though the project was announced in 2016, filming has yet to begin.

Meanwhile, clinical laboratory scientists will soon get to watch the next “real world” chapter in the Holmes’ saga play out in federal court later this summer. They will also have multiple opportunities in the coming years to be “entertained” by the Theranos scandal on big and small screens.

—Andrea Downing Peck

Related Information

‘The Dropout’: William H. Macy, Laurie Metcalf, Elizabeth Marvel, Utkarsh Ambudkar, Kate Burton Among 10 Cast in Hulu Limited Series

Here Are All the Ways Theranos CEO Elizabeth Holmes Has Imitated Steve Jobs Over the Years

Elizabeth Holmes Hulu Series ‘The Dropout’ Adds 10 Guest Stars, including William H. Macy, Laurie Metcalf, Stephen Fry

U.S. v. Elizabeth Holmes, et al.

Hot Startup Theranos Has Struggled with Its Blood Test Technology

Amanda Seyfried to Play Elizabeth Holmes in Hulu Series ‘The Dropout,’ Taking Over from Kate McKinnon

Former Theranos CEO Elizabeth Holmes Is Pregnant, Causing a Further Delay in Her Trial Date