Attorneys for former Theranos CEO Elizabeth Holmes and former President Ramesh Balwani are in court maneuvering before the federal case starts the trial phase this summer. Last week, Judge Edward J. Davila ruled that prosecutors from the federal Department of Justice (DOJ) cannot argue that physicians and insured patients were victims of fraud that Theranos committed, as prosecutors had argued in an indictment.
In 2018, a federal grand jury indicted Holmes and Balwani. Each defendant was charged with two counts of conspiracy and nine counts of wire fraud, stemming from allegations that they engaged in a multi-million-dollar scheme to defraud investors, and a separate scheme to defraud doctors and patients. (See “Holmes, Balwani Indicted by Department of Justice,” TDR, June 18, 2018.)
‘Revolutionize Lab Testing’
In the indictment, the DOJ charged that Theranos, Holmes, and Balwani defrauded investors and consumers who trusted Theranos’ technology after Holmes and Balwani claimed the company’s blood-testing methods would revolutionize clinical lab testing, The Wall Street Journal (WSJ) reported. Holmes and Balwani have pleaded not guilty.
On Feb. 11, Davila dismissed counts accusing Holmes and Balwani of defrauding doctors or nonpaying patients, such as those with health insurance. Davila ruled the indictment didn’t show Holmes and Balwani intended to obtain money from nonpaying patients or that the doctors were victims of fraud, the WSJ reported.
The effect of the judge’s decision was unclear, because prosecutors haven’t disclosed to the public how many victims were paying or nonpaying patients, the WSJ added. The case will continue because Davila denied motions from Holmes’ and Balwani’s attorneys to dismiss the indictment, the WSJ said. The defendants’ attorneys had argued that the DOJ failed to establish that alleged statements and omissions from Holmes and Balwani were materially false, the WSJ reported.
During an earlier hearing in the case, a lawyer for Holmes made the unusual claim that incorrect blood tests are a fact of life. Prosecutors had argued that some of Theranos’ blood tests were unreliable. At that point, Holmes’ lawyer Amy Saharia said, “That’s not true,” reported the San Jose Mercury News. “There were no problems with them whatsoever,” Saharia added. “All tests have error rates. The government should not be permitted to try a case with anecdotes when incorrect blood tests are a fact of life.”
In January, the Mercury News reported Holmes has had between seven and nine attorneys representing her in the case. But in a civil case in Arizona, Holmes has represented herself and phoned in her appearance in that case, according to published reports.
In the Arizona case, court records showed that Holmes had two lawyers defending her. Last fall, three lawyers representing Holmes quit, saying she hadn’t paid them for more than a year and probably never would, the newspaper wrote. “Now, the court docket shows Holmes representing herself in the civil case,” it added.