For months, Ramesh Balwani’s lawyers have tried to separate him from Elizabeth Holmes, his ex-girlfriend and business partner of the failed blood-testing company Theranos.
Mrs Holmes was convicted in January of cheating with start-up investors. Mr Balwani is seeking different results in his own fraud case.
But on Tuesday, in the closing statement of Mr. Balwani’s trial, prosecutors linked him directly to Mrs. Holmes and to the year-long fraud in Theranos. Jeffrey Schenk, an assistant U.S. attorney and chief prosecutor in the case, displayed a text message that Mr. Balwani sent to Mrs. Holmes in 2015 that was used as evidence in the trial.
“I am responsible for everything in Theranos,” Mr. Balwani wrote. “Everything is my decision.”
The text message was a confession of guilt, Mr Shenk said, adding that he was “acknowledging his role in the fraud.”
The presentation limits evidence to more than three months in Mr. Balwani’s trial, which largely reflects the final fall of Mrs. Holmes. Mrs. Holmes and Mr. Balwani, 57, were accused of exaggerating the power and business performance of Theranos’ blood-testing machine in 2018 when, in fact, the products did not work and its business was struggling. The two have pleaded not guilty. Mrs Holmes was convicted on four of the 11 charges.
The trial of Mr. Balwani, also known as Sunny, was not the culmination of Mrs. Holmes’ high-profile case. Yet it acts as a code in the eroded era of start-up growth that often relies on hype and hyperbole. Mrs. Holmes and Mr. Balwani are among the very few tech executives who have ever faced trial for fraud.
As Mrs. Holmes tried to blame others for cheating on Theranos, Mr. Balwani pointed the finger at her. Throughout the trial, his lawyers argued that many of Theranos’ blood tests worked. And they said that Mrs. Holmes controlled Theranos, not Mr. Balwani. Their concluding argument was to begin later on Tuesday.
Mrs. Holmes, now 38, met Mr. Balwani when she was 18. They started dating a few years later, after the founding of Mrs. Holmes Theranos. In 2009, Mr. Balwani invested in Theranos and became its chief operating officer, eventually taking charge of its lab. The couple kept their relationship a secret and lived together in a spacious home they owned in Atherton, Calif.
In 2016, after Theranos was criticized for lying about his blood testing ability, Mr. Balwani left the company and split with Mrs. Holmes. The pair were accused of cheating together, but Mrs Holmes argued in the filing to dismiss the cases and accused Mr Balwani of mental and sexual abuse. His trial included repeated dramatic testimony to the allegations. That issue was dropped from Mr. Balwani’s trial.
To convict Mr. Balwani, prosecutors must convince the judges that he deliberately lied to investors and patients about Theranos’ blood tests and business transactions.
Prosecutors tried to hold Mr Balwani responsible for the financial speculations that Theranos showed investors and the state of its labs. New witnesses include investors and executives who dealt directly with Mr. Balwani instead of Mrs. Holmes.
A projection presented to investors in October 2014 shows that Theranos will bring in $ 140 million that year. In reality, the revenue was limited. The following year, Mr. Balwani estimated revenue of about $ 1 billion for investors. Theranos’s internal assumptions were much lower, the evidence shows, and the reality was close to zero.
A new witness, Patrick Mendenhall, who had a direct deal with Mr. Balwani when he was investing in Theranos, outlined a promise that proved to be misleading or false.
Brian Grossman, an investor in hedge fund PFM Health Sciences, who was also a witness in Mrs. Holmes ‘trial, testified that Mr. Balwani provided his party with financial estimates that exaggerated Theranos’ estimated revenue.
“When Mr. Balwani contacts an investor, it is for a purpose, and the purpose is to deceive them in order to get money,” Mr. Shenk said.
Prosecutors also emphasized Mr Balwani’s role in running Theranos’ lab, which the executive described as a “disaster zone” used as evidence in a 2014 text message. Mr Balwani will “remove the barrier” by intimidating or pushing employees who are concerned about the Theranos test, such as Dr Adam Rosendorf, a former lab director who testified at both tests, Mr Shenk said.
Significantly absent from the witness stand were James Mattis, a former Secretary of Defense and member of the Theranos Board, and Mrs. Holmes, both of whom testified at Miss Holmes’ trial. Mr Balwani did not testify in his defense.
If convicted, Mr Balwani and Miss Holmes will be sentenced together in September.