The jury’s deliberations lasted for four full days after a lengthy trial that began in March with initial statements. A jury of five men and seven women determined that Balwani had defrauded both patients and investors, and found him guilty of the 12 charges he faced, which included ten charges of federal electronic fraud and two of conspiracy to commit electronic fraud.
During Holmes’ trial, an independent jury acquitted her of charges related to patient fraud and was unable to reach a unanimous verdict on three of the charges related to investor fraud. She was found guilty of four investor-related charges.
Balwani, the former president and chief operating officer of the failed blood test startup, was indicted four years ago along with Holmes, the founder and former CEO, for allegedly defrauding investors and patients. His trials were interrupted after Holmes’ legal team explained in legal documents that it planned to make accusations about their relationship as part of its defense.
Balwani showed little emotion when his fate was read aloud. He then briefly met with a small support system present in the courtroom. The verdict comes about six months after Holmes’ trial ended.
His verdict marks the end of a rare case of criminal fraud against two Silicon Valley startup executives and the latest chapter in a company and a founder, once seen as a poster child of the entrepreneurial dream of building a product disruptive with potential to change the world. .
“Balwani is a reminder that she, like everyone else, didn’t do it alone,” said Margaret O’Mara, a technology industry historian and professor at the University of Washington at CNN Business. “He still had an important role in running the company.”
Holmes founded Theranos when he was 19 in an effort to create a cheaper and more efficient alternative to traditional blood tests, a goal he said was inspired by his own fear of needles. The startup later claimed to have developed a technology capable of testing a number of conditions, such as cancer and diabetes, using just a few drops of blood. Theranos eventually raised $ 945 million from investors, including well-known figures such as media mogul Rupert Murdoch and the Walton family of Walmart. He also established partnerships with prominent retailers.
Then it all crashed, starting with a 2015 Wall Street Journal investigation into the launch that revealed holes in its test methods and technological capabilities.
Balwani’s trial took place in the same courtroom in San Jose, California, where Holmes was convicted. His case, also presided over by Judge Edward Davila, was postponed several times due to delays in Holmes’ trial and later by an increase in the Covid-19.
To present his case against Balwani, the government called two dozen witnesses to try to convince the jurors that he lied and intentionally and consciously tricked investors and patients into getting money for Theranos. As in the case of Holmes, the government tried to untangle the layers of alleged fraud for jurors, including concealing the use of machines manufactured by third parties, financial exaggeration, misrepresentation of working with pharmaceutical companies, and l ‘army and take advantage of the means to perpetuate the scheme. .
The defense, on the other hand, called for two witnesses to testify. During the initial and final arguments, he portrayed Balwani as having acted in good faith and believing in the company’s technology. He also argued that prosecutors chose information to prove their case and questioned whether the government had enough evidence for the jury to convict Balwani.
Balwani, 57, faces up to 20 years in prison, as well as a $ 250,000 fine plus restitution for each electronic fraud charge and each conspiracy count.
Holmes, 38, is scheduled to be sentenced in late September.
The Balwani road to Holmes and Theranos
While Holmes ’impressive rise and fall is probably what most will remember from Theranos’ history in the coming years, O’Mara said Balwani is actually “most representative of the valley in terms of his career “.
Balwani and Holmes first crossed paths in the summer of 2002. The two met while attending a summer program in Beijing to learn Mandarin. Balwani, almost 20 years older than Holmes, had already had a successful career in the software industry and as an entrepreneur.
Originally from South Asia, Balwani moved to the United States on a student visa in 1986 to attend college in Texas. After graduating, he came to Silicon Valley and worked for technology companies like Lotus and Microsoft. He started an e-commerce business, which he eventually sold. In 2002, he returned to school to earn his MBA.
As Holmes testified in his own defense at his trial, the two forged a friendship. They kept in touch and their relationship eventually became romantic. In 2005, the year after Holmes left Stanford to work full-time at Theranos, the couple lived together.
Balwani took on a formal role at Theranos in 2009, shortly after securing a $ 10 million loan to the company. On the recommendation of the Theranos board, according to Balwani’s defense, he would eventually take on the role of COO and chairman. Their romantic relationship, however, remained largely private to investors, employees, and business partners.
Under the leadership of Holmes and Balwani, Theranos established a major business partnership with Walgreens, achieved a valuation of $ 9 billion, and received brilliant coverage in the press. Holmes appeared on multiple magazine covers and was hailed as the rare founder of a $ 1 billion business, not to mention one who is said to be a paper billionaire.
But in 2015, the Journal reported that Theranos had only performed about a dozen of the hundreds of tests it offered using its proprietary blood test device and with questionable accuracy. The Journal also revealed that Theranos relied on devices manufactured by third parties from traditional blood testing companies rather than its own patented technology.
Balwani, who had been overseeing the laboratory that processed patient samples, left the company in May 2016. (His personal relationship also ended at that time.) Theranos annulled two years of results from the tests. blood.
In 2018, after nearly two years of unrest, Holmes and Theranos settled charges of “mass fraud” with the U.S. Stock Exchange and Securities Commission, but did not admit or deny any of the allegations as part of the deal. . Balwani, on the other hand, is fighting the charges. Jeffrey Coopersmith, the lawyer who also represents him in his criminal trial, said in a statement at the time that he “accurately represents Theranos to investors to the best of his ability.”
Theranos dissolved shortly afterwards.
“Partners in everything”
While their trials were separate, each occupied a prominent place in the judicial proceedings of the other.
As U.S. Deputy Attorney Robert Leach told jurors during the prosecution’s initial arguments at Balwani’s trial, the government believes he and Holmes “were partners in everything, including their crimes.”
Although Balwani was an integral part of Theranos and a confidant of Holmes throughout the time he ran the company, he was more of a backstage force. In addition to the critical role of overseeing his patient lab, he also oversaw his key business partnership with Walgreens and managed Theranos ’financial projections. Balwani sometimes also communicated directly with some investors to get deals.
During his criminal trial, Holmes suggested that Balwani exercised even more power than his own company in some way. Taking the position in self-defense, he stated that he was the victim of an abusive relationship for a decade with Balwani. She claimed that Balwani exercised enormous control over her, prescribing a restrictive lifestyle and image to succeed in the business world. At times, she alleged in her testimony, he forced her to have sex with him. Balwani’s lawyers have flatly denied the allegations.
Holmes stopped before saying that Balwani told him to cheat on anyone. “It affected everything I was, and I don’t quite understand that,” he stated.
Mark MacDougall, a white-collar defense attorney and former federal prosecutor, said both the prosecution and the defense probably benefited from being able to see how the evidence and testimony went with the jurors at Holmes’ trial. “Each side in Sunny’s trial would have made adjustments based on the outcome of the Holmes case, which could explain a different verdict,” he said.
Although Balwani did not take the stands, his defense team’s strategy included pointing the finger at Holmes. The defense highlighted to the jurors that he also believed in Holmes and Theranos, just as many other notable investors, business partners, and employees had been.
The list of people who believed in Holmes and Theranos included Stanford University professor of chemical engineering Channing Robertson, who was the first member of the company’s board of directors; former Secretary of Defense James Mattis and former Secretary of State George Shultz, who also served on the board.
“This was the Theranos board with which investors were understandably impressed, like Mr Balwani no doubt,” Coopersmith said during the final arguments.
The caliber of Theranos supporters was reflected in the testimonies convened by the government. Among those who testified at both trials were investor Chris Lucas, whose uncle Don Lucas was a well-known Silicon Valley investor and former chairman of the Theranos board; Lisa Peterson, who helped verify a deal for the multimillion-dollar family of former U.S. Secretary of Education Betsy DeVos, and Daniel Mosley, a prominent lawyer who was introduced to Theranos through her longtime client Henry Kissinger, the former Secretary of State who once served on the board. of the company. (Mosley introduced several of his clients to Holmes and Theranos, including the DeVos family.)
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