Who is it really? blamed for the spectacular demise of blood-testing start-up Theranos? Is Elizabeth Holmes, the founder of the girl boss faced with 11 counts of electronic fraud to investors who are accused of fraud? Or did the company’s employees sign off on various reports showing the technology working well? What about Theranos board members — like George Shultz, James Mattis, and Henry Kissinger — who have been paid hundreds of thousands of dollars to advise the company? Or is it Ramesh Balwani, Holmes’s business partner and ex-boyfriend, who faces separately 11 counts of fraud?
Each of these theories has been explored in the past few days as Holmes has taken a stand, 11 weeks after an experiment that has enthralled Silicon Valley and beyond. It marks the first time she has told her story since Theranos officially closed in 2018, the same year she was accused of fraud.
Holmes began her testimony Friday afternoon, which led to a record number of people appearing outside the court on Monday and Tuesday morning. Audiences began lining up as early as 2 a.m. this week, shivering as they waited for one of the limited seats at the San Jose Courthouse. The crowd was filled with reporters, concerned citizens and a man who shouted “God bless you, mistress!” when Holmes arrives on Tuesday. Historian Margaret O’Mara, who compared the scene to the early iPhone releases, said: “The valley has never seen a case of famous business fraud like this before. Holmes benefited from the hype when her company took off in the early 2000s. Now, she finds herself in another hype cycle.
As a young executive, Holmes often portrayed himself as a villain. She appeared on the covers of magazines and welcomed comparisons to Steve Jobs. But in court, Holmes – now 37 and no longer wearing her signature black turtlenecks – emphasized the parts of the job she delegated.
When asked who was responsible for verifying that the blood tests worked as promised, Holmes pointed to Adam Rosendorff, the laboratory director of Theranos. Daniel Young, an “incredibly smart” employee Holmes was in charge of, forged a successful partnership with Walgreens. The decision not to disclose that Theranos sometimes uses third-party equipment was made by the company’s legal counsel, Holmes said, who told her the information constitutes a “trade secret”. Balwani, not Holmes, is in charge of the company’s financial projections. And famous marketing suggests that Theranos uses only “a drop of blood”? Holmes testified that she did not sign every marketing document produced by Chiat Day, the expensive advertising agency she hired.
“This is probably the most common defense in cases involving allegations of large-scale financial fraud,” says David Sklansky, who teaches and writes on criminal law at Stanford. “Whether it works or not depends on how trustworthy it is to the jury.”
