Web Stories Wednesday, June 19

Lawyers for Elizabeth Holmes, the convicted Silicon Valley grifter, are set to argue her appeal before a California court Tuesday, revisiting a case that exposed the shortcomings of the tech world’s fake-it-till-you-make-it startup culture.

Holmes was sentenced to 11 years in prison for defrauding investors in her failed blood-testing company, Theranos. She is seeking a new trial, arguing that the judge in her case erred in several decisions during the 2022 proceedings.

Holmes is serving her sentence at a minimum-security facility in southern Texas and, as with most defendants, is not expected to appear in court when California’s Ninth Circuit hears her appeal. Since her conviction, her projected release date from prison has been moved up, shaving about two years off her sentence.

Over the past decade, the story of Theranos — valued at $10 billion at its peak — has become a cautionary tale of tech-startup hubris and hype.

It had all the hallmarks of a Silicon Valley juggernaut: A 19-year-old founder who dropped out of Stanford and dressed like Steve Jobs, an audacious mission to disrupt the medical establishment and lots of buzz among deep-pocketed investors such as Larry Ellison and Rupert Murdoch.

The pitch was simple: Just one drop of blood, spun through Theranos’ proprietary machine, could deliver faster, more accurate results than traditional testing that required whole vials drawn from a patient’s veins.

The trouble is, the tech never really worked, as a Wall Street Journal investigation revealed in a series of articles in 2015. Theranos’ unraveling, and Holmes herself, became the subject of a bestselling book, a Hulu scripted series and an award-winning documentary.

Federal prosecutors in 2018 charged Holmes and her former partner, Ramesh “Sunny” Balwani, with running a multimillion-dollar scheme to defraud investors, doctors and patients. A jury ultimately convicted her on four counts of defrauding investors, but not guilty on the counts that pertained to defrauding patients.

Holmes knowingly concealed the technology’s problems, and still pushed to get the company’s Edison devices into pharmacies, prosecutors argued.

“Holmes repeatedly told potential investors that major pharmaceutical companies had validated Theranos’s device, and the US military was using it in the battlefield to treat wounded soldiers,” lawyers for the government said in court filings. “In truth, Theranos’s device could never complete more than 12 types of blood tests, often with less accuracy, less automation, and less consistency” than conventional methods. And the devices were never used in war zones.

Balwani was convicted separately and sentenced to 13 years in prison.

Prosecutors have sought to underscore the real-world implications of Holmes’ and Balwani’s lies to investors. In a filing to the appeals court, they note that one woman received results from Theranos’ test indicated “she was going to have a miscarriage when she was carrying a healthy baby,” the filing states. “Another received results indicating that he had late-stage prostate cancer when he did not. Another was informed (incorrectly) that she had HIV.”

Holmes’ lawyers, who didn’t respond to CNN’s request for comment Monday, have said in court documents that the criminal trial was “teeming with issues for appeal.”

Specifically, Holmes has argued that Judge Edward Davila erred in his ruling that she could not refer to the testimony of Balwani, her former boyfriend and business partner, in her own defense. Her lawyers have argued that prosecutors’ statements about Holmes’ relationship with Balwani “would have probably led to Ms. Holmes’ acquittal in a new trial.”

During Holmes’ trial, the government characterized the pair’s relationship as one between two co-equals, her laywers said in a 2022 filing. Then, in Balwani’s trial, “the government took the opposite position and highlighted Mr. Balwani’s age, experience, and influence over Ms. Holmes.”

Criminal appeals are always an uphill battle, and Holmes’ case is no exception.

“The issues that Holmes’s legal team has raised…are all issues that are difficult to win on appeal — it’s difficult to win on issues when you’re Monday morning quarterbacking the decisions made by the judge,” said Agustin Orozco, a former federal prosecutor and a partner with the law firm Crowell & Moring.

In prosecutors’ filing to the court, Orozco notes, they frequently raise a “harmless error” argument — essentially saying that even if the lower court did make mistakes, “it doesn’t matter because the evidence is so overwhelming against Holmes.”

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