SAN JOSE, Calif. — In a surprising twist, failed startup founder Elizabeth Holmes took the witness stand at her trial Friday, defending herself against criminal fraud charges involving her defunct Palo Alto blood-testing startup Theranos.
Speaking with confidence — and frequently a small smile — Holmes spoke directly to the central allegation in the case: that she intended to defraud patients and investors, claiming her technology could conduct a full range of blood tests on small samples when she knew it had serious accuracy problems. Asked by one of her lawyers, "Did you believe that Theranos had developed technology that was capable of performing any blood test?” Holmes responded, "I did."
Holmes, who founded the blood-testing startup at age 19 in 2003, is charged with allegedly bilking investors out of hundreds of millions of dollars and defrauding patients with false claims that the company’s machines could conduct a full range of tests using just a few drops of blood, when she knew the technology had serious accuracy problems. She and her co-accused, former company President Sunny Balwani, have denied the allegations. Balwani is to be tried next year.
Her testimony was a striking development, and a potentially risky move by defense attorneys, coming just hours after the prosecution rested its case. The biggest question in Holmes’ trial has been whether she would take the stand to try to reshape the narrative around her and Theranos after 10 weeks of critical testimony against her from witnesses like former U.S. Defense Secretary Gen. James Mattis, four former Theranos lab directors and representatives for other ultrawealthy investors in the company that became Silicon Valley’s most notorious startup crash.
Legal experts say having defendants take the stand in criminal cases is rare because it opens them up to aggressive cross-examination from prosecutors. Prior to calling Holmes to the stand, the defense asked the judge to acquit her on the basis of insufficient evidence; the judge said he would reserve his decision on that motion. The judge did dismiss one of the 12 fraud counts against Holmes because of an error made by the prosecution in their indictment.
Prosecutors likely won’t have the chance to cross-examine Holmes until after Thanksgiving as the defense plans to continue questioning her through the two trial days set next week. In her testimony Friday, Holmes — a Stanford dropout whose case has drawn national interest — discussed her background and education, and the origins of her ideas for a blood-testing startup.
That startup, initially called Real-Time Cures, developed a prototype blood-testing device in 2004, she said, before she changed the company’s name to Theranos in 2005. Speaking in a register slightly higher than the baritone for which she has become famous, Holmes told jurors that she “worked for years with teams of scientists and engineers to miniaturize all the technologies in a laboratory,” with the “core” goal of running tests on small blood samples.
Initially, Theranos wanted to work with pharmaceutical companies developing new drugs, Holmes said. Her startup later pivoted to offering blood-testing services for the public. Holmes told the jury that around 2009 or 2010, Theranos had a technological breakthrough that allowed the company to “run any test.”
Claims by Holmes that Theranos could perform all the tests a major lab company could do have been a central issue in the trial. Jurors have seen Theranos promotional materials touting a menu of 200 tests. Holmes told the jury her company could run 70 test types for patients, and only 12 on their own machines, but that when she talked publicly she wasn’t limiting her comments to those dozen tests.
Holmes testimony comes after the jury has heard compelling evidence that Holmes misled investors, including documents that she distributed lauding Theranos’ technology and bearing apparently stolen logos from pharmaceutical giants Pfizer and Schering-Plough.
Jurors also heard that Holmes told investors her technology was being used on military med-evac helicopters, though Mattis, who served on Theranos board and invested $85,000 in the firm, testified that he wasn’t aware the company’s technology was ever deployed by the Pentagon.
Prior to Holmes’ taking the stand, the defense called Fabrizio Bonanni, scientist and former biotechnology executive who joined Theranos’ board in 2016 — after the company had been deeply shaken by a federal regulator’s finding that its technology was threatening patients’ lives, and Wall Street Journal exposés that raised alarms about testing accuracy and other issues.
After meeting Holmes and hearing about the company’s technology and challenges, Bonnani declined her offer that he become chief operating officer but agreed to an unpaid position on the board. Joining him on the board at the same time were former U.S. Centers for Disease Control director William Foege and former Wells Fargo CEO Richard Kovacevich.
Under cross-examination, Bonanni said he did not know that before he joined Theranos, the company had voided all the test results from its “Edison” blood-testing machines, which the jury has heard occurred because of accuracy problems.
Holmes, charged with a dozen counts, faces maximum penalties of 20 years in prison and a $2.75 million fine if convicted, plus possible restitution, the Department of Justice has said.
Earlier Friday, without the jury present, Holmes lawyer Amy Saharia said that Holmes’ bringing in expert advisers like Bonnani at Therano shows her diligence in trying to fix problems in the company, and weakens the prosecution’s case. The judge, however, noted that prosecutors could argue that “once she found out that the lid was off and everything was in the public eye she scrambled ... when you’re in the dark, you start to light candles.”
When Bonnani took the stand he testified that Holmes very strongly supported comprehensive efforts to address deficiencies in her company. On the stand, he praised her vision, her “mastery” of all aspects of Theranos’ systems. “I admired her lack of defensiveness and her willingness to listen to other people’s opinions that I thought was remarkable,” he testified.
How long the defense will take to make its case and how many witnesses it will call remain unclear. Earlier court filings show Holmes claimed she was coerced and abused by Balwani, her former long-term romantic partner, and may call a psychologist to testify in support of those claims. Balwani is expected to face trial next year on the same set of felony fraud charges.