Ex-boyfriend of Elizabeth Holmes is on trial in Theranos case

Elizabeth Holmes was a star entrepreneur whose process of defrauding investors in her blood-testing startup became one of the biggest Silicon Valley spectacles since the introduction of the iPhone. Her January conviction marked a rare moment in technology’s boastful history: a chief executive was held criminally responsible for lying.

During much of her trial, Ms. Holmes tried to blame her deputy and ex-boyfriend, Ramesh Balwani, for what went wrong in her company, Theranos. Now Mr. Balwani, who is known as Sunny, gets the chance to respond in his own fraud case. Jury selection was set to begin Wednesday in the same federal courtroom in San Jose, California, where Ms. Holmes was determined.

The first trial offered, and the second trial promises, a close examination of an unusual relationship between a young woman and an older man. Mrs. Holmes and Mr. Balwani had a secret romance that was also a professional alliance, an exciting promise to improve healthcare for millions that instead put patients at risk. Their blood tests didn’t work, though they assumed new and better technology would save them from their reckless claims.

Mr Balwani, 57, is a former software executive who made a fortune during the dotcom boom of the late 1990s. He befriended Mrs. Holmes while they were studying at Stanford University in China the summer before her freshman year. Their romantic relationship eventually led him to join Theranos in 2009 as president and chief operating officer.

He was the opposite of a star, barely mentioned in the glowing cover stories about Mrs. Holmes and Theranos. But by all the evidence, Mr Balwani and Mrs Holmes, now 38, were a team that tightly controlled the start-up. Few knew they were in a relationship.

“She was the wizard of Oz, blinding the investors and the media, but he was the one behind the curtain working the machines,” said Reed Kathrein, a San Francisco attorney who successfully sued Ms. Holmes and Theranos in 2016 on behalf of investors. He said he was confident the prosecution would show that “he knew she was lying and would never put an end to it”.

“He knew everything,” said Mr. Kathrein.

Mr Balwani’s trial is over familiar territory. He faces the same 12 charges that Ms. Holmes was initially faced with. (One count was dropped after a government procedural error.) He pleads not guilty.

Ms. Holmes was found guilty of four counts of investor defrauding and acquitted of four charges of patient defrauding; the jury got stuck on the other three investor counts. She will be convicted in the fall.

The consensus among legal experts following the case is that the government’s successful prosecution of Ms Holmes will give her a boost in Mr Balwani’s trial.

“The government has had a chance to do a full run, so they will have learned what worked and what didn’t,” said James Melendres, a former federal prosecutor who represents corporate clients.

Prosecutors, Mr Balwani and his lawyers declined to comment. Through her lawyers, Ms. Holmes declined to comment.

While Mrs. Holmes’ background has been extensively documented, relatively little is known about Mr. Balwani, including why he is called Sunny.

An experienced software manager, he was fortunate to have his start-up bought by a larger company just before the stock market crash of 2000, earning him about $40 million. He divorced, went back to school to get an MBA and studied computer science, and bought luxury cars. (His license plate, in a nod to Karl Marx, was DASKPTL.) When he joined Theranos, he invested millions of his own money in it, his lawyers have said.

At Theranos, he had a reputation for being a tough, demanding boss who became increasingly paranoid that employees would steal trade secrets that would supposedly revolutionize blood testing. In an incident related by journalist John Carreyrou, Mr Balwani called the police to chase a departing employee, explaining that the former employee had “stole property in his mind”.

From the lawyers of Mr. Balwani is expected to highlight his lack of experience in the biomedical device field, which was at the heart of Theranos’s claims. Legal experts said he was unlikely to testify. He would most likely be less sympathetic on the witness stand than Ms. Holmes, a new mother who played out her childhood and arrived in court hand-in-hand with her mother and her partner.

“He doesn’t have those optics in his favor,” said Ann Kim, a former federal prosecutor who represents companies under government investigation.

When Mrs. Taking the stand in defense, Holmes tried to turn the story surrounding her spectacular demise on its head by introducing allegations of abuse against Mr Balwani. He denied the allegations and text messages released during the trial showed a relationship of more or less equals, especially as the company came under pressure from whistleblowers and the media.

“The whole thing that we have to respond to liars is ridiculous,” Ms Holmes said in one message. Mr Balwani promised retaliation against their accusers: “We will also take legal action once this is over.”

At the heart of the government’s pursuit of both defendants is the argument that they have crossed the line from hype — as common in Silicon Valley as breathing — into deception.

Ms. Holmes was able to conjure up an alternate reality with the effortless ease of her role model, Apple co-founder Steve Jobs. Witnesses at her trial testified that she had led people to believe that she would change the world. Investors poured nearly $1 billion into Theranos.

Like most of the dull humanity, Mr. Balwani had no such gifts. There is only one video of him online, but it reveals his style.

In March 2014, while Theranos was rolling out his fingerstick blood testing system at Walgreens, Arizona, Mr. Balwani made a presentation on “Healthcare Innovation” to the Health and Human Services Committee of the Arizona Senate. He wasn’t originally supposed to – Mrs Holmes had to cancel – and he didn’t look like he was having a good time.

Mr Balwani told lawmakers the company was working on “something we believe is magical”. He spoke of a particular patient who “had no limbs.” When this man had to give blood, the needle went down his neck. At the Theranos clinic, however, he had “a small limb attached to his body” and “we were able to put a finger prick on him.”

How a person without limbs suddenly got a limb was not explained. It was almost as if Mr. Balwani had challenged the senators to point out that Theranos was literally thinking magic.

They did not. Instead, they greeted him.

“I love bringing the free market into our health care system,” said state senator Kelli Ward, a Republican, who noted she was a primary care physician.

(Senator Ward is now the chairman of the Republican State Party and has been active in trying to nullify the results of the local elections in favor of President Trump. “It’s even clearer now that we have to make the free market work,” she said in a statement. an e-mail .)

Neither the prosecution nor the defense have submitted the final list of witnesses for Mr. balwani. In December, the attorneys submitted their proposed questionnaires to potential jurors, including a preliminary witness list.

A handful of potential witnesses to the Holmes trial were beaten for obvious reasons, including Mrs. Holmes’ mother, Noel, and former Secretary of State Henry Kissinger, a Theranos board member. Mindy Mechanic, the Holmes team’s expert witness on domestic violence who ultimately did not take the position, was also removed. The legal team of Mr. Balwani appointed experts in forensic accounting, intellectual property and SQL databases.

A potential government witness would make headlines. However, it is extremely unlikely that Ms. Holmes will testify, even if it could reduce her jail time.

“She probably seems to be fighting this to the end of the world,” said Jen Kennedy Park, a white-collar attorney.