For months, Ramesh Balwani’s lawyers have been trying to differentiate him from Elizabeth Holmes, his former girlfriend and business partner at the failed blood-testing company Theranos.
Ms. Holmes was found guilty in January of defrauding the start-up’s investors. Mr Balwani is seeking a different outcome in his own fraud case.
But on Tuesday, in closing arguments before Mr Balwani’s jury, prosecutors linked him directly to Ms. Holmes and the years of fraud in Theranos. Jeffrey Schenk, an assistant US attorney and a chief prosecutor in the case, showed a text message that Mr. Balwani told Ms. Holmes in 2015 and used it as evidence in the trial.
“I am responsible for everything at Theranos,” wrote Mr Balwani. “It’s all been my decisions too.”
The text was an admission of guilt, Mr Schenk said, adding, “He acknowledges his role in the fraud.”
The presentation covered more than three months of testimony in the trial of Mr. Balwani, which was largely a reflection of Ms. Holmes. She and Mr Balwani, 57, were accused in 2018 of exaggerating the capabilities of Theranos’ blood testing machines and business performance when, in fact, the products were not working and the company was struggling. The couple pleaded innocent. Ms. Holmes was convicted on four of the eleven charges.
The trial for Mr Balwani, who is known as Sunny, lacked the fanfare of Ms. Holmes’ case. It nevertheless serves as a coda for a waning era of startup growth that often relied on hype and hyperbole. Mrs. Holmes and Mr. Balwani are among the few tech executives ever prosecuted on charges of fraud.
Just as Mrs. Holmes tried to blame others for the deception in Theranos, Mr. Balwani has pointed the finger at her. At the trial, his lawyers claimed that many of Theranos’ blood tests had worked. They said Mrs. Holmes, not Mr. Balwani, was in control of Theranos. And on Tuesday they painted Mr. Balwani as a true believer in the vision and technology of Theranos.
Mr Balwani “put his heart and soul into Theranos,” said Jeffrey Coopersmith, who represents him. “He worked tirelessly, year after year, to make the company a success.”
Mrs. Holmes, now 38, met Mr. Balwani when she was 18. They started dating years later, after Mrs. Holmes founded Theranos. Mr. Balwani joined Theranos in 2009 as Chief Operating Officer and eventually invested $4.6 million in the company and took charge of the laboratory. The couple kept their relationship a secret and lived together in a large house they owned together in Atherton, California.
In 2016, after Theranos came under fire for lying about his blood testing abilities, Mr Balwani left the company and split with Ms Holmes. The couple was accused of fraud together, but Mrs. Holmes argued in the files to separate the cases and accused Mr Balwani of emotional and sexual abuse. Her trial included dramatic testimony about the charges. That subject was barred from the trial of Mr. balwani.
To convict Mr Balwani, prosecutors must convince jurors that he deliberately lied to investors and patients about Theranos’ blood tests and business dealings.
Prosecutors tried to blame Mr Balwani for the financial projections Theranos showed to investors and the condition of his labs. New witnesses included investors and executives who did business directly with Mr. Balwani, rather than Ms. Holmes.
A projection, presented to investors in October 2014, showed that Theranos would bring in $140 million that year. In reality, sales were $150,000. The following year, Mr. Balwani forecast nearly $1 billion in revenue in investor pitches. Theranos’ internal projections were much lower, evidence showed, and the reality was $429,210.
Mr Schenk said Theranos leaders had instructed its scientists to validate blood tests and only offer tests to the public if it needed money from investors or customers. “Not when the science was ready,” he said.
A new witness, Patrick Mendenhall, who dealt directly with Mr Balwani while making an investment in Theranos, outlined the promises that were found to be misleading or false.
Brian Grossman, an investor with the hedge fund PFM Health Sciences who also witnessed Ms. Holmes’s trial, testified that Mr. Balwani had given his team financial forecasts that far overestimated Theranos’ projected earnings.
“When Mr. Balwani communicates with an investor, it is for a purpose, and the purpose is to trick them into getting money,” Mr. Schenk said.
Prosecutors also highlighted Mr Balwani’s role in running the Theranos lab, which the director called a “disaster zone” in a 2014 text message. Mr Balwani would also “eliminate dissent” by intimidating or pushing away employees who expressed concerns about Theranos testing, such as Dr. Adam Rosendorff, a former lab director who testified in both studies, said Mr Schenk.
Mr Coopersmith, the defense attorney, said the government had painted a “very misleading” picture of Mr Balwani’s time in Theranos and that it was unfair to display private texts out of context as evidence of a conspiracy.
The messages did not indicate that Mr. Balwani told someone to commit fraud, Mr. Coopersmith. “If there were a conspiracy, you’d think there would be all kinds of conspiracy, sinister conversations, and there just aren’t,” he said.
Notably absent from the witness stand were James Mattis, a former Secretary of Defense and board member of Theranos, and Ms. Holmes, both of whom had testified at Ms. Holmes’s trial. mr. Balwani did not testify in defense.
If convicted, Mr Balwani and Ms Holmes will be sentenced together in September.
Erin Woo reporting contributed.
