Elizabeth Holmes may accuse Ramesh Balwani of abuse in Theranos fraud trial defense
Elizabeth Holmes may try to rely on mental health or mental defect in her defense in the Theranos criiminal fraud trial which begins this week in San Jose, California. She may accuse her ex-boyfriend Ramesh Sunny Balwani of erasing “her capacity to make decisions.”
In 2018, prosecutors filed criminal charges against Holmes, 37, and Balwani, 56. Prosecutors allege that the two senior Theranos executives “engaged in a multi-million-dollar scheme to defraud investors, and a separate scheme to defraud doctors and patients.”
In 2003, after dropping out of Stanford University, Elizabeth Holmes founded Theranos, a Palo Alto, California based medical testing start up. She claimed that its portable blood analyzer could conduct tests from a few drops of blood from finger pricks, revolutionizing the blood testing industry.
In 2009, Ramesh “Sunny” Balwani, an investor, joined the start-up as president and chief operating officer. He personally guaranteed a $12 million credit line to Theranos, according to John Carreyrou’s Bad Blood: Secret and Lies in a Silicon Valley Start-up. (Cover in photo.) Balwani and Holmes were in a romantic relationship. He was divorced from his wife Japanese artist Keiko Fujimoto in 2002.
Theranos’ board of directors included Jim Mattis, secretary of defense under President Donald Trump, Henry Kissinger, the former secretary of state, and a couple of U.S. senators. Investors in the company included Betsy DeVos, secretary of education under President Trump, and billionaires Carlos Slim of Mexico and Rupert Murdoch, who controls News Corp. which owns The Wall Street Journal, The Times of London and other media businesses around the world.
Venture capitalists and the media hailed Holmes as the next Steve Jobs, the founder of Apple. Drug retailers Safeway and Walgreen’s, the Cleveland Clinic medical system and other reputed organizations were working on using Theranos’ blood tests. Holmes was on the cover of Fortune and other magazines. In 2014, investors valued Theranos at $9 billion, making Holmes a billionaire.
But in 2015, some medical researchers as well as John Carreyrou, a two-time Pulitzer Prize winner then at The Wall Street Journal, exposed flaws in Theranos’ technology as well as in claims made by Holmes and the company.
In 2018, Elizabeth Holmes and Sunny Balwani were charged by the U.S. Securities and Exchange Commission (SEC) “with raising more than $700 million from investors through an elaborate, years-long fraud” making false statements about the technology, business, and financial performance.
Holmes settled the SEC case by paying a $500,000 fine. Balwani is fighting the SEC charges in court. Theranos filed for bankruptcy in 2018.
In the criminal case, prosecutors allege that Holmes and Balwani falsely claimed that Theranos was revolutionizing medical laboratory testing through “innovative methods” for drawing, testing and interpreting results from a patient’s blood samples, according to the prosecutors. Theranos provides “accurate, fast, reliable, and cheap blood tests and test results,” Holmes and Balwani stated. They did not mention that the blood tests were “not capable of consistently producing accurate and reliable results” for HIV, calcium, chloride, potassium, bicarbonate, sodium and other tests, according to the prosecutors.
Both Holmes and Balwani are contesting the criminal charges and say they did not commit any fraud. While Holmes’ trial is set to begin on Tuesday, Balwani is expected to be tried in January 2022.
In her defense, Holmes may allege that Balwani sexually abused her as well as engaged “in a decade-long campaign of psychological abuse, contemporaneous with the events” at Theranos, which led to the criminal charges against the two of them. This is according to 2019 and 2020 court filings which were made public this week, following a legal challenge by Dow Jones & Co., the publisher of The Wall Street Journal.
Holmes may introduce evidence that Balwani “verbally disparaged her…controlled what she ate, how she dressed, how much money she could spend, who she could interact with.” She further alleges that “Balwani’s control included monitoring her calls, text messages, and emails; physical violence, such as throwing hard, sharp objects at her; restricting her sleep; monitoring her movements; and insisting that any success she achieved was because of him.”
Balwani, who left Theranos in 2016, denies Holmes’ allegations as “salacious and inflammatory accusations.”
Ramesh “Sunny” Balwani was born in Pakistan. His family, who are Hindus, migrated to India. In 1986, Balwani emigrated to the U.S. from India to study at the University of Texas, Austin; he received a degree in information systems. Later, he earned an MBA from the University of California, Berkeley.
Balwani worked as a software engineer at Lotus and Microsoft. He then joined CommerceBid.com, an e-commerce company, as one of the founders. In 1999, at the height of the dotcom bubble, it was sold to Commerce One for $230 million, almost all in stock. Balwani reportedly made about $40 million from the sale.
Scientists and engineers working at Theranos told John Carreyrou, the author of Bad Blood, that Balwani terrorized and traumatized them. Balwani drove a black Porsche with the license plate “DAZKPTL,” apparently referring to “Das Capital” Karl Marx’s book on capitalism.
Following news of Elizabeth Holmes claiming mental abuse as defense, Carreyrou tweeted: “As we predicted in Episode 1 of the podcast: Holmes is going to use the Svengali defense and try to shift all the blame to Sunny by alleging that he held her in his psychological grip.”
If convicted of the fraud charges, Holmes and Balwani each face a maximum sentence of twenty years in prison.
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