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Elizabeth Holmes trial: Defense argues that she 'went down with the ship,' should be acquitted

Case sent to jury for deliberation
Elizabeth Holmes, former CEO of Theranos, arrives at the federal courthouse in San Jose on Oct. 1, 2021.

The defense in the Elizabeth Holmes criminal fraud trial used its last chance to address the jury to talk about missing witnesses' aspirations, and Holmes' belief that the technology her company invented would "change the world." 

The jury is about to decide whether Holmes, founder and CEO of the now-defunct blood-testing company Theranos, is guilty of misleading investors, doctors and patients about the Palo Alto-based company's ability to run hundreds of blood tests based on a single fingerstick and to analyze the tests on its proprietary Edison devices. 

Holmes is charged with seven counts of investor-related wire fraud and four counts of wire fraud against patients, including one count based on advertisements that solicited patients to get tested at Theranos sites in Walgreens. 

In his final two hours of closing argument on Friday, defense attorney Kevin Downey asked the jury to reject all of the investor-related charges. 

The issue is "not that people lost money," he said, but whether Holmes "persuaded them to invest with an intent to deceive." 

The investors, Downey said, all signed documents stating that they had substantial investment experience. They recognized that the Theranos investment was "highly speculative" and that the company's business plans and projections were not guaranteed. 

Rather than being influenced by anything Holmes said, Downey argued, these sophisticated investors jumped in because Walgreens had put the Theranos technology in its stores, and they wanted to be in on the ground floor. 

"That judgment (by Walgreens) was important to them," Downey said because they assumed that Walgreens "would have looked at the technology in great detail," an assumption "that was true." 

Responding to the prosecution's arguments that Holmes consistently lied to investors and the media about how many lab tests the company could run on the Edisons, Downey argued that the prosecution wrongly connected her statements to the company's existing technology and an early version of the Edisons that at its best could run only 12 tests. 

In fact, he said, Holmes was making forward-looking statements about a next phase and an upgraded machine that would be able to run hundreds of tests.
Downey dismissed the idea that Holmes misled investors in telling them that the military was using Theranos technology, arguing both that the company did in fact enter into contracts with the U.S. Special Operations Command and other military units and that Holmes made clear to investors that use of Theranos technology on medevacs and in the battlefield was again a future prediction. 

Downey then put up a list of 10 military people who worked with Theranos and asked why the government had not called any of those people as witnesses.
Regarding the patient-related claims, Downey again reframed the issue: It's "not about an errant test," however regrettable that might be, but whether Holmes knew that Theranos "could not consistently provide accurate and reliable results." 

After pointing out that Theranos administered over 8 million tests through its clinical lab, Downey reminded the jury that the prosecution called only three patient witnesses to talk about a total of seven test results and did no kind of statistical analysis or computation of the rate of error a fact "that alone is the basis to decide" that the patient charges "do not have merit." 

Again, he took the government to task for not calling one of the patient's doctors who ordered nearly 2,000 tests for his other patients, apparently without incident, and for not asking another physician to review his files on other patients to see if there were other errors. 

Downey then disputed the government's entire theory of the case that Theranos was "out of time and out of money" when Holmes decided to commit fraud, beginning with negotiations with Walgreens and Safeway in 2010. 

Although Theranos had money problems in early 2009, Downey said that by the time of the negotiations for retail placement, Thermos had had the technological "breakthrough" that could eventually revolutionize health care. 

In 2013 and early 2014, when the investors bought in, the company had just received a "substantial payment" from Walgreens and was on the cusp of a national expansion. 

Theranos was getting "tens of millions of dollars," Downey said, and companies were "eager for partnerships with it." 

"You decide" whether the government's motive theory makes sense, Downey told the jury. 

Downey ended by asking the jury to think about Holmes' conduct once the unraveling of Theranos began. 

"Crooks cash out, criminals cover up, rats flee a sinking ship," Downey said. 

But Holmes, Downey argued, stayed on "because she believed in that technology, and she went down with that ship when it went down." 

In a long rebuttal, prosecutor John Bostic said that the "rosy picture" of a revolutionary technology "never existed" except in the words of Holmes and her alleged co-conspirator Sunny Balwani. 

"The disease that plagued Theranos was not a lack of effort; it was a lack of honesty," Bostic argued, saying that "the darker truth" is that the technology had serious problems. 

As to the defense argument that the investors could have looked more closely at Theranos before putting in their money, Bostic said that the law does not allow the negligence of the victim as a defense: "In cases where you might feel that a given investor wasn't careful enough ... know that that has nothing to do with your verdict." 

As to the small number of inaccurate patient test results presented in the government's case, Bostic said it was "difficult" to identify incorrect test results without doing a comparative test using another testing method. But, he argued, the jury does "not need a statistical analysis" to find that Holmes knew the technology did not work. 

After U.S. District Judge Edward Davila instructed the jury on the applicable law, the jury began its deliberations.

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