SAN JOSE, Calif. (KRON) — Opening statements began Tuesday for the trial of Ramesh “Sunny” Balwani, Elizabeth Holmes’ ex-boyfriend and former COO of Theranos.
According to federal prosecutors, Balwani was Holmes’ co-conspirator for defrauding sophisticated investors out of hundreds of millions of dollars.
“They ran the company together. They were partners in everything, including their crimes,” Assistant U.S. Attorney Robert Leach told the jury.
The rise and fall of Theranos was one of the biggest scandals in Silicon Valley’s history. Holmes was a Stanford University dropout who founded her startup company in 2003 with dreams of revolutionizing blood testing and becoming the next Steve Jobs.
She was a Silicon Valley superstar until federal investigators exposed her of fraud.
Balwani is facing the same 12 counts of fraud and conspiracy that Holmes was put on trial for. Earlier this year, Holmes was convicted in a separate trial on four counts.
Balwani’s hopes for a better fate than Holmes will come down to a new jury.
In opening statements, Leach told the jurors that they were not selected because they had medical degrees or expertise in technology.
The jurors were selected because “you have common sense. And in the end, this is a case about fraud, about lying, and deceiving to get money,” Leach said.
“The scheme brought them fame, adoration, and comparison to companies like Microsoft and other unicorn technology companies,” Leach said.
When Balwani joined Theranos in 2009 as its president and COO, “he had no medical degree, no experience in blood testing, building medical devices, or running a lab. What he did have was a connection to Holmes. Balwani was her romantic partner.”
Balwani was directly in charge of Theranos’ lab, manufacturing, Walgreens partnership, and company’s finances, prosecutors said.
Balwani and Holmes claimed their company had invented a mini blood testing machine “that could run any blood test from a drop of blood from the finger,” Leach said.
“He and Holmes began making grandiose, spectacular claims about Theranos capabilities and accomplishments. They tried to convince retailers (Safeway and Walgreens) that Theranos technology was ready for use for patients,” Leach said.
Theranos claimed, from just a fingerprick of blood, its mini blood analyzers could run hundreds of rapid blood tests for less than the cost of traditional labs.
“It was never able to do more than 12 blood tests, and even those, it did badly,” Leach said.
In 2013, “the spectacular grand promises Holmes and Balwani made were not materializing. On top of all of this, Theranos was quickly running out of money … time …. and options. So what did Holmes and Balwani do? They decided to deceive and cheat,” Leach said.
Theranos had $0 in revenue in 2012 and 2013. In 2014, the company had $150,000 in revenue, and in 2015 it had less than $2 million. Theranos was barely able to pay its own employees.
Meanwhile, Balwani was telling investors that Theranos would have $140 million in revenue by the end of 2014, and $1 billion in revenue by 2015, Leach told the jury.
The company’s finance manager testified during Holmes’ trial that she had no idea where those numbers came from.
Theranos fooled reporters into writing glowing articles in Fortune magazine and the Wall Street Journal, which Holmes and Balwani in turn used to recruit and deceive more investors, Leach said.
Their false and misleading claims were “enormously successful. They raised hundreds of millions of dollars from investors. It made Holmes and Balwani billionaires,” Leach said.
Balwani owned Theranos shares that equated to half a billion dollars.
Holmes owned even more shares that equated to $4.5 billion.
“Insiders at Theranos knew what was really going on … and were troubled by it,” Leach said.
Prosecutors showed the jury photos of some of the insiders — four former Theranos lab employees — who will testify at Balwani’s trial: Erika Cheung, lab associate; Dr. Mark Pandori, co-lab director in 2013 and 2014; Dr. Adam Rosendorff, lab director in 2013 – 2014; Dr. Sunil Dhawan, lab director from 2014-2015.
During her trial, Holmes accused Balwani of verbal and sexual abuse, and blamed him for what went wrong at Theranos. She tearfully testified that Balwani controlled and manipulated her during their relationship, essentially controlling her life.
Balwani’s defense team firmly denied the abuse allegations.
KRON4 interviewed one prospective juror, Gabriela Villasenor, who was not picked after she told Balwani’s attorneys that she was vaguely aware of Holmes’ abuse allegations.
“Honestly I didn’t follow Elizabeth Holmes’ case. I knew the nuts and bolts of it. But the exact allegations I did not know. His attorney asked, ‘Would you label him a woman abuser if you were a juror selected?’ I said, ‘no because I don’t know the circumstances,’” Villasenor said.
This breaking news story will be updated.