SAN JOSE, Calif. (KRON) — At the Elizabeth Holmes trial, prosecutors are using her own words against her.

They plan to play audio tapes for the jury of phone calls Holmes made with investors.

Holmes is charged with defrauding investors while she was a rising star in Silicon Valley and CEO of her blood testing company, Theranos.

Legal analyst and former San Francisco deputy district attorney Michele Hagan said the tapes will be damaging against the defense.

The more damage the defense suffers at Holmes’ lengthy federal fraud trial, the more pressure Holmes will feel to testify in her own defense, Hagan said.

Elizabeth Holmes
Elizabeth Holmes holds her husband’s hand as she leaves the federal courthouse in San Jose on Sept. 8, 2021. (Getty Images)

Holmes has the choice of taking the witness stand after the prosecution rests its case. Her decision will be “the biggest gamble of her life,” Hagan said.

As the face of Theranos, Holmes won over high-powered investors and partners, including: media mogul Rupert Murdoch, Oracle founder Larry Ellison, former U.S. Secretary of State James “Mad- Dog” Mattis, and former U.S. Secretary of State George Shultz.

Perhaps she could win over a jury as well?

Holmes’ attorneys are defending her as a hardworking, “young,” and “naïve” CEO who “underestimated business obstacles.” Holmes dropped out of Stanford and founded her biotech startup in Palo Alto, Calif., when she was 19.

Prosecutors have a list of nearly 200 witnesses and the trial is expected to last through January. For the first two months of the trial, witnesses have testified that Holmes was calling the shots, and was fully aware of what was going on.

Two whistleblowers, ex-Theranos lab director Adam Rosendorff and ex-Theranos lab tech Erika Cheung, testified that Holmes’ invention — which she proclaimed would revolutionize blood testing — was a flop.

Courtroom sketch of Elizabeth Holmes
Courtroom sketch of Elizabeth Holmes (Sketch by Vicki Behringer)

Holmes told investors and business partners that she had invented a box that could produce blood test results from just a fingerprick of blood.

Rosendorff and Cheung testified that the machines frequently produced inaccurate results. Cheung said lab techs were working around-the-clock trying to get the machines to work, some even sleeping in their cars.

Ramesh “Sunny” Balwani, Holmes’ ex-boyfriend and COO of Theranos, texted Holmes that the blood lab was a “disaster zone.”

Senior scientist Surekha Gangakhedkar testified that she met with Holmes directly on a regular basis telling her about failures unraveling in the lab. 

Despite the lab’s problems, Holmes pushed forward with opening “wellness centers” in Walgreens stores, accepting patients, and wooing more wealthy investors to throw millions of dollars into her company.

Another witness called by prosecutors, former Theranos finance manager So Han Spivey, testified that Theranos was hemorrhaging money. Theranos had net losses of $11 million in 2009, $16 million in 2010, and $27 million in 2011. The company went for years without having its financial statements audited, Spivey testified.

Hagan said Spivey’s testimony helped to establish a motive for why Holmes would need to defraud investors.

One of those investors recorded a conference call Holmes made with several of Theranos’ investors in 2013. Prosecutors submitted a recording of the call into evidence, and plan to play it for the jury when the trial resumes next week.

On the call, Holmes says her private company is worth more than $7 billion. She gives a glowing financial outlook for her company’s potential under her plan to open “wellness centers” in Walgreens and Safeway pharmacies nationwide.

“We launched our retail infrastructure. We are operating now in California and Arizona. We have opened our first stores and have patients coming in live every day. We are working to expand that as fast as possible. The speed with which we expand is critical in the context of capturing the market opportunity that we created. And we are putting a lot of resources into establishing a national footprint as fast as we can,” Holmes said.

The recorded call could help strengthen the prosecution’s opening statement. Prosecutor Robert Leach said Holmes’ true intentions were not to revolutionize healthcare. Leach vilified Holmes as a con-artist who faked her way to the top to achieve wealth and fame.

“This case is about fraud, about lying and cheating to get money,” Leach told the jury.

Her alleged scheme “is a fraud on Main Street and it’s a fraud in Silicon Valley,” Leach said to the jury.

Holmes told investors that Theranos would generate $140 million in revenue in 2014, Leach said. Investor Lisa Peterson testified earlier this week that she had no idea Theranos had no revenue in 2012 and 2013. Peterson handled private equity investments for the billionaire DeVos family, which invested $100 million into Theranos in 2014.

Hagan said the recorded call is potentially incriminating for Holmes, including when she claims Theranos’ blood tests are highly accurate.

Holmes tells investors, “In this framework that we’ve created, we’ve built the opportunity for people to be able to do their tests in a whole new way. Being able to get access to this laboratory data which is incredibly powerful information that drives so much of clinical decision making. We don’t have the variability that is associated with traditional laboratory testing. We have built this out in such a way in which we have a less than 5 percent variance on our tests. This is a richness of data for the physician community.”

One investor on the call remarks, “It’s remarkable what you’ve accomplished.”

Holmes, 37, is charged with 12 counts of wire fraud and conspiracy to commit wire fraud. She faces up to 20 years in prison if convicted. Balwani is facing the same charges and will be put on trial separately next year.

Hollmes and Balwani
Elizabeth Holmes and Sunny Balwani are being put on trial separately. (Getty Images)