SAN JOSE, Calif. (KRON) — Prosecutors delivered closing arguments Tuesday for the fraud trial of Ramesh “Sunny” Balwani, Elizabeth Holmes’ ex-boyfriend and business partner.

The two Theranos executives built a Silicon Valley biotech blood testing company with a “house of cards,” Assistant US Attorney Jeff Schenk told jurors.

“He knows his financial projections are wrong. It’s only a matter of time before that house of cards crumbles,” Schenk told the jury.

Faced with failure, Holmes and Balwani conspired together to defraud sophisticated investors out of millions and endangered patients’ lives by moving forward accepting patients for blood testing in Walgreens stores, Schenk said. They did this despite knowing Theranos’ technology was deeply flawed.

“In 2013, Theranos was running on fumes, it needed an infusion of cash to survive. Mr. Balwani had a choice to make. He could watch Theranos fail, watch his girlfriend’s business collapse. He knew Theranos was not generating revenue, and would not generate any meaningful revenue, by being honest. So he chose a different path. Mr. Balwani knew there were two sources of possible revenue for Theranos. They came up with two schemes, two plans, to defraud investors and patients,” Schenk said.

Holmes famously founded her startup company at age 19 in Palo Alto in 2003. Her face graced “Fortune” magazines covers as America’s youngest self-made billionaire.

Holmes and Balwani were charged with 12 counts of fraud and conspiracy. In January, a jury found Holmes guilty of defrauding investors, and not guilty of defrauding patients. The jury’s split verdict did not stop prosecutors from trying to convict Balwani on all 12 counts with a different jury.

For Tuesday’s closing arguments, Schenk displayed charts highlighting Holmes and Balwani’s “roles” in the conspiracy.

The chart for Holmes’ role wrote: “Agreement to get money and keep Theranos alive. Recruit investors. Communicate false statements to investors.”

The chart showing Balwani’s role wrote:  “Run the lab. Remove dissent. Recruit investors. Keep Walgreens engaged through deception. Communicate false statements to investors.”

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

Private text messages that Balwani wrote to Holmes have haunted his defense throughout the trial. Schenk showed the text messages to the jury again Tuesday.

“I am responsible for everything at Theranos. All have been my decisions too,” Balwani texted to Holmes in February of 2015 when their company was on the brink of collapsing.

Schenk explained, “He isn’t bragging in this text. He is acknowledging his role.”

A second problematic text message sent by Balwani to Holmes in 2014 read, “lab is a f***ing disaster zone,” he wrote. Prosecutors said, “He knows that the lab is a disaster. The text messages prove knowledge of the lab disaster.”

Before the jury begins deliberations, prosecutors went through each criminal count. According to a timeline displayed by prosecutors, a conspiracy to victimize investors was executed between 2010-2015, and a conspiracy to victimize patients happened between 2013-2016.

“All years that Mr. Balwani worked at Theranos,” Schenk emphasized.

For her trial, Holmes pinned the blame for what went wrong at Theranos on Balwani. For his trial, Balwani’s defense team threw the blame back at her.

Balwani’s defense team will have a chance to make a final impression on the jury when it delivers closing arguments on Wednesday.

Ramesh “Sunny” Balwani was COO of Theranos. (Photo by Justin Sullivan /Getty Images)

Key witnesses for Balwani’s trial

On Tuesday, Schenk displayed photographs of every witness who testified for the 3-month-long trial.

Holmes and Balwani’s trials were strikingly similar. Many of the same witnesses testified, including ex-Theranos lab directors, wealthy investors, doctors, patients, journalists, and whistle-blowers.

ERIKA CHEUNG: Cheung was a whistleblower who worked in Theranos’ blood lab. Her job was to process patients’ blood samples. After spending time in the lab, she didn’t believe that Theranos machines generated accurate results. She raised her concerns directly to Balwani and quit after her concerns fell on deaf ears, Cheung testified. She later went to the media and state health regulators to raise the alarm. 

DR. MARK PANDORI:  Pandori was co-Theranos lab director with Adam Rosendorff “at an important time when Theranos went live with patient testing at Walgreens,” prosecutors said.  Decisions that should have been made by laboratory directors were instead dictated by what was best for the business. Pandori repeatedly raised his concerns about accuracy and reliability to Balwani, but “they were not well received,” prosecutors said. When Pandori announced that he was leaving the company, he was told to write his concerns in a memo. “That was akin to hitting your head against a wall,” Schenk said.

SO HAN SPIVEY: Spivey was Theranos’ finance manager. She testified that Holmes and Balwani showed investors revenue projections that did not match up with her data. “She did not prepare this document that investor Lisa Peterson received (in October 2014.) Balwani told Peterson that Theranos would generate $140 million in revenue in 2014 and $1 billion in revenue in 2015,” Schenk said.

DANIEL EDLIN: Daniel Edlin as a project manager whose desk at Theranos was right outside Holmes and Balwani’s offices. Edlin was one of Holmes’ brother’s college buddies. He testified about what he observed in their working relationship. “Because of his physical desk, he could tell you how they interacted with each other, whether they spoke with one voice,” Schenk said. Edlin left Theranos after an article was published in the Wall Street Journal in 2015 exposing the company’s flawed technology.

NIMESH JHAVERI:  Jhaveri was a Walgreens executive tasked with operationalizing Theranos’ Walgreens launch. Jhaveri testified that Balwani knew pilot launches in Arizona Walgreen stores were not going well.

“When Balwani communicates financial projections to investors, astronomical numbers, $100 million or a billion, they are contingent on launching Theranos blood testing in 900 Walgreens stores nationwide. Mr. Balwani knows it’s unlikely they will go national with Walgreens,” Schenk told the jury. “It was only a matter of time before Walgreens discovers Theranos can’t test on fingerstick. He knows his financial projections are wrong. It’s only a matter of time before that house of cards crumbles.”

DR. ADAM ROSENDORFF: Rosendorff was a Theranos lab director. He testified that while lab directors call the shots in most laboratories, Theranos’ executives took control of its own lab.

“Normally, the buck stops with the lab director. They have the power to make all the decisions in the lab. At Theranos, that simply wasn’t true. Mr. Balwani was in charge. (Rosendorff) could see problems in the lab, but didn’t have the power to fix them. (That) frustrated him more than anything,” Schenk told the jury. Like many others at Theranos, Rosendorff eventually quit.