Former Theranos president Ramesh ‘Sunny’ Balwani begins his defense

“Sunny Balwani did not start Theranos, he did not control Theranos,” said Mr. Cazares. “Elizabeth Holmes, not Sunny, founded Theranos and built Theranos.”

At the time when Mr. Balwani joined Theranos in 2009 as President and CEO, Ms. Holmes spent six years building “a small but sophisticated company,” Mr. Cazares. His knowledge of the company was largely based on what Mrs Holmes, who was also his girlfriend, and Theranos scientists told him, Mr Cazares said.

Mr. Balwani, 56, faces a dozen cases of wire fraud and conspiracy to commit fraud for allegedly lying to investors and patients about the blood-testing startup technology. Mr. Balwani helped run the business from 2009 to 2016 with Ms. Holmes and helped finance it by taking out a $ 13 million loan and buying $ 5 million in shares. The two had a romantic relationship that spanned more than a decade and were intertwined with their joint management of the company, according to evidence in the case.

Ms. Holmes was found guilty of wire fraud and conspiracy in January in a separate criminal case.

Ms. Holmes and Mr. Balwani was indicted in June 2018, but in March 2020, U.S. District Judge Edward Davila accepted Mr. Balwani’s request to adjourn the proceedings so that they would have separate legal proceedings. Judge Davila presided over Ms. Holmes’ trial and also oversees Mr. Balwani’s cases; the same assistant U.S. attorneys who brought Ms. Holme’s case, Mr. also accuses. Balwanis sag.

Sir. Balwani’s trial had been delayed due to a lengthy jury selection and the Covid-19 pandemic, and because Mrs Holmes gave birth to a boy last year, which postponed her own trial.

The government has accused Mr. Balwani, like Mrs Holmes, to mislead investors, business partners and patients about the potential of Theranos’ technology and its economy. Theranos claimed that it could test for more than 200 health conditions by simply using a few drops of blood from a finger prick. Prosecutors have alleged, and witnesses in Ms. Holmes’ lawsuit testified that the company used its proprietary device for only 12 types of patient tests, and these tests could be inaccurate. Theranos relied on commercial blood testers for most of his tests, lawyers from both sides have said.

Mr. Cazares said Theranos used investor money, as it promised, to build the company. Da Mr. Balwani traveled in May 2016, Theranos had hundreds of millions of dollars in the bank, patents and hundreds of blood samples developed by Theranos researchers, said Mr. Cazares.

“The money was there, the business was there,” Mr Cazares said. And Mr Balwani, whose stake in Theranos was worth as much as $ 500 million on paper, walked away from Theranos without selling any shares.

Da Mr. Balwani left in 2016, Theranos struggled with unreliable and inaccurate blood tests, deteriorating retail partnerships, dissatisfied investors and regulatory control, The Wall Street Journal reported. Regulators had revealed major shortcomings in the laboratory he oversaw. The company was dissolved in 2018 following civil lawsuits, a settlement with the Securities and Exchange Commission over fraud allegations in which Theranos did not admit or deny wrongdoing but paid a fine, and the federal indictment.

The government’s indictment alleges fraud from 2010 to 2016, when Mr Balwani was in the company. In Ms. Holmes’ trial, she described Mr. Balwani as her closest business mentor, influencing how she ran the business – even though he was not the ultimate decision maker.

The government’s opening statements provided a foretaste of a case that repeated the case against Mrs Holmes.

‘This is a case of fraud. About lying and cheating to raise money and property, ”said Assistant U.S. Attorney Robert Leach. Mr. Balwani “did this to get money from investors, and he did this to get money and business from paying patients who reckoned Theranos could provide accurate and reliable blood tests so they could make important medical decisions.”

Mr. Leach said that Mr. Balwani was responsible for what he described as false financial projections given to investors. Mr. Leach said Mr. Balwani told investors they should expect Theranos to have $ 990 million in revenue in 2015, when the company actually had less than $ 2 million in sales, among other projections that Mr Leach said were misleading.

Mr. Cazares countered this claim, saying that Mr. Balwani accurately portrayed the company’s expected revenue growth based on an agreement from Walgreens Boots Alliance Inc.

to place Therano’s blood test devices in thousands of retail pharmacies.

Mr. Balwani is an entrepreneur and immigrant from a family of farmers who became rich because of his own success in tech startups before going to work at Theranos, said Mr. Cazares. Mr. Balwani had worked as a software engineer and had a trade education when he went to the blood test company, where he was put in charge of the laboratory despite having no medical or laboratory experience.

Mr. Cazares challenged the government to charge Mr. Balwani without reviewing a database containing all of Theranos’ laboratory test data, including 9 million patient test results.

The database is a difficult problem. The government sued a copy of Theranos’ proprietary laboratory results database, but in August 2018, a few days after the government received a copy on an external hard drive, Theranos officials destroyed the entire database, the Journal reported. The government later learned that a password was missing to use their hard drives.

Before Mr. Balwani’s lawyers outlined the broad lines of his defense, prosecutors on Tuesday described Mr. Balwani as half of a business duo who lied to cheat investors and patients for money. “They were partners in everything, including their crimes,” Mr. Leach.

Mr. Balwani was a full-fledged participant in the lies Theranos spread, Mr. Leach, driven by its dwindling liquidity reserves and unreliable technology. The company went on for years without revenue and its cash had dropped to $ 6.9 million in 2013, he said.

For a time, Mr. Leach said, their scam was hugely successful: They raised hundreds of millions of dollars from investors, and it “brought them fame and adoration.”

Mr. Leach told the jury that they would soon see text message exchanges that Mr. Balwani and Ms. Holmes shared under their years-long personal relationship, which was largely hidden from Theranos investors, employees and board members. Prosecutors also introduced hundreds of these messages under Ms. Holmes’ lawsuit, which showed that the two worked together as the top officers of a multibillion-dollar company and as romantic partners.

“They honestly explained to each other how bad things were in Theranos at the time when they proclaimed Theranos as a revolution in healthcare,” said Mr. Leach.

Write to Heather Somerville at [email protected]