SAN JOSE, Calif.: One-time entrepreneur Elizabeth Holmes, under questioning by prosecutors, struggled Tuesday to recall key events that led to her facing criminal fraud charges for allegedly fleecing investors and customers of her failed blood-testing startup Theranos.
Her cross-examination began the day after she shared painfully vivid memories of alleged abuse by her ex-lover and business partner, Sunny Balwani.
In between bouts of hazy recollection, Holmes wept on the witness stand after the federal prosecutor interrogating her asked to read aloud some of the amorous texts that she and Balwani exchanged during a five-year period while they were running Theranos and living together in a stealth romantic relationship.
U are God’s tigress and warrior. You are extraordinary,” Balwani cooed to Holmes in a 2015 documents displayed in court Tuesday. Holmes quickly responded with this text: Coming from my tiger means the whole universe to me.”
While poring over the old texts, Holmes occasionally dabbed away tears and wiped her nose with a tissue while a jury watched and listened along with a packed courtroom that included one person who trained a pair of binoculars on Holmes from a back row
The drama unfolded the day after Holmes cast herself as a victim of Balwani’s abusive and controlling behavior while they were romantically involved from 2005 to 2016. Balwani, 56, also served as Theranos’ chief operating officer from 2009 to 2016 while Holmes, 37, was the CEO and controlling shareholder.
As part of her testimony, Holmes said she was raped at Stanford a traumatic experience that she asserted Balwani exploited to control everything from her diet to her friendships.
Both Holmes and Balwani are now fighting criminal charges of duping investors and patients into believing that Theranos has invented a device that could scan for hundreds of potential health problems with a few drops of blood. After raising nearly $1 billion, Theranos collapsed amid revelations that the purportedly revolutionary technology she was peddling was horribly flawed.
Holmes’ trial, which began in early September, is now heading toward its climax. Balwani, who is being tried separately, is expected to face the court early next year.
Although Holmes has been on the stand since Nov. 19, Tuesday marked the first opportunity that federal prosecutors got to grill her under oath.
Robert Leach, the government lawyer confronting Holmes, didn’t touch upon Holmes’ alleged rape at Stanford nor her testimony about Balwani berating her, sometimes in profane terms. Instead, he used roughly 12,000 texts sent between Holmes and Balwani to counter her contention that they had a relationship that was more toxic than romantic.
At one point, Leach asked Holmes if she would be surprised if the word love” appeared 594 times in the texts obtained by the government and the word loving” was used 105 times. No,” Holmes said with a slight smile.
But Holmes spent much of Tuesday responding I don’t remember” and I don’t know to Leach’s questions about key incidents in the startup’s history. She claimed forgetfulness so frequently that Leach made the phrase lets see if I can refresh your memory” a common refrain as he presented her with document after document related to the fraud charges.
In particular, Leach seemed intent on proving that Holmes she knew she was making false statements to investors and Walgreens, which briefly used Theranos’ blood tests in its pharmacies.
Holmes’ apparent forgetfulness contrasted sharply to her recall of her interactions with Balwani some of them dating back to more than a decade.
But she also made it apparent she has been reflecting about her behavior at Theranos. She expressed remorse for the way she responded to the concerns of two former employees and her attempts to stop the 2015 publication of a Wall Street Journal expose that helped lead to Theranos’ collapse.
I could not say more strongly the way that we handled the Wall Street Journal process was a total disaster. We really messed up,” Holmes said.
John Carreyrou, the reporter who wrote the Wall Street Journal story and a book about Theranos’ rise and fall, sat in the back of the courtroom during Holmes’ moment of contrition while taking notes for a podcast he has been doing about the trial.
Holmes also acknowledged she was too quick to dismiss warnings from two former employees, Erika Cheung and Tyler Shultz, who reported that Theranos’ blood-testing device dubbed Edison was delivering inaccurate results that could endanger patients’ health.
I sure as hell wished we treated her differently and listened to her,” said Holmes of Cheung, who quit Theranos in exasperation after concluding her complaints were being ignored.
Shultz, the grandson of former U.S. Secretary of State and Theranos board member George Shultz, also resigned from Theranos in 2015 under similar circumstances.
Both Cheung and Shultz became whistleblowers and provided information to Carreyrou for his Journal story. After discovering that Cheung and Shultz were talking to Carreyrou, Theranos attorney David Boies sent letters to both of them threatening to sue them. Holmes on Tuesday insisted she was trying to protect trade secrets.
The tactics sullied Holmes’ relationship with George Shultz, who initially backed her even after his grandson began sounding alarms about Theranos’ technology.
George Shultz, who died earlier this year, became fed up after Theranos sent over attorneys to pressure Tyler to sign non-disclosure documents at his house in May 2015, prompting him to call Holmes and complain that it was “one of the worst things I have ever seen anyone do,” according to Leach.
Holmes told Leach she didn’t recall precisely what George Shultz said during that conversation. I remember George being angry,” she said.
Holmes could face prison time of up to 20 years if convicted.
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