SAN JOSE — In a surprising twist, failed startup founder Elizabeth Holmes took the witness stand at her trial Friday, defending herself against criminal fraud charges involving her defunct Palo Alto blood-testing startup Theranos.
Speaking with confidence — and frequently a small smile — Holmes spoke directly to the central allegation in the case: that she intended to defraud patients and investors, claiming her technology could conduct a full range of blood tests on small samples when she knew it had serious accuracy problems. Asked by one of her lawyers, ‘Did you believe that Theranos had developed technology that was capable of performing any blood test?” Holmes responded, ‘I did.’
Holmes, who founded the Palo Alto blood-testing startup at age 19 in 2003, is charged with allegedly bilking investors out of hundreds of millions of dollars and defrauding patients with false claims that the company’s machines could conduct a full range of tests using just a few drops of blood, when she knew the technology had serious accuracy problems. She and her co-accused, former company president Sunny Balwani, have denied the allegations. Balwani is to be tried next year.
Her testimony was a striking development, and a risky move, in a trial that has captured national attention, primed by two documentaries, a best-selling book and news that Jennifer Lawrence will star as Holmes in an upcoming movie.
One of the biggest questions in the case has been whether Holmes herself would take the stand to try to reshape the narrative about her meteoric rise and fall: Holmes’ company soared to a valuation of $9 billion, but went belly-up in 2018, the same year the U.S. Securities and Exchange Commission accused her of “an elaborate, years-long fraud.” She agreed to pay a $500,000 penalty and be banned for 10 years from serving as an officer or director for any public company.
Legal experts say having defendants take the stand in criminal cases is rare because it opens them up to aggressive cross-examination from prosecutors. Prior to calling Holmes to the stand, the defense asked the judge to acquit her on the basis of insufficient evidence; the judge said he would reserve his decision on that motion. The judge did dismiss one of the 12 fraud counts against Holmes because of an error made by the prosecution in their indictment.
“It’s always a risk to put your client on because if they make a mistake they can sink the whole case,” said former Santa Clara County prosecutor Steven Clark. But, he added, “what’s at issue here is Elizabeth Holmes’ intent. And the best person to say what Elizabeth Holmes’ intent was is Elizabeth Holmes, and that’s why I think she’s taking the stand. She’s very charismatic. She’s really good on her feet. And I think the jury will like her.”
“This is the pitch meeting of her life,” Clark said. “She’s going to be explaining herself to 12 people as to what was in her mind.”
Prosecutors likely won’t have the chance to cross-examine Holmes until after Thanksgiving as the defense plans to continue questioning her through the two trial days set next week. In her testimony Friday, Holmes — a Stanford dropout — discussed her background and education, and the origins of her ideas for a blood-testing startup.
That startup, initially called Real-Time Cures, developed a prototype blood-testing device in 2004, she said, before she changed the company’s name to Theranos in 2005. Speaking in a register slightly higher than her infamous baritone, Holmes told jurors that she “worked for years with teams of scientists and engineers to miniaturize all the technologies in a laboratory,” with the “core” goal of running tests on small blood samples.
Initially, Theranos wanted to work with pharmaceutical companies developing new drugs, Holmes said. Her startup later pivoted to offering blood-testing services for the public. Holmes told the jury that around 2009 or 2010, Theranos had a technological breakthrough that allowed the company to “run any test.”
Claims by Holmes that Theranos could perform all the tests a major lab company could do have been a central issue in the trial. Jurors have seen Theranos promotional materials touting a menu of 200 tests. Holmes told the jury her company could run 70 test types for patients, and only 12 on their own machines, but that when she talked publicly she wasn’t limiting her comments to those dozen tests.
Holmes took the stand just hours after the prosecution rested its case, following 10 weeks of critical testimony from witnesses like former U.S. Defense Secretary Gen. James Mattis, four former Theranos lab directors and representatives for ultra-wealthy investors in the company that became Silicon Valley’s most notorious start-up crash. The jury has so far heard compelling evidence that Holmes misled investors, including documents that she distributed lauding Theranos’ technology and bearing apparently stolen logos from pharmaceutical giants Pfizer and Schering-Plough.
Jurors also heard that Holmes told investors her technology was being used on military med-evac helicopters, though Mattis, who served on Theranos board and invested $85,000 in the firm, testified that he wasn’t aware the company’s technology was ever deployed by the Pentagon.
Holmes faces maximum penalties of 20 years in prison and a $2.75 million fine if convicted, plus possible restitution, the Department of Justice has said.
Jason Green contributed reporting.
