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Prosecutors called Theranos founder and CEO Elizabeth Holmes a liar and a cheat on Wednesday while her attorneys argued that the company’s failure was not a crime.
“Out of time, out of money, Elizabeth Holmes decided to lie,” Robert Leach, an assistant U.S. attorney, said while laying out the case that Theranos ran out of cash in 2009 and knowingly misled investors to keep the company afloat.
Prosecutors said Holmes was not only the face of Theranos, the blood testing start-up she founded, but she also oversaw everything about the company, “dazzling” investors like Walgreens and Safeway with false claims.
“She owned it, she controlled it, the buck stopped with her,” Leach said. “And as you’ll hear from insiders, she was not an absentee CEO, she was there all the time. She sweated the details. She was in charge.”
The long-anticipated opening arguments were heard during a five-hour hearing. Holmes arrived to court alongside her partner Billy Evans, her mother Noel Holmes and Evans’ father William Evans. She wore a gray skirt suit with a cream colored blouse and a light blue face mask. It was a very different image than her signature black turtleneck during her heyday at Theranos.
The crowd outside was the largest since the criminal trial began last Tuesday. Among the spectators were three women with blonde hair who mimicked Holmes’ signature look wearing all black with their hair pulled back in a bun. They sat next to Holmes’ family in the courtroom.
Inside the courthouse before opening statements, Holmes was spotted embracing her mother. During the hearing, she sat between her attorneys and occasionally glanced back at her family which was seated directly behind her.
Evans, who Holmes’ shares a newborn child with, was seen consoling Holmes’ mother during breaks, at one point putting his hand on her back as they spoke with the courtroom sketch artist. At least seven of Holmes’ friends and family members were inside the courtroom packed mainly with members of the media in San Jose where Holmes is fighting a dozen charges of fraud and conspiracy.
Lance Wade, an attorney for Holmes, argued that she “made mistakes, but mistakes are not crimes,” adding that “a failed business does not make a CEO a criminal. Ms. Holmes did not go to work every day intending to lie, cheat and steal.”
“Ms. Holmes walked away with nothing,” Wade told the jury of seven men and five women. “But failure is not a crime. Trying your hardest and coming up short is not a crime.”
Prosecutors said in 2013 Theranos had only $13 million in cash and told jurors the company was burning through $1 million to $2 million per week. They alleged that Holmes and Balwani, Theranos executive and for a time her boyfriend, raised hundreds of millions of dollars from investors through hyping the company’s technology in interviews with the press.
“The defendant’s fraudulent scheme made her a billionaire,” Leach said. “At one point her stock in Theranos was worth billions. The scheme brought her fame, honor and adoration.”
Holmes skyrocketed to fame nearly a decade ago, gracing the cover of Fortune and Forbes magazines, appearing on television news programs and even hailed as the next Steve Jobs, whom prosecutors said she “greatly admired.”
“She was touted as one of the most powerful women in business. She was sought as one of the most celebrated CEOs in Silicon Valley and in the world,” Leach said. “But under the façade of Theranos’ success, there were problems brewing.”
Defense attorneys told jurors that Theranos employed hundreds of people in Silicon Valley.
“It was real. It was innovative,” Wade said, adding that the well-known list of investors knew the risks of investing in a start-up.
“To invest in Theranos you needed to be a multimillionaire. In many cases they were billionaires, some of the most wealthy, sophisticated people in the world,” Wade said. “They were sophisticated and they knew what they were buying.”
Theranos raised more than $700 million from investors including media mogul Rupert Murdoch, former Education Secretary Betsy DeVos and the Walton family of Walmart fame. Some of the investors are expected to testify in the trial.
Her defense also pointed to Holmes’ relationship with Balwani, laying the groundwork to place the blame on him.
“You’ll hear that trusting and relying on Mr. Balwani as her primary adviser was one of her mistakes,” Wade said, telling jurors the two met when Holmes was 18 years old and Balwani 37.
“Sometimes he got a temper, he’d lash out. He did not always treat people kindly,” Wade said of Balwani. “You’ll learn how he tested the limits of how he treated some employees. You’ll have to wait for all of the evidence and then decide how to fairly view that relationship in total.”
CNBC confirmed that during the trial Holmes and Evans have been staying in a home on the grounds of the storied Green Gables estate in Silicon Valley. The 74-acre property is currently listed for sale for $135 million. During a court break, CNBC asked Evans’ father, William Evans, whether he was paying for the couples rent on the home. Evans stayed silent.
After five hours Holmes left the courthouse, ignoring reporter questions while holding hands with her partner.