Holmes set to blame Balwani for Theranos mismanagement (1)

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Theranos Inc. founder Elizabeth Holmes is set in her criminal fraud trial to blame some of the blame for her blood-testing startup’s problems on her second-in-command and ex-boyfriend Ramesh “Sunny “Balwani.

Among the topics cited by Holmes’ attorneys in a court filing Wednesday included the company’s lab operations, financial modeling and business deployment with Walgreens, which ultimately failed two years before Theranos collapsed in 2018.

Holmes’ attorneys have asked U.S. District Judge Edward Davila to let them use as evidence certain statements Balwani made when questioned by federal securities regulators. Balwani’s attorney said the former Theranos president would invoke his right not to self-incriminate under the Fifth Amendment of the Constitution if he was called to testify at trial, according to the record.

Elizabeth Holmes leaves federal court in San Jose, California in 2019.

Photographer: / Bloomberg

Holmes’ trial is in its eleventh week. She testified for three days and is due to return to the witness stand on Monday.

She and Balwani face the same charges of defrauding investors and patients by lying about the capacity of the Theranos machines, but he is due to stand a separate trial next year. Both have pleaded not guilty.

Wednesday’s filing does not explicitly state that Balwani was responsible for the startup’s mismanagement. But Holmes, in her testimony, has previously sought to deflect some of the government’s allegations of unlawful conduct at Theranos by explaining that as CEO she acted on the basis of information from her employees.

Holmes told the jury on Tuesday that Balwani’s financial modeling produced discrepancies in revenue projections in 2014 and 2015, when the Walgreens relationship faltered.

Holmes’ attorney Lance Wade had hinted to the jury in their opening argument in September that part of their defense was to blame Balwani.

“You will learn that trusting and relying on Mr. Balwani as his main advisor was one of his mistakes,” he said.

Balwani’s lawyer Jeffrey Coopersmith did not immediately respond to a request for comment.

The case is US v. Holmes, 18-cr-00258, US District Court, Northern District of California (San Jose).

(Updates with Tuesday’s testimony in the seventh paragraph)

–With help from Joel Rosenblatt.

To contact the reporter on this story: Peter Blumberg in San Francisco at [email protected]

To contact the editors responsible for this story: Katia Porzecanski at [email protected]

Joe schneider

© 2021 Bloomberg LP All rights reserved. Used with permission.

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