Former Theranos chief Sunny Balwani convicted


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Former Theranos chief executive Ramesh “Sunny” Balwani, who was longtime deputy founder Elizabeth Holmes, was convicted of all 12 counts in federal court in San Jose for defrauding investors and patients associated with the biotech company. Associated Press.

Balwani faced 10 counts of wire fraud and two counts of conspiracy to commit wire fraud after initially being charged against his former business partner Holmes. Balwani received a tougher judgment – Holmes was convicted in January on four counts of fraud for misleading investors into investing in a blood testing startup that once promised to transform the medical diagnostics industry.

Theranos founder Elizabeth Holmes found guilty in high-profile Silicon Valley fraud case.

Theranos has been the shining star of Silicon Valley for more than a decade, attracting investment from seasoned tech folks like Oracle’s Larry Ellison and venture capitalist Tim Draper. He had an all-star board of directors that included former Secretary of Defense Jim Mattis and former Secretaries of State Henry Kissinger and George Shultz. Holmes founded the company while still a student at Stanford, and she charmed potential business partners, investors and the media with her vision of making blood tests cheaper and less painful.

But the house of cards collapsed after a Wall Street Journal investigation found that Theranos technology wasn’t working as well as the company boasted. His small desktop device, sometimes called the Edison or MiniLab, could only do about a dozen blood tests, testimonies from former employees showed, a far cry from the hundreds of tests Theranos offered to do.

The collapse of the company shattered Holmes’ image as a revolutionary innovator in Silicon Valley and has been the subject of a bestseller, several podcasts, an HBO documentary and, most recently, a Hulu series starring Amanda Seyfried.

Thearanos’ downfall has shattered confidence in some corners of the biotech industry and served as yet another example of Silicon Valley greed that has outdone its purpose for some.

Elizabeth Holmes learned all the wrong lessons from Silicon Valley

Balwani, a man almost 20 years older than Holmes, was by her side most of the time as a business and romantic partner. Federal prosecutors filed charges against both together, but the defendants’ cases were later dropped when Holmes accused Balwani of abusing her. He denied the accusations. The claims did not surface during Balwani’s trial.

But the court largely followed the Holmes case: prosecutors called more than a dozen of the same witnesses, including former investors and directors of the company’s lab.

However, Balwani received more convictions than Holmes, which was not unusual because they had different jurors, said Robert Dugdale, a former federal prosecutor who is a Kendall Brill & Kelly partner and specializes in defense work. white collar workers.

Different jurors may consider the same set of facts and draw slightly different conclusions, he said, noting that both Holmes and Balwani were convicted on at least some of the charges.

“Sometimes juries come up with not quite consistent results,” he said. “Small deviations are common.”

The government also streamlined its case for a second time, said Michael Weinstein, head of the white-collar criminal division at Cole Schotz and a former federal prosecutor. Prosecutors focused on evidence, were more selective with their witnesses, and their presentation was tougher, he said.

“In the end, it was too much for the jury not to find guilty,” he said. He added that Balwani, an older and more experienced business leader, may not have been as “sympathetic” as Holmes, who started working on Theranos when she was a college student.

Although he was a less public figurehead, Balwani had significant responsibilities at the company, including managing the biotech company’s doomed relationship with Walgreens, overseeing its labs, and overseeing some of its finances and investor relations, the trial revealed.

Prosecutors said Balwani was well aware of the problems Theranos was facing and dismissed employees’ concerns. Erica Chung, a former lab assistant who said she shared her concerns with Balwani, later became a key informant who exposed the company.

“What he’s saying to Erika Chung is that he’s questioning her experience and he’s fed up with people who don’t have enough experience to question Theranos blood tests,” Attorney Jeff Schenck said in his closing remarks. “And he tells her that her one job at Theranos is to process patient samples and not ask any questions.”

Balwani’s defense team did not dispute the fact that the former chief had a lot of control and responsibility in Theranos. He “drank from multiple fire hoses” including lab operations, software, investors and manufacturing, his lawyer Jeffrey Coopersmith said in court.

But his defense team argued that Balwani believed in Theranos and, as Holmes said, acted on the belief that Theranos was doing everything it could to make blood testing more accessible.

“The evidence in this case has shown that Mr. Balwani has always acted in good faith to make blood testing more accessible, convenient and accessible to everyone,” Coopersmith said in his closing remarks.

Unlike Holmes, who testified for several days, Balwani did not speak during the trial. His team called just two witnesses, including a doctor who referred patients to Theranos and an unrelated computer specialist who spoke about the lost database of test results.

Trial of Elizabeth Holmes is the hottest ticket in Silicon Valley

Balwani, a former dot-com software entrepreneur, guaranteed Theranos a $10 million loan in 2009 and later bought millions of dollars worth of company stock. In 2009, he became vice chairman of Theranos and was later promoted to president and chief operating officer.

He first met the 18-year-old Holmes on an international trip to China in the summer before she started college. Balvani was then 37 years old. The couple later became romantically involved and continued to date while he worked at the startup.

In a statement, Balwani’s lawyer said he was “disappointed” by the verdict.

“We plan to explore and consider all of Mr. Balwani’s options, including an appeal,” Coopersmith said.

Holmes is expected to be sentenced in September and Balwani in November.

“Mr. Balwani had a choice,” Attorney Schenck said in his closing statement. “He could have watched Theranos collapse, he could have watched his girlfriend’s business collapse, or he could have gone the other way.”

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