SAN JOSE, Calif. (KRON) – During Elizabeth Holmes’ trial, prosecutors use their own words against her.
They plan to play audiotapes for the jury of Holmes’ phone calls with investors.
Holmes is accused of defrauding investors when she was a rising Silicon Valley star and CEO of her blood testing company, Theranos.
Legal analyst and former San Francisco deputy attorney Michele Hagan said the tapes would be damaging to the defense.
The more damage the defense takes in Holmes’ long federal fraud trial, the more pressure Holmes will feel to testify in his own defense, Hagan said.
Holmes has the option of taking the witness stand after the prosecution has completed its case. His decision will be “the biggest bet of his life,” Hagan said.
As the face of Theranos, Holmes has won over investors and big power partners including: media mogul Rupert Murdoch, Oracle founder Larry Ellison, former US Secretary of State James “Mad-Dog” Mattis and former US Secretary of State George Shultz.
Perhaps she could also convince a jury?
Holmes’ lawyers defend her as a hard-working, “young” and “naive” CEO who “underestimated trade barriers.” Holmes dropped out of Stanford and founded his biotech startup in Palo Alto, Calif., At the age of 19.
Prosecutors have a list of nearly 200 witnesses and the trial is expected to last until January. During the first two months of the trial, witnesses said Holmes was in command of the beatings and was fully aware of what was going on.
Two whistleblowers, former Theranos lab director Adam Rosendorff and ex-lab technician Theranos Erika Cheung, testified that Holmes’ invention – which she said would revolutionize blood testing – was a failure.
Holmes told investors and business partners that she invented a box that could produce blood test results from a simple blood stick.
Rosendorff and Cheung testified that the machines frequently produced inaccurate results. Cheung said lab technicians worked around the clock trying to get the machines running, some even sleeping in their cars.
Ramesh “Sunny” Balwani, Holmes ‘ex-boyfriend and Theranos’ COO, texted Holmes that the blood lab was a “disaster zone”.
Senior scientist Surekha Gangakhedkar testified that she met directly with Holmes on a regular basis to tell him about the failures going on in the lab.
Despite the lab’s troubles, Holmes went on to open “wellness centers” in Walgreens stores, accept patients, and woo wealthier investors to invest millions of dollars in his business.
Another witness called by prosecutors, former Theranos CFO So Han Spivey said Theranos was bleeding money. Theranos recorded net losses of $ 11 million in 2009, $ 16 million in 2010 and $ 27 million in 2011. The company went for years without having its financial statements audited, Spivey said.
Hagan said Spivey’s testimony helped establish a motive why Holmes would need to defraud investors.
One of those investors recorded a conference call that Holmes made with several Theranos investors in 2013. Prosecutors have submitted a recording of the call for evidence and plan to broadcast it to the jury when the trial resumes next week. .
On the call, Holmes says his private company is worth more than $ 7 billion. She gives encouraging financial prospects for the potential of her business as part of her plan to open “wellness centers” in Walgreens and Safeway pharmacies nationwide.
“We launched our retail infrastructure. We now operate in California and Arizona. We opened our first stores and welcome patients every day. We are working to expand it as quickly as possible. The speed at which we grow is essential to seize the market opportunity that we have created. And we’re putting a lot of resources into building a national footprint as quickly as possible, ”said Holmes.
The recorded appeal could help strengthen the prosecution’s opening statement. Prosecutor Robert Leach said Holmes’ true intentions were not to revolutionize healthcare. Leach vilified Holmes as a con artist who faked his way to the top to achieve wealth and fame.
“This case is about fraud, lying and cheating to get money,” Leach told the jury.
His alleged scheme “is a fraud on Main Street and it is a fraud in Silicon Valley,” Leach told the jury.
Holmes told investors that Theranos will generate $ 140 million in revenue in 2014, Leach said. Investor Lisa Peterson said earlier this week that she had no idea Theranos had no income in 2012 and 2013. Peterson managed private equity investments for billionaire DeVos family, which invested 100 million dollars in Theranos in 2014.
Hagan said the taped call is potentially incriminating for Holmes, including when she says Theranos’ blood tests are very accurate.
Holmes tells investors: “Within this framework that we have created, we have created the opportunity for people to be able to perform their tests in a whole new way. Being able to access this lab data which is incredibly powerful information that guides a lot of clinical decision making. We don’t have the variability associated with traditional lab tests. We built this in such a way that we have a variance of less than 5 percent on our tests. This is a wealth of data for the medical community.
An investor on the call said: “It is remarkable what you have accomplished. ”
Holmes, 37, is charged with 12 counts of wire fraud and conspiracy to commit wire fraud. She faces up to 20 years in prison if convicted. Balwani faces the same charges and will be tried separately next year.