Theranos saga returns to courtroom as ex-COO Balwani set for trial

He was the person behind the lab curtain at blood-testing start-up Theranos. Now he takes middle stage in his personal felony fraud case.

Opening arguments within the trial of Ramesh “Sunny” Balwani, former president and chief working officer of Theranos, start Wednesday within the San Jose federal courthouse, the place a jury in January discovered Theranos ex-CEO Elizabeth Holmes, responsible of 4 counts of wire fraud and conspiracy to commit wire fraud.

A jury of six males and six girls will determine the destiny of Balwani, who has been charged with the identical crimes as Holmes. Every carries a penalty of as much as 20 years in jail. He pleaded not responsible.

Whereas Holmes awaits sentencing in September, she may reemerge as a key witness in opposition to Balwani. Along with serving as Theranos’ No. 2 govt, Balwani was Holmes’ boyfriend.

Throughout her trial, Holmes accused Balwani of a sample of sexual and psychological abuse, which “impacted every part about who I used to be,” she advised the jury. Balwani has denied the allegations.

Reed Kathrein, an lawyer who represented some buyers in a lawsuit in opposition to Holmes and Theranos, advised CNBC that Balwani was central to the Theranos ruse, which concerned mendacity in regards to the firm’s know-how and bilking shareholders out of a whole bunch of thousands and thousands of {dollars}.

“Sunny ran every part, knew every part,” stated Kathrein, who is not concerned in Balwani’s felony fraud case. “Whereas he is probably not the general public face and he might not have made the statements, he was utterly complicit in getting the cash from buyers and sufferers.”

Widespread publicity surrounding Holmes’ case delayed opening arguments, as Decide Edward Davila and the attorneys representing either side had issue discovering a full slate of unbiased jurors. It took 4 days and the questioning of near 100 candidates to fill the 12-person jury.

Throughout jury choice, greater than half of the potential jurors raised their fingers when requested by attorneys if they’d heard about Holmes or Theranos. A number of stated they’d data of Holmes’ abuse claims in opposition to Balwani.

Prosecutors have not stated whether or not they plan to name Holmes again to the stand after she served as the principle witness in her personal trial. Kathrein stated Holmes may testify in opposition to Balwani in a bid to scale back her jail sentence.

“Elizabeth has already indicated that she needs to throw him underneath the bus,” Kathrein stated. “She did it when he left Theranos. She did it once more at her personal trial. I’d not be stunned if she throws him underneath the bus but once more and testifies to save lots of herself from a harsh sentence.”

Balwani’s lawyer, Jeffrey Coopersmith, declined to remark. Attorneys for Holmes did not reply to CNBC’s request for remark.

Balwani, a former software program govt who made thousands and thousands throughout the dot-com growth, met Holmes in 2002 in Beijing, the place they had been each finding out Mandarin. It was the summer time earlier than Holmes’ freshman 12 months at Stanford College. She was 18, he was 37.

Holmes began Theranos the next 12 months and shortly dropped out of Stanford. In 2005, she and Balwani moved in collectively in Palo Alto, California. Nevertheless, their 12-year romance was largely stored a secret from buyers, enterprise companions and staff.

Balwani’s involvement with Theranos started in 2009. The corporate was struggling financially, and Balwani stepped in by offering a $13 million mortgage. Six months later, he was president and COO.

In line with Holmes, Balwani was her mentor and suggested her on the right way to run an organization. In her testimony, she stated she understood Balwani to be a profitable businessman and that he labored for Microsoft co-founder Invoice Gates.

In essentially the most dramatic second of her four-month trial, Holmes described Balwani’s controlling habits. She advised the jury Balwani dictated every part from her schedule to her food plan. Nevertheless, she stopped wanting blaming the all the mishaps on Balwani and stated he by no means advised her what to say to buyers or pharmacy companions like Walgreens.

“He wasn’t who I believed he was,” Holmes advised the jury. “And I spotted if I used to be going to repair the problems and permit the corporate to see by way of its potential I had to do this with out him within the firm.”

Holmes stated she moved out of the Silicon Valley dwelling they shared in 2016, after an inspection from regulators revealed main issues contained in the Theranos laboratory. Balwani left Theranos later that 12 months.

In March 2018, the Securities and Trade Fee charged Balwani and Holmes with “huge fraud.” Whereas Holmes agreed to settle the SEC’s prices with out admitting or denying the allegations, Balwani rejected the settlement and is preventing the costs separate from his felony trial.

Danny Cevallos, an lawyer and NBC Information authorized analyst, stated Balwani is at an obstacle as a result of Holmes has already been convicted. Textual content messages obtained by CNBC throughout the Holmes trial present each Balwani and Holmes had been concerned with the corporate’s every day operations.

The federal government “found out what labored and what did not work with Holmes,” Cevallos stated. That makes “this case is much more hermetic,” he added.

Barbara McQuade, a former U.S. lawyer, agrees that Balwani faces lengthy odds.

“There’s usually extra of a bonus to the protection when it is the second time by way of a case,” stated McQuade, who’s additionally an NBC authorized analyst. “Witnesses nearly at all times make minor contradictions of their testimony. A protection lawyer who is sweet will acknowledge these inconsistencies and level them out to indicate that the witness’ reminiscence is fallible.”

However prosecutors might favor to not name Holmes, McQuade stated, as a result of “she’s a identified fraudster and she or he’s good at fraud.”

Cevallos additionally sees the rationale to preserving Holmes off the stand.

“The federal government is aware of firsthand what a convincing particular person Elizabeth is,” Cevallos stated. “It is basically what they prosecuted her about. They’ve already received a case with out her, and so they most likely don’t desire her to get off lighter than Balwani.”