SAN JOSE, Calif. — In a harshly worded closing argument, prosecutors said Tuesday that former Theranos chief operating officer Ramesh “Sunny” Balwani “was not a victim, he was the perpetrator of a fraud” in the fall of the company, while his lawyer blasted the thesis of the government calling it inconsistent.
The closing statements capped a three-month trial in which the government alleged Balwani acted with his ex-girlfriend and business partner, Theranos founder Elizabeth Holmes, in a multimillion-dollar scheme to defraud investors and patients.
“Mr. Balwani had a choice to make,” Assistant U.S. Attorney Jeffrey Schenk said. “He could see Theranos failing, he could see his girlfriend’s business collapsing, or he could pursue it differently. Mr. Balwani knew at the time that Theranos was not generating money and would not generate being honest with people.”
In his four-hour closing argument, Schenk relentlessly attacked Balwani’s credibility at Theranos and tied him to multiple parts of the company.
“Together with Elizabeth Holmes they came up with two plans,” Schenk said. “Two plans to defraud these groups of individuals. They decided to defraud the investors of Theranos and they decided to defraud the patients. And it is because of these decisions that Mr. Balwani made that we are together since March.”
Balwani, 56, faces ten counts of wire fraud and two counts of conspiracy to commit wire fraud. He, like Holmes, pleaded not guilty. Balwani joined Theranos in 2009 when the company was in financial difficulty. He intervened by granting a loan of 13 million dollars.
Six months later, Balwani became chief operating officer and president of Theranos and eventually took over lab operations. Holmes and Balwani went to great lengths to keep their romance a secret from employees, investors and business partners.
At one point, Balwani’s stake was worth $500 million, according to his lawyers, and the software executive never sold a share. His personal and professional relationship with Holmes ended in 2016 just as Theranos was beginning to fall apart.
During closing arguments, Schenk introduced the jury to the 24 government witnesses, summarizing their testimony while displaying their photo on the courtroom screen.
The government’s case against Balwani was very similar to the case prosecuted against Holmes, who was sentenced in January four counts of fraud and conspiracy to commit wire fraud against investors. While Holmes awaits sentencing in September, his lawyers filed a motion asking the judge to overturn the verdict and acquit him.
Unlike Holmes, Balwani did not testify in his own defense. Balwani’s attorneys presented a much shorter case, calling two witnesses: an Arizona doctor who used Theranos blood analyzers and a technical information consultant who testified about a missing database containing the patient test results.
Schenk reminded jurors that Balwani told investors Theranos would generate $1 billion in revenue by 2015 through a deal with Walgreens.
“He knows he tricked Walgreens into the business relationship,” Schenk said. “And it’s only a matter of time before this house of cards comes crashing down.”
The drugstore chain was a key partner for Theranos, rolling out wellness centers in 40 of its stores in Arizona. “The relationship with Walgreens has been helpful in recruiting investors,” Schenk said. Walgreens ended its partnership with the start-up in 2016.
Prosecutors argue that Balwani was responsible for the lofty financial projections investors relied on. Schenk said when investors question Theranos’ claims, Balwani often reassures them that the technology works.
“Because what is fatal to fraud? Schenk asked the jury. “The truth.”
The defense, which began its argument late Tuesday afternoon, tried to drill holes. “The government decided not to show you the whole story because it was inconsistent with the story they wanted to tell,” said Jeffrey Coopersmith, an attorney for Balwani.
Coopersmith ticked off the star group of board members and power investors that Holmes attracted.
“She was brilliant and charismatic – she had to be,” Coopersmith said. “Mr. Balwani would have seen the same thing in Elizabeth Holmes that these people saw. And you wonder why he was attracted to Theranos, why he was attracted to Ms. Holmes.”
Coopersmith told the jury that Balwani “put his heart and soul into Theranos, he worked tirelessly year after year to make the company a success”, adding later “the government has not proven that Mr. Balwani had tried to deceive or deceive anyone”.
Federal prosecutors will have the final say in their rebuttal. The jury is expected to begin its deliberations this week.
“Mr. Balwani wants you to think he’s a victim,” Schenk said. “That he had options and never exercised them, so he left money on the table. He also wants you to think he wasn’t high enough in the organization chart to have meaningful conversations. with investors and patients. But you know that’s not the truth.”
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