Theranos Trial: United States vs. Elizabeth Holmes, Day 11 (Much Ado about Nothing)

On the eleventh day, the defense shifted gears and put its best fact forward: Elizabeth Holmes wasn't a scientist. Previously, the defense told us of a prodigy who, like Icarus, flew too close to the sun and fell. I mocked the defense for prioritizing images over logic because in the end, truth prevails: Holmes couldn't know the status of in-house product integration because she lacked the credentials to run a lab and was unqualified to do so. Repeat after me: poorly supervising a lab director isn't wire fraud, even if lab results are unreliable or inaccurate. What is not working today may work tomorrow.

Repeat after me: reverse engineering another company's hardware is not a crime. Emails yesterday prove Adam Rosendorff knew Theranos utilized a Siemens product, acquiesced in its use, and agreed to hide information--more specifically, proprietary information--from a technical representative. (No one seems to have clean hands except Erika Cheung and Tyler Schultz.)

With respect to proving Holmes' guilt, Adam Rosendorff's testimony was irrelevant, except as follows:

Holmes never asked Rosendorff to offer unreliable or inaccurate tests while at Theranos; 

Rosendorff was never told to report inaccurate results by either Holmes or Balwani; and

Rosendorff never used unreliable or inaccurate assays on patient tests. 

If you're wondering how the defense is running roughshod over the government's case, you're not the only one. To secure a conviction, the government need only prove 1) Holmes lied to investors, who then transferred money to Theranos, or 2) Holmes lied to journalists in order to lure investors, who then transferred money to Theranos. For some reason, the government seems to be arguing a poorly performing diagnostic lab--in which Holmes lacks jurisdiction and therefore authority--equals wire fraud. Did the government originally intend to prosecute a lab director, only to set its sights on the CEO after securing a lab director's cooperation? If so, the government has bypassed four weeks of specific statements made about the "Edison" to investors and instead embarked on a twelve weeks' demolition of Theranos itself. But Theranos isn't on trial. Holmes is. 

I can already predict the remaining trajectory of events. The government will "expose" claims Holmes made to investors, journalists, and other board members. In response, the defense will show standard legal clauses--either safe harbor or forward-looking statements--allowing entrepreneurs to raise money based on concepts. (If every entrepreneur needed a finished product before being able to advertise ideas, most companies--and IPOs--wouldn't exist.) Sample line: "Due to uncertainties and risks, the investment community is urged not to place undue reliance on written or oral forward-looking statements of Theranos or its executives." (Wade has already displayed a statement mentioning Theranos was a speculative investment.)

The government will argue people--whether Wall Street or Main Street--shouldn't be allowed to raise money through public lies when internal operations clearly indicate difficulties attaining a finished product within a reasonable time. Had the government focused solely on the Edison and specific statements relating to the Edison, it might have succeeded. Instead, by soliciting testimony regarding miscommunication and cultural clashes between Theranos' software, science, and hardware teams, any juror who's worked at a startup, an outsourcing firm, or a Fortune 500 company realizes we're dealing with mismanagement and a man's desperate attempt to save a personal relationship.

Repeat after me: mismanagement is not a crime. Participating in a marketing firm's attempt to create the next Apple, Inc. is not a crime. As long as Holmes avoids a questionable domestic violence defense, she's already in the realm of reasonable doubt. Assuming she testifies, the result will originate from the same process as most other trials: the jury chooses a verdict based on whom they like and whom they dislike. Every single admitted email or text sent by Holmes shows a reasonable and kind person who was once in love. Advantage, Holmes.

© Matthew Mehdi Rafat (2021)

ISSN 2770-002X