Elizabeth Holmes grilled by prosecutors on witness stand in her criminal fraud trial

By Bobby Allyn

Published November 30, 2021 at 9:20 PM EST

Former Theranos founder and CEO Elizabeth Holmes leaves the Robert F. Peckham Federal Building with her partner Billy Evans.

When Elizabeth Holmes and Ramesh "Sunny" Balwani split, her life was shattered.

"Nothing is real any more," Holmes told the jury in her federal fraud trial she recalled thinking back in 2016.

"My whole foundation, life, what I believed in, devotion to the company, was based on believing he was this person," Holmes said of Balwani, her ex-boyfriend and business partner of the now-collapsed blood-testing startup Theranos.

"There was no way I could save our company if he was there," Holmes said Tuesday. "And so, that was it."

One day earlier, Holmes delivered emotional testimony to the court that Balwani was a manipulative partner who emotionally and sexually abused her, just as she adored and poured faith into him.

She said the abuse occurred during the time in which prosecutors allege she and Balwani lied to investors and duped patients and doctors about Theranos, which Holmes, now 37, founded as a 19 year old.

The startup was once celebrated as a biotech breakthrough and made Holmes one of the world's youngest female billionaires before the company disintegrated in scandal.

On Tuesday, federal prosecutors had their first chance to directly question Holmes and offered another theory of the case: that Holmes was engrossed with the innerworkings of the company as chief executive when it was engaged in fraud and that her relationship with Balwani, who faces a separate trial, was more romantic than Holmes' portrayal.

Holmes and Balwani have both pleaded not guilty.

Intimate texts create uncomfortable moments

In some of the more uncomfortable moments of the day's testimony, Assistant U.S. Attorney Robert Leach made Holmes read cloying text messages with Balwani where she called him "my tiger" and Balwani wrote "I worship you."

Holmes, welling up and sniffling as she recited the years-old messages to her onetime boyfriend, looked uneasy as Leach pressed her on the particulars of the texts.

"Would it surprise you to know that the word 'love' appears in the texts 594 times?" Leach asked of the trove of messages prosecutors subpoenaed as part of the investigation.

Cracking a smile at the question, Holmes replied: "No."

During the questioning, some members of the the jury of eight men and four women looked uncomfortable, gazing tensely at images of the intimate text messages on screens in the jury box.

Prosecutors underscore Holmes' power as CEO

The prosecution sought to emphasize in Holmes' fifth day of testimony that her attempts since the start of the trial to shift blame on Balwani and other Theranos employees is not a sufficient defense, since she was the company's chief executive.

"Ultimately, all roads lead to the CEO?" Leach asked Holmes, and she agreed.

"The buck stops with you?" Leach said. Holmes responded: "I thought so."

She had the power to fire Balwani whenever she wanted, Leach noted on several occasions. Holmes did not disagree.

The jury must find beyond a reasonable doubt that Holmes intentionally bamboozled investors and misled patients in order to convict her. And what kind of shape jury deliberations take may hinge on just how credible Holmes comes across from the witness stand.

Holmes faces the maximum possible penalty of 20 years in prison, but, if convicted, would likely receive far less time.

Holmes discusses 'forged' drug company documents

In one of the more startling statements on direct examination last week, Holmes conceded that she herself affixed the logos of drug companies like Pfizer and Schering-Plough without their permission on documents provided to Walgreens to bolster the bona fides of the company.

On cross examination by prosecutors on Tuesday, Holmes recollection became murkier.

Leach asked her if she had Pfizer's permission to put the report on the pharmaceutical giant's letterhead, and Holmes said: "I don't know. I don't remember this process."

The test validation report originally said it was prepared for a doctor, but that was deleted before it was shared with Walgreens. Was it removed by Holmes, Leach asked?

"I think so," Holmes said.

When pressed on another document from another drug company, GlaxoSmithKline, Leach asked Holmes if she had altered language on the report, and Holmes, again, testified that she did not recall.

Government says Holmes retaliated against whistleblowers

The government opened its cross-examination of Holmes by zeroing in on the months before journalist John Carreyrou, then with The Wall Street Journal, began investigating Theranos for a series of stories that helped spark the regulatory scrutiny that put the company's demise into motion.

"We were very worried about Mr. Carreyrou's story," Holmes testified, saying earlier that protecting trade secrets was the main concern. In a text to Balwani, she wrote that she and Balwani "need to get ahead of all of it."

Leach asked Holmes about trying to shake down Theranos whistleblowers suspected to have worked with Carreyrou in exposing the company. Prosecutors said Holmes' response included hiring private investigators to spy on ex-Theranos employee Erika Cheung and attempting to get Tyler Shultz, a onetime employee and the grandson of former Secretary of State George Shultz, to sign an affidavit affirming he never spoke to the Journal, as well as naming every employee he knew who spoke to the paper.

From the stand, Holmes acknowledged that the company's actions targeting Cheung and Shultz were a mistake.

"The way we handled the Wall Street Journal process was a disastrous," Holmes testified. "We totally messed it up."

Leach then displayed an email from September 2016 in which Holmes wrote to Rupert Murdoch, who owns the Journal and who invested more than $100 million into Theranos, hoping he would intervene to shut down Carreyrou's reporting. Murdoch declined.

Carreyrou, sitting in the back of the courtroom, jotted down notes for the podcast series he hosts focused on the trial.

'Mad Money' appearance played in the courtroom

Following the publication of Carreyrou's story raising questions about the number of tests Theranos was able to perform and the accuracy of the company's technology, Holmes made a now-famous defiant appearance on CNBC's "Mad Money" with Jim Cramer.

On Tuesday, as a rapt courtroom watched on, a clip of that interview was played for the jury. Holmes appeared expressionless from the witness stand.

One of the claims in the Journal report was that of the 240 blood tests Theranos offered, just about 15 were being processed using the company's proprietary device known as the Edison. (Cheung would later testify that the number was even lower: around 12.) On the 2015 interview, Holmes said told Cramer: "Every test that we offer in our lab can be run on our proprietary devices."

Holmes was then shown an email from former Wells Fargo CEO Richard Kovacevich, who was an investor and board member of Theranos, asking about exactly how many tests are being performed on the company's Edison compared to conventional lab equipment.

Leach pointed out how Holmes did not mention the use of commercial blood-testing machines in response, asking if Holmes now regrets that.

"There are many things I wish I did differently," Holmes told the jury.

The prosecution's cross-examination of Holmes is scheduled to resume on Wednesday.