Lawyer for Theranos founder hints at possible defense.
Who got harmed isn’t relevant, feds say — ‘The scheme was the fraud’
A lawyer for Theranos founder Elizabeth Holmes hinted in court Monday about possible defenses against the fraud charges facing her client.
After U.S. District Court Judge Edward Davila referred to prosecutors’ claim that Theranos’ bloodtesting technology “never worked,” Holmes’ lawyer Amy Saharia responded, “That’s not true.” Saharia later in the hearing said Holmes’ team disputes the prosecution’s allegation that some of the defunct firm’s blood tests were unreliable. “There were no problems with them whatsoever,” Saharia said.
Saharia, during a pre-trial hearing in federal court in San Jose, noted that prosecutors have alleged specific incidents of inaccurate Theranos test results, in an HIV test and two pregnancy tests.
“All tests have error rates,” Saharia said. “The government should not be permitted to try a case with anecdotes when incorrect blood tests are a fact of life.”
Even if the prosecution were correct that some patients experienced harm, Saharia said that would be irrelevant to the case because wire fraud involves the loss of money or property. She acknowledged that patients who paid for their own tests could be considered victims, but those who were covered by insurance suffered no loss of money or property, nor did doctors.
Assistant U.S. Attorney John Bostic, arguing for the prosecution, said it didn’t matter whether anyone was harmed. “What matters here is the defendants’ intent,” Bostic said.
“It doesn’t matter what ended up actually happening. The scheme was the fraud.”
Holmes is accused of felony wire fraud in connection with her failed Palo Alto startup, which she founded as a Stanford University dropout in 2003. The indictment alleges she schemed to defraud doctors and patients, along with investors who put more than $700 million into the firm.
During Monday’s twoand-a-half-hour hearing, Saharia also pointed out that the indictment claims former CEO Holmes and former Theranos president Sunny Balwani defrauded investors, doctors and patients “through their company.” Saharia suggested that even if misleading information about Theranos
had been issued, Holmes and Balwani may not be culpable. Though the indictment suggests that statements on the Theranos website and in marketing materials were attributable to its CEO and president, the attorney noted that “Theranos employed hundreds of people.”
In response, the judge asked, “If they don’t know what’s on their own website they can’t be responsible?”
Saharia said the alleged misstatements about Theranos’s business and bloodtesting equipment covered a “vast swath” of the company’s operations, and statements about the firm were also made via advertisements, news articles and company press releases. “There’s a vast number
of potential sources of misleading statements,” Saharia said.
She also took issue with Bostic’s claim that knowingly selling inaccurate blood tests for medical care warrants criminal fraud charges. Saharia countered that such actions would be more properly addressed in a civil case over “breach of implied warranty.”
Saharia also argued that the prosecution has not alleged that Holmes and her company had a fiduciary duty to act in the interests of investors, doctors and patients, so claims that Holmes broke a duty of trust don’t hold up.
Holmes is set to go on trial in early August.