A jury in California has convicted former Theranos executive Ramesh “Sunny” Balwani of collaborating with disgraced Theranos CEO Elizabeth Holmes in a massive fraud involving the blood-testing company that once enthralled Silicon Valley.
On 7 July, the 12 jurors found Balwani guilty on all 12 felony counts of defrauding both Theranos investors and the patients who relied on wildly unreliable blood tests that could have jeopardised their health, reports The Associated Press (AP).
The outcome puts Balwani and Holmes in similar situations. Holmes was convicted on four counts of investor fraud and conspiracy earlier this year. During that trial, Holmes tearfully accused Balwani of sexually and emotionally abusing her while the two were romantically involved. An attorney for Balwani has vehemently denied those charges.
Holmes and Balwani face up to 20 years in prison.
After the verdicts, US District Judge Edward Davila raised Balwani’s bail to $750,000 from $500,000 and set 15 November as his sentencing date. Holmes, who is out on $500,000 bail, is scheduled to be sentenced on 26 September.
The two convictions represent a victory for federal prosecutors, who seized on the Theranos case as a rare opportunity to hold ambitious entrepreneurs accountable for engaging in technological hyperbole while pursuing fame and fortune. In the process, they hoped to discourage the practice of making bold and unproven promises about still-nascent products – a startup strategy known as “fake it until you make it”.
While Holmes insinuated during her trial that Balwani manipulated her into making poor choices, Balwani’s lawyers explicitly sought to shift all the blame for any misconduct squarely on Holmes.
As part of Balwani’s defence, the lawyers pointed out that Holmes was not only CEO, but also a Silicon Valley star who persuaded investors to pour nearly $1bn into Theranos. Holmes boasted that her company had found a way to scan for hundreds of potential diseases with a device called the Edison that could test just a few drops of blood taken with a finger prick. Such technology could potentially revolutionise healthcare.
But it turned out that the Edison never worked properly, providing faulty test results that Theranos conducted as part of a deal to set up mini labs in Walgreen’s pharmacies. The flaws in Theranos’ vaunted technology prompted Holmes and Balwani to shift their testing to conventional machines made by other vendors and while drawing vials of blood from patients’ veins – a far cry from Holmes’ promises.
After committing about $15m of his own money to bolster Theranos and then becoming the company’s chief operating officer in 2010, Balwani eventually oversaw the blood-testing lab that was delivering the inaccurate results and supervised the Walgreen’s deal. That crucial detail may have influenced the jury to convict him of defrauding patients while another jury acquitted Holmes on the same charges.
Balwani also prepared many of the projections about Theranos’ future revenue that helped the company raise money from investors. Those forecasts were grossly exaggerated.
Unlike Holmes, who spent seven days on the witness stand during her trial, Balwani didn’t testify in his own defence.
His decision not to tell his side of the story left jurors to make their decision based solely on the evidence, which included testimony from witnesses who depicted him as an often abrasive executive.
“Balwani’s defence mirrored Holmes’ in one key aspect: Both depicted the pair as tireless workers who believed so deeply in Theranos’ technology that they never sold their respective stakes in the company. At one point in 2014, Holmes’ fortune was estimated at $4.5bn while Balwani’s Theranos holdings were valued at $500m.
But everything began to unravel in late 2015 after a series of explosive articles in The Wall Street Journal exposed rampant problems with Theranos’ technology. By May 2016, Holmes had dumped Balwani as her business and romantic partner.
Holmes is now the mother of an infant son fathered by her current partner, Billy Evans, who was by her side through most of her trial.
AP article – Former Theranos exec Ramesh Balwani convicted of fraud (Open access)
See more from MedicalBrief archives:
Theranos: A cautionary tale on how not to commercialise medical advances
Founder of blood-test startup convicted of fraud
Founder of ‘breakthrough’ blood-testing technology gives evidence