Prosecution Rests in Trial of Former Theranos President Ramesh ‘Sunny’ Balwani

Over nine weeks that included testimony from 24 witnesses in San Jose, Calif., prosecutors sought to convince a jury that Mr. Balwani conspired with Ms. Holmes to defraud investors and patients about the startup’s technology and blood-testing capabilities. Although Ms. Holmes was the company’s chief executive and founder, Mr. Balwani, as Theranos’s second-in-command and her longtime boyfriend, had enormous power at the Silicon Valley company and was a full participant in the fraud scheme, government attorneys have alleged.

Mr. Balwani, 56, faces 12 counts of wire fraud and conspiracy to commit wire fraud. He joined Theranos in 2009 as vice chairman of its board and the following year became president and chief operating officer, a position he held until 2016. He also helped finance the company by underwriting a $13 million loan and buying $5 million in stock.

”After Balwani joined the company, he and Elizabeth Holmes began making grandiose spectacular claims about Theranos’s capabilities and its accomplishments,” Assistant U.S. Attorney Robert Leach told the jury. Those never materialized and Theranos was running out of money, so, Mr. Leach said “They decided to deceive and cheat.”

The government’s case against Mr. Balwani mostly mirrored the one against Ms. Holmes, who is awaiting sentencing in September after a jury in January convicted her of one count of conspiracy to commit wire fraud and three counts of wire fraud for intentionally deceiving investors. Her attorneys made a verbal motion with the judge asking for an acquittal and have said she will appeal any guilty verdict.

Theranos raised about $945 million from investors before going bust in 2018 following a federal indictment, civil lawsuits, Securities and Exchange Commission charges and regulatory scrutiny that shuttered its lab operations.

Mr. Balwani had unfettered access to all aspects of the company—and was fully informed about its many technical and clinical problems and cash shortfalls, government witnesses testified.

“He sought to know everything he could about everything,” Mark Pandori, Theranos lab director from 2013 to 2014, testified in March.

A former

Walgreens Boots Alliance Inc.

executive testified that Mr. Balwani was in charge of Theranos’s relationship with the drugstore retailer, supplying regular updates on its technology and detailing why Theranos did about 40% of its blood draws using the traditional needle-in-the arm method and not its proprietary finger-prick technology.

Prosecutors allege that Mr. Balwani was responsible for misleading financial models shown to investors, which overstated Theranos’s revenue by as much as nine-times the company’s own internal projections. Brian Grossman of hedge fund PFM Health Sciences LP testified that Mr. Balwani had supplied his team with the financial model for the company that informed their decision to invest a total of $96 million. Theranos told investors to expect about $990 million in revenue in 2015, when internally the company projected $113 million.

“We did take their estimates and we used those,” Mr. Grossman testified Friday.

Theranos claimed its blood-testing device could cheaply and quickly run more than 200 health tests using a proprietary device. The government argued and evidence in Ms. Holmes’s case showed that Theranos managed to use its proprietary finger-prick blood-testing device for just 12 types of patient tests, and those results were unreliable.

The government also alleges Theranos misrepresented its operations and capabilities to investors and business partners including Walgreens with false claims that its technology had been validated by pharmaceutical giants and was being used in medical evacuation helicopters by the U.S. military.

Write to Heather Somerville at [email protected]

Over nine weeks that included testimony from 24 witnesses in San Jose, Calif., prosecutors sought to convince a jury that Mr. Balwani conspired with Ms. Holmes to defraud investors and patients about the startup’s technology and blood-testing capabilities. Although Ms. Holmes was the company’s chief executive and founder, Mr. Balwani, as Theranos’s second-in-command and her longtime boyfriend, had enormous power at the Silicon Valley company and was a full participant in the fraud scheme, government attorneys have alleged.

Mr. Balwani, 56, faces 12 counts of wire fraud and conspiracy to commit wire fraud. He joined Theranos in 2009 as vice chairman of its board and the following year became president and chief operating officer, a position he held until 2016. He also helped finance the company by underwriting a $13 million loan and buying $5 million in stock.

”After Balwani joined the company, he and Elizabeth Holmes began making grandiose spectacular claims about Theranos’s capabilities and its accomplishments,” Assistant U.S. Attorney Robert Leach told the jury. Those never materialized and Theranos was running out of money, so, Mr. Leach said “They decided to deceive and cheat.”

The government’s case against Mr. Balwani mostly mirrored the one against Ms. Holmes, who is awaiting sentencing in September after a jury in January convicted her of one count of conspiracy to commit wire fraud and three counts of wire fraud for intentionally deceiving investors. Her attorneys made a verbal motion with the judge asking for an acquittal and have said she will appeal any guilty verdict.

Theranos raised about $945 million from investors before going bust in 2018 following a federal indictment, civil lawsuits, Securities and Exchange Commission charges and regulatory scrutiny that shuttered its lab operations.

Mr. Balwani had unfettered access to all aspects of the company—and was fully informed about its many technical and clinical problems and cash shortfalls, government witnesses testified.

“He sought to know everything he could about everything,” Mark Pandori, Theranos lab director from 2013 to 2014, testified in March.

A former

Walgreens Boots Alliance Inc.

executive testified that Mr. Balwani was in charge of Theranos’s relationship with the drugstore retailer, supplying regular updates on its technology and detailing why Theranos did about 40% of its blood draws using the traditional needle-in-the arm method and not its proprietary finger-prick technology.

Prosecutors allege that Mr. Balwani was responsible for misleading financial models shown to investors, which overstated Theranos’s revenue by as much as nine-times the company’s own internal projections. Brian Grossman of hedge fund PFM Health Sciences LP testified that Mr. Balwani had supplied his team with the financial model for the company that informed their decision to invest a total of $96 million. Theranos told investors to expect about $990 million in revenue in 2015, when internally the company projected $113 million.

“We did take their estimates and we used those,” Mr. Grossman testified Friday.

Theranos claimed its blood-testing device could cheaply and quickly run more than 200 health tests using a proprietary device. The government argued and evidence in Ms. Holmes’s case showed that Theranos managed to use its proprietary finger-prick blood-testing device for just 12 types of patient tests, and those results were unreliable.

The government also alleges Theranos misrepresented its operations and capabilities to investors and business partners including Walgreens with false claims that its technology had been validated by pharmaceutical giants and was being used in medical evacuation helicopters by the U.S. military.

Write to Heather Somerville at [email protected]