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Opening statements are expected to begin today in a long-delayed and awaited criminal fraud trial against Elizabeth Holmes, a Stanford University dropout whose blood testing company Theranos propelled her to become the youngest self-made billionaire woman in the world.
Holmes, now 37, launched the Silicon Valley startup in 2003 at just 19, with a vision to overhaul diagnostic healthcare. For more than a decade, the entrepreneur sold investors the idea of ​​developing an analyzer, the size of a desktop printer, that could perform a series of routine tests on as little as a drop or two of blood taken from a patient’s finger.
Watch Elizabeth Holmes’ New Documentary From Yahoo Finance Here
A decade after his efforts began, in 2013, Holmes struck a deal with pharmacy giant Walgreens to take the analyzer from the research and development phase to a commercial product. Under a $ 140 million contract, Theranos placed the machine, known in its various versions as TSPU, Edison or miniLab, inside Walgreens wellness centers, where customers have ordered a variety of routine blood tests.
However, former Wall Street Journal reporter John Carreyrou exposed Theranos’ technological shortcomings in an explosive investigation published in October 2015.
While Holmes had publicly claimed that Theranos could perform nearly 200 common diagnostic tests, in reality, its proprietary analyzer and method of blood collection fell short of producing reliable and accurate tests. Instead, Theranos has relied on traditional off-site lab analyzers and larger blood draws to perform the bulk of the testing on offer.
In January 2016, the Centers for Medicare and Medicaid notified Theranos of laboratory deficiencies that they said posed “an immediate danger” to the health of patients. The agency sanctioned the company and agreed to a regulation prohibiting Holmes from owning or operating a clinical laboratory for two years. The deal forced the company to shut down its Walgreens and lab operations.
The revelations prompted Walgreens, three investors and clients of Theranos to sue Theranos and Holmes. Walgreens sued for breach of contract and investors claimed it was fraud. Holmes settled the lawsuits by paying Walgreens $ 25 million to end its breach of contract claim. A lawyer for two late stage investors said his clients had recovered their investments as part of a settlement with Holmes and Theranos. In addition, Holmes faced allegations of fraud from the Securities and Exchange Commission and accepted a fine of $ 500,000.
In 2018, a federal grand jury indicted entrepreneur and former Theranos COO and chairman Ramesh “Sunny” Balwani, who was also Holmes’ boyfriend, charging them with wire fraud and conspiracy. The indictment claims the couple used Theranos to defraud investors and patients and distorted its technology from 2010 to 2015. The charges each carry a maximum sentence of 20 years in prison.
Holmes and Balwani will be tried separately, due to Holmes’ claims that Balwani abused her when she was leading Theranos. In court documents, Holmes’ attorneys said she suffered “a decade-long campaign of psychological abuse” from Balwani that caused her to suffer from post-traumatic stress disorder. Balwani allegedly controlled what she ate, how she dressed and how long she slept. Balwani monitored his phone calls, texts and emails and threw hard and sharp objects at him, according to the documents.
A jury of seven men and five women was selected last week for the Holmes trial, which is expected to last up to four months. Balwani will be tried in 2022.
Alexis Keenan is a legal reporter for Yahoo Finance. Follow Alexis on Twitter @alexiskweed.
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