Elizabeth Holmes, founder of Theranos Inc., arrives at federal court in San Jose, California, U.S., on Tuesday, Nov. 30, 2021.
David Paul Morris | Bloomberg | Getty Images
SAN JOSE, CALIF. — In her first day facing questions from the prosecution, Theranos founder Elizabeth Holmes admitted that she tried to get News Corp’s Rupert Murdoch to kill a story that the Wall Street Journal was preparing to publish about her company in 2015.
“You personally went to the owner of the Wall Street Journal to try to quash the story,” Robert Leach, an assistant U.S. attorney, asked of Holmes.
“I did,” Holmes replied.
The article from the Journal’s John Carreyrou, who’s no longer with the paper, was finally published on Oct. 15, 2015, and opened the investigative floodgates that eventually led to Theranos’ demise in 2018 and the indictment of Holmes on criminal fraud charges.
Holmes faces 11 counts of wire fraud and conspiracy to commit wire fraud for her role at the blood-testing company, and could spend up to 20 years in prison if convicted. She pleaded not guilty
In her four prior appearances in front of the jury, beginning Nov. 19, Holmes took questions from her defense attorneys, who attempted to portray their client as a young and perhaps overly-ambitious entrepreneur out to do good and change the world. On Monday, Holmes wrapped up her answers, detailing to the jury her decade-long abusive relationship with ex-boyfriend Ramesh “Sunny” Balwani, who was also the company’s president.
The cross-examination on Tuesday returned the focus to Holmes and her alleged deceptions and efforts to mislead investors, patients and the public. Murdoch was one of the many wealthy individuals to invest in Theranos, personally putting in $125 million earlier in 2015.
That gave Holmes a direct line into Murdoch. Leach showed the jury an email Holmes sent to the media tycoon in September of that year. In it, Holmes referenced Gerard Baker, who was then the Journal’s editor-in-chief.
“As I’ve reflected on this, I thought that were I in your shoes I would want to know/be in the loop on this one,” Holmes wrote. “We are very much hoping that Gerard will meet with our team.”
She told the jury, “It was part of my effort to get Mr. Murdoch to make sure our trade secrets are not published.”
Drew Angerer | Bloomberg | Getty Images
Holmes acknowledged that she was “very worried” about the Journal’s story.
Carreyrou, who attended the trial this week, left the Journal in 2019, a year after publishing his book on Theranos, “Bad Blood: Secrets and Lies in a Silicon Valley Startup.” Carreyrou told CNBC on Tuesday, “I stand by every line of what I wrote.”
On the stand, Holmes was asked about her threats on former employees Tyler Shultz and Erika Cheung, who became whistleblowers. Cheung testified as a government witness that she was followed by private investigators and threatened with litigation following her departure from the company.
The whistleblower was right
Holmes acknowledged that she hired Boies Schiller Flexner, the law firm of David Boies, after she learned Cheung was talking to Carreyrou. Holmes said she was trying to prevent Cheung from disclosing company trade secrets.
“I don’t think she was right about the specific issues she was raising but I sure as hell wish we treated her differently and listened to her,” said Holmes, who was evasive at times on Tuesday and appeared more flustered than in her appearances taking questions from defense attorneys.
“You know today that Ms. Cheung was right, isn’t that fair?” Leach asked.
“Yes,” Holmes said, also telling the jury that the way she handled the Journal’s investigation was “a disaster.”
At the direction of the prosecution, Holmes read aloud text messages she’d written to and received from Balwani. She broke down on the stand when reading the messages.
In a text to Holmes on Oct. 21, 2015, Balwani wrote, “I prayed from the bottom of my heart for you. I have never prayed with this intensity in my life for anything and anyone you will shine.” Holmes read the message while wiping away tears.
Former Theranos President and COO Ramesh “Sunny” Balwani smiles after a hearing at a federal court in San Jose, California, July 17, 2019.
Stephen Lam | Reuters
In another message, Balwani wrote, “U r God’s tigress and warrior. You are extraordinary.” Holmes responded, “Coming from my tiger means the whole universe to me,” and she wrote, “I love you.”
“Fair to say this is an example of Mr. Balwani expressing love and affection to you?” Leach asked.
“It is,” Holmes said.
Leach pointed out that the word “love” appeared 594 times in the government’s 12,000 text messages between Holmes and Balwani.
It was a striking departure in tone from Monday, when Holmes claimed that Balwani physically and sexually abused her throughout their relationship and that he controlled nearly every aspect of her life, including her schedule and diet.
“He impacted everything about who I was,” Holmes told the jury, in response to questions from her defense attorneys. “And I don’t fully understand that.”
Balwani, who faces the same charges as Holmes, denied the allegations and has also pleaded not guilty. His trial is expected to begin in early 2022.
Leach also pressed Holmes about her working relationship with Balwani.
“Sunny Balwani reported to you?” Leach asked.
“He did,” Holmes said.
“You could fire him at any time?” Leach asked.
“I could,” Holmes responded.
In a surprise admission, Holmes acknowledged that she had another romantic involvement while in a relationship with Balwani.
“How long did that relationship last?” Leach asked.
“It didn’t,” Holmes said. “It was not actually a formal relationship.”
“But you were romantic with somebody other than Mr. Balwani from 2010 to 2015?” Leach asked.
“Yes,” Holmes said.
The court recessed shortly before 4 p.m. California time. Holmes’ cross-examination will continue on Tuesday. The defense said it will rest next week, at which point the government will have an opportunity for a rebuttal before jury deliberations begin.