How new revelations in the Elizabeth Holmes fraud trial reflect on Silicon Valley

Elizabeth Holmes, founder of the former health technology company Theranos, faced cross-examination Tuesday in her fraud case. Federal prosecutors have alleged deception that led investors and patients to believe the company could conduct a range of tests using a few drops of blood. Rebecca Jarvis, chief business, technology & economics correspondent for ABC News joins Judy Woodruff to discuss.

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  • Judy Woodruff:

    Elizabeth Holmes, the founder of the former health technology company Theranos, faced cross-examination today for the first time in the fraud case against her.

    Federal prosecutors have called 29 witnesses over 11 weeks, in an attempt to reveal the alleged deception that led investors and patients to believe the company could conduct a range of tests using just a few drops of blood. The start-up collapsed in 2018.

    Rebecca Jarvis is the chief business, technology, and economics correspondent for ABC News and the host of "The Dropout," a podcast about Holmes and the ongoing trial, which is being held in San Jose.

    Rebecca Jarvis, thank you very much for being with us.

    The defense has only begun its side. The prosecution has spent, what, almost two months making this case or even longer. If you can, sum up what the prosecution was trying to do.

  • Rebecca Jarvis, ABC News:

    Well, Judy, the prosecution has shown now in meticulous detail their allegations that Elizabeth Holmes was the one in charge of her company, Theranos, that she's the reason investors, patients and doctors were defrauded here.

    And they have shown us individuals, including investors, patients. We have heard from doctors. We have heard from scientists inside the company. We have heard from scientists outside the company, in meticulous detail, laying out this fraud and putting Elizabeth Holmes at the front of it.

  • Judy Woodruff:

    And she has just, as we said, taken the stand, I guess just before Thanksgiving. She's only — we have only heard from her for a few days, but it's been dramatic, including her discussing being raped in college.

    Give us a sense of what she's saying and what the reaction's been.

  • Rebecca Jarvis:

    Well, Judy, this has been explosive testimony.

    We have barely heard from Elizabeth Holmes since the charges were first brought and, frankly, have never heard some of the things she's been saying on the stand, and seen here in the way she's behaved on the stand, getting emotional, talking about, as you mentioned, being raped as a college student at Stanford, that being, according to her, one of the reasons she decided to drop out of Stanford and begin her blood testing company, Theranos.

    And she's also raised these allegations which we thought might come up at this trial against her former boyfriend and COO, Sunny Balwani, alleging years of abuse in the relationship, alleging it was emotional, it was physical, he dictated everything from her schedule to way that she ate.

    Now, these are claims he has denied vociferously. But these are claims that she raised. And they are something that certainly the jurors now are going to have to think about as they think about the bigger picture question, which is, did this woman intend to commit fraud?

  • Judy Woodruff:

    And what I have read, Rebecca, is that she's walking this fine line, because, on the one hand, she's saying she was heavily influenced by him over a period of time, but then she's now saying that he was not the reason she made these decisions as the head of the company.

  • Rebecca Jarvis:

    Well, and that's a really important point that you raised, Judy, because she was asked point blank by her own attorney, did Sunny Balwani dictate what you said to investors? Did he dictate what you shared with Walgreens, your biggest customer, Walgreens being the place, the one place where Theranos tests got in front of patients in this country?

    So she said point blank, no, that he was not a part of those decisions. That is the fraud here. The fraud is not about the rest of these conversations and allegations, though they might make the jury feel more connected to her.

    Of course, they have sat in front of her now for many weeks. She's been there in the trial with her family sitting behind her, her partner. They have been told that she's a new mom, she has a newborn baby. And so they have really seen this woman for an extended span of time.

  • Judy Woodruff:

    And, Rebecca, of course, whatever the jury decides will have an enormous impact on her. She could face up to 20 years in prison.

    But it's also seen as a case important for the future of Silicon Valley. How so?

  • Rebecca Jarvis:

    Well, it raises these questions about faking it until you make it.

    There are definitely people who believe that this is endemic to Silicon Valley, that this is the way people behave in Silicon Valley. And then there are those who think this is absolutely not the case. The bottom line here is, this is a woman who was able to raise more money than almost any other female founder. She became one of the wealthiest self-made women in the world. At one point, her company was worth $9 billion.

    So it does raise these questions about how — what standards we hold founders to. What is important when a device like a blood testing device gets in front of anybody at a Walgreens store?

  • Judy Woodruff:

    And, finally, any sense of what we can expect next from the defense?

  • Rebecca Jarvis:

    Well, we have certainly now heard this cross-examination today from the prosecution. And they have raised a number of text exchanges between Elizabeth Holmes and her former boyfriend and COO, Sunny Balwani.

    The defense is going to have to come back strong here, because the prosecution has presented a lot of very important evidence that really links — especially today, that really links Elizabeth Holmes directly to the allegations of fraud.

  • Judy Woodruff:

    Rebecca Jarvis watching this riveting trial.

    Thank you very much, Rebecca. We appreciate it.

  • Rebecca Jarvis:

    Thank you, Judy.

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