Former Theranos Executive Ramesh Balwani Convicted of Fraud | business news

By MICHAEL LIEDTKE, AP Technology Reporter

SAN JOSE, Calif. (AP) — A jury on Thursday 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 took Silicon Valley by storm.

The 12-member jury found Balwani guilty on all 12 counts of defrauding both Theranos investors and patients who relied on unreliable blood tests that could have jeopardized their health.

Balwani sat impassively as the verdicts were read out in a courtroom in San Jose, California, blinking frequently but not looking at the seven women and five men who convicted him.

The result puts Balwani and Holmes in similar situations. Holmes was convicted of 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.

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Both Holmes, 38, and Balwani, 57, face up to 20 years in prison.

After the verdicts, US District Judge Edward Davila raised Balwani’s bail from $500,000 to $750,000 and set a sentencing date of November 15. Holmes, who is free on $500,000 bond, is scheduled to be sentenced Sept. 26.

The dual convictions represent a resounding victory for federal prosecutors, who seized on the Theranos case as a unique opportunity to hold ambitious entrepreneurs accountable for engaging in tech hyperbole as they sought fame and fortune. In the process, they hoped to discourage the practice of making bold, unproven promises about still-fledgling products, a startup strategy known as “fake it until you make it.”

“We are pleased with the jury’s hard work and attention to the evidence presented. We appreciate the verdict and look forward to the sentencing process,” US Attorney Stephanie Hinds said outside the courthouse.

Balwani did not respond to requests for comment as he left court with his legal team.

After the verdicts were read and the jury was dismissed, Balwani approached his two brothers who were sitting behind him for what appeared to be a solemn discussion. The three remained silent, heads bowed.

While Holmes insinuated during her trial that Balwani manipulated her into making poor decisions, Balwani’s attorneys explicitly sought to place the blame directly on Holmes for any misconduct.

As part of Balwani’s defense, lawyers pointed out that Holmes was not only the CEO, but also a Silicon Valley star who persuaded investors to invest nearly $1 billion in Theranos. Holmes boasted that his company had found a way to screen for hundreds of potential diseases with a device called Edison that could test just a few drops of blood taken from a finger prick. Such technology could potentially revolutionize medical care.

But it turned out that the Edison never worked properly and provided faulty test results that Theranos conducted as part of a deal to set up mini-labs in Walgreen’s pharmacies. Flaws in Theranos’ vaunted technology led Holmes and Balwani to switch their tests to conventional machines made by other vendors and while drawing vials of blood from patients’ veins, a far cry from Holmes’s promises.

After committing about $15 million of his own money to bolster Theranos and then becoming the company’s COO in 2010, Balwani eventually oversaw the blood-testing lab that was turning in inaccurate results and oversaw the Walgreen deal. That crucial detail may have influenced the jury to convict him of defrauding patients, while another jury acquitted Holmes of the same charges.

Balwani also prepared many of Theranos’ future earnings projections that helped the company raise money from investors. Those forecasts turned out to be greatly exaggerated.

Unlike Holmes, who spent seven days on the witness stand during his trial, Balwani did not testify in his own defense. After Holmes’s trial, jurors who were interviewed by the media said that she found her sympathetic, if not entirely believable.

“The reason she didn’t testify is probably because she knows she doesn’t have Elizabeth’s charisma,” said Jill Huntley Taylor, a longtime jury consultant who also helps with trial strategy.

Balwani’s decision not to tell his side of the story caused jurors to make their decision based solely on the evidence, which included witness testimony that described him as an often abrasive executive.

“Just because jurors didn’t know about Balwani didn’t mean they couldn’t form an opinion about him,” Huntley Taylor said.

Balwani’s defense mirrored Holmes’s in one key respect: Both described the couple as hard workers who believed so deeply in Theranos technology that they never sold their respective stakes in the Palo Alto, California-based company. At one point in 2014, Holmes’ fortune was estimated at $4.5 billion, while Balwani’s Theranos holdings were valued at $500 million.

But it all started 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 left Balwani as his business and romantic partner. Holmes is now the mother of a young son fathered by her current partner, Billy Evans, who was by her side for most of her trial.

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