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This week in Elizabeth Holmes' Theranos trial: Safeway and Walgreens testify

Two jurors have already been dismissed, and dozens more witnesses are still expected to testify in the coming weeks and months.

Elizabeth Holmes at the federal building

Theranos founder Elizabeth Holmes arrives in federal court on Sept. 8 for opening arguments in her highly anticipated trial. 

David Odisho/Getty Images

The trial of former Theranos CEO Elizabeth Holmes convened on a Thursday this week for the first time since the trial started over a month ago. A COVID scare and other scheduling issues have led to multiple short weeks so far, but the case is on the docket for Judge Edward Davila's courtroom in San Jose through Friday. 

The focus of testimony over the past few weeks has been the startup's deals with Safeway and Walgreens to provide Theranos'  purportedly revolutionary blood-testing technology for use in stores. Executives from both mega-retailers testified they were sold on Theranos, its tech and the charisma of its founder.

"Not all CEOs are alike. She would rise to the top of the pile in terms of vision, in terms of command of the information," former Safeway CEO Steven Burd told the court, according to The Wall Street Journal.

Holmes is charged with multiple counts of conspiracy and fraud over claims she made about the company's compact blood-testing machine. Investigations revealed the technology had serious problems. In a few short years, Theranos went from being valued at $9 billion to being one of the decade's more notorious Silicon Valley stories.

Safeway spent hundreds of millions of dollars to install new clinics in stores as part of its Theranos partnership, but the devices never made it to any of the locations. Walgreens did initiate in-store blood testing with Holmes' company, but thousands of those test results would ultimately be voided, with Walgreens suing Theranos in a case that was eventually settled.

The initial stage of the trial has also seen testimony from former employees like Erika Cheung, who worked in the company's lab testing blood samples. "I left Theranos because I was uncomfortable processing patient samples," she testified. 

Former lab director Adam Rosendorff also spent several days on the stand describing how the company prioritized profits over patients. He told the jury he was pressured to defend faulty test results. During cross-examination, Holmes' attorneys pointed to contradictions in Rosendorff's testimony and questioned how hard he tried to bring problems to the attention of management.

The trial is set to last for months, with potentially more than 200 witnesses testifying. So far, two jurors have been dismissed and replaced by alternates. A young woman was released for reasons of financial hardship, while another said her Buddhist beliefs around forgiveness would make it hard to reach a verdict. 

Holmes' defense attorneys argued in opening statements in September that the failure of the health care startup was due to "technical" shortcomings rather than deception on the part of its disgraced founder. Holmes attorney Lance Wade told jurors in a San Jose courtroom that the story of Theranos' remarkable fall was "far more human and real, and oftentimes ... complicated and boring."

"Out of time, out of money, Elizabeth Holmes decided to lie," assistant US attorney Robert Leach told the 12-member jury last month.

Defense attorneys later countered that Theranos investors were well aware of the risks involved in backing the startup.

The courtroom drama has been over three years in the making, with Holmes originally charged in June 2018. The start of the trial was also delayed multiple times by the COVID-19 pandemic and by the birth of Holmes' child on July 10 of this year. 

Here's what else to know about one of the biggest trials of the decade so far.

What happened to Holmes and Theranos?

In 2003, Holmes dropped out of Stanford University at 19 to found Theranos with the goal of disrupting the blood-testing industry. The company said it was developing proprietary technology that required gathering a smaller amount of blood than a conventional intravenous draw and was more portable than traditional tests sent off to a lab.

Theranos began to see more mainstream attention in 2013 when it signed up Walgreens and Safeway as potential customers. At one point the startup was valued at more than $9 billion.

Holmes began to appear on the cover of various publications, including Fortune, sometimes drawing comparisons to Steve Jobs for her seeming powers of disruption and a penchant for high-necked black tops.

But the fortunes of both Holmes and Theranos began to change in 2015 when The Wall Street Journal took a deeper look into the company. The Journal reported that only a small portion of tests were being done with the company's testing machine, named Edison, and that many tests were being run on other companies' machines, using diluted blood samples. The accuracy of test results that patients received from Theranos was also called into question.

All this led to the charges filed against Holmes in 2018, a settlement with the Securities and Exchange Commission and the permanent shuttering of Theranos shortly thereafter.

A 2019 documentary, a book called Bad Blood: Secrets and Lies in a Silicon Valley Startup by Wall Street Journal reporter John Carreyrou and multiple podcasts about the company's precipitous fall helped bring mainstream attention to the story.

Former Theranos employee and whistleblower Tyler Shultz spoke with CNET in 2020 about the whole saga.

What is Holmes charged with?

Holmes is formally charged with two counts of conspiracy to commit wire fraud and 10 counts of wire fraud.

"The charges stem from [Holmes'] allegedly deceptive representations about [Theranos] and its medical testing technology," reads a statement from the US district court in Northern California

Essentially, Holmes is accused of lying to patients about how the company's blood testing worked and how effective the tests were. Some of the charges also relate to Holmes allegedly misleading investors about the internal workings at Theranos and how much revenue the company was expected to generate.

If convicted, Holmes could be sentenced to up to 20 years in prison.

What is Holmes' side of the story?

Though Holmes denied that the allegations made by the Journal's original reporting were true, she's never told her side of the story from that point on in depth.

"This is what happens when you work to change things," Holmes said on CNBC's Mad Money in 2015. "First they think you're crazy, then they fight you, and then all of the sudden you change the world."

The 37-year-old reportedly pursued a book deal to get her story out. The book never materialized, but a widely acclaimed HBO documentary about the Theranos collapse, The Inventor: Out for Blood in Silicon Valley by director Alex Gibney, came out in 2019. It didn't portray Holmes in a flattering light and she didn't cooperate with the filmmakers, so her take on the events of the past half-decade largely remains a mystery.

Holmes' lawyers come from the high-powered Washington firm that defended President Bill Clinton at his impeachment trial. One possibility is they'll argue she was following something like the Silicon Valley "fake it till you make it" ethos and that she always believed in the long-term potential of the company and its technology to eventually deliver on its promises.

According to The Wall Street Journal, Holmes' lawyers have said she may argue that "she believed any alleged misrepresentations were true and accordingly that Theranos was a legitimate business generating value for investors."

There were hints of this defense in opening statements, when Wade referred to the company's technology as "real" and "innovative."

On Aug. 28, newly unsealed court filings suggested Holmes could seek to defend herself by alleging she suffered psychological, sexual and emotional abuse at the hands of former Theranos president and onetime boyfriend Ramesh "Sunny" Balwani, and that because of submissiveness to him, she believed allegedly fraudulent statements she made were true. 

This strategy was also foreshadowed in opening arguments in which Wade referred to Balwani's temper and promised more related evidence would be presented during the trial. 

Lawyers for Balwani called abuse allegations "outrageous." One of the filings, by lawyers for Holmes, said she was likely to testify.

We'll soon see whether Holmes ultimately takes the stand to tell her side of things.

How can I watch the trial?

The trial officially began Sept. 7, with opening arguments the following day. There won't be an online feed of the trial, and television cameras won't be allowed in the courtroom, so the best way to follow the case will be via reporters in the room taking notes the old-fashioned way.

In total, over 200 potential witnesses have been identified between the prosecution and the defense, so it's possible testimony will go on for weeks. 

Balwani faces similar charges in a separate trial scheduled for next year.

Both Holmes and Balwani have pleaded not guilty.