It’s been two years since Theranos was in the news. In April 2023, both Elizabeth Holmes and Ramesh ‘Sunny’ Balwani started serving their lengthy sentences for multiple charges of fraud (11 years, 3 months and 12 years, 9 months respectively, generally reduced to 85% of sentence). Last week, the three judges of the US Court of Appeals for the Ninth Circuit in San Francisco ruled to uphold both trials on investor fraud and the award of $452 million in restitution. The original verdicts were made in separate trials in the US District Court for the Northern District of California by Judge Edward Davila, but the appeals were considered together. [TTA 12 June 2024]
Neither appeal of the separate trials proved that any errors were significant enough, nor any testimony excluded, that would provide grounds to overturn the verdict.
The key issues centered on legal errors made by the District Court in allowing certain witnesses’ testimony to veer into ‘expert territory’, which is an error, but that “any error was harmless”. For instance, both defenses concentrated on Kingshuk Das, MD, the final Theranos lab director who worked there March 2016 to June 2018 and voided two years of Edison Lab tests. He testified about his experience at Theranos (fact witness) but in court was allowed to express his opinion as a scientist though he was not qualified by the court as an ‘expert witness’. That is a separate procedure that involves a special qualifications hearing (Daubert hearing) that did not take place with Dr. Das. The appeals panel found that Dr. Das should have been qualified as a expert witness and would have easily done so. Not doing so was an error that was not challenged by Holmes’ team at the time. But the court’s error was harmless. Dr. Das’ testimony on the Edison devices’ reliability and accuracy was supported by other testimony. The testimony regarding the device was one of many other misrepresentations made to investors that the jury had to review.
Another issue was the CMS report on the labs, issued in January 2016 after much of the deception had already taken place. Holmes’ appeal team argued it should have been excluded as misleading to the jury. It was admitted into evidence as relevant to Holmes’ state of mind, intent, and knowledge about the labs’ conditions. The District Court did not “abuse its discretion” in permitting it for that limited purpose.
Holmes’ team also challenged the exclusion of statements from Sunny Balwani about “owning” the Theranos financial model.
Regarding restitution, the conclusion in the ruling summary was direct: “The panel concluded that any error was harmless because the district court’s factual findings compel the conclusion that the victims’ actual losses were equal to the total amount of their investments.”
The very tough decision was written by Judge Jacqueline H. Nguyen. Her fellow judges were Mary M. Schroeder and Ryan D. Nelson. The decision PDF is here. (It seems quite readable, but was not fully read by this Editor.)
Their chances for further appeal, either in the Ninth Circuit with a larger panel or by the US Supreme Court, as “very unlikely” for the first and “almost inconceivable” for the second, according to Stanford Law professor Robert Weisberg, quoted in the Mercury News.
This Editor recommends a review of the Reddit thread by mattschwink, “Annotating the 9th Circuit review of Holmes appeal”, which was (again) of great assistance in summarizing the appeal issues. He also confirmed for me that Sunny Balwani was moved from the limited facilities at Terminal Island FCI to Lompoc FCI, north of Santa Barbara and a stone’s throw from Vandenberg Space Force Base. Thank you, Matt, again! Press coverage has been minimal: Mercury News, AP, BBC
Immediately preceding the 9th Circuit Court’s decision was a People cover puff piece on Elizabeth Holmes. You may be able to read it all the way through without being amazed at her manipulation and lack of contrition on defrauding investors and patients. It doth make much of her claims that she was sexually abused not only at a college party but also in her years with Sunny Balwani, for which she is in therapy there. She is continuing to research and write patents for new healthcare inventions, presumably between law clerking, advocacy, teaching French, and weekend family visits. The Bryan FCI does not, even in her description, sound like ‘It’s Been Hell and Torture’. (Perhaps she’s seeking a Federal pardon?) More than likely, she will be enjoying the facilities and the visits until April 2032. And then there is the $452 million restitution to somehow scrape up.
No “equal time” exclusive interviews with Sunny Balwani, of course.
It strikes this Editor that, in the words that Orson Welles wrote for his character and that of Marlene Dietrich in ‘Touch of Evil’ that both Holmes’ and Balwani’s futures ‘are all used up’. That is, they will emerge from their respective prisons and live on, but as to any role in medical research, the parade will have long passed them by.
Postscript: The Mercury News published a rather anodyne interview with one of her prosecutors, John Bostic, who is now in private practice as a partner with Cooley in the Bay Area. It’s brief but interesting as to why he was chosen–he was a molecular biology major in college–which helped him to understand the technical aspects of Theranos and make them understandable to judge and jury. The strongest evidence against her? “There was evidence that Holmes knew some things that she was saying were not true, and there was also some evidence of document altering that I think was very easy for the jury to understand.” The one notable takeaway was that Silicon Valley and technology companies shouldn’t ‘fake it till they make it’, which is a lesson they’ve already learned.
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