Elizabeth Holmes fails to keep customer complaints, test results out of criminal fraud trial

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·3 min read
SAN JOSE, CALIFORNIA - MAY 4: Theranos founder Elizabeth Holmes leaves the Robert F. Peckham Federal Building with her defense team in downtown San Jose, Calif., on Tuesday, May 4, 2021. (Photo by Nhat V. Meyer/MediaNews Group/Mercury News via Getty Images)
SAN JOSE, CALIFORNIA - MAY 4: Theranos founder Elizabeth Holmes leaves the Robert F. Peckham Federal Building with her defense team in downtown San Jose, Calif., on Tuesday, May 4, 2021. (Photo by Nhat V. Meyer/MediaNews Group/Mercury News via Getty Images)

A federal judge on Wednesday denied a request from former Theranos CEO Elizabeth Holmes to keep customer complaints, test results, and a regulatory report out of her upcoming criminal fraud trial connected to her failed blood-testing startup. As a result, patients who complained of inaccurate test results will be permitted to testify.

In a request to suppress the evidence, Holmes' lawyers argued that the government should be prevented from introducing Theranos test results at trial because a now-destroyed company database could have helped her rebut claims that the tests couldn't consistently produce accurate and reliable results. 

Theranos had turned over a copy the database, which stored blood test results, to the government on an encrypted hard drive before destroying the original database. However, the government later realized it could not access the copy of the database.

"[Holmes] contends that allowing the government to use that evidence as 'evidence of fraud' after it failed to gather and preserve the...database would violate her rights to present a complete defense and to receive due process, because the entirety of the...database was necessary to rebut that evidence," Judge Edward Davila wrote in his order.

"The threshold question for the Court is whether the...database is potentially exculpatory," he added, using a term referring to evidence that clears a person of guilt.

Davila said, ultimately, Holmes failed to show that the database was so critical to her defense that the government's actions to retain or not retain it were enough to keep its other evidence from the jury.

"Holmes does not contend that the...database is materially exculpatory, but rather argues that it is potentially useful evidence," Davila said. "The database information alone would not provide a conclusive determination of whether the Theranos blood tests were accurate, and it could just as likely contain incriminating evidence to the contrary."

Holmes' defense team blames the government for failing to preserve the database after her defense lawyers turned it over. But prosecutors say Holmes purposefully frustrated the government's effort to access the database by providing a password, without a necessary private key.

At the time of the transfer of the database, an email from Holmes' attorneys included the password, but failed to mention that a private key would also be necessary for access, according to the judge's ruling.

Without the database, Holmes' attorneys argued, anecdotal evidence from customers and a report from the Centers for Medicare and Medicaid Services (CMS), a federal agency that oversees laboratory operations, is too prejudicial to her defense. The CMS report, issued in January 2016, alleged deficiencies identified during the agency’s inspection of Theranos laboratory in Newark, California.

Holmes is charged with wire fraud and conspiracy to commit wire fraud against Theranos' investors and patients. The wire fraud charges each carry a penalty of up to 20 years in prison.

In May, the court denied Holmes’ motion to exclude the anecdotal evidence, saying “[e]ach time a Theranos customer allegedly paid for an accurate and reliable blood test based on Holmes’s representations and did not receive such a test, that experience on its own is evidence of the fraud.”

Other pretrial motions are pending before the court, including requests filed by Holmes for the court to require extra precaution in selecting and questioning jurors. The filings — a proposed jury questionnaire and proposed jury instructions — point to the challenges Holmes’ lawyers face in empaneling a jury untainted by the flood of media coverage published on Holmes’ and Theranos’ downfall.

Jury selection for Holmes' trial is scheduled to begin Aug. 31. A separate trial for her co-defendant, Ramesh “Sunny” Balwani, is scheduled to begin in January 2022.

Alexis Keenan is a legal reporter for Yahoo Finance and former litigation attorney. Follow Alexis Keenan on Twitter @alexiskweed.

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