Another Theranos Trial Begins, This Time Without the Fanfare

SAN JOSE, Calif. — A small group with cameras milled around on the sidewalk. Inside, a smattering of reporters stared into their phones. And when the defendant walked in, flanked by lawyers, barely anyone noticed.

So began the federal trial on Tuesday of Ramesh Balwani, the tech executive who is accused of defrauding patients and investors about Theranos, the blood testing start-up he helped build. Mr. Balwani, who goes by Sunny, has pleaded not guilty to a dozen charges of wire fraud and conspiracy to commit wire fraud.

The sparse crowd and quiet atmosphere at U.S. District Court in San Jose, Calif., felt nothing like the circus frenzy that engulfed the same sidewalk months earlier when his alleged co-conspirator and former girlfriend, Elizabeth Holmes, stood trial on the same charges.

Mr. Balwani’s lawyer started his opening statement by deflecting blame onto Ms. Holmes, who was the chief executive of Theranos.

“Sunny Balwani did not start Theranos,” said the lawyer, Steve Cazares, from the Orrick firm. “He did not control Theranos.”

Ms. Holmes’s fame and then notoriety made her trial a media spectacle — the story of her rise and fall has been chronicled in podcasts, a book, a documentary and a Hulu series — as well as a parable of Silicon Valley hype and hubris. For months, spectators, journalists and obsessive true-crime fans lined up before dawn to witness her comeuppance.

In January, a federal jury convicted Ms. Holmes on four counts, making her the rare start-up founder found guilty of fraud. She is scheduled to be sentenced in September. Out on bail, Ms. Holmes, 38, has been living on an estate in Woodside, Calif., with her partner, Billy Evans, and newborn son.

Over the next 13 weeks or so, jurors will decide whether Mr. Balwani, 57, is guilty of the same charges. He did not bask in the warm glow of media accolades that catapulted Ms. Holmes into Silicon Valley’s most elite circles. But evidence in her trial showed that the pair, who dated for over a decade, worked closely on nearly every aspect of Theranos’s technology and business dealings.

Taking the stand in her defense, Ms. Holmes blamed Theranos’s problems and many of her own mistakes on Mr. Balwani, who was the start-up’s president and chief operating officer. She claimed that he had controlled every aspect of her life, including her work. She even accused Mr. Balwani of emotionally and sexually abusing her, an accusation he has denied.

At the heart of his trial is whether the government can prove that Mr. Balwani intended to defraud patients and investors with false claims about Theranos’s technology and business. The company raised nearly $1 billion from investors on the promise that its blood-testing devices would revolutionize health care.

But prosecutors say that even as the company struck deals with retailers including Walgreens, conducted thousands of tests on patients and hyped up its abilities in the press, Ms. Holmes and Mr. Balwani knew the technology did not work.

On Tuesday, the courtroom atmosphere was muted. With only two dozen members of the public — mostly journalists — to spread out on the wooden benches, there was no need for the extra row of chairs, overflow room or ticketing system that governed who secured a spot in Ms. Holmes’s trial. Mr. Balwani’s two brothers sat quietly at the end of a bench reserved for the defense. Both declined to comment.

In opening statements, prosecutors tried to tie Mr. Balwani’s actions directly to Ms. Holmes and to the deceptions at Theranos. Despite his lack of background in science and medicine, Mr. Balwani was put in charge of Theranos’s laboratory.

He also led Theranos’s relationship with Walgreens and oversaw the wildly overblown financial projections that Theranos gave investors, at one point claiming the company would make $1 billion in revenue in a year when its income was negligible.

“They were partners in everything, including their crimes,” said Robert Leach, an assistant U.S. attorney and a lead attorney for the prosecution.

Mr. Balwani met Ms. Holmes in a language immersion program in China the summer before her freshman year at Stanford University. Their romantic relationship, which they hid from investors and employees, led him to join Theranos in 2009. As Theranos found success, they bought a home together in Atherton, Calif.

In hearings before the trial, lawyers from both sides agreed to refrain from discussing Ms. Holmes’s abuse allegations, deeming them prejudicial to the jury.

Another wrinkle in getting started? Finding jurors who had somehow missed the wall-to-wall coverage of Ms. Holmes’s trial. Over four days, lawyers questioned more than 100 potential jurors, dismissing many who said they were biased after consuming content about Theranos, before selecting a panel of 12, plus six alternates. One juror has already been replaced by an alternate after reporting symptoms of Covid-19.

In opening statements before Judge Edward J. Davila, prosecutors indicated that they would rely on many of the same witnesses who testified at Ms. Holmes’s trial, including whistle-blowers from the company, business partners, investors and patients. (The first, called on Tuesday, was Erika Cheung, a whistle-blower who was also an early witness in Ms. Holmes’s case.)

Mr. Leach outlined several areas of alleged fraud that mirrored the government’s arguments in Ms. Holmes’s trial, including the abilities of Theranos’s blood-testing device, its financial statements, and its relationships with pharmaceutical companies, retail outlets and the military.

Mr. Balwani’s lawyers veered from the playbook of Ms. Holmes’s defense. In his opening statement, Mr. Cazares argued that individual patient testimony and test results were insignificant without considering all of Theranos’s patient data, which had been in an encrypted database of nine million patient test results.

Theranos provided a copy of the database to federal prosecutors in 2018, after a grand jury subpoena, but the government was never given the encrypted key needed for access to the information. Theranos destroyed the database that same year.

Mr. Cazares argued that the government had neglected to analyze that data. His opening statement was likely to be opening the door to a broader argument over who was at fault for the loss of the database.

“Sometimes a small door can open to a wide pasture,” Judge Davila said.