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 Holmes’ Top 3 Defenses 

Michael Santos

Michael Santos

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Elizabeth Holmes pleads not guilty and goes to trial; she could not form fraudulent intent while suffering from PTSD and mental illness.

HOLMES’ TOP 3 DEFENSES

Elizabeth Holmes’ legal team vows to mount an aggressive defense at trial. Opening statements begin next week. 

The defense strategy centers on three main arguments so far: 

  • Holmes suffered PTSD and other mental health issues stemming from codefendant Sunny Balwani’s abusive conduct during the time of the alleged fraud. (Balwani categorically denies all allegations of abuse.)
  • In Silicon Valley’s tech startup culture, aggressive marketing to raise capital is the norm. 
  • Missing data unavailable for trial would help corroborate Holmes’ story.  

Click here to read Part 1 in our Silicon Valley Fraud Trial blog series: THE BASICS

PTSD & Mental Health Issues

Holmes’ primary defense centers around the psychological, emotional, and sexual abuse Holmes alleges she suffered at the hands of her codefendant and former romantic partner, Sunny Balwani. 

Balwani vehemently denies all allegations of abuse or violence towards Holmes.

According to legal filings, Holmes has post-traumatic stress disorder (PTSD), depression, and anxiety due to her relationship with Balwani. Specifically, Holmes’ team plans to introduce evidence at trial that:

  • Balwani “verbally disparaged her and withdrew affection if she displeased him, controlled what she ate, how she dressed, how much money she could spend, who she could interact with — essentially dominating her and erasing her capacity to make decisions;” and that 
  • Balwani engaged in abusive conduct, including “monitoring her calls, text messages and emails; physical violence, such as throwing hard, sharp objects at her; restricting her sleep; monitoring her movements, and insisting that any success she had was because of him.”

In essence, the defense argues that Holmes could not form the fraudulent intent needed to prove her guilt while suffering from abuse and trauma at the hands of her codefendant Balwani.

Legal observers call this the Svengali defense. Svengali refers to an evil person who dominates, manipulates, and controls another. In criminal law, the Svengali defense portrays the criminal defendant as a pawn in the hands of a more influential and persuasive criminal mastermind. Holmes will try to convince the jury that Balwani, who will not be present during Holmes’ trial, was her “Svengali.” 

To substantiate her PTSD and mental health claims, Holmes’ lawyers are likely to call an expert to testify. One expert working with Holmes’ legal team is a psychologist who focuses on intimate partner violence. 

PTSD has formed the basis for certain criminal defenses and can also be helpful in the context of sentencing mitigation strategies. Courts have recognized testimony about PTSD as scientifically reliable and therefore allowed as expert testimony. 

*Pro-Tip: PTSD and other mental health issues can form part of a comprehensive sentencing mitigation plan. At Prison Professors, our team works alongside our client’s legal counsel to develop sentencing mitigation plans to achieve better outcomes. 

An equally critical question is whether the defense can establish these accusations without the testimony of Holmes herself. The question may be moot since her lawyers already suggest that Holmes will testify.

For any criminal defendant, testifying in her defense is not an easy decision. It is a cornerstone of our criminal justice system that a defendant, protected by the Fifth Amendment of the US Constitution, does not have to take the stand. Should Holmes take the stand at her trial, prosecutors will use her past statements to discredit her. For example, when questioned under oath about many of the events surrounding Theranos’ alleged fraud during an SEC investigation in 2017, Holmes responded 600 times, stating, “I don’t know.” That alone could prove very damaging in front of the jury. As the leading face of Theranos, Holmes is on the record with many public statements that prosecutors can use to undermine her credibility.

Regardless, Holmes’ legal team recently indicated Holmes herself would tell the story of Balwani’s manipulation and abuse, to such a degree that she did not have the state of mind needed to form criminal intent to commit fraud. The confident and charismatic CEO everyone saw on TV was just a facade. Instead, Balwani dominated her, a much younger, less experienced woman.

Blaming Balwani is not without risk. To blame him, Holmes would have to admit her wrongful conduct. Also, jurors may have a hard time accepting Holmes as clueless and naive while at the same time hearing that she was a high-powered self-made billionaire CEO. 

In Silicon Valley, Aggressive Marketing is Not Fraud

Holmes’ legal team previewed another overarching defense to the fraud charges: everybody markets aggressively in Silicon Valley; that is not fraud, it’s the norm. All tech startups exaggerate their technology to raise money in Silicon Valley. Marketing puffery and aggressive salesmanship is not a fraud. Experienced investors know this and could not have been duped.  

Missing Data Would Exonerate Holmes

To what extent did Theranos produce inaccurate lab results for patients? 

Reports show that Theranos had to withdraw or correct over one million test results. Prosecutors plan to introduce this evidence at trial and testimony from about a dozen patients who received some of those incorrect lab results. 

For example, one patient’s Theranos lab result falsely indicated that she had AIDS. Another patient’s Theranos lab result falsely showed that she was having a miscarriage. She was fine and carried her baby to term. 

On the other hand, Holmes’ legal team argues that the Judge should exclude patient testimony about inaccurate lab results from the trial. The patients’ testimony is anecdotal and could be prejudicial. All laboratories produce some errors; the government cherry-picked a few unlucky patients to create the impression that a large portion of Theranos’ testing data was faulty. 

To draw firm conclusions about Theranos’ testing data and the overall accuracy of Theranos’ lab results and draw firm conclusions would require analysis of all the Theranos’ testing data. To consider the lab results data fairly, the jury should have access to the complete picture, including what caused any incorrect results.

The complete set of lab results is missing, hampering Holmes’ ability to counter the government’s claims. Expect the fight over the missing data and its impact on the jury to continue to play out at trial. 

CONCLUSION

Most defense strategies in federal criminal trials are long-shots. Statistically, the odds are overwhelmingly in the government’s favor. About 90 percent of federal criminal cases reportedly end in guilty pleas. Criminal defendants only win acquittal after a trial in about 1 percent of cases.  

When it comes to wire fraud, the government wins the vast majority of the time. Reports show that in 2019, for example, 597 defendants pleaded guilty to wire fraud, out of 645. Twenty-eight reportedly lost after a trial. Only two wire fraud defendants who took their cases to trial won an acquittal.

With such overwhelming odds, the Holmes trial team has its hands full. Right now, the defense strategy centers on Holmes’ PTSD and other mental health issues from Balwani’s years of abuse (which Balwani adamantly denies). The defense also argues that Theranos’ aggressive marketing is not fraud, and that the missing testing data would support Holmes’ story.

Whether or not Holmes’ defenses serve to acquit her on the merits at trial, PTSD and mental health issues can form part of a comprehensive sentencing mitigation plan. At Prison Professors, our team works alongside our client’s legal counsel to develop sentencing mitigation plans to achieve better outcomes.

Follow the Prison Professors blog for regular updates on Holmes’ Silicon Valley fraud trial.

Prison Professors, an Earning Freedom company, works alongside (not in place of) civil and criminal defense counsel to help clients proactively navigate through investigations and prosecutions. Our team also helps clients prepare mitigation and compliance strategies.

If you have any questions or are uncertain about any of the issues discussed in this post, schedule a call with our risk mitigation team to receive additional guidance.

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