It’s no surprise that Elizabeth Holmes’ co-defendant and former boyfriend, Ramesh “Sunny” Balwani, came out swinging against her Tuesday in opening statements to his criminal fraud trial, defense lawyers say.
The description of Balwani's role countered that of prosecutors, who characterized the defendant as Holmes' partner in crime. Balwani, 56, faces a dozen fraud and conspiracy charges tied to his role as president and chief operating officer of Holmes’ defunct blood testing company, Theranos.
His trial, now unfolding in the same San Jose, California courtroom where a jury convicted Holmes on four fraud counts, in January, brings one of Silicon Valley’s most high-profile cases closer to resolution.
White collar criminal defense experts say Balwani is somewhat disadvantaged by facing a trial after Holmes, who testified that he abused her and influenced her behavior at Theranos.
“The defense in this case starts at a deficit. It must overcome both the publicity surrounding Holmes’ conviction, and also Holmes’ own statements against Balwani,” Gregory Gilchrist, professor of Law at University of Toledo College of Law, told Yahoo Finance.
White collar criminal defense experts say that Balwani’s strategy is somewhat predictable, in part because a case against multiple defendants opens the door to finger pointing as to who's responsible for Theranos' false claims that it could conduct numerous diagnostics tests from a finger prick of blood.
“It allows Balwani to escape some culpability, and allows him to point the finger at her in making the final decisions as to the representations to the public, or the investors, or to patients,” says Michael Weinstein, a former U.S. prosecutor who chairs Cole Schotz’s white collar defense and investigations department.
Balwani’s counsel wisely framed a distinction between Holmes as Theranos’ sole founder, and Balwani as a subordinate who joined five years after its founding, according to Kyle Clark, a criminal defense attorney for Baker Botts. Unlike Holmes, Clark pointed out, Balwani invested millions in Theranos that he lost after the company's implosion. Balwani extended the company a $12 million line of credit before leaving the company in 2016 after seven years.
“I think Balwani will emphasize that he put his own money at risk and ultimately lost some of it when Theranos ceased operations — that he is an investor who lost money too,” Clark said.
While Balwani does have the advantage of that distinction, Gilchrist noted that the testimony and evidence in Holmes' case pigeon-holes Balwani in certain ways.
“Ultimately, Balwani is entitled to his own trial and independent consideration," Gilchrist said. "But everyone in the courtroom knows that this ideal and the reality of Holmes' recent high-profile conviction are in tension.”
Balwani, who made millions as an executive during the dot com boom, started dating Holmes soon after she dropped out of Stanford University at the age of 19. Holmes testified in her own defense, describing Balwani, 19 years her senior, as a physically and mentally abusive romantic partner whose controlling demands behind the scenes impacted her decisions.
“I think a jury is going to instinctively have a problem with the age difference, and his experience in the industry,” Weinstein said. “So they may have a higher expectation from him as to how to carry himself throughout the business.”
Theranos raised nearly $1 billion from investors before collapsing in the wake of a bombshell 2015 Wall Street Journal report revealing it was not, in fact, conducting the array of blood tests from a finger prick of blood, as Holmes promoted. Balwani was indicted in 2018 on 12 separate felony counts of wire fraud and conspiracy to commit wire fraud — each carrying a maximum penalty of 20 years in prison.
Homes' jury returned guilty verdicts on four of 11 charges brought against her, and she's set to be sentenced on Sept. 26.
Alexis Keenan is a legal reporter for Yahoo Finance. Follow Alexis on Twitter @alexiskweed.