The Elizabeth Holmes trial was always really known as the Theranos Trial. While Holmes was the protagonist, it was a made-for-Hollywood drama full of intrigue and deeply flawed characters. Now, almost three months after the founder/CEO was found guilty of four counts of wire fraud and conspiracy, we are about to go at it all again with the person who may have been making the lion’s share of the daily operational decisions at Theranos.
While the guilty verdict in the Holmes trial does not have any direct legal bearing on the fraud and conspiracy charges facing Ramesh “Sunny” Balwani, the most important strategic differentiator in this case is that prosecutors are essentially getting a second chance to prove an almost identical fact set. As I recently commented on NBC News, the Elizabeth Holmes trial was the Theranos Trial Part One and the Balwani piece will be the Theranos Trial Part Two.
Just like an NFL team, the prosecution has been going over game tape of the Elizabeth Holmes trial to learn from what they did exceedingly well, reasonably competently, and - if they are being completely honest with themselves - not well at all.
An interesting and necessary pivot will be that prosecutors spent the Elizabeth Holmes trial trying to prove that she acted alone. Now many of the same facts need to be repurposed and repackaged to tell a different sorry - that Mr. Balwani may have been the deeply manipulative person that Holmes often suggested he was.
Balwani also has to deal with the optics of having been 37 years old when he met 18-year-old Elizabeth Holmes and started a sexual relationship soon thereafter. While perhaps not legally significant to the facts of the case, these are horrible optics for the defense as Balwani faces a jury. Any and all arguments that he had no decision-making power around the novice Holmes may be taken by a jury with a pillar of salt.
There is also an important jury selection issue at play here. While it was impossible to find a true jury of Elizabeth Holmes’ peers, given her background and life experiences, it will be equally challenging to find a jury that can relate to Balwani. Design or system flaw, the reality is that both defendants will have been judged by a jury of people who can never understand them or what their lives were like in building what was tracking to be a multi-billion dollar business.
While Balwani simply doesn’t have the star power that Elizabeth Holmes does - which means that his trial isn’t expected to be in news headlines every single day - from a legal perspective his trial may be even more interesting. How much blame a jury will attribute to someone who wasn’t in the CEO role at Theranos but was a far more experienced leader, administrator, and entrepreneur is going to be very interesting to watch.
At its core, the totality of both Theranos trials will always be about technology. There is the potential for the collective result of the Holmes and Balwani trials to become fodder for regulators seeking to change the legalities around venture capital and how startup investments can be done.
Two key themes emerge from these trials that could spark how legislators envision this space: the need for startup founders to be far more transparent about the actual progress and prospects of their nascent business and the need for investors to do infinitely better and more ongoing due diligence on companies in which they choose to invest.
No matter the result of the Balwani half of the trial, l’affaire Theranos is already emblazoned in the American tech industry imagination, as much cautionary tale as a post-modern interpretation of the American Dream gone bad.