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A federal jury in California said it was struggling to reach a unanimous verdict on three of 11 charges against Elizabeth Holmes. U.S. District Judge Edward Davila instructed the jurors to continue deliberating.
Holmes is accused of defrauding the investors and patients of Theranos, the start-up that she promised would revolutionize the blood-testing industry. Prosecutors charged her with 11 counts of wire fraud and conspiracy, each potentially carrying a 20-year sentence. Which three charges the jury is deadlocked on wasn’t disclosed.
Judge Davila issued an Allen charge, which is generally intended to encourage jurors in the minority to reconsider their stance, The Wall Street Journal and other media outlets reported. The judge told the jury to take as much time as needed, emphasizing that there is no hurry.
The case is one of the most widely followed white-collar criminal trials in recent history. Interest was stoked by the 2018 best-seller Bad Blood by former Wall Street Journal reporter John Carreyrou, whose articles a few years earlier first raised doubts about the claims Holmes made about Theranos technology.
Holmes captured the public’s imagination with her story of dropping out of Stanford University at the age of 19 in 2003 to start the company that became Theranos. She said her company would be able to cheaply perform a battery of standard blood tests, using just a finger prick of blood instead of the usual test-tube full. She filled the Theranos board with luminaries, including former Secretaries of State George P. Schultz and Henry Kissinger, who lacked medical expertise.
Theranos stock never made it to the public markets. But by 2014, Holmes’s start-up had raised over $700 million from venture capitalists and private investors to reach a private market valuation of $10 billion.
Walgreen
s locations in the
Walgreens Boots Alliance
(ticker: WBA) chain took customer blood samples for Theranos processing, and the grocer Safeway spent $350 million outfitting locations for in-store blood tests.
But in early 2015, professors at Stanford and the University of Toronto expressed concern about Theranos’ technology claims. In October 2015, Carreyrou reported in The Wall Street Journal that Theranos wasn’t processing blood tests with its own Edison machines, but instead used conventional commercial test systems. Even so, Carreyrou reported that Theranos results might be unreliable. Holmes tried to stop Carreyrou, appealing to one of the company’s investors, Rupert Murdoch, whose
News Corp
(NWSA) owns Dow Jones, the publisher of both the Journal and Barron’s. Murdoch declined to intervene.
After the Journal articles, Theranos was investigated by state and federal healthcare regulators. In 2016, Walgreens suspended use of Theranos blood tests. By January 2017, Theranos had discontinued lab operations. The firm shut down in September 2018.
In March 2018, Holmes, Theranos and the company’s former president, Ramesh Balwani, were charged with fraud by the Securities and Exchange Commission. Without admitting the SEC’s civil charges, Holmes settled—forfeiting Theranos stock and agreeing to a bar from serving as an officer or director in a public company. Balwani is contesting the allegations.
Holmes and Balwani were indicted by a Silicon Valley-based federal grand jury in June 2018, on wire fraud and conspiracy charges. They each pleaded not guilty and separate trials were set. Balwani’s trial begins in January.
The Holmes trial started in August in the San Jose, Calif., courtroom of U.S. District Judge Edward Davila. In the first 11 weeks of testimony, prosecutors presented testimony by former employees who said their warnings were rebuffed, investors who said they were duped, and patients who said they were frightened by false reports of health problems indicated by Theranos tests.
Holmes took the stand for seven days in her own defense. She denied any intent to defraud Theranos customers and investors, saying reports from subordinates led her to believe that parts of Theranos technology worked. Holmes testified she had been raped while a student at Stanford and testified that she later suffered emotional and sexual abuse by Balwani—allegations that Balwani has denied.
Write to Bill Alpert at william.alpert@barrons.com and Connor Smith at connor.smith@barrons.com
Read More: Jury Reports Deadlock on Some Charges in Theranos Trial