Theranos founder and former CEO Elizabeth Holmes.Photo: Jeff Chiu (AP)
The fraud case against the ex-management of crooked blood-testing startup Theranos, former CEO Elizabeth Holmes and former President Ramesh “Sunny” Balwani, is just one component of a larger investigation into the company, Bloomberg reported on Friday.
Theranos claimed to have developed a miraculous line of blood-testing machines capable of running complicated tests on the amount of blood obtained by a single finger prick—a claim that, if true, would have revolutionized medical testing. It was not true. Despite raising around $900 million and achieving a $10 billion valuation, the tech never worked and the blood tests the company did run were so poorly performed the Centers for Medicare and Medicaid Services concluded it put patients at risk. A Securities and Exchange Commission civil fraud case and rounds of eviscerating layoffs later, a federal grand jury indicted Holmes and Balwani on wire fraud charges.
According to Bloomberg, during a hearing on Friday, Justice Department prosecutors working on the criminal trial won a ruling allowing them to search through over 200,000 company documents (barring those lawyers from both sides agree are protected). Bloomberg wrote that both the U.S. district court judge at work in the case and prosecutors alluded to Theranos and Balwani’s case as just one phase of a larger criminal investigation:
U.S. Magistrate Judge Susan van Keulen rejected Holmes’s and Balwani’s request after the hearing. In her order, she also referenced undisclosed “charges and activities” in the government’s broad, ongoing investigation that may extend beyond the former Theranos executives.
The ruling could give prosecutors additional leverage at trial or in any plea deal, including any potential agreement by one defendant of the former couple to aid the prosecution of the other. Assistant U.S. Attorney John C. Bostic defended the government’s request for the Theranos documents, describing the June indictment of Holmes and Balwani as “just an event in the ongoing investigation,” rather than the culmination of the probe.
“This story is bigger than what’s captured in the indictment,” Bostic said. According to Bloomberg, he continued that the current trial “doesn’t capture all the criminal conduct” prosecutors have so far discovered. In her court order, van Keulen also wrote that the investigation “concerning Theranos is far-reaching, extends beyond the subject matter of the current indictments, and may extend beyond these defendants.”
The Theranos documents in question include “contracts with dozens of companies and institutions,” Bloomberg wrote. A lawyer for the defense characterized the document request as an abuse of investigative powers, but ultimately did not sway van Keulen.
Last month, Theranos notified its shareholders that the company would be dissolved and all remaining assets liquidated in order to pay back remaining unsecured creditors. But while the company basically only exists on paper at this point and soon may not exist at all, it looks an awful lot like prosecutors aren’t done with it yet.
[Bloomberg]
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