The trial of Elizabeth Holmes and Ramesh Balwani, two former executives at Theranos, has been underway for over a month. It is now on display with the revelation that Holmes had an office romance with Balwani, who was her boss and mentor.
Elizabeth Holmes’s Office Romance With Ramesh Balwani Now on Display in Court
In July 2015, Elizabeth Holmes received a text message from Ramesh “Sunny” Balwani, her senior deputy at Theranos Inc.
Mr. Balwani said, “I am sorry at where you and I are.” He also added, “U need me.”
Ms. Holmes responded, “It’s simply difficult to adapt.” “It was emotional at first, but I’m ready now.”
Few others realized it at the time, but Mr. Balwani was also her long-term live-in lover, according to prosecutors and Ms. Holmes’ attorneys. The text conversations indicate that the little-known connection was disintegrating just as the blood-testing company was starting to face the sort of scrutiny that would lead to its demise in 2018.
According to individuals acquainted with the situation, the couple split up in the months after that text conversation. Now, their sexual connection has taken center stage in Ms. Holmes’ criminal-fraud trial in the federal courtroom in San Jose, Calif., which lasted more than a decade, expanding and waning along with the growth and collapse of Theranos, as the texts reveal.
Evidence of the romantic connection may be useful to Ms. Holmes if she chooses to pursue a mental-health defense. Mr. Balwani allegedly assaulted Ms. Holmes mentally, emotionally, and sexually, leaving her under his control, according to her lawyers. Any accusations of abuse have been refuted by Mr. Balwani’s counsel.
Some of the private text conversations were presented aloud in court by prosecutors, possibly aiding their argument that Ms. Holmes ignored repeated warnings about incorrect blood-test results.
Andrey Spektor, a former federal prosecutor with the Eastern District of New York who isn’t involved in the case but has seen parts of the text conversations, said, “You do have some sort of evidence that she understood that not everything was well with the business.” “Those signals alone will not lead to a conviction, but when combined with everything else, it makes for a very compelling case.”
Outside federal court in San Jose, Calif., on Oct. 1, Elizabeth Holmes is pictured with her mother and boyfriend as she arrives for her fraud trial.
The Wall Street Journal’s Nick Otto took this photo.
After promising investors and patients that their blood-testing equipment could correctly and reliably screen for more than 200 ailments from a finger prick of blood, Ms. Holmes and Mr. Balwani were each charged with a dozen charges of wire fraud and conspiracy to conduct wire fraud. Prosecutors claim that the technology failed to perform as expected, and that Ms. Holmes and Mr. Balwani lied to seek more funding when they ran out of funds.
Both have entered not guilty pleas. Ms. Holmes’ trial started last month, and Mr. Balwani’s trial is set to start early next year.
Ms. Holmes’ and Mr. Balwani’s federal prosecutors and lawyers did not reply to requests for comment.
Hundreds of text conversations acquired by prosecutors and published into court documents, as well as newly unredacted court papers from prosecutors and Ms. Holmes’ defense, have revealed details about their connection. The court documents were released after the judge in the case decided in favor of Dow Jones & Co., the publisher of The Wall Street Journal, in a legal challenge.
According to defense lawyers, Mr. Balwani and Ms. Holmes met in 2002 on a language immersion trip to China, when she was 18 and he was 37. According to attorneys’ testimony in trial and court documents, they started dating shortly after Ms. Holmes dropped out of Stanford University in 2003 to work full-time on Theranos at Mr. Balwani’s suggestion, and she subsequently moved into Mr. Balwani’s home. Prosecutors said he joined Theranos in 2009 as president and chief operating officer, managing the company’s lab. Prosecutors claimed he had worked as a software developer and startup CEO and had no background in pathology or laboratory science.
In opening remarks, Assistant US Attorney Robert Leach stated the pair “managed Theranos as equals and made important choices in collaboration with each other as partners do.”
The text exchanges were made public between November 2013 and October 2015, when Ms. Holmes’ public prominence was rising and Theranos was partnering with Walgreens Boots Alliance Inc. to make its blood tests accessible to patients in California and Arizona. According to prosecutors’ interviews with board members, investors, and former staff, they provide a glimpse into a business partnership that helmed one of the most storied Silicon Valley startup failures and a romantic relationship that had been kept secret for years from Theranos investors, board members, and most employees.
From November 2013 through October 2015, the text exchanges between Elizabeth Holmes and Sunny Balwani were made public.
Their text conversations alternated between talks about software testing and recruiting new customer service workers, as well as heart-eyed emoticons and nicknames for each other—she referred to him as “tiger” and “my king.”
According to prosecutors’ interview with the assistant, Paige Williams, who was entered into the court record, on Valentine’s Day in 2016, Ms. Holmes and Mr. Balwani each requested a personal assistant at the business to buy flowers for the other as a surprise. Mr. Balwani assigned the same assistant the duty of purchasing flowers for Ms. Holmes’ birthday and anniversary.
Ms. Holmes informed Mr. Balwani in a text message in December 2014 that they were planned a future together and that Theranos would be their legacy: “And for our kids never forget who we are,” she said.
Prosecutors claim Mr. Balwani and Ms. Holmes hid their connection from business board members and investors. According to prosecutors’ interviews with former workers, those who were aware of the situation were told not to speak about it.
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When two senior executive officers are dating, there’s a higher chance that one of them may make choices that aren’t in the best interests of the business or shareholders, but are advantageous to their significant other, according to Adam J. Epstein, a startup CEO and board advisor.
Mr. Epstein said, “Any rational investor would wish to know that information.”
Mr. Balwani’s text conversations were critical of Theranos’ flaws at times, and he urged that they be fixed.
In April 2015, he messaged Ms. Holmes, saying, “We need FDA clearance.” He was referring to the Food and Drug Administration, which would supervise regulatory approval of the company’s trademark “nanotainers” for collecting finger-pricked blood. In a second communication, he described the business lab as a “disaster zone.”
He rebuked Ms. Holmes’ frequent media appearances, claiming that the business lacked “real substance.” Ms. Holmes replied that the public attention was assisting Theranos in gaining more revenue.
He also warned her against claiming that all of Theranos’ patented blood tests are done with a finger prick of blood. According to court evidence, Theranos used the conventional needle-in-the-arm technique for many of its testing.
Mr. Balwani texted Ms. Holmes in April 2015, saying, “Reminder. “I need to close a deal on a Cleveland clinic.”
The arrangement relates to a contract in which Cleveland Clinic, a medical institution in Ohio, would test Theranos’ gadgets in order to scientifically verify the technology and then transmit the findings to Theranos for publication. The deal was essentially terminated when the firm failed to deliver its equipment to Cleveland Clinic.
According to a court filing by prosecutors, this constituted a warning signal for at least one investor, investment banker Byron Trott, who chose not to support Theranos in part because the company had failed to follow through with Cleveland Clinic. Requests for comment from Mr. Trott went unanswered.
As the long-awaited trial of Theranos founder and former CEO Elizabeth Holmes begins, the Wall Street Journal looks back at the scandal’s major turning points and talks to legal writer Sara Randazzo about what to anticipate in the fraud trial. Adele Morgan/WSJ photo illustration
It’s possible that Mr. Balwani’s harsh comments are personal. In June 2015, he informed her, “We are sluggish, unorganized, and not focused,” not just at work, but also “in the context of u and me.”
“What makes you say lazy?” Ms. Holmes inquires.
Other times, she was reassuring, responding to Mr. Balwani’s messages regarding the company’s difficulties with “Agree” or “Exactly.” Other texts revealed her concern about Theranos’ problems: in September 2015, when the FDA paid a surprise inspection visit to Theranos’ lab, she texted Mr. Balwani, “Praying absolutely non stop.”
The text exchanges reveal a pair who often blamed others—often their subordinates—for Theranos’ problems.
In November 2014, Ms. Holmes texted Mr. Balwani, referring to Theranos employees, saying, “This is where our issues are.” Several months later, Mr. Balwani said of workers, “Most disheartening how terrible these guys are.”
Mr. Balwani messaged Ms. Holmes several months later, in July 2015, saying, “We need to commit to one other and move out of this misery so we may live in paradise.”
Ms. Holmes said, “I commit.” “Completely.”
Theranos claimed that their blood-testing technology could correctly and consistently diagnose more than 200 diseases with a single finger prick of blood.
The United States Attorney’s Office for the Northern District of California provided this image.
Mr. Balwani suddenly departed Theranos in 2016, as the firm faced regulatory fines and a federal criminal investigation. Ms. Holmes’ associates said at the time that she dismissed him after the labs he supervised failed a crucial inspection. According to court records filed by the defense, she went on to blame him for any lies the company may have told about its blood-testing technology.
The defense claims that Ms. Holmes thought she was speaking the truth about Theranos because she depended on Mr. Balwani for accurate information about the company’s operations and trusted what he said.
Prosecutors claim that Ms. Holmes’ possible mental-health defense in relation to Mr. Balwani’s alleged abuse contradicts her comments to the Securities and Exchange Commission in 2017. Ms. Holmes characterized Mr. Balwani as a subordinate in her evidence, and she said that their personal connection had waned years ago as their attention moved to the company they operated together.
Ms. Holmes subsequently reached an agreement with the Securities and Exchange Commission (SEC) without admitting or denying wrongdoing.
People close to Ms. Holmes said Mr. Balwani was usually respectful to Ms. Holmes in public and that Ms. Holmes seemed to have complete control over business decisions.
—This article was co-written by Sara Randazzo and Christopher Weaver.
Heather Somerville can be reached at [email protected]
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Elizabeth Holmes’s office romance with Ramesh Balwani has now been displayed in court. The former CEO of Theranos is at the center of a lawsuit involving fraud and conspiracy allegations. Reference: ramesh balwani wife.
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