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Ramesh ‘Sunny’ Balwani, Chief Operating Officer of blood testing company Theranos, has been found guilty by a federal jury in the United States on all counts related to a multimillion-dollar fraud scheme at the company founded by his former girlfriend Elizabeth Holmes, once touted as Silicon Valley’s rising star.
On Thursday, a federal jury in San Jose found Pakistan-born Mr Balwani, 57, guilty of two charges of conspiracy and ten counts of wire fraud in connection with a multimillion-dollar scheme to deceive investors and patients in conjunction with Theranos operations. In a statement, United States Attorney Stephanie Hinds and Federal Bureau of Investigation (FBI) Special Agent in Charge Sean Ragan announced
The decision was rendered on Thursday following a trial that began in March of this year before United States District Judge Edward J Davila and ended little over 6 months after a jury found Holmes guilty of one count of conspiracy and three counts of wire fraud in related proceedings.
Mr Balwani is still out on bond pending further proceedings. Balwani’s sentencing hearing has been scheduled for November 15, 2022, at which time he faces a maximum sentence of 20 years in prison and a fine of USD 250,000, plus restitution, for each count of conspiracy and wire fraud.
From September 2009 to July 2016, he worked at the Palo Alto-based blood-testing startup started in 2003 by Holmes, 38.
Mr Balwani worked for Theranos in a variety of capacities, including member of the company’s board of directors, president, and chief operating officer.
The government presented evidence at trial that Mr Balwani conspired to commit wire fraud against investors between 2010 and 2015, conspired to commit wire fraud against patients who paid for Theranos’ blood testing services between 2013 and 2016, and committed wire fraud against both investors and patients while at Theranos.
According to the statement, the government provided evidence on conspiracy allegations relating Mr Balwani’s claims that Theranos produced a revolutionary and patented analyzer known as the TSPU, Edison, or minilab.
Mr Balwani and Holmes said the analyzer could perform a full range of clinical tests using little blood samples taken from a finger poke. They further claimed that the analyzer could give more accurate and dependable results than traditional methods – all at a faster rate than was previously achievable.
The government proved at trial that Holmes and Mr Balwani were aware that many of their claims regarding the analyzer were incorrect, but colluded to persuade potential investors and patients that the claims were accurate.
Holmes, Mr Balwani, and others were aware that the analyzer had accuracy and reliability issues, conducted a limited number of tests, was slower than other competing devices, and, in certain ways, could not compete with existing, more conventional machines.
Similarly, on substantive fraud charges, evidence showed Mr Balwani used advertisements and solicitations to encourage and induce patients to use Theranos’s blood testing laboratory services, despite knowing Theranos was incapable of consistently producing accurate and reliable results for certain blood tests.
According to the statement, evidence showed that Mr Balwani represented to investors that Theranos would produce over $100 million in sales and break even in 2014, and that Theranos projected to generate about $1 billion in revenue in 2015.
However, Theranos resorted to using traditional machines purchased from third parties to perform majority of Theranos’s blood testing, and Mr Balwani was well aware that the company would produce only nil or moderate profits in 2014 and 2015.
Mr Balwani misled potential investors about Theranos’ financial position and future possibilities, according to the trial testimony.
The evidence established that Mr Balwani misrepresented to investors that Theranos would significantly increase the number of Wellness Centers within Walgreens stores, despite the fact that Theranos’ retail Walgreens expansion had halted due to a variety of difficulties.
A superseding indictment was returned by a federal grand jury in July 2020, charging Mr Balwani with two counts of conspiracy to commit wire fraud and ten counts of wire fraud.
Mr Balwani, like Holmes, was charged with conspiring to commit wire fraud against Theranos investors from 2010 to 2015, conspiring to commit wire fraud against patients who paid for Theranos’ blood testing services from 2013 to 2016, and ten counts of wire fraud.
Six of the wire fraud counts concerned fraud against Theranos investors, while the remaining four featured wire fraud against patients who paid for Theranos’ blood testing services and advertising purchased by Theranos to attract those patients. Mr Balwani was found guilty on all counts in the judgments issued on Thursday.
On January 3, 2022, a different jury convicted Holmes of the investor-related conspiracy count as well as three charges of wire fraud in a separate trial.
The jury acquitted Holmes on the patient-related conspiracy wire fraud count as well as three other wire fraud counts; also, one count of wire fraud involving a Theranos patient was dismissed during Holmes’ trial.
In her trial, the jury was unable to achieve a unanimous decision on three charges of investor fraud. Judge Davila set Holmes’ sentencing for September 26, 2022.
According to Ragan, the jury concluded that Theranos’ deceit amounted to a “criminal conspiracy.”
“The FBI has spent years investigating this investment fraud enterprise…
“Lies, deception, and criminal conduct cannot substitute creativity and accomplishment,” said FBI Special Agent in Charge Ragan.
