White Collar Crime

Blood-testing company Theranos CEO Holmes and company president indicted

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Elizabeth Holmes/Krista Kennell (Shutterstock.com).

Elizabeth Holmes, the CEO and founder of blood-testing company Theranos, was indicted Friday on wire fraud charges.

Also indicted was Ramesh “Sunny” Balwani, a Theranos employee who had worked as the company’s president and chief operating officer, report the Recorder, the Washington Post, the Huffington Post and the Wall Street Journal. A press release is here.

Prosecutors had alleged Holmes and Balwani knew the company’s proprietary blood analyzer couldn’t consistently produce accurate and reliable results for certain blood tests, yet they claimed it was more accurate, reliable and faster than traditional testing methods. The indictment claims the duo misled doctors and investors, as well as patients who purchased the blood tests at Walgreens.

Holmes and Balwani are charged with two counts of conspiracy to commit wire fraud and nine counts of wire fraud.

In March, Holmes settled civil fraud charges filed by the Securities and Exchange Commission. She did not admit wrongdoing. The SEC had claimed Holmes raised more than $700 million from investitors “through an elaborate, years-long fraud” by making false statements about Theranos’ technology and finances. The SEC also accused Balwani of misleading investors.

Balwani’s lawyer, Jeffrey Coopersmith of Davis Wright Tremaine, released a statement saying Balwani did not commit fraud.

“All Mr. Balwani did was put his heart and soul, and millions of dollars of his money, toward changing the face of health care by giving people access to cost-effective blood tests so they could take charge of their own health and monitor changes for signs of disease,” the statement said.

The reports that Theranos is “on the verge of liquidation” and Holmes has told investors that a private equity firm that loaned Theranos $65 million is likely to seize the company. Holmes stepped down as CEO on Friday. David Taylor, the company’s general counsel, will serve as CEO, the Post reports.

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