Ramesh “Sunny” Balwani, former right-hand man to fallen Silicon Valley entrepreneur Elizabeth Homes, is facing fraud allegations almost identical to those that led to Holmes’ four guilty verdicts in January.
Criminal defense experts believe, however, that the couple’s legal strategies differ significantly. A key reason is that the Balwani case is being advanced with the jury testimony and verdicts already recorded in the Holmes case.
And while both sides can gain or lose advantages from the scenario, it represents a balancing act for Balwani’s defense to avoid being pushed into a more vulnerable position.
“Balwani has the benefit of taking all testimony,” white collar crime attorney Benjamin Gluck told Yahoo Finance. “It has exactly the same disadvantage.”Gluck explained that the defendant’s advantage is that he knows much of what witnesses would say on the stand. Balwani has that luxury because most of the witnesses who are supposed to testify against him have already testified against Holmes.
But it can be a double-edged sword, Gluck argued, since Holmes’ trial now serves as a kind of dress rehearsal for these witnesses.
“It becomes more difficult to shake witnesses who have already withstood cross-examination and have been ‘claimed’ by a conviction,” the lawyer said.
Does Holmes take a stand?
According to George Demos, a former SEC attorney and associate professor at the University of California-Davis School of Law, the permanent trial cuts both ways after the trial of a co-defendant.
In the Balwani case, however, he expects an advantage from the government. His defense team has the ability to dig holes in the testimony of any witness, but the government is likely to narrow its witness list at best, Demos suggested.
“The government will undoubtedly simplify their account and focus on the witnesses who were most convincing in the first trial,” the professor said.
One influential witness who no doubt impressed the jury during the Holmes trial was Elizabeth Holmes herself. In theory, Holmes could take a stand against Balwani, although this is unlikely given prosecutors’ attempt to discredit her at the trial as credible would have to offer a witness.
However, Balwani’s strategy must take into account the possibility that Holmes’ words could have an impact on his case.
“I would be very surprised if Elizabeth Holmes testified at the Balwani trial,” Caroline Johnston-Polisi, a criminal defense attorney and law associate at Columbia University School of Law, told Yahoo Finance.
After all, according to the government, she is not a credible witness. He is also still abiding by his Fifth Amendment Act Against Self-Incrimination as he has not yet completed the appeals process in his case,” he added. “Never say never, but I don’t think it’s going to happen in this case.”
Even with Holmes’ trial in the rear-view mirror, attorneys believe Balwani’s central defense may differ from Holmes’.
Johnson-Polisi expects Balwani to raise a classic antagonistic defense that reflects Holmes’ mantra that he did not know or oversee every aspect of Theranos, particularly its laboratory operations, which Holmes testified were the responsibility of its directors.
“I think you’ll see that Sunny’s defense has to be a defense of knowledge,” Johnston-Polisi said. “Must go back to: The dollar always ended with Elizabeth.”
The downside of Balwani
According to demos, this strategy could be more difficult for Balwani than for Holmes.
A veteran tech entrepreneur nearly 20 years older than Holmes, Balwani made his fortune during the dot-com boom. He befriended Holmes in 2002, a year before he launched Theranos at the age of 19 with the goal of developing a machine that could perform diagnostic tests with simple drops of blood from a fingertip.
For more than a decade, Holmes has been selling investors the idea that its desktop printer analyzer could process drops of blood through a variety of common tests.
In 2009, Holmes hired Balwani as company president and later as COO. During this time, the two went to great lengths to keep their romantic relationship a secret.
“Balwani will no doubt mirror Holmes’ defense that business failure is not a crime, but the difference is that Balwani has even less credibility to claim that than Holmes,” Demos said.
Holmes, he explained, had the advantage of advocating naivety as a college dropout who began making business decisions as a startup founder. He also had the benefit of being tried a few months after the birth of their first child.
“Balwani shares all of Holmes’ responsibilities but does not benefit from his empathic qualities,” added Demos.
About five years after the company was founded, Balwani helped Holmes keep Theranos afloat with a $12 million line of credit. In 2013, the duo signed a $140 million deal with Walgreens (WBA) to distribute Theranos devices at Walgreens locations in Palo Alto and Arizona.
But the company eventually collapsed after a bombshell in the 2015 Wall Street Journal report. The Journal revealed that the company did not, in fact, perform the series of blood tests promoted by Holmes on a blood sting.
Like Holmes, Balwani was charged in 2018 with 12 separate felonies of computer fraud and conspiracy to commit computer fraud, each carrying a maximum sentence of 20 years in prison. First, the judge dropped the alleged fraud charges against Holmes’ doctors, and Holmes’ attorneys successfully supported the dismissal of another charge of alleged fraud against patients.