Elizabeth Holmes' Startling Admissions on the Stand

witness after witness. Investors, former employees, scientists, and even a retired four star general testified to deceptionalist, staggering scale and the fabrication of the success of her blood testing technology. Holmes decided to try to reverse the government's narrative by taking the stand in her own defense. The greatest risk of offend and can take at trial. Joining me is Bloomberg Legal reporter Joel rosen Blatt, who was in the courtroom for her testimony. How did she appear on the stand?

Did you hear her famous deep voice? Many people have asked about that because it's such a curiosity. She does not speak in any kind of irregular or deep voice that we had heard previously or when she was pitching Tarranness. She speaks in what seems to be her natural voice, the way you would imagine, you know, a woman of her age speaks. She had this reputation for being dynamic, charismatic and dazzling investors. Did that come across on the stand. Yeah.

When she first appeared, she was basically pitching her company. The start of her defense was that Frans is a legitimate company. And they showed videos kind of ripping the top off of her company's blood testing analyzers and really looking at the inside of it, and her explaining that, and you could see her almost pitching it the way she pitched it too investors or to Walgreens or safe Way. And so she came across as a saleswoman who very

much knew her stuff. You know, she studied chemical engineering before she dropped out of Stanford, and she came across as highly intelligent and pretty calm. I mean, she's clearly rehearsed much of this testimony, but she came across somebody knew what she was talking about. Did she ever come

out and say the blood testing machine actually worked? She did say that, I mean, she's described it as a kind of continuing work in progress, but that it was working and it was doing what they had hoped it would do, or it was just at least very close, she emphasized definitely in the beginning and this changed, but that it was working. She didn't make the claim that

it worked just exactly as she had advertised. In other words, she didn't outright lie and say it did the hundreds or even thousands of tests that Sanos had claimed that the machine could do. But she explained how it did work. She at one point explained the FDA approval for one

particular test was her main defense. Then when she said coming up short is not a crime, that's where she ultimately got to But it took a very dramatic turn about why the company failed when she started pointing the blame at other people, including her lab director and her ex boyfriend and the former president of far Nos, Sonny Bowani. For a lot of the questions before trial were what she would say about her relationship with bel Wanni. So

what did she say? Well, the testimony started and it appeared that if she wasn't going to go down that road, it almost got mundane. The testimony got kind of technical

and mundane. And then I think it was on day three of her testimony where she explained first of all that she was raped while she was a student at Stanford, and then that quickly turned into meeting Sonny Bowani just before actually she went to Stanford, and that she then disclosed this rape to Sonny and how he then took her under his arm and showed her how to become

an entrepreneur. But he did this in a way that she described as almost kind of cult like dictating for example, what she should eat, how much she should sleep, who she could talk to, whether she could see her friends, and discouraging her from seeing her family, and really very controlling. And so in this way started pointing the finger at Sunny Bolwanni as the person who kind of really made her perform at Starranos the way he wanted her to

the way he thought she should. Now bel Wannie has denied her allegations of abuse, but he's being tried separately next year and can't be called to testify at this trial. Did she have any kind of evidence to back up her claims, Well, that's what's really missing from this so she just described it. What she also described was sexual assault by Sonny, and she said that that happened kind

of throughout the course of their ten year relationship. And so she does have proof of that in the sense she has contemporaneous notes that she took on her iPhone or kind of eye message notes that she took about how she felt after she was sexually assaulted by Sonny. This was kind of shocking testimony, and it was upsetting. She was crying on the stand as she explained it, and so she has those notes. She also has handwritten notes from Sonny kind of telling her how she should behave.

Now what she doesn't have, and what's kind of a glaring omission is she doesn't have anything from Sonny saying you should tell investors, or you should tell safe Way, or you should tell anybody that our company is performing these tests that it can't perform, or that we are achieving this revenue that we don't have, and that you should doctor reports endorsing fa NOS technology. She doesn't have any of that, and that's what she's charged with. So

that's a problem, I think for her defense. So she testified that Belwanni was controlling, but she admitted that he didn't control the statements she made as the company CEO. Well, that's I think the most interesting part of the testimony.

So her lawyer asked her, you know, did Sonny force you to make the statements to investors or to journalists or to her board, or did he control your actions in your dealings with partner's Walgreens and safe Way, who were deceived clearly, And her response to that was that he did not. But in the almost the very next sentence, she said, in fact, she wasn't so sure. I have the quote she said, I don't know he impacted everything about who I was, and I don't fully understand that.

So it's a gray area. And I think what she's doing is she's putting in juror's mind that Sonny was there and he was oppressive and controlling. She's not going to go on record and make it so plain to say he made me lie to investors, But now jurors have this in their mind that you know, he was a strong force in the background and the really manipulative and you know, horrible man is her testimony that had to be at play and had to be influencing her.

What about the forging of documents and the use of pharmaceutical companies logos on documents. Did she link that to him. She has not linked that to him, And this is another aspect of her defense which is a real mix of different kind of strategies. She didn't blame that on him, and in fact, on her direct testimony, she admitted that she was the one who did that. So she admitted that she lifted the logos of Fiser and sharing Plow and put them on reports that purported to endorse their

nosed technology. And this is a reason that Walgreen's bought into the technology and adopted it. So she said that she wished she had done that differently. So this is another dimension of her defense where she's expressing regret and remorse. Now on her cross examination, the prosecutor dug deeper into that.

You know, it wasn't just the lifting of logos, it was also the manipulation of text and copy in those reports where she doctored those documents to really make the endorsements much more pronounced, and she had to explain that she did that too, She was responsible for that. So the apology worked. It was kind of effective. On her own direct testimony. Under cross examination, it looked much much worse. Did you see any reaction from the jurors, especially when

she was crying. Sometimes you can see a juror nodding or patting their rise. This jury has been really hard to read. They seem very studious. They're taking notes, and they're displaying, as far as I can tell, just kind of almost no expression, just really careful observers, but not betraying kind of what they're thinking or feeling. I personally felt like her explanations of abuse were incredible. They seemed believable, But as to what the jurors are thinking, I can't tell.

She's confronted with so much wrongdoing. There's just so much evidence against her that I think that's what's going on here. It's a multifaceted and multi pronged defense where she has to own up to some of this. I mean, you can't just deny it, our point the finger or blame Sonny for all of it. There's some of it that she just did, you know, that lifting of the logos and actually manipulating the copy. She did that, and so

what do you do with that? I mean, I don't think there's anything left to do but say, you know, I wish I had done it differently. The government has to prove her intent to commit these crimes. How does her defense negate intent? Where she's pointing to Wawani, the argument is that I was so under his control that

I couldn't have formed the intent to defraud investors. I think that if she's going to go kind of squarely down that road, she needs a psychological expert to endorse that, to explain that somebody who's undergone this trauma in some way unable to distinguish to some important degree right from

wrong and was maybe deluded. This trial has been full of these kind of useful breaks, and there's a big pause here now where her lawyers, I think it to reassess how they've done and what the effect has been, and decide whether or not her defense without pointing to Bowani or with the least kind of putting him in the sphere of her defense, is enough and they've done enough kind of otherwise to cast some doubt on her intent, or maybe just pry one juror loose if that's been enough,

or if they need to now bring in this psychological expert to go more squarely down the road of blaming Sunny Balwani. Her cross examination continues next week and I know you'll be in the courtroom for that. Thanks Joe. That's Joe Rosenblack, Bloomberg legal reporter. I'm gonna show you how to make a gift from a video and put your gifts on a giffy. You can make them out

of movies, video games, don't switches are your own human experiences. Yeah, no matter how you pronounce it, those short video loops of cats furiously typing dancing football players or even this year's Turkey pardon where the final straw for UK regulators. It's the first time a major global regulator has ordered a Silicon Valley giant to unwind a deal after completion. Joining me is Jennifer Ree, Bloomberg Intelligence Senior litigation analyst.

So this was a kind of stealth deal. Facebook bought Giffe in without notifying regulators, right. So you know regulators across globally, UK, US, Europe, they each have rules and thresholds about the deals that actually have to get notified to the competition authorities and can't close prior to the competition authorities having a chance to take a look and if they are of a certain size, there's no need

to do that. Legally, you can sign it, you can close it immediately lee And that's what happened with this deal. Now there's some allegations that they did a little bit of finagling with the revenues in order to fall below that threshold, but nonetheless it did fall below the threshold. They didn't need to notify it legally and they were able to legally close it. But on the other hand, US and UK, as we see here, and even Europe

have the right still to challenge consummated deals. It isn't done often, but it is within their charters, it is within the law and they have the right to do that. And in fact, that's what the UK's Competition Authority did here. And Facebook did that while it was under investigation by antitrust regulators for buying companies in order to eliminate them as potential threats to its monopoly power. Yes, very much so. Pretty nervy on the part of Facebook with that is

exactly right. And you know, UK turned around and fairly quickly after the deal was completed, issued what's called the whole separate order called an initial enforcement order, where They basically said, look, we want to look into this, and so we are ordering you not to integrate. You can't integrate this company because it needs to be divestible at the end of the day, at the end of our investigation,

and Facebook actually appealed that. They went to the Competition Appeal Tribunal which is like a court, and they were denied. So that order went into effect. And since a June of two thousand twenty, Facebook has had the whole Giffy separate and not integrate the company. So why did the c m A order Facebook to sell Giffy? What were its reasons? So it did a really long investigation and there were two separate areas where the c m A

had concerns. They felt that the deal would result in a substantial lessening of competition in display advertising, where they felt Giffy was a potential competitor. On the social media side, they basically felt that with control of Giffy, it would

allow Facebook to disadvantage some of its social media competitors. So, in other words, it could prevent Twitter or TikTok or Snapchat from accessing this library of gifts and people like using them, and all of these social media black forms are about user engagement, and so what that would do, according to the c m A, is drive more users into Facebook and away from some of its rivals because they liked the ability to use these gifts and have

access to them. The other thing they said Facebook could do is actually demand money or consumer data from these rivals in exchange for the use of the gift library. So that was one area where they were concerned about what we think about as foreclosure or a vertical concern. The other concern was more about potential competition down the road. Before Facebook acquired Gifty, Giffy was starting its own kind of display advertising business. It was allowing companies to sort

of brand a gift. So maybe you could use a gift that's kind of a dancing Pepsi cola can and it's an ad to drive brand awareness. And when Facebook book Giftee, but before that UK order went into effect, Facebook shut down that business. And what the c m A said is, well, that business another option for advertisers outside of Facebook to advertise a product online, and this was Facebook shutting down that potential competitor in the display

advertising market. And it was for those two reasons that they determined that this would be deal that would substantially lessen competition and was illegal. Is this the first time that a regulator has ordered a Silicon Valley giant to unwind a deal after completion? Yes, so far it is now other deals outside of Silicon Valley companies have actually been ordered to unwind post acquisition and have done that, but in this area we're talking about our big tech platforms,

this is the first. There is an ongoing effort in the US by the Federal Trade Commission to force Facebook to sell off Instagram or WhatsApp for both, and that's leaving its way through the courts right now. Is Facebook going to appeal this? They can. They have four weeks to do it, and they would appeal to the Competition Tribunal. Now it would be an uphill climb for Facebook right now. The c m A statistics in front of that tribunal are very good. They've won almost sevent of all merger

appeals since two thousand ten. And in the last couple of years there were two consummated deal CMA ordered to be unwound and they both appealed and the tribunal affirmed the CMA's decisions. In both, so certainly you know it's worth a staff for Facebook, and they probably will, but it would be an upshill road. Is the FTC investigating the Giffie purchase, so it might be there were some reports that the FTC and DJ were discussing this and

that one of them probably is investigating. We don't know which one, and we don't know where they are in an investigation. Thanks Jen, that's Jennifer Ree, Bloomberg Intelligence Senior Litigation Analyst. Coming up. Elizabeth Holmes takes the stand in her own defense. This is Bloomberg and that's it for this edition of the Bloomberg Law Show. Remember you can always get the latest legal news on our Bloomberg Law Podcast.

You can find them on Apple Podcasts, Spotify, and at www dot Bloomberg dot com, slash podcast, Slash Law and you join us every week night at ten pm Wall Street Time for the Bloomberg Laws Show. I'm June Grosso and you're listening to Bloomberg