It May Be the Trial of the Year

of the day. That's what Elizabeth Holmes told NBC in an interview in But that's not what she'll be telling jurors in August when she goes on trial for defrauding investors in her blood testing startup Sarahnus, once the world's youngest female self made billionaire and the darling of the tech and media worlds with her promise to revolutionize blood testing. Home spectacular fall from Grace has been recounted in books, countless news stories, and an HBO documentary When is Not

This was real? FLoC I don't have many secrets, and whatever secrets she does have may now be heard in open court. Joining me is Anne Coughlin, a criminal law professor at the University of Virginia Law School, and prosecutors want to describe holmes wealth and lavish lifestyle to travel on private jets, the stays in luxury hotels and the like, and they say it's to show she had a financial incentive to commit fraud. But the defense says, it's really

to prejudice the jury. Well, of course, all evidence of guilty is going to make the jury prenjudice in a sense, but I mean that's the question that the judge had to consider. One issue in the case is what was

Holmes's motive for doing the fraud? And the government is going to show that part of her motive was to enrich herself, and one way to do that is to show the large sums of money that she was able to spend on herself, both in her capacity as the CEO of Saranos and then of course just as a human being in the world, and so that's relevant to motive.

At the same time, the concern is that it's going to make her look bad in the eyes of the jury, and the jury is going to convict her because they think she's a and thrift or because there's some kind of class by its So the judge was trying to balance these two interest the government's interest in this relevant evidence and then the worry that the jury would be

untarily swayed against her. So he splits the difference, if you will, and allows the prosecution to admit some evidence of her spending spending that's related to her lifestyle as the CEO, but not specific purchases she made, designer brands, luxury places that she stayed, and so forth. We've heard a lot about possible trial strategies, possible defenses she'll put on. Do we know yet what her defense will be? You know,

it's very hard to tell. I've read the judges order on the evidentiary emotions, the emotions in limity we call them, and of course what we're trying to do is to parse the tea leaves, especially with risk, back to what homes of strategy is going to be. And it's very hard to tell, you know. Obviously, her lawyers have tried to keep out a lot of the evidence that the government wants to admit, and the judge denied many of

those emotions. But at the same time, you're reading the order trying to figure out what exactly is her theory of defense going to be, and it is difficult to say. It looks to me as if it's going to come down to what we call a mental state argument. In other words, to convict her for these forms of fraud, the government has to show not nearly that she made the false misrepresentations, but that she knew that they were false and that she did it for the purpose of

defrauding investors. And so that's I take it. What we're expecting her theories to revolve around is, Yeah, it turns out my equipment didn't work. My blood tests were not accurate, they were not fast. I couldn't do all of the things that I promised, but I thought I thought that I could. I thought that that stuff was gonna work. I didn't know my motive was not to defraud people. And it's kind of hard to see what that case is going to look like until we know what her

story is. Is she going to try to present that defense by calling mental health experts, so we believe that she is. She indicated in prior filings that that was going to be one of her strategies, but of course we won't know until we get to the trial that in fact that she's going to do that. So it's interesting to think about what story can she tell to negate the inference that she knew that these statements were false and that she put them out there for the

purpose of defrauding investors and defrauding doctors and patients. What story can she tell to suggest that she had an innocent mind, if you will, And I mean, there's a

couple of stories that she can tell. Some of them are suggest did by the extensive media coverage, the investigative reporting, the documentary that suggests that you know, all along she believed in herself and her ability to create this amazing product, this blood testing technology that could just take a couple of drops and then magically provide accurate results that previously we could not do this way, and that she really really believed that she was going to be able to

do that. And you know, on some levels she knew that she couldn't do it today, but she was always hoping that the breakthrough was just around the corner, right, That she believed in herself. Um that it takes time to get this kind of technology off the ground, And and that would be one potential story is that she actually thought that she could do it, even though from what we might call an objective perspective, that belief was false.

Now that's a tough oh, because you know, the fact that you think you can do something in the future, um, doesn't negate the fact that you're lying about your current ability to do it. If you see what I mean. But that seemed to be one theory that she was floating at one time. It doesn't seem to work as a legal matter, but that seemed to be a story that's been told, at least in part by the documentary.

I believe at some point there was a possibility that she would point to her former lover and the correct as sort of a Sengali. So now that their trials are separate, can she just try to blame it on him? Right? So that's the other theory. So one theory is I actually thought I could do this. You know, I believed in myself, and so I actually honestly believed that I was telling the truth when I told my investors, trust me, we will be able to do this. Um, that's one story.

The other story is that she made the false statements she knew they were false. But the claim would be I did this out of fear, out of trauma, out of duress. I was under the spell of this powerful man, and I was doing it again, not because I wanted to defraud people, but because I was terrified of him or was unable to resist his power. Those kinds of claims, Now, that's a really tricky claim, because the claim would then be that she was acting under some kind of psychological duress,

and those are very tough claims to satisfy. Notice, in effect, she would be conceding. Yep. I knew that my lover and I were making false statements, and I knew that they were being used for the purpose of defrauding folks. But I went along with it only because I was suffering from the effects of his arrest. And it's just a very hard claim to make. But that was the suggestion in some of her earlier filings that that was going to be her theory. And yes, now that the

cases are severed, they're being tried separately. I take it that each of these characters can point the finger at the other. She can say I was doing it under his arrest. He could say, I take it. I believe her. I believed her when she She was the one who came up with this company, she was the one who developed the technology, and I believed her representations to be true. She is pregnant, which is one reason that the trial was put off. So when she's tried on August thirty one,

she'll be a new mother. Will that have any effect on the jury. Will the jury either glean that or will they be told that June. To my eyes, one of the most fascinating features of this trial are what I would call the gender to ask x um, the fact that Elizabeth Holmes is a woman is one of the reasons that we, I think, are so fascinated by the case. And you know, ultimately these two trials, we have this really long history of grister's and swindlers and

con men, if you will, in this country. But just as the phrase con men confidence man suggests, the defendants usually are men. And so the fact that Holmes is a woman really changes the trajectory, the arc of the narratives that we might tell and then might accept when thinking about her guilt. So it's just completely fascinating. Yes, the idea that she is pregnant, that she is a new mother. Somehow she'll you know, she'll have some kind

of maternal halo around her. People may be inclined to be more sympathetic to her, less inclined to see her as a villain, you know, less inclined to hear as the mastermind of this criminal enterprise. So all of those things are going to be on the table in a case like this. So, on the one hand, there are studies and certainly plenty of anecdotal evidence as well as fictional stories that show that juries, courts, law enforcement may be inclined to be more lenient when women are involved.

Women aren't viewed as being as dangerous as men, right. But at the same time, we can find that in some cases there's a tremendous amount of you know, animosity or additional hostility towards female criminals. And it just so depends on the kinds of stories that we tell, you know, will she emerge from this trial as you know, a young woman who fell into the clutches of this older

lover who you know, had influence on her. Um. She was this up and rising star who was trying to make, you know, make it good in this dairy masculine world. And and somehow we should see her as the innocent um who fell into this difficult place and now she's a new mother, and how could we punish someone like her?

Or will we see her as a scheming adventuress. You know that that's the other side of the coin, someone who was trying to use her femininity to you know, forge these relationships with these powerful investors who are men um So she's taking advantage of them, not just through the lies that she told about Thereinos, but by using her femininity as well as a kind of power over them. So it's really hard to know how the story is

going to unfold the trial. But the fact that she's a mother, Yes, we revere mothers in this culture, and there may well be a feeling that she doesn't deserve to be punished as badly because she's a mom. On the other hand, people may may turn on her and think, wow, you know, you are behaving in a way that contradicts the type of behavior that we expect from from women and especially from others. So it's really really hard to tell. I wonder if she'll take the stand in her own defense.

So that's the million dollar question that I had as well. Thank you so much for raising it. One of the things that will be fascinating about this trial is if there is a trial. So many of the cases that you know go off by plea buggins, and that could still happen in this case. But if the case goes to trial, it will be it's potentially going to be a spectacular one. And the big question is will she take the stand? And from where I sit right now, it's hard to see how she could imagine that she'd

prevail without taking the stand. The story that would exonerate her, or the story that would create a reasonable doubt about her guilt and lead a jury to acquit is going to be a story about her mental state, a story about what she knew, what she thought, what she intended over the course of the years that the government alleges that she was scheming and lying and basically stealing people's money,

What was in her mind. And we draw inferences about what's in people's minds from facts, you know, from their conducts, from the money they made, from the spending they did, for the messages they sent at the time, from the meetings they offended. So all of that stuff is going to be a piece of it. But it's really hard to imagine how the case could be successful without her taking the stand. I guess I'm tipping my hand right now and saying that from where I sent, the government's

evidence looks overwhelming. Thanks. And that's Professor and Coughlin of the University of Virginia Law School. And that's it for this edition of The Bloomberg Law Show. Remember you can always at 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. I'm

June Grasso. Thanks so much for listening, and please turn into The Bloomberg Law Show every week night at ten pm Eastern right here on Bloomberg Radio.