Where the Elizabeth Holmes trial stands at its halfway point

Feelings Drama

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00:00Welcome back to Squawk Box. The trial of Theranos founder Elizabeth Holmes reaching now a halfway point.

00:05Scott Cohn joins us with the latest on this ongoing saga. Scott.

00:11Hi, Andrew. Today we wrap up week six in what is supposed to be a 13-week trial

00:16as the government tries to prove that when Elizabeth Holmes was promising to change the world,

00:22billed as the next Steve Jobs, she was actually running a massive fraud.

00:26And this, prosecutors say, is one example.

00:30In 2014, when she was coming into her own as the darling of Wall Street in Silicon Valley,

00:35touting her new blood testing technology that was supposed to revolutionize health care,

00:40the person running the lab where all of those tests were to be processed

00:43was not a board-certified lab technician, but a dermatologist working part-time.

00:49His name is Sunil Dhawan. He took the stand for the government yesterday. He'll be back later this morning.

00:54He was actually Sonny Balwani's dermatologist. That's the former Theranos president and Holmes' ex-boyfriend.

01:01Dhawan testified that when Balwani recruited him in 2014, he promised a very minimal time commitment,

01:07though that would change the next year when regulators started asking questions.

01:12But he also testified he had very little contact with Holmes herself.

01:16Holmes' attorneys say she wasn't involved in lab operations at that point.

01:19All she did was run a business that failed, and as they say, failure is not a crime.

01:24This week, we've also heard from former executives at Safeway and Walgreens,

01:28both of which spent hundreds of millions of dollars in hopes of having Theranos testing in their stores.

01:34Prosecutors say those companies, along with doctors, patients who got erroneous test results,

01:38and many more are among Elizabeth Holmes' many victims.

01:42As this trial continues, guys.

01:43So, Scott, you and I have sat in many courtrooms, sometimes together, watching these cases in real time.

01:52Is there a sense that you have at this point, and I know it's almost unfair to prejudge the outcome,

01:58but can you feel a sense of which way this is moving,

02:02and is the evidence that the prosecutors are offering compelling?

02:06Is the evidence that the defense is offering compelling?

02:08Well, the defense's role at this point is to try and pick apart all of that evidence that the prosecution is offering,

02:17and the prosecution isn't through their case.

02:19So it's hard to tell exactly how it's going.

02:21It's going to be interesting, though, to see how the defense counters all of this.

02:25They've already given the hints of this in their opening statements six weeks ago,

02:30talking about how, as I said, failure is not a crime,

02:33and that really all Elizabeth Holmes was doing was what's typical in Silicon Valley,

02:39touting this new technology, bringing in money, and so on,

02:44but was not dishonest to investors.

02:48And that's what the prosecution has to prove.

02:50They have to prove that she intended to commit fraud.

02:52That's a pretty high bar, and we'll see how it goes.

02:55Scott, that's what I'm going to ask you.

02:57Of the evidence you've seen thus far,

02:58is there demonstrable evidence of what you would describe as intent,

03:03intent to lie, intent to defraud, intent to do something knowingly wrong?

03:11I think the jury, so to speak, is still out on this.

03:15I mean, that's what the government, again, is trying to prove.

03:18They're trying to show that she was very much involved with things,

03:21that she knew what was going on,

03:23that she and Sonny Balwani were kind of together as the people who were running this company,

03:30and that she would have known.

03:32Now, this testimony yesterday and today from the dermatologist,

03:37in some ways runs counter to that,

03:39because he's testified that he had almost no contact with Holmes

03:43until towards the end, when the heat started coming in from regulators.

03:47But the idea is that she is out there telling everybody,

03:52telling investors, telling journalists and everyone else

03:54what a great and revolutionary company this is,

03:57when she knows or should know that the company is not what she claims it to be,

04:02and that by that point, in 2014, 2015,

04:05it was pretty clear that this technology was not working,

04:08even though she said otherwise.

04:09So, let's get started.

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