Theranos Founder Holmes Fights to Shield Wealth From Jury

Ms. Holmes is facing a trial in late August on charges of wire fraud and conspiracy to commit wire fraud for alleged misrepresentations she made about Theranos’s blood-testing technology.

Theranos touted a breakthrough technology that purported to test for a variety of health conditions using blood extracted from a finger prick.

The startup collapsed in 2018, following the criminal charges against Ms. Holmes and former Chief Operating Officer Ramesh “Sunny” Balwani and a series of articles in The Wall Street Journal investigating questions about the company’s claims. Both she and Mr. Balwani, who will separately face trial after her, have pleaded not guilty.

U.S. District Judge Edward Davila said Thursday he had concerns about whether prosecutors could talk about the popularity Ms. Holmes obtained as CEO along with perks such as the use of a private jet and stays in fancy hotels. Ms. Holmes was once worth $4.5 billion on paper. Mr. Downey said in court she received a salary of a “couple hundred thousand dollars a year,” which he said was probably less than many of her peers.

Judge Davila didn’t issue an immediate ruling on the request by Ms. Holmes to exclude the details, one of more than 20 motions he is weighing this week to help shape what jurors hear at the trial.

“The point here is the so-called success of Theranos was entirely the product of a fraud,” Assistant U.S. Attorney John Bostic said in court, arguing that details about her lifestyle are relevant because they can help show Ms. Holmes’ motive.

Ms. Holmes appeared in court this week for the first time in more than a year after months of proceedings held virtually because of the coronavirus pandemic.

The three days of hearings largely centered on whether evidence the government might present to a jury cuts to the crux of the allegations against Ms. Holmes: that she misrepresented the accuracy and reliability of Theranos tests to investors and patients.

Judge Davila didn’t indicate in court how he would rule on several requests by Ms. Holmes, which were contested by the government, to exclude details of federal inspections of Theranos labs and citations issued accusing the company of not abiding by industry standards.

Attorneys for Ms. Holmes argued this week that jurors could unfairly view the violations found by the Centers for Medicare and Medicaid Services and Food & Drug Administration as proof that Ms. Holmes is guilty.

“The jury could convict based on violation of a regulation, that’s the danger,” Jean Ralph Fleurmont, a Williams & Connolly attorney representing Ms. Holmes, told the judge.

Prosecutors said Ms. Holmes regularly cited Theranos’s compliance with federal standards to the press and in board meetings, making it relevant. The fact that they weren’t complying with industry standards is “a brick in the wall” that helps show the company’s tests “were not accurate or reliable,” assistant U.S. Attorney Robert Leach said.

Judge Davila is weighing whether prosecutors can show jurors a 2016 report from CMS that found deficiencies in the lab. The agency told Theranos it needed to correct the problems within days. Government lawyers said they planned to call as witnesses a CMS inspector who came to Theranos’s lab and a former employee who complained to the agency.

Following the CMS report, Theranos voided every test result taken on its proprietary machine, known as the Edison.

“CMS doesn’t make accuracy and reliability findings, full stop,” Patrick Looby, an attorney for Ms. Holmes, told the judge, in an effort to bolster his argument that the details should stay out.

Mr. Leach disagreed, saying “these obviously go to the heart of the government’s allegations.”

Write to Sara Randazzo at [email protected]