Safeway, Walgreens relationship with Theranos disputed in ex-CEO Elizabeth Holmes fraud case
Prosecutors, attorneys at odds over the ousted Theranos founder and CEO's efforts
Prosecutors and attorneys are at odds over the ousted Theranos founder and CEO Elizabeth Holmes' efforts to have some of the charges against her dismissed.
Her legal team has questioned the prosecutor's decision to classify certain parties as investors, rather than business partners, which extends the time limit prosecutors have before she cannot be prosecuted.
Holmes wore a dark-colored blouse and jacket on Tuesday when she joined her attorney, Amy Saharia, prosecutors and Judge Edward J. Davila, among others, for a virtual hearing regarding new charges that allege the one-time millionaire bilked Safeway and Walgreens, among others, by misrepresenting the accuracy of her Theranos' technology, according to Law360.com.
DISGRACED EX-THERANOS CEO ELIZABETH HOLMES IS ASKING FOR TOO MUCH: PROSECUTORS
SAN JOSE, CALIFORNIA - JANUARY 14: Former Theranos founder and CEO Elizabeth Holmes (L) leaves the Robert F. Peckham U.S. Federal Court on January 14, 2019 in San Jose, California. (Justin Sullivan/Getty Images)
Safeway and Walgreens, Saharia argued, are business partners, but are unfairly being identified as investors. The "investor" classification, in turn, caused Holmes to be charged with a different crime that included a longer statute of limitations, which would have otherwise expired, according to court records and Law360.com.
"Walgreens and Safeway are smooshed into the definition of investor," she reportedly said. "We just don't think it's credible that the government has been charging what it [claims it's] been charging all along."
According to the report, both retailers had both agreed to use Theranos’ blood-testing technology in their wellness facilities. The deals crumbled after news of the technology’s flaws came to light.
EX-THERANOS CEO HOLMES PUTS MENTAL STATE AT ISSUE, TO BE EXAMINED BY U.S. EXPERTS
Former Theranos CEO Elizabeth Holmes leaves after a hearing at a federal court in San Jose, California, July 17, U.S., 2019. (REUTERS/Stephen Lam)
But prosecutor John Bostic argued that the “defense made an error” in thinking that a business partner could not also be considered an investor.
Saharia also argued that the allegations involving Safeway and Walgreens were moot nonetheless because the government took too much time to file the charges and failed to get the proper consent, according to records and the report.
EMBATTLED THERANOS FOUNDER ELIZABETH HOLMES MOVES TO HAVE INDICTMENT DISMISSED
Prosecutors allege that Holmes and former chief operating officer Ramesh “Sunny” Balwani deliberately misled investors, policymakers and the public about the accuracy of Theranos’ blood-testing technologies.
A logo sign outside of the headquarters of Theranos in Palo Alto, California on January 24, 2016. (Kristoffer Tripplaar/AP)
The two pleaded not guilty to wire fraud and conspiracy to commit wire fraud. If convicted, they could each face maximum penalties of 20 years in prison, a $2.75 million fine and possible restitution, the Department of Justice said.
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Holmes forfeited control of Theranos in 2018 and agreed to pay a $500,000 fine to settle charges by the Securities and Exchange Commission that she had committed a “massive fraud” that led investors to pour $700 million into the firm.
She was originally scheduled to go to trial in the summer of 2020, but the date has been pushed back several times. The trial is slated to start on March 2021.
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FOX Business' Michael Lundin and The Associated Press contributed to this report.