(Bloomberg) — A judge is grappling with a request by U.S. prosecutors to add news articles about Theranos Inc. back in its up-and-coming days to the mound of evidence they’re using against founder and former chief executive officer Elizabeth Holmes when she goes to trial this summer.
Lawyers for Holmes are fighting to keep a jury from seeing the stories, as many as 50 in all, some of them quite bullish about the blood-testing startup’s prospects as a health-care breakthrough.
The government is trying to show that overheated news coverage of Theranos was part of the alleged fraud Holmes is charged with — that she manipulated the media to whip up an investor frenzy in the company, which peaked at a valuation of $9 billion in 2014 before it collapsed into insolvency.
“The articles made it a lot easier for these investors to be defrauded,” Assistant U.S. Attorney John Bostic said during a marathon hearing in San Jose, California, over what evidence will be allowed into a trial that starts Aug. 31 with jury selection and is expected to last about four months.
“They didn’t want to miss out on what, according to the coverage, was going to be a lucrative investment opportunity,” Bostic said. Holmes “exploited that favorable coverage and paved the way for the fraud.”
Lawyers for Holmes seemed to agree the jury will hear from journalist Roger Parloff, who wrote a 2014 profile of Holmes in Fortune magazine and a December 2015 follow-up for its website titled “How Theranos Misled Me.” A doctor named Eric Topol, who interviewed Holmes in 2013 for a piece in an online medical news site titled “Creative Disruption? She’s 29 and Set to Reboot Lab Medicine,” may also testify.
The remaining articles shouldn’t be permitted because they make subjective observations and rely on or quote anonymous sources, and because Holmes isn’t responsible for their content, one of her lawyers, Patrick Looby, told Davila. The authors also won’t be at the trial for cross-examination, he added, putting the defense at an improper disadvantage.
“These articles have no place as evidence in this trial,” Looby said.
Davila maintained his typically genial but conservative demeanor with lawyers, revealing little about which articles he’ll permit prosecutors to use. He observed that what gets published in modern media is often determined by editorial “whims.”
“Is the court going to be put in the position of executive editor?” he mused.
Looby cautioned the judge that the sheer volume of news stories prosecutors want to make available as evidence is an unfair burden in preparing Holmes’s defense. He also challenged the government’s characterization of Holmes as someone at the “center of the media ecosystem” who possessed the power to manipulate articles as the “puppeteer of their own statements.”
That’s “outdated,” he said.
Bostic brought up another news story that Holmes’s team isn’t eager for the jury to see: Wall Street Journal reporter John Carreyrou’s 2015 expose that is widely credited with pulling the curtain back on blood testing at Theranos.
That Holmes continued to promote the accuracy of blood-testing by Theranos even after the Journal story revealed deep problems with the company’s technology shows that she “doubled down on the previous misrepresentations,” the prosecutor said.
Holmes’s lies to the media, and her refusal to correct them even when confronted by a concerned Theranos lawyer, served as “an important tool the defendant used to commit the fraud in this case,” Bostic said. “The desire to be famous, to receive this praise, was part of her motive in her scheme to defraud.”