Elizabeth Holmes appears to be gaining ground as her appeal is heard

May 30, 2023: Disgraced Theranos CEO Elizabeth Holmes, left, is escorted to a federal prison camp in Bryan, Texas, where she will spend the next 11 years serving time for overseeing an infamous testing hoax blood. (AP Photo/Michael Wyke)

On Tuesday, the lawyer for jailed fraudster Elizabeth Holmes appeared to make progress with the trio of judges who were weighing her bid for a new trial.

Holmes, 40, was convicted by a jury in early 2022 of four counts of defrauding investors in Theranos, her now-defunct Palo Alto blood-testing startup. On Tuesday, his appeal was heard by the U.S. Court of Appeals for the Ninth Circuit in San Francisco, with one of his attorneys and a prosecutor sparring before a three-judge panel.

Holmes’ lawyer, Amy Saharia, claimed that Judge Edward Davila, presiding over the trial in U.S. District Court in San Jose, illegally allowed former Theranos scientist Dr. Kingshuk Das to testify as as an expert before the jury. Appeals Court Judge Ryan Nelson indicated in comments Tuesday that she may be right.

“There’s a very good story here for Ms. Holmes,” Nelson said. “They have a pretty good basis to justify some injustice here.” Despite this, he noted that his conviction was supported by “pretty damning evidence.”

Much of the 50-minute hearing was devoted to debate over whether the judge in Holmes’ trial broke court rules by letting Das give the jury his opinion on the poor performance of the technology. Theranos. Appeals courts can order new trials if they believe that trial judges made errors in applying the law or if the procedure was not fair.

Jurors in Holmes’ four-month trial in U.S. District Court in San Jose were told that Das’ review of Theranos’ processes and technology led him to overturn all test results — 50,000 to 60 000 of them – from the company’s problematic “Edison” blood analyzers. . Das told the jury that after informing Holmes that her devices “apparently malfunctioned from the start,” she countered with an “alternative explanation” that the problems arose from the company’s quality assurance processes and not from its machines.

But Saharia argued that Das’ statements, including: “I found these instruments unfit for clinical use,” violated court rules and jurors should never have heard them. His testimony about the effectiveness of the technology represented opinions based on scientific evidence, and under court rules, such statements in a jury trial can only come from witnesses who have gone through the legal process to be considered as experts, Saharia argued.

Nelson said he had “some issues” with the testimony that Davila allowed Das to provide, and suggested that prosecutors used Das to “get some of that testimony” that should have only come from a expert witness.

Federal prosecutor Kelly Volkar told the justices that Davila “carefully analyzed” Das’ testimony and sustained several objections from Holmes’ lawyers when Das was questioned on the witness stand.

“This was a case where every issue was often argued to the death,” Volkar said, adding that Davila “took great care in making decisions.”

Judge Jacqueline Nguyen said Davila rightly allowed Das to discuss what he said to Holmes. But Nguyen seemed to agree that testimony requiring “highly specialized knowledge” was not appropriate for a witness not approved by the court as an expert.

Saharia said Holmes’ legal team does not dispute that the Theranos tests were inaccurate.

“The central question in this case was whether Ms. Holmes knowingly misrepresented the capabilities of Theranos’ technology,” Saharia said. “She had a good faith belief in the accuracy of this technology.”

Holmes, a Stanford University dropout, was indicted in 2018 in connection with $878 million in losses among Theranos investors. Davila estimated the harm suffered by investors as a result of his criminal conduct at $381 million.

In November 2022, Davila sentenced Holmes, a mother of two young children, to 11 years and three months in prison. Holmes, U.S. Bureau of Prisons inmate No. 24965-111, had about two years reduced from her sentence — likely due to good behavior and participation in programs at her minimum-security prison — and is expected to be released in August 2032.

Theranos, founded by Holmes in 2003 and once valued at $9 billion, claimed its machines could use just a few drops of blood from a finger prick to run more than a thousand tests, for everything from diabetes to cancer through pregnancy and HIV infection.

Jurors in Holmes’ trial heard evidence that Holmes falsified internal Theranos documents by adding the logos of stolen pharmaceutical companies to suggest that the companies had validated her technology, and that she and Theranos falsely suggested to investors that its machines were used on the battlefield. The jury also heard that Theranos provided investors with wildly inflated revenue expectations and sought to cover up the poor performance of its machines.

Federal criminal appeals result in very low rates, according to the federal court system. If Holmes loses, she could appeal to the U.S. Supreme Court, but its justices hear only about 100 to 150 appeals a year out of the more than 7,000 she is typically called upon to review, according to the court system . The justices did not say Tuesday when they would rule on his appeal.

Also Tuesday, in the same court, a lawyer representing Holmes and former Theranos Chairman Sunny Balwani argued before the three judges that Davila’s order requiring the two men to pay more than $450 million in restitution to investors should be rejected.

Patrick Looby, a lawyer representing Holmes and Balwani, argued that their fraud did not rob Theranos of its “residual” value. “The fact that investors may have had difficulty selling their shares is not due to fraud,” Looby said. “It’s just the nature of investing in a private company.”

Volkar argued that victims had “no opportunity” to recover their costs.

Nelson seemed to agree.

“If you can’t salvage,” Nelson said, “it’s not residual value.”