Former Theranos CEO Elizabeth Holmes walks outside the courtroom where she’s standing trial for fraud, on May 6, 2021.
Elizabeth Holmes’ jet-setting, lavish lifestyle as CEO of Theranos took center stage on Thursday as her attorneys argued it was irrelevant to her criminal fraud case.
“What she wore, where she stayed, how she flew and what she ate has nothing to do with this trial,” said Holmes’ attorney Kevin Downey, adding that its “inflammatory commentary that could do great damage.”
But the government strongly disagreed, saying Holmes’ opulent way of living was bolstered by the alleged fraud.
“In addition to her salary, the company provided for her luxurious travel on private jets and expensive lodging,” said John Bostic an assistant U.S. attorney. “The point here is the so-called success of Theranos was entirely the product of fraud.”
The judge pushed back on the government’s argument, comparing her benefits to other CEOs and asking “what’s the value that she’s at the Four Seasons or a Motel 6?”
Federal prosecutors cited an email between Holmes and a Theranos-paid assistant where she discusses dinner at an expensive restaurant and purchasing clothes and jewelry.
Defense attorneys argued Holmes chose not to cash in her stock and didn’t ask for a higher salary, adding “there’s no question Miss Holmes was traveling almost exclusively on company business, much of which was not only encouraged but arranged by the board of directors.”
Holmes’ ownership stake in Theranos was valued at up to $4.5 billion. Prosecutors say her spending more than kept pace and she was overtaken by her fame.
Holmes “became a celebrity in Silicon Valley,” said Bostic. “She met dignitaries, politicians and other business leaders as a result, these things truly were benefits, intangible but benefits nonetheless and part of the fraudulent scheme.”
As she walked into the courthouse, Holmes refused to answer questions from CNBC’s Scott Cohn on whether she’s concerned to have her wealth on display.
A former Theranos executive who was close to Holmes told CNBC the embattled CEO didn’t see anything wrong with her spending while running the company on life support.
“Having, at one point, three assistants was not fiscally sound,” says the former Theranos executive who asked not to be named. “It goes to her judgement and decision-making knowing the financial state the company was in.”
Holmes’ meteoric rise was captured in countless high-profile media appearances with world leaders, creating her image as a business celebrity.
“She became an immediate darling for a product that wasn’t even on the market,” the former executive said. “Elizabeth was touted as the next Steve Jobs and was suddenly invited to sit on stage with Bill Clinton. Part of it was her own doing but when people put you on stage with VIPs it validates your brands.”
Reality came crashing down in 2018 when the shortcomings and inaccuracies of Theranos were exposed by a Wall Street Journal investigation.
The judge is expected to make rulings on which evidence jurors can hear this week.