Theranos plans to challenge regulators in court, but federal prosecutors are pressing for a plea deal
Prosecutors have pressed Elizabeth Holmes, the founder of embattled diagnostic testing firm Theranos, to take responsibility for the $9bn company’s failures before reaching a plea deal, according to an allegation presented in a court filing on Thursday.
My enemy’s enemy is my enemy, says Theranos founder Elizabeth Holmes Read more
The filing in federal court in Boston alleges that Holmes has ignored numerous opportunities to admit liability for alleged misconduct at the heart of a federal criminal investigation into the company, which has struggled to stay afloat.
Holmes founded Theranos in 2003 and raised $1.3bn from investors including JP Morgan and Apple. By 2013, she had helped the firm develop an automated lab system that she claimed would be 99.9% accurate.
The document claimed that Holmes “concealed from the government material facts which would have substantially altered the public’s perception”, such as a potential customer’s lawsuit that the company might have settled before those details became public.
The filing also said that Holmes’ lawyers argued against the company’s admission of liability before a federal judge last July – a key moment in the investigation into her company’s failures. The company is seeking to raise $100m through a stock offering to pay off its debts, but investors and creditors are seeking to stop the plan.
Holmes has maintained that the company had never conducted blood tests using its Edison system and has called for the company to be taken over by a new investor.
My enemy’s enemy is my enemy. – Elizabeth Holmes
On Thursday, Theranos’s chief executive, Ramesh “Sunny” Balwani, who is being investigated for alleged misconduct by federal authorities, resigned, the company said.
Theranos has been criticized for misleading investors about its performance and for a lack of proper scientific testing for some of its tests.
Prosecutors argued that Theranos lacked sufficient evidence to convince a judge to allow it to proceed with its offerings.
“The availability of relevant evidence may well prove stronger than the ‘need’ for the relief requested,” prosecutors wrote in a filing.
The company also listed a range of investor claims and legal liabilities that it said would have called into question the ability of the company to be owned by another party.
In an email, Holmes said: “As an entrepreneur and a leader in the health care industry, I fully understand the perspective of our investors and creditors.”