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Speaker 1: This is Bloomberg Law with June Brusso from Bloomberg Radio.

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Speaker 1: I'm the founder and CEO of this company. Anything that

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Speaker 1: happens in this company is my responsibility at the end

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Speaker 1: of the day. Elizabeth Holmes took full responsibility for thoroughness

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Speaker 1: in sixteen in an interview with NBC. Her view appears

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Speaker 1: to be a bit more nuanced as she fights eleven

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Speaker 1: counts of fraud and conspiracy in a Silicon Valley courtroom.

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Speaker 1: For nearly three months, Holmes has sat attentively listening to

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Speaker 1: witness after witness. Investors, former employees, scientists, and even a

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Speaker 1: retired four star general testified to deceptionalist, staggering scale and

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Speaker 1: the fabrication of the success of her blood testing technology.

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Speaker 1: Holmes decided to try to reverse the government's narrative by

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Speaker 1: taking the stand in her own defense. The greatest risk

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Speaker 1: of offend and can take at trial. Joining me is

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Speaker 1: Bloomberg Legal reporter Joel rosen Blatt, who was in the

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Speaker 1: courtroom for her testimony. How did she appear on the stand?

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Speaker 1: Did you hear her famous deep voice? Many people have

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Speaker 1: asked about that because it's such a curiosity. She does

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Speaker 1: not speak in any kind of irregular or deep voice

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Speaker 1: that we had heard previously or when she was pitching Tarranness.

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Speaker 1: She speaks in what seems to be her natural voice,

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Speaker 1: the way you would imagine, you know, a woman of

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Speaker 1: her age speaks. She had this reputation for being dynamic,

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Speaker 1: charismatic and dazzling investors. Did that come across on the stand. Yeah.

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Speaker 1: When she first appeared, she was basically pitching her company.

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Speaker 1: The start of her defense was that Frans is a

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Speaker 1: legitimate company. And they showed videos kind of ripping the

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Speaker 1: top off of her company's blood testing analyzers and really

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Speaker 1: looking at the inside of it, and her explaining that,

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Speaker 1: and you could see her almost pitching it the way

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Speaker 1: she pitched it too investors or to Walgreens or safe Way.

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Speaker 1: And so she came across as a saleswoman who very

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Speaker 1: much knew her stuff. You know, she studied chemical engineering

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Speaker 1: before she dropped out of Stanford, and she came across

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Speaker 1: as highly intelligent and pretty calm. I mean, she's clearly

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Speaker 1: rehearsed much of this testimony, but she came across somebody

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Speaker 1: knew what she was talking about. Did she ever come

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Speaker 1: out and say the blood testing machine actually worked? She

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Speaker 1: did say that, I mean, she's described it as a

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Speaker 1: kind of continuing work in progress, but that it was

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Speaker 1: working and it was doing what they had hoped it

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Speaker 1: would do, or it was just at least very close,

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Speaker 1: she emphasized definitely in the beginning and this changed, but

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Speaker 1: that it was working. She didn't make the claim that

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Speaker 1: it worked just exactly as she had advertised. In other words,

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Speaker 1: she didn't outright lie and say it did the hundreds

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Speaker 1: or even thousands of tests that Sanos had claimed that

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Speaker 1: the machine could do. But she explained how it did work.

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Speaker 1: She at one point explained the FDA approval for one

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Speaker 1: particular test was her main defense. Then when she said

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Speaker 1: coming up short is not a crime, that's where she

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Speaker 1: ultimately got to But it took a very dramatic turn

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Speaker 1: about why the company failed when she started pointing the

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Speaker 1: blame at other people, including her lab director and her

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Speaker 1: ex boyfriend and the former president of far Nos, Sonny Bowani.

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Speaker 1: For a lot of the questions before trial were what

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Speaker 1: she would say about her relationship with bel Wanni. So

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Speaker 1: what did she say? Well, the testimony started and it

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Speaker 1: appeared that if she wasn't going to go down that road,

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Speaker 1: it almost got mundane. The testimony got kind of technical

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Speaker 1: and mundane. And then I think it was on day

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Speaker 1: three of her testimony where she explained first of all

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Speaker 1: that she was raped while she was a student at Stanford,

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Speaker 1: and then that quickly turned into meeting Sonny Bowani just

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Speaker 1: before actually she went to Stanford, and that she then

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Speaker 1: disclosed this rape to Sonny and how he then took

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Speaker 1: her under his arm and showed her how to become

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Speaker 1: an entrepreneur. But he did this in a way that

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Speaker 1: she described as almost kind of cult like dictating for example,

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Speaker 1: what she should eat, how much she should sleep, who

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Speaker 1: she could talk to, whether she could see her friends,

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Speaker 1: and discouraging her from seeing her family, and really very controlling.

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Speaker 1: And so in this way started pointing the finger at

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Speaker 1: Sunny Bolwanni as the person who kind of really made

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Speaker 1: her perform at Starranos the way he wanted her to

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Speaker 1: the way he thought she should. Now bel Wannie has

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Speaker 1: denied her allegations of abuse, but he's being tried separately

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Speaker 1: next year and can't be called to testify at this trial.

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Speaker 1: Did she have any kind of evidence to back up

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Speaker 1: her claims, Well, that's what's really missing from this so

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Speaker 1: she just described it. What she also described was sexual

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Speaker 1: assault by Sonny, and she said that that happened kind

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Speaker 1: of throughout the course of their ten year relationship. And

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Speaker 1: so she does have proof of that in the sense

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Speaker 1: she has contemporaneous notes that she took on her iPhone

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Speaker 1: or kind of eye message notes that she took about

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Speaker 1: how she felt after she was sexually assaulted by Sonny.

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Speaker 1: This was kind of shocking testimony, and it was upsetting.

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Speaker 1: She was crying on the stand as she explained it,

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Speaker 1: and so she has those notes. She also has handwritten

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Speaker 1: notes from Sonny kind of telling her how she should behave.

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Speaker 1: Now what she doesn't have, and what's kind of a

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Speaker 1: glaring omission is she doesn't have anything from Sonny saying

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Speaker 1: you should tell investors, or you should tell safe Way,

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Speaker 1: or you should tell anybody that our company is performing

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Speaker 1: these tests that it can't perform, or that we are

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Speaker 1: achieving this revenue that we don't have, and that you

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Speaker 1: should doctor reports endorsing fa NOS technology. She doesn't have

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Speaker 1: any of that, and that's what she's charged with. So

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Speaker 1: that's a problem, I think for her defense. So she

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Speaker 1: testified that Belwanni was controlling, but she admitted that he

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Speaker 1: didn't control the statements she made as the company CEO. Well,

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Speaker 1: that's I think the most interesting part of the testimony.

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Speaker 1: So her lawyer asked her, you know, did Sonny force

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Speaker 1: you to make the statements to investors or to journalists

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Speaker 1: or to her board, or did he control your actions

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Speaker 1: in your dealings with partner's Walgreens and safe Way, who

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Speaker 1: were deceived clearly, And her response to that was that

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Speaker 1: he did not. But in the almost the very next sentence,

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Speaker 1: she said, in fact, she wasn't so sure. I have

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Speaker 1: the quote she said, I don't know he impacted everything

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Speaker 1: about who I was, and I don't fully understand that.

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Speaker 1: So it's a gray area. And I think what she's

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Speaker 1: doing is she's putting in juror's mind that Sonny was

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Speaker 1: there and he was oppressive and controlling. She's not going

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Speaker 1: to go on record and make it so plain to

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Speaker 1: say he made me lie to investors, But now jurors

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Speaker 1: have this in their mind that you know, he was

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Speaker 1: a strong force in the background and the really manipulative

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Speaker 1: and you know, horrible man is her testimony that had

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Speaker 1: to be at play and had to be influencing her.

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Speaker 1: What about the forging of documents and the use of

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Speaker 1: pharmaceutical companies logos on documents. Did she link that to him.

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Speaker 1: She has not linked that to him, And this is

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Speaker 1: another aspect of her defense which is a real mix

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Speaker 1: of different kind of strategies. She didn't blame that on him,

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Speaker 1: and in fact, on her direct testimony, she admitted that

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Speaker 1: she was the one who did that. So she admitted

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Speaker 1: that she lifted the logos of Fiser and sharing Plow

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Speaker 1: and put them on reports that purported to endorse their

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Speaker 1: nosed technology. And this is a reason that Walgreen's bought

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Speaker 1: into the technology and adopted it. So she said that

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Speaker 1: she wished she had done that differently. So this is

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Speaker 1: another dimension of her defense where she's expressing regret and remorse.

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Speaker 1: Now on her cross examination, the prosecutor dug deeper into that.

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Speaker 1: You know, it wasn't just the lifting of logos, it

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Speaker 1: was also the manipulation of text and copy in those

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Speaker 1: reports where she doctored those documents to really make the

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Speaker 1: endorsements much more pronounced, and she had to explain that

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Speaker 1: she did that too, She was responsible for that. So

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Speaker 1: the apology worked. It was kind of effective. On her

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Speaker 1: own direct testimony. Under cross examination, it looked much much worse.

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Speaker 1: Did you see any reaction from the jurors, especially when

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Speaker 1: she was crying. Sometimes you can see a juror nodding

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Speaker 1: or patting their rise. This jury has been really hard

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Speaker 1: to read. They seem very studious. They're taking notes, and

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Speaker 1: they're displaying, as far as I can tell, just kind

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Speaker 1: of almost no expression, just really careful observers, but not

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Speaker 1: betraying kind of what they're thinking or feeling. I personally

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Speaker 1: felt like her explanations of abuse were incredible. They seemed believable,

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Speaker 1: But as to what the jurors are thinking, I can't tell.

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Speaker 1: She's confronted with so much wrongdoing. There's just so much

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Speaker 1: evidence against her that I think that's what's going on here.

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Speaker 1: It's a multifaceted and multi pronged defense where she has

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Speaker 1: to own up to some of this. I mean, you

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Speaker 1: can't just deny it, our point the finger or blame

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Speaker 1: Sonny for all of it. There's some of it that

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Speaker 1: she just did, you know, that lifting of the logos

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Speaker 1: and actually manipulating the copy. She did that, and so

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Speaker 1: what do you do with that? I mean, I don't

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Speaker 1: think there's anything left to do but say, you know,

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Speaker 1: I wish I had done it differently. The government has

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Speaker 1: to prove her intent to commit these crimes. How does

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Speaker 1: her defense negate intent? Where she's pointing to Wawani, the

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Speaker 1: argument is that I was so under his control that

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Speaker 1: I couldn't have formed the intent to defraud investors. I

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Speaker 1: think that if she's going to go kind of squarely

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Speaker 1: down that road, she needs a psychological expert to endorse that,

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Speaker 1: to explain that somebody who's undergone this trauma in some

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Speaker 1: way unable to distinguish to some important degree right from

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Speaker 1: wrong and was maybe deluded. This trial has been full

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Speaker 1: of these kind of useful breaks, and there's a big

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Speaker 1: pause here now where her lawyers, I think it to

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Speaker 1: reassess how they've done and what the effect has been,

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Speaker 1: and decide whether or not her defense without pointing to

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Speaker 1: Bowani or with the least kind of putting him in

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Speaker 1: the sphere of her defense, is enough and they've done

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Speaker 1: enough kind of otherwise to cast some doubt on her intent,

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Speaker 1: or maybe just pry one juror loose if that's been enough,

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Speaker 1: or if they need to now bring in this psychological

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Speaker 1: expert to go more squarely down the road of blaming

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Speaker 1: Sunny Balwani. Her cross examination continues next week and I

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Speaker 1: know you'll be in the courtroom for that. Thanks Joe.

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Speaker 1: That's Joe Rosenblack, Bloomberg legal reporter. I'm gonna show you

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Speaker 1: how to make a gift from a video and put

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Speaker 1: your gifts on a giffy. You can make them out

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Speaker 1: of movies, video games, don't switches are your own human experiences. Yeah,

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Speaker 1: no matter how you pronounce it, those short video loops

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Speaker 1: of cats furiously typing dancing football players or even this

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Speaker 1: year's Turkey pardon where the final straw for UK regulators.

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Speaker 1: It's the first time a major global regulator has ordered

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Speaker 1: a Silicon Valley giant to unwind a deal after completion.

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Speaker 1: Joining me is Jennifer Ree, Bloomberg Intelligence Senior litigation analyst.

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Speaker 1: So this was a kind of stealth deal. Facebook bought

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Speaker 1: Giffe in without notifying regulators, right. So you know regulators

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Speaker 1: across globally, UK, US, Europe, they each have rules and

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Speaker 1: thresholds about the deals that actually have to get notified

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Speaker 1: to the competition authorities and can't close prior to the

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Speaker 1: competition authorities having a chance to take a look and

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Speaker 1: if they are of a certain size, there's no need

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Speaker 1: to do that. Legally, you can sign it, you can

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Speaker 1: close it immediately lee And that's what happened with this deal.

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Speaker 1: Now there's some allegations that they did a little bit

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Speaker 1: of finagling with the revenues in order to fall below

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Speaker 1: that threshold, but nonetheless it did fall below the threshold.

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Speaker 1: They didn't need to notify it legally and they were

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Speaker 1: able to legally close it. But on the other hand,

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Speaker 1: US and UK, as we see here, and even Europe

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Speaker 1: have the right still to challenge consummated deals. It isn't

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Speaker 1: done often, but it is within their charters, it is

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Speaker 1: within the law and they have the right to do that.

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Speaker 1: And in fact, that's what the UK's Competition Authority did here.

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Speaker 1: And Facebook did that while it was under investigation by

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Speaker 1: antitrust regulators for buying companies in order to eliminate them

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Speaker 1: as potential threats to its monopoly power. Yes, very much so.

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Speaker 1: Pretty nervy on the part of Facebook with that is

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Speaker 1: exactly right. And you know, UK turned around and fairly

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Speaker 1: quickly after the deal was completed, issued what's called the

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Speaker 1: whole separate order called an initial enforcement order, where They

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Speaker 1: basically said, look, we want to look into this, and

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Speaker 1: so we are ordering you not to integrate. You can't

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Speaker 1: integrate this company because it needs to be divestible at

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Speaker 1: the end of the day, at the end of our investigation,

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Speaker 1: and Facebook actually appealed that. They went to the Competition

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Speaker 1: Appeal Tribunal which is like a court, and they were denied.

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Speaker 1: So that order went into effect. And since a June

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Speaker 1: of two thousand twenty, Facebook has had the whole Giffy

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Speaker 1: separate and not integrate the company. So why did the

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Speaker 1: c m A order Facebook to sell Giffy? What were

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Speaker 1: its reasons? So it did a really long investigation and

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Speaker 1: there were two separate areas where the c m A

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Speaker 1: had concerns. They felt that the deal would result in

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Speaker 1: a substantial lessening of competition in display advertising, where they

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Speaker 1: felt Giffy was a potential competitor. On the social media side,

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Speaker 1: they basically felt that with control of Giffy, it would

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Speaker 1: allow Facebook to disadvantage some of its social media competitors. So,

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Speaker 1: in other words, it could prevent Twitter or TikTok or

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Speaker 1: Snapchat from accessing this library of gifts and people like

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Speaker 1: using them, and all of these social media black forms

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Speaker 1: are about user engagement, and so what that would do,

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Speaker 1: according to the c m A, is drive more users

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Speaker 1: into Facebook and away from some of its rivals because

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Speaker 1: they liked the ability to use these gifts and have

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Speaker 1: access to them. The other thing they said Facebook could

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Speaker 1: do is actually demand money or consumer data from these

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Speaker 1: rivals in exchange for the use of the gift library.

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Speaker 1: So that was one area where they were concerned about

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Speaker 1: what we think about as foreclosure or a vertical concern.

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Speaker 1: The other concern was more about potential competition down the road.

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Speaker 1: Before Facebook acquired Gifty, Giffy was starting its own kind

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Speaker 1: of display advertising business. It was allowing companies to sort

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Speaker 1: of brand a gift. So maybe you could use a

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Speaker 1: gift that's kind of a dancing Pepsi cola can and

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Speaker 1: it's an ad to drive brand awareness. And when Facebook

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Speaker 1: book Giftee, but before that UK order went into effect,

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Speaker 1: Facebook shut down that business. And what the c m

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Speaker 1: A said is, well, that business another option for advertisers

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Speaker 1: outside of Facebook to advertise a product online, and this

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Speaker 1: was Facebook shutting down that potential competitor in the display

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Speaker 1: advertising market. And it was for those two reasons that

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Speaker 1: they determined that this would be deal that would substantially

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Speaker 1: lessen competition and was illegal. Is this the first time

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Speaker 1: that a regulator has ordered a Silicon Valley giant to

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Speaker 1: unwind a deal after completion? Yes, so far it is

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Speaker 1: now other deals outside of Silicon Valley companies have actually

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Speaker 1: been ordered to unwind post acquisition and have done that,

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Speaker 1: but in this area we're talking about our big tech platforms,

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Speaker 1: this is the first. There is an ongoing effort in

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Speaker 1: the US by the Federal Trade Commission to force Facebook

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Speaker 1: to sell off Instagram or WhatsApp for both, and that's

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Speaker 1: leaving its way through the courts right now. Is Facebook

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Speaker 1: going to appeal this? They can. They have four weeks

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Speaker 1: to do it, and they would appeal to the Competition Tribunal.

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Speaker 1: Now it would be an uphill climb for Facebook right now.

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Speaker 1: The c m A statistics in front of that tribunal

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Speaker 1: are very good. They've won almost sevent of all merger

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Speaker 1: appeals since two thousand ten. And in the last couple

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Speaker 1: of years there were two consummated deal CMA ordered to

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Speaker 1: be unwound and they both appealed and the tribunal affirmed

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Speaker 1: the CMA's decisions. In both, so certainly you know it's

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Speaker 1: worth a staff for Facebook, and they probably will, but

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Speaker 1: it would be an upshill road. Is the FTC investigating

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Speaker 1: the Giffie purchase, so it might be there were some

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Speaker 1: reports that the FTC and DJ were discussing this and

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Speaker 1: that one of them probably is investigating. We don't know

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Speaker 1: which one, and we don't know where they are in

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Speaker 1: an investigation. Thanks Jen, that's Jennifer Ree, Bloomberg Intelligence Senior

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Speaker 1: Litigation Analyst. Coming up. Elizabeth Holmes takes the stand in

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Speaker 1: her own defense. This is Bloomberg and that's it for

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Speaker 1: this edition of the Bloomberg Law Show. Remember you can

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Speaker 1: always get the latest legal news on our Bloomberg Law Podcast.

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Speaker 1: You can find them on Apple Podcasts, Spotify, and at

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Speaker 1: www dot Bloomberg dot com, slash podcast, Slash Law and

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Speaker 1: you join us every week night at ten pm Wall

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Speaker 1: Street Time for the Bloomberg Laws Show. I'm June Grosso

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Speaker 1: and you're listening to Bloomberg