WEBVTT - It May Be the Trial of the Year 0:00:03.200 --> 0:00:07.960 This is Bloomberg Law with June Brusso from Bloomberg Radio. 0:00:09.119 --> 0:00:11.640 I'm the founder and CEO of this company. Anything that 0:00:11.680 --> 0:00:13.960 happens in this company is my responsibility at the end 0:00:13.960 --> 0:00:16.919 of the day. That's what Elizabeth Holmes told NBC in 0:00:16.960 --> 0:00:20.440 an interview in But that's not what she'll be telling 0:00:20.560 --> 0:00:23.759 jurors in August when she goes on trial for defrauding 0:00:23.760 --> 0:00:28.080 investors in her blood testing startup Sarahnus, once the world's 0:00:28.120 --> 0:00:31.040 youngest female self made billionaire and the darling of the 0:00:31.080 --> 0:00:34.800 tech and media worlds with her promise to revolutionize blood testing. 0:00:35.240 --> 0:00:39.000 Home spectacular fall from Grace has been recounted in books, 0:00:39.120 --> 0:00:44.120 countless news stories, and an HBO documentary When is Not 0:00:45.280 --> 0:00:50.239 This was real? FLoC I don't have many secrets, and 0:00:50.280 --> 0:00:53.199 whatever secrets she does have may now be heard in 0:00:53.320 --> 0:00:56.279 open court. Joining me is Anne Coughlin, a criminal law 0:00:56.320 --> 0:01:00.000 professor at the University of Virginia Law School, and prosecutors 0:01:00.040 --> 0:01:04.200 want to describe holmes wealth and lavish lifestyle to travel 0:01:04.240 --> 0:01:07.680 on private jets, the stays in luxury hotels and the like, 0:01:08.120 --> 0:01:10.319 and they say it's to show she had a financial 0:01:10.400 --> 0:01:14.400 incentive to commit fraud. But the defense says, it's really 0:01:14.440 --> 0:01:18.000 to prejudice the jury. Well, of course, all evidence of 0:01:18.040 --> 0:01:21.640 guilty is going to make the jury prenjudice in a sense, 0:01:21.840 --> 0:01:24.080 but I mean that's the question that the judge had 0:01:24.160 --> 0:01:27.800 to consider. One issue in the case is what was 0:01:28.160 --> 0:01:32.360 Holmes's motive for doing the fraud? And the government is 0:01:32.400 --> 0:01:35.200 going to show that part of her motive was to 0:01:35.360 --> 0:01:37.760 enrich herself, and one way to do that is to 0:01:37.840 --> 0:01:40.360 show the large sums of money that she was able 0:01:40.440 --> 0:01:44.319 to spend on herself, both in her capacity as the 0:01:44.360 --> 0:01:46.960 CEO of Saranos and then of course just as a 0:01:47.120 --> 0:01:50.960 human being in the world, and so that's relevant to motive. 0:01:51.400 --> 0:01:54.480 At the same time, the concern is that it's going 0:01:54.560 --> 0:01:56.520 to make her look bad in the eyes of the jury, 0:01:56.560 --> 0:01:58.680 and the jury is going to convict her because they 0:01:58.720 --> 0:02:01.880 think she's a and thrift or because there's some kind 0:02:01.920 --> 0:02:04.840 of class by its So the judge was trying to 0:02:05.640 --> 0:02:10.080 balance these two interest the government's interest in this relevant 0:02:10.240 --> 0:02:13.840 evidence and then the worry that the jury would be 0:02:14.160 --> 0:02:17.880 untarily swayed against her. So he splits the difference, if 0:02:17.880 --> 0:02:21.320 you will, and allows the prosecution to admit some evidence 0:02:21.320 --> 0:02:25.480 of her spending spending that's related to her lifestyle as 0:02:25.560 --> 0:02:31.560 the CEO, but not specific purchases she made, designer brands, 0:02:31.680 --> 0:02:35.920 luxury places that she stayed, and so forth. We've heard 0:02:35.960 --> 0:02:41.639 a lot about possible trial strategies, possible defenses she'll put on. 0:02:42.080 --> 0:02:45.440 Do we know yet what her defense will be? You know, 0:02:45.560 --> 0:02:49.440 it's very hard to tell. I've read the judges order 0:02:49.840 --> 0:02:54.119 on the evidentiary emotions, the emotions in limity we call them, 0:02:54.320 --> 0:02:56.880 and of course what we're trying to do is to 0:02:56.960 --> 0:03:00.440 parse the tea leaves, especially with risk, back to what 0:03:00.560 --> 0:03:03.000 homes of strategy is going to be. And it's very 0:03:03.080 --> 0:03:06.520 hard to tell, you know. Obviously, her lawyers have tried 0:03:06.560 --> 0:03:08.520 to keep out a lot of the evidence that the 0:03:08.560 --> 0:03:11.840 government wants to admit, and the judge denied many of 0:03:11.880 --> 0:03:15.400 those emotions. But at the same time, you're reading the 0:03:15.520 --> 0:03:19.120 order trying to figure out what exactly is her theory 0:03:19.160 --> 0:03:22.160 of defense going to be, and it is difficult to say. 0:03:22.840 --> 0:03:25.080 It looks to me as if it's going to come 0:03:25.120 --> 0:03:28.360 down to what we call a mental state argument. In 0:03:28.360 --> 0:03:31.800 other words, to convict her for these forms of fraud, 0:03:32.320 --> 0:03:35.480 the government has to show not nearly that she made 0:03:35.520 --> 0:03:39.280 the false misrepresentations, but that she knew that they were 0:03:39.320 --> 0:03:41.600 false and that she did it for the purpose of 0:03:41.640 --> 0:03:45.840 defrauding investors. And so that's I take it. What we're 0:03:45.880 --> 0:03:50.680 expecting her theories to revolve around is, Yeah, it turns 0:03:50.760 --> 0:03:56.480 out my equipment didn't work. My blood tests were not accurate, 0:03:56.680 --> 0:03:59.600 they were not fast. I couldn't do all of the 0:03:59.680 --> 0:04:03.200 things that I promised, but I thought I thought that 0:04:03.280 --> 0:04:05.600 I could. I thought that that stuff was gonna work. 0:04:05.720 --> 0:04:08.680 I didn't know my motive was not to defraud people. 0:04:09.040 --> 0:04:12.520 And it's kind of hard to see what that case 0:04:12.640 --> 0:04:14.440 is going to look like until we know what her 0:04:14.480 --> 0:04:17.960 story is. Is she going to try to present that 0:04:18.120 --> 0:04:23.200 defense by calling mental health experts, so we believe that 0:04:23.279 --> 0:04:27.400 she is. She indicated in prior filings that that was 0:04:27.440 --> 0:04:30.440 going to be one of her strategies, but of course 0:04:30.440 --> 0:04:32.479 we won't know until we get to the trial that 0:04:32.560 --> 0:04:34.880 in fact that she's going to do that. So it's 0:04:34.920 --> 0:04:38.919 interesting to think about what story can she tell to 0:04:39.120 --> 0:04:43.560 negate the inference that she knew that these statements were 0:04:43.600 --> 0:04:46.000 false and that she put them out there for the 0:04:46.040 --> 0:04:50.360 purpose of defrauding investors and defrauding doctors and patients. What 0:04:50.600 --> 0:04:54.000 story can she tell to suggest that she had an 0:04:54.040 --> 0:04:56.440 innocent mind, if you will, And I mean, there's a 0:04:56.480 --> 0:04:58.880 couple of stories that she can tell. Some of them 0:04:59.000 --> 0:05:04.640 are suggest did by the extensive media coverage, the investigative reporting, 0:05:04.880 --> 0:05:09.520 the documentary that suggests that you know, all along she 0:05:10.160 --> 0:05:16.560 believed in herself and her ability to create this amazing product, 0:05:16.720 --> 0:05:20.000 this blood testing technology that could just take a couple 0:05:20.000 --> 0:05:24.960 of drops and then magically provide accurate results that previously 0:05:25.080 --> 0:05:27.719 we could not do this way, and that she really 0:05:27.760 --> 0:05:29.800 really believed that she was going to be able to 0:05:29.839 --> 0:05:33.200 do that. And you know, on some levels she knew 0:05:33.680 --> 0:05:37.200 that she couldn't do it today, but she was always 0:05:37.240 --> 0:05:40.280 hoping that the breakthrough was just around the corner, right, 0:05:40.360 --> 0:05:43.799 That she believed in herself. Um that it takes time 0:05:43.880 --> 0:05:47.039 to get this kind of technology off the ground, And 0:05:47.040 --> 0:05:49.640 and that would be one potential story is that she 0:05:49.839 --> 0:05:54.040 actually thought that she could do it, even though from 0:05:54.080 --> 0:05:58.000 what we might call an objective perspective, that belief was false. 0:05:58.600 --> 0:06:02.200 Now that's a tough oh, because you know, the fact 0:06:02.279 --> 0:06:05.560 that you think you can do something in the future, um, 0:06:05.760 --> 0:06:08.640 doesn't negate the fact that you're lying about your current 0:06:08.680 --> 0:06:10.600 ability to do it. If you see what I mean. 0:06:10.839 --> 0:06:13.480 But that seemed to be one theory that she was 0:06:13.640 --> 0:06:16.480 floating at one time. It doesn't seem to work as 0:06:16.520 --> 0:06:19.039 a legal matter, but that seemed to be a story 0:06:19.080 --> 0:06:22.480 that's been told, at least in part by the documentary. 0:06:23.000 --> 0:06:25.760 I believe at some point there was a possibility that 0:06:25.839 --> 0:06:30.840 she would point to her former lover and the correct 0:06:31.279 --> 0:06:34.839 as sort of a Sengali. So now that their trials 0:06:34.880 --> 0:06:39.080 are separate, can she just try to blame it on him? Right? 0:06:39.120 --> 0:06:42.800 So that's the other theory. So one theory is I 0:06:42.960 --> 0:06:46.400 actually thought I could do this. You know, I believed 0:06:46.480 --> 0:06:50.880 in myself, and so I actually honestly believed that I 0:06:50.960 --> 0:06:55.200 was telling the truth when I told my investors, trust me, 0:06:55.800 --> 0:06:58.880 we will be able to do this. Um, that's one story. 0:06:58.920 --> 0:07:02.919 The other story is that she made the false statements 0:07:03.680 --> 0:07:06.560 she knew they were false. But the claim would be 0:07:06.800 --> 0:07:12.160 I did this out of fear, out of trauma, out 0:07:12.240 --> 0:07:16.040 of duress. I was under the spell of this powerful man, 0:07:16.680 --> 0:07:22.600 and I was doing it again, not because I wanted 0:07:22.600 --> 0:07:27.240 to defraud people, but because I was terrified of him 0:07:27.680 --> 0:07:32.440 or was unable to resist his power. Those kinds of claims, Now, 0:07:32.480 --> 0:07:35.160 that's a really tricky claim, because the claim would then 0:07:35.200 --> 0:07:38.480 be that she was acting under some kind of psychological duress, 0:07:38.600 --> 0:07:43.520 and those are very tough claims to satisfy. Notice, in effect, 0:07:43.600 --> 0:07:48.239 she would be conceding. Yep. I knew that my lover 0:07:48.520 --> 0:07:51.880 and I were making false statements, and I knew that 0:07:51.960 --> 0:07:54.920 they were being used for the purpose of defrauding folks. 0:07:54.960 --> 0:07:57.960 But I went along with it only because I was 0:07:58.240 --> 0:08:01.200 suffering from the effects of his arrest. And it's just 0:08:01.280 --> 0:08:03.800 a very hard claim to make. But that was the 0:08:03.960 --> 0:08:07.280 suggestion in some of her earlier filings that that was 0:08:07.320 --> 0:08:10.000 going to be her theory. And yes, now that the 0:08:10.080 --> 0:08:14.080 cases are severed, they're being tried separately. I take it 0:08:14.120 --> 0:08:17.240 that each of these characters can point the finger at 0:08:17.320 --> 0:08:20.640 the other. She can say I was doing it under 0:08:20.760 --> 0:08:24.840 his arrest. He could say, I take it. I believe her. 0:08:25.240 --> 0:08:28.000 I believed her when she She was the one who 0:08:28.040 --> 0:08:30.200 came up with this company, she was the one who 0:08:30.240 --> 0:08:35.840 developed the technology, and I believed her representations to be true. 0:08:36.559 --> 0:08:40.520 She is pregnant, which is one reason that the trial 0:08:40.640 --> 0:08:44.520 was put off. So when she's tried on August thirty one, 0:08:44.640 --> 0:08:47.199 she'll be a new mother. Will that have any effect 0:08:47.240 --> 0:08:50.760 on the jury. Will the jury either glean that or 0:08:50.800 --> 0:08:54.400 will they be told that June. To my eyes, one 0:08:54.440 --> 0:08:58.320 of the most fascinating features of this trial are what 0:08:58.400 --> 0:09:01.160 I would call the gender to ask x um, the 0:09:01.200 --> 0:09:05.640 fact that Elizabeth Holmes is a woman is one of 0:09:05.679 --> 0:09:09.120 the reasons that we, I think, are so fascinated by 0:09:09.160 --> 0:09:13.439 the case. And you know, ultimately these two trials, we 0:09:13.559 --> 0:09:19.200 have this really long history of grister's and swindlers and 0:09:19.440 --> 0:09:22.560 con men, if you will, in this country. But just 0:09:22.679 --> 0:09:27.079 as the phrase con men confidence man suggests, the defendants 0:09:27.160 --> 0:09:30.800 usually are men. And so the fact that Holmes is 0:09:30.880 --> 0:09:35.600 a woman really changes the trajectory, the arc of the 0:09:35.720 --> 0:09:39.880 narratives that we might tell and then might accept when 0:09:39.920 --> 0:09:44.640 thinking about her guilt. So it's just completely fascinating. Yes, 0:09:44.960 --> 0:09:47.800 the idea that she is pregnant, that she is a 0:09:47.920 --> 0:09:51.480 new mother. Somehow she'll you know, she'll have some kind 0:09:51.480 --> 0:09:55.520 of maternal halo around her. People may be inclined to 0:09:55.559 --> 0:09:58.800 be more sympathetic to her, less inclined to see her 0:09:58.800 --> 0:10:01.600 as a villain, you know, less inclined to hear as 0:10:01.720 --> 0:10:06.000 the mastermind of this criminal enterprise. So all of those 0:10:06.040 --> 0:10:08.040 things are going to be on the table in a 0:10:08.120 --> 0:10:11.560 case like this. So, on the one hand, there are 0:10:11.800 --> 0:10:16.320 studies and certainly plenty of anecdotal evidence as well as 0:10:16.320 --> 0:10:21.280 fictional stories that show that juries, courts, law enforcement may 0:10:21.280 --> 0:10:24.240 be inclined to be more lenient when women are involved. 0:10:24.280 --> 0:10:28.240 Women aren't viewed as being as dangerous as men, right. 0:10:28.920 --> 0:10:32.400 But at the same time, we can find that in 0:10:32.480 --> 0:10:36.839 some cases there's a tremendous amount of you know, animosity 0:10:37.000 --> 0:10:41.880 or additional hostility towards female criminals. And it just so 0:10:42.120 --> 0:10:44.960 depends on the kinds of stories that we tell, you know, 0:10:45.000 --> 0:10:48.079 will she emerge from this trial as you know, a 0:10:48.080 --> 0:10:51.760 young woman who fell into the clutches of this older 0:10:51.880 --> 0:10:55.760 lover who you know, had influence on her. Um. She 0:10:55.880 --> 0:10:58.520 was this up and rising star who was trying to make, 0:10:58.800 --> 0:11:01.920 you know, make it good in this dairy masculine world. 0:11:02.920 --> 0:11:05.720 And and somehow we should see her as the innocent 0:11:06.520 --> 0:11:10.080 um who fell into this difficult place and now she's 0:11:10.120 --> 0:11:13.360 a new mother, and how could we punish someone like her? 0:11:14.000 --> 0:11:17.960 Or will we see her as a scheming adventuress. You 0:11:18.000 --> 0:11:20.800 know that that's the other side of the coin, someone 0:11:20.880 --> 0:11:25.240 who was trying to use her femininity to you know, 0:11:25.360 --> 0:11:29.400 forge these relationships with these powerful investors who are men 0:11:30.240 --> 0:11:34.280 um So she's taking advantage of them, not just through 0:11:34.720 --> 0:11:38.480 the lies that she told about Thereinos, but by using 0:11:38.520 --> 0:11:41.600 her femininity as well as a kind of power over them. 0:11:42.040 --> 0:11:45.160 So it's really hard to know how the story is 0:11:45.200 --> 0:11:48.200 going to unfold the trial. But the fact that she's 0:11:48.240 --> 0:11:53.120 a mother, Yes, we revere mothers in this culture, and 0:11:53.679 --> 0:11:57.720 there may well be a feeling that she doesn't deserve 0:11:57.760 --> 0:12:00.760 to be punished as badly because she's a mom. On 0:12:00.800 --> 0:12:04.559 the other hand, people may may turn on her and think, wow, 0:12:05.280 --> 0:12:09.880 you know, you are behaving in a way that contradicts 0:12:10.200 --> 0:12:14.760 the type of behavior that we expect from from women 0:12:15.240 --> 0:12:18.440 and especially from others. So it's really really hard to tell. 0:12:19.120 --> 0:12:21.800 I wonder if she'll take the stand in her own defense. 0:12:23.080 --> 0:12:25.840 So that's the million dollar question that I had as well. 0:12:25.920 --> 0:12:28.120 Thank you so much for raising it. One of the 0:12:28.160 --> 0:12:31.160 things that will be fascinating about this trial is if 0:12:31.160 --> 0:12:33.240 there is a trial. So many of the cases that 0:12:33.360 --> 0:12:36.840 you know go off by plea buggins, and that could 0:12:36.840 --> 0:12:39.680 still happen in this case. But if the case goes 0:12:39.720 --> 0:12:43.160 to trial, it will be it's potentially going to be 0:12:43.200 --> 0:12:46.040 a spectacular one. And the big question is will she 0:12:46.160 --> 0:12:48.840 take the stand? And from where I sit right now, 0:12:49.080 --> 0:12:53.640 it's hard to see how she could imagine that she'd 0:12:53.640 --> 0:13:01.280 prevail without taking the stand. The story that would exonerate her, 0:13:01.679 --> 0:13:05.800 or the story that would create a reasonable doubt about 0:13:05.880 --> 0:13:09.720 her guilt and lead a jury to acquit is going 0:13:09.760 --> 0:13:12.720 to be a story about her mental state, a story 0:13:12.760 --> 0:13:17.120 about what she knew, what she thought, what she intended 0:13:17.400 --> 0:13:20.679 over the course of the years that the government alleges 0:13:20.960 --> 0:13:25.439 that she was scheming and lying and basically stealing people's money, 0:13:25.600 --> 0:13:29.320 What was in her mind. And we draw inferences about 0:13:29.320 --> 0:13:33.200 what's in people's minds from facts, you know, from their conducts, 0:13:33.360 --> 0:13:36.000 from the money they made, from the spending they did, 0:13:36.040 --> 0:13:38.080 for the messages they sent at the time, from the 0:13:38.120 --> 0:13:40.880 meetings they offended. So all of that stuff is going 0:13:40.920 --> 0:13:43.080 to be a piece of it. But it's really hard 0:13:43.160 --> 0:13:47.880 to imagine how the case could be successful without her 0:13:47.920 --> 0:13:50.920 taking the stand. I guess I'm tipping my hand right 0:13:50.960 --> 0:13:53.520 now and saying that from where I sent, the government's 0:13:53.720 --> 0:13:58.560 evidence looks overwhelming. Thanks. And that's Professor and Coughlin of 0:13:58.600 --> 0:14:01.520 the University of Virginia Law School. And that's it for 0:14:01.520 --> 0:14:04.440 this edition of The Bloomberg Law Show. Remember you can 0:14:04.440 --> 0:14:07.400 always at the latest legal news on our Bloomberg Law Podcast. 0:14:07.600 --> 0:14:10.360 You can find them on Apple Podcasts, Spotify, and at 0:14:10.520 --> 0:14:15.559 www dot bloomberg dot com slash podcast slash Law. I'm 0:14:15.640 --> 0:14:18.760 June Grasso. Thanks so much for listening, and please turn 0:14:18.840 --> 0:14:21.240 into The Bloomberg Law Show every week night at ten 0:14:21.320 --> 0:14:23.840 pm Eastern right here on Bloomberg Radio.