Theranos founder might face new charges, judge says

Theranos founder Elizabeth Holmes might face new charges about her blood-testing startup that doubles the length of the alleged conspiracy to defraud investors and introduces additional categories of victims, a federal judge ruled.

Although he did not yet authorize the government to prosecute the expanded charges, U.S. District Judge Edward Davila found on Friday that "dismissal is not warranted at this stage."

The contested charges were added via a supplemental filing rather than in an indictment. Defense attorneys argued the amendment violated Holmes' due process protections since a grand jury did not return the superseding information.

But Davila said it is "not the filing of information" that violates the Fifth Amendment but the "prosecution of a defendant without an indictment."

Holmes and former company president Ramesh Balwani are accused of 12 counts of wire fraud over the defunct Palo Alto blood-testing startup once valued at over $9 billion. They are charged with bilking investors and consumers out of hundreds of millions of dollars, allegedly telling them Theranos' proprietary technology was capable of conducting a full range of laboratory tests in a fraction of the time with just a few drops of blood.

In May, prosecutors brought in superseding information to broaden the charges in the case even though the defendants did not waive their right to be charged by indictment. The prosecutors explained the move was necessary to require Holmes and Balwani to appear for further proceedings on the specific charges and was timely filed within the statute of limitations since grand jury proceedings were suspended in the Northern District of California courts from March to June. U.S. v. Holmes et al., 18-cr-00258 (N.D. Cal., filed June 14, 2018).

Defense attorneys maintained due process rights and federal procedure require crimes carrying a year or more in prison to be brought by indictment except when those protections are waived, an argued the superseding information must be "deemed without legal effect and dismissed immediately." They claimed that bringing the new charges to satisfy the statute of limitations is improper and accused the DOJ of intentionally waiting as part of its strategy.

The DOJ and Holmes' lawyers at Williams & Connolly LLP did not immediately respond to requests for comment.

While he agreed an indictment is constitutionally required to prosecute defendants on the new accusations, Davila said prosecutors are still allowed to bring the charges. Federal procedure, he found, "simply establishes that prosecution may not proceed without a valid waiver."

Responding to whether the superseding information requires defendants to appear for further proceedings based on the charges, the judge said the issue is irrelevant since prosecutors did not ask for defendants to do so. He also ruled that any statute of limitations issues would arise under superseding indictments rather than the supplemental filing.

"Consequently, the court is not prepared to say that the superseding information has no legal effect at this time," he wrote. "The court will determine [its] legal effect when the relevant issues are squarely presented."

A jury trial, which was to begin in July and was postponed to October because of COVID-19 shutdowns, is now scheduled for March.

In an order issued last week, Davila allowed prosecutors to examine Holmes in preparation of her intent to introduce evidence of a mental disease that affects her guilt. She will call as an expert California State University at Fullerton psychology professor Mindy Mechanic, who regularly testifies in cases "involving battered women charged with crimes and in other legal cases involving childhood or adult trauma, victimization and post-traumatic stress disorder," according to her faculty bio.