Prosecution Can Argue Elizabeth Holmes’ “Lavish Lifestyle” Motivated Her To Commit Fraud, Judge Rules

When it comes to the forthcoming trial of disgraced Theranos CEO Elizabeth Holmes, her “appetite for fame and fortune” can and will be used against her as a potential motivator to commit fraud, a judge ruled late last week.

Holmes’ trial, which has already been delayed several times (due to the pandemic and to Holmes’ pregnancy), is finally set to commence in August. Prosecutors are keen to paint a picture of Holmes as someone who traveled on private jets, stayed in luxury hotels and relied on multiple personal assistants, Bloomberg Law wrote late last week.

Her association with celebrities and “other wealthy and powerful people” could be used as evidence she had incentive to commit fraud, the government wants to argue.

And that seemed OK with U.S. District Judge Edward Davila, who agreed to allow that line of prosecution, but for “some limitations”. 

The judge’s ruling, issued Saturday, said the government could compare Holmes to other tech CEOs. The judge wrote: “This includes salary, travel, celebrity, and other perks and benefits commensurate with the position. Each time Holmes made an extravagant purchase, it is reasonable to infer that she knew her fraudulent activity allowed her to pay for those items.”

The judge did, however, ask that the government refrain from getting into the weeds and “referring to specific purchases, brands of clothing, hotels and other personal items”.

Barbara McQuade, a former U.S. Attorney who teaches at the University of Michigan law, commented that the ruling was fair: ”People should not be punished merely for being wealthy, just as they should not be punished merely for being poor, but if someone profited from a crime, then the fruits of their crime is fair game to show their guilt and motive.” 

Holmes’ lawyers had argued that using her wealth against her would “inflame” the jury and that it should be off-limits: “The real value of the evidence to the government is to paint a misleading picture of Ms. Holmes as a woman who prioritized fashion, a luxurious lifestyle, and fame, and to invite a referendum on startup and corporate culture.”

The government countered: “Theranos’s stock — both literal and figurative — soared as a result of” Holmes’s fraud, prosecutors said in a court filing. “The evidence at trial will show that these benefits were meaningful to the defendant, who closely monitored daily news to cultivate her image.”