Elizabeth Holmes’s Trial Could Reveal Her Side of Theranos Story

After Theranos began imploding five years ago—with federal investigators building cases against her for allegedly misleading investors and patients about the company’s technology—Ms. Holmes remained convinced she had done nothing wrong, people close to her at the time recalled, and wanted a venue to profess her innocence.

In 2016, months after Theranos received its first criminal subpoena, Ms. Holmes pitched a book idea to Bob Barnett, a lawyer and book agent known for landing six-figure-plus advances for the political elite, people familiar with the matter said. The meeting, at Theranos’s Palo Alto, Calif., headquarters, was brokered by the company’s then-general counsel, they said.

Mr. Barnett told Ms. Holmes that there could be a market for her book—but only if she could emerge successfully from the federal investigations, one of the people said. He told her his Washington law firm, Williams & Connolly LLP, could help with her legal troubles, too, the people recall.

The book deal didn’t happen. Ms. Holmes was indicted in June 2018 on charges of wire fraud and conspiracy to commit wire fraud; and Theranos, a startup once valued at more than $9 billion, dissolved three months later. Her criminal trial in San Jose, Calif., is set to begin Tuesday. Four of Mr. Barnett’s partners will be defending her.

Mr. Barnett declined to comment. Ms. Holmes’s lawyers didn’t respond to requests for comment.

Her lawyers haven’t disclosed whether jurors will hear directly from Ms. Holmes in the trial. Deciding whether Ms. Holmes will take the stand in her own defense is one of the most important strategic decisions they face in fighting the U.S. charges. Doing so carries risks, defense lawyers said, but it is also often the best opportunity to create sympathy with jurors.

“She had a lot of people believe in her” in her early Theranos days, said Mark MacDougall, a white-collar defense lawyer at Akin Gump Strauss Hauer & Feld LLP and a former prosecutor, who isn’t connected to the case. “I would not underestimate her ability to tell her story.”

To win a conviction, prosecutors must establish that Ms. Holmes intentionally defrauded investors and patients about the nature of Theranos’s technology. Precisely how her lawyers will try to clear her name won’t be known until the trial.

But Ms. Holmes’s past behavior—for instance, the aborted book project—and filings made by her defense team show one possible opening: arguing that she always believed the promise of Theranos, which she said had developed technology that could perform dozens of blood tests using just a few drops of blood.

In reality, Theranos used its proprietary technology only on a handful of tests, and regulators found those to be unreliable. The rest were performed on conventional lab machines.

In court filings, her lawyers have said she is entitled to argue “that she believed any alleged misrepresentations were true and accordingly that Theranos was a legitimate business generating value for investors.”

Indeed, even after the company faced criminal subpoenas and regulatory sanctions, Ms. Holmes often took actions that seemed to depart from the reality of a company on the brink of collapse.

In late 2016, after regulators closed her labs and forced her to rescind thousands of test results, Ms. Holmes shocked some subordinates by spending time seeking advice about the appearance of Theranos’s products from designer Yves Béhar, former employees said.

Mr. Béhar said Theranos approached him that December about a project that would be “a new direction for the company,” but nothing came of the inquiry.

As Theranos’s financial condition deteriorated, Ms. Holmes agreed to “leadership coaching,” people familiar with the matter said. Her coach—Bill Redmon, a former official at Bechtel Corp., a company affiliated with one-time Theranos board member Riley Bechtel—didn’t respond to requests for comment. Mr. Bechtel didn’t respond to requests for comment.

Later in 2017, Theranos officials suggested in private meetings with investors that an initial public offering of Theranos shares was a possibility, notes taken by an investor who attended one of the meetings show. “Yeah right,” the investor wrote in the notes about an IPO.

In Theranos’s last two years, Ms. Holmes instructed her staff to edit her Wikipedia page to reflect what she saw as important accomplishments; company officials attempted to circulate shots taken by a high-profile fashion photographer to media outlets; and the company brought in the crisis consultant who inspired the ABC show “Scandal” to respond to a coming book by

John Carreyrou,

The Wall Street Journal reporter who broke the Theranos story in October 2015, people familiar with the matter said.

She also continued to push the book idea, even after Mr. Barnett’s advice, people familiar with the matter said. Although Ms. Holmes never submitted a book proposal or any draft, she stayed in touch with Mr. Barnett about the possible book, one of the people said.

Her attempts to turn around the company didn’t work, and Theranos closed down in fall 2018, months after the criminal charges were brought against Ms. Holmes and Ramesh “Sunny” Balwani, her former boyfriend and No. 2 executive at the company. Both have pleaded not guilty, and Mr. Balwani faces a separate trial next year.

Ms. Holmes’s lawyers have suggested that she believed that Theranos would succeed. “The government appears to argue now that the entire company existed as a scheme to defraud investors and that any truthful statements promoting the company are inherently fraudulent,” her lawyers wrote in a January 2020 filing.

Her lawyers have argued that all blood tests have error rates and that many Silicon Valley startups prize secrecy. They also have hinted that they could bring a mental-health or mental-defect defense, which appears poised to potentially set her up against Mr. Balwani.

Ms. Holmes’s lawyers told prosecutors in December 2019 that she could call a psychologist, Mindy Mechanic, as an expert as part of such a defense. Dr. Mechanic, a professor at California State University, Fullerton, has testified in prior court cases as an expert on the mental-health impacts of domestic violence and sexual assault. Dr. Mechanic declined to comment.

The court authorized the government to conduct its own psychological examination of Ms. Holmes, but the majority of court filings related to the possible defense have been filed under seal, which the Journal’s publisher, Dow Jones & Co., has challenged.

One element potentially in her favor is that she didn’t appear to personally profit from the alleged fraud, said Mr. MacDougall of Akin Gump. The law doesn’t require a defendant to profit for fraud to occur, Mr. MacDougall said, “but in practical terms, it does.”

Ms. Holmes received as much as $400,000 a year while serving as Theranos’s chief executive and lived in a house in Los Altos Hills, Calif., that the company rented for her, according to a legal record and people familiar with the matter.

But her funds appeared to dry up soon after the company dissolved: She stopped paying her former personal lawyers at the firm Cooley LLP by September 2018, court records show.

The Cooley lawyers argued to criminal prosecutors before Ms. Holmes was indicted that she was too inexperienced and dependent on others to have intentionally committed a crime, court filings show. Theranos’s board included two former secretaries of state, a former four-star general, business leaders and influential lawyers.

Excerpts of a Cooley presentation included in the court record show that in March 2018 the lawyers argued that Ms. Holmes was a college dropout with no more than a “basic science background, creativity and vision.”

That line of defense could be weakened by statements Ms. Holmes made in a July 2017 deposition with the Securities and Exchange Commission as part of its civil case, when she said, “I mean, I’m the CEO. I’m the ultimate decision maker for the company.”

Ms. Holmes settled with the SEC in 2018, agreeing to pay a $500,000 penalty, without admitting or denying the charges.

Write to Christopher Weaver at christopher.weaver@wsj.com and Sara Randazzo at sara.randazzo@wsj.com