The family of former U.S. Education Secretary Betsy DeVos family claims they were misled by founder and CEO Elizabeth Holmes into investing $100 million into failed health care startup Theranos, NBC reports.
Tuesday's testimony in the trial of Elizabeth Holmes revealed that the DeVos family was originally going to invest $50 million but later chose to double it to $100 million after speaking with Holmes, NBC reports.
"A witness from the DeVos family office testified about numerous statements made by Holmes that turned out to be false, including that Theranos’ proprietary device could run hundreds of tests using a tiny amount of blood. The success of this charge will turn on whether the government is able to persuade the jury that Holmes knew at the time that the technology was not capable of operating in the way she represented," says Jessica Roth, a former federal prosecutor with the Southern District of New York and co-director of the Jacob Burns Center for Ethics in the Practice of Law at Cardazo School of Law.
Holmes and her colleague and former romantic partner, Ramesh “Sunny” Balwani, are currently charged with nine counts of wire fraud and two counts of conspiracy to commit wire fraud.
The charges stem from allegations that the two were involved in a scheme to defraud doctors, patients and investors by marketing faulty blood tests, putting lives at risk and losing billions of dollars of venture capital.
According to "Bad Blood: Secrets and Lies of a Silicon Valley Startup" – a book written about Holmes by John Carreyrou, the reporter who exposed her – Holmes' winning pitch was that a pinprick of blood could be used on their machines to help people detect life-threatening conditions earlier.
“For DeVos, the best argument is that Holmes apparently withheld material, really important information, and DeVos relied on what Holmes was saying. For Holmes, the best argument is that although there may have been aggressive and overly hopeful marketing, there was no fraud, and the DeVos family office was run by sophisticated, experienced financial advisors and analysts,” says Jack Sharman, a defense and government investigations lawyer with Lightfoot, Franklin and White.
DeVos wasn't the only investor Holmes allegedly had fooled.
Media titan Rupert Murdoch and family-owned Cox Enterprises also bet the same massive sum of $100 million on the enterprise. She also convinced Oracle founder Larry Ellison and Riley Bechtel, chairman of closely held construction giant Bechtel Group, to invest.
On Theranos's Board of Directors were other political heavyweights such as former secretaries of State George Shultz and Henry Kissinger, former U.S. Sens. Sam Nunn and Bill Frist, former secretary of Defense William Perry and former Defense Secretary James Mattis.
What's in it for DeVos and her family to testify?
"The DeVos family, like any other investor, may be eligible for restitution if Holmes is convicted. The court can impose an order of restitution as part of the sentence," Roth says.
If Holmes is convicted in this criminal case, the DeVos family could also get money back by launching a civil case, according to Sharman.
"One would think DeVos would have a fair chance of success in a civil case, with a civil case’s lower burden of proof. As a practical matter, though, DeVos would have to consider if Holmes or Theranos will have enough assets to satisfy a significant judgment,” Sharman says.
You can reach the author Michelle Shen @michelle_shen10 on Twitter.
This article originally appeared on USA TODAY: Betsy DeVos family alleges $100 million-con investment in Theranos
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