Judge Rules Against Former Theranos Exec During SEC Trial

Published: Friday, April 26, 2019 - 10:32pm

A principal of former blood-testing company Theranos Inc. is back in court again. This time the hearing involves the company's former president hounding employees.

Theranos President Ramesh “Sunny” Balwani was blocked by a judge from collecting information after clinic employees reported his behavior. 

The hearing Wednesday was called after the Fountain Hills clinic wrote a letter to the court complaining about Balwani’s conduct. The clinic said the information he seeks, including laboratory results and records, is private patient data. The clinic refused to release the information in either the Securities and Exchange Commission or criminal case.

The Fountain Hills clinic called Balwani a “a morally bankrupt sociopathic liar” and said he physically and legally threatened a doctor there.

Balwani is fighting federal securities fraud allegations from his tenure at Theranos. His lawyer says information at the Fountain Hills clinic is essential for his defense in that case. Fountain Hills reportedly compared Theranos blood test results against those of another provider.  Balwani's attorney said his client needs it to mount his best defense.

But, U.S. Magistrate Judge Nathanael Cousins rejected Balwani’s request, saying it imposes both a financial cost and a privacy cost to patients.

Federal prosecutors are looking to pause the SEC's suit against Balwani, arguing that his pretrial information-gathering requests have exceeded the boundaries of the civil litigation and jeopardize the criminal case against him. The next hearing on the request is scheduled for June.

Both Balwani and former Theranos Chief Executive Officer Elizabeth Holmes were sued by the Securities and Exchange Commission and criminally charged with fraud. Holmes settled the SEC’s claims against her. 

Theranos was once valued at as much as $9 billion. It unraveled amid what prosecutors describe as a massive fraud masterminded by Holmes and Balwani to dupe investors, doctors and patients. 

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