Charles H. Sloan-As the jury deliberates Elizabeth Holmes' fate, experts say 'fraud is complicated'

The Charles H. Sloanimage of Elizabeth Holmes as a disgraced former startup founder who careened her once-high-flying blood-testing company off a cliff has been etched into Silicon Valley history.

Many who formed opinions about Holmes after watching the documentary, reading the bestselling book or listening to a podcast on her former startup Theranos have been puzzling over why the jury has been debating the case against her for five days and still can't decide.

Part of the reason: the story of Theranos has looked vastly different over the past four months from inside a federal courthouse in San Jose, Calif., than it has from the outside.

It is beyond dispute that Theranos, once valued at $9 billion, imploded after failing to meet its promises. Its blood tests were often secretly conducted on third-party commercial blood analyzer machines unbeknownst to investors and patients, who assumed the company's "innovative" device was doing the processing. And when results did come back, patients reported inconsistent, flawed or flat-out false results.

Far less clear is what was going through Holmes' mind when she touted the capabilities of her so-called Edison devices or what she was thinking when she spoke to investors about Theranos' work with the military. Investors say they were left with the impression that Theranos was on the cusp of deploying its technology on the battlefield, and on medevac helicopters, in the Middle East to save lives when it was not. Holmes says that was never her intention when she spoke about the company's work with the Department of Defense, which was remarkably limited.

Issues that arose about financial projections that turned out to be drastically inflated, or laboratory snafus that contributed to inaccurate test results were overseen by employees below her, Holmes testified. But how much did she know and what, if anything, did she hide about what she knew?

Was she a huckster who intentionally hoodwinked investors or a startup executive who stretched the truth always believing the questionable boasts would one day become a reality?

In short, the image of Holmes as a fraudster in popular culture is not so clear-cut when examined with a legal lens.

"The difference in this case versus a case of someone dealing cocaine is if you're caught with a suitcase of cocaine, that's a problem," said Brian Klein, a former federal prosecutor who is now a defense lawyer in Los Angeles. "Whereas here, running a startup, trying to develop a new technology for blood testing, that's all very legal. The question becomes 'what were you thinking when you were doing these things?' And that's really hard to get to."

Holmes took the witness stand, a rare move for a defendant in a white-collar criminal case

Over 15 weeks of testimony, prosecutors summoned nearly 30 witnesses to the stand to make the case that Holmes duped investors and patients about her blood-testing technology and that she knew exactly what she was doing the whole time: lying about her company to generate hype and hundreds of millions of investment dollars. If the testimony is to be believed, prosecutors say, the jury should find her guilty of 11 counts of wire fraud and conspiracy to commit wire fraud, which is punishable by up to 20 years in federal prison.

But Holmes' side of the story adds complexity to what the government is trying to sell to jurors. She took a gamble and testified over seven days. It is rare for a defendant in a white-collar criminal case to take the witness stand because that exposes them to sometimes withering cross-examination from the government.

Holmes, though, had an impressive performance, legal experts say. As she testified, she was focused and thorough. She said that company responsibility was shared by other managers and deputies. Looking back, she said, she wishes she had handled many things differently, like getting the consent of pharmaceutical companies before affixing their logos on reports validating Theranos technology and not retaliating against ex-employees who blew the whistle on the company.

"I sure as hell wish we treated her differently," Holmes said of Erika Cheung, who became a key Theranos whistleblower.

Holmes also delivered impassioned and tearful testimony, accusing her ex-boyfriend and No. 2 at Theranos, Ramesh "Sunny" Balwani, of emotional and sexual abuse. (Balwani, who denies the abuse, is facing a fraud trial on the same charges in February. Because the two are pointing the finger at each other, the judge agreed to allow them to have separate trials.)

Holmes' testimony may have shaped how the jury sees her and how they feel about her, which underpins how credible her side of the story is, according to Caroline Polisi, a white-collar criminal defense attorney in New York.

"She had a meticulously well-crafted persona," Polisi said.

"She went to great lengths to be perceived as a powerful, in-control person. We saw a softer side of her, and I do think that's calculated," she said. "And it's hard for jurors to separate personal feelings about a defendant with their dispassionate view of the law."

For jurors, there is a lot mixing together: the alleged crimes, the high standard of the law and the persuasiveness of Holmes, a seasoned pitchwoman who brought in nearly $1 billion in investment after becoming the eccentric public face of the company.

For five days, jurors have been deliberating Holmes' fate in private, trying to come to consensus on the charges after the judge in the case, Edward Davila, read 39 pages of instructions about the rules of their debate. They have only returned two notes to the judge. The first was about whether they could take the jury instructions home. The answer: No. The second question was about a 2013 recording of Holmes talking up Theranos to potential investors. The recording was replayed for the jurors.

Don't read too much into how long the jury is taking to deliberate

While it is not uncommon to see juries in high-profile white-collar trials deliberate for five days or longer, the suspense does make everyone involved jittery, said Amanda Kramer, a New York-based white collar criminal defense lawyer who used to work as a federal prosecutor. She cautions against reading too into the duration of jury deliberations.

"As a prosecutor, I was always very nervous when jury deliberations took a long time, but it's almost impossible to know what it means," Kramer said. "But remember, for the jury, there's just a lot to remember over a four-month trial."

"It could be," adds Klein, "that the jury has agreed on most things, but there are just a few things they're trying to work out."

If the jury cannot all come together, known as a hung jury, the judge could declare a mistrial. But Klein said since the jury has not sent a note to the judge indicating they are deadlocked, that should not be assumed.

"Fraud is complicated," Kramer said. "There's a lot of evidence that is dry when it comes in at trial, and it's time-consuming for jurors to synthesize all of the evidence that they've seen and heard."

Jurors on Wednesday will return to the San Jose federal courthouse to continue the work of synthesizing the evidence against Holmes.