• Show Notes
  • Transcript

In this episode of the CAFE Insider podcast, Preet and Joyce discuss the second indictment stemming from special counsel John Durham’s investigation into the origins of the FBI’s Russia probe. They also break down the trial of Elizabeth Holmes, the disgraced founder of biotech company Theranos, and the first lawsuits brought under Texas’s restrictive abortion law.

We hope you’re finding CAFE Insider informative. Email us at letters@cafe.com with your suggestions and questions for Preet and Joyce.

This podcast is brought to you by CAFE Studios and Vox Media Podcast Network.

Tamara Sepper – Executive Producer; Adam Waller – Senior Editorial Producer; Mathew Billy – Audio Producer; Jake Kaplan – Editorial Producer

REFERENCES & SUPPLEMENTAL MATERIALS

Up Against The Mob, CAFE

SUSSMANN INDICTMENT

18 U.S. Code §1001 – Statements or entries generally

Federal Rules of Criminal Procedure Rule 29 – Motion for a Judgment of Acquittal

United States v. Michael Sussmann, U.S. District Court District of Columbia, indictment, 9/16/21

United States v. Kevin Clinesmith, U.S. District Court District of Columbia, criminal complaint, 8/14/20

“​​Grand Jury Indicts D.C. Attorney with Making False Statements to the FBI in 2016 Regarding Alleged Communications Between Trump Organization and Russian Bank,” DOJ, Special Counsel John Durham, press release, 9/16/21

“Appointment of Special Counsel to Investigate Matters Related to Intelligence Activities and Investigations Arising Out of the 2016 Presidential Campaigns,” Attorney General Barr, order, 10/19/21

“​​Durham’s Sussmann indictment is a bizarre coda for DOJ’s Russia investigation,” MSNBC, 9/19/21

ELIZABETH HOLMES TRIAL

18 U.S. Code §1343 – Fraud by wire, radio, or television

18 U.S. Code §1349 – Attempt and conspiracy

United States v. Elizabeth Holmes and Ramesh “Sunny” Balwani, U.S. District Court Northern District of California, third superseding indictment, 7/28/20

“U.S. v. Elizabeth Holmes, et al.,” DOJ press release, 8/24/21

“Elizabeth Holmes Plans To Accuse Ex-Boyfriend Of Abuse At Theranos Fraud Trial,” NPR, 8/28/21

“Who Could Testify at the Theranos Trial? Murdoch, Mad Dog Mattis, and More,” Daily Beast, 8/28/21

“Theranos and Elizabeth Holmes: History of the WSJ Investigation,” WSJ, 8/24/21

ABORTION

Texas S.B. 8 – Texas Heartbeat Act

Whole Woman’s Health v. Judge Austin Reeve Jackson, U.S. Supreme Court, order & dissents, 9/1/21

Oscar Stilley v. Alan Braid, U.S District Court Western District of Texas, complaint, 9/20/21

Felipe Gomez v. Alan Braid, U.S District Court Western District of Texas, complaint, 9/20/21

U.S. v. Texas, U.S. District Court Western District of Texas, complaint, 9/9/21

“Opinion: Why I violated Texas’s extreme abortion ban,” Dr. Alan Braid, WaPo, 9/18/21

Preet Bharara:

From CAFE and the Vox Media Podcast Network, welcome to CAFE Insider. I’m Preet Bharara.

Joyce Vance:

And I’m Joyce Vance.

Preet Bharara:

How are you, Joyce?

Joyce Vance:

I’m doing well, Preet. It’s been a long couple of weeks, right?

Preet Bharara:

Yes. It has been. What’s new in the Vance household?

Joyce Vance:

Well, new in the Vance household is some serious consideration of a new puppy. Do you guys have dogs?

Preet Bharara:

We do not.

Joyce Vance:

We have two at the moment and we are-

Preet Bharara:

Well, you have two dogs.

Joyce Vance:

Two dogs.

Preet Bharara:

Cats?

Joyce Vance:

We have a few.

Preet Bharara:

A few cats. And how many chickens?

Joyce Vance:

So in sad news, I had promised my husband I wouldn’t keep the entire clutch that we had hatched. So I’ve sent four of them to a farm that’s not too far away from us and that I believe leaves us with 12 chickens.

Preet Bharara:

So the sum total of animals in your household is what?

Joyce Vance:

Lots. In the south, we say a mess of animals.

Preet Bharara:

A mess of animals. All right. So what kind of dog are you going to get?

Joyce Vance:

Well, that’s the question. Bob loves dogs. My mother-in-law actually used to breed dog. She was a pretty good dog breeder. She had some success with showing her dogs, but we’ve been talking. We have not had a lab since our very first dog, so maybe a lab. We’re big dog people. I’d love to know what kind of dogs our listeners think we should get. What kind of dogs do you have, what kind of dogs you love to help us make a decision.

Preet Bharara:

You hear that, folks? Joyce Vance needs advice on what kind of dog to get.

Joyce Vance:

Advise me.

Preet Bharara:

I just want to remind everyone, CAFE has a new podcast, Up Against The Mob, everything you want to know about the Italian mafia hosted by our colleague, Elie Honig. Episode three is out tomorrow, Wednesday, September 22nd. You can find Up Against The Mob wherever you listen to podcasts. Okay. So now about this, would you call a terrible case a dog back in the day in Alabama? Is that an insult to canines?

Joyce Vance:

Not an insult to canines, I don’t think specifically, but I can remember people walking into my office with sort of a blue file and sort of flapping the pages together and saying, “This one barks like a dog.”

Preet Bharara:

We should, I guess, do some background. There’s a prosecutor named John Durham, who for a very long time was the United States attorney in the District of Connecticut. I have said previously, and I think you have said previously, has a good reputation, career kind of guy. And during the Trump administration, he was appointed as a special counsel to look at the investigation by people who were looking at collusion between the Trump campaign and Russia. So it was an investigation of the investigators. It has not been that productive. It’s lasted longer than the entire special counsel investigation conducted by Bob Mueller. Before now, there was one indictment of an FBI lawyer who altered an email, and we’ve talked about that before. But now there’s a new charge against a law firm partner, previously a partner of Mark Elias at the law firm of Perkins Coie. The defendant’s name was Michael Sussmann. He was charged literally five years to the day, and as a reason for that because the statute of limitations is five years on false statements.

Preet Bharara:

But he was charged five years to the day after the defendant, Michael Sussmann, had a conversation with the general counsel of the FBI way back in September of 2016 relating to his findings on potential communications between the Trump organization and a bank, Alpha Bank, known to have ties to the Kremlin. What’s the charge, Joyce?

Joyce Vance:

So the charge here is a violation of 18 U.S. Code § 1001, a statute that makes it a crime to lie to a federal agent or a federal investigator. The lie has to be material. The statute is one, I don’t know about your office, we use this pretty frequently. In fact, we would use this a lot of the time in a public corruption situation when people impeded the investigation. I mean, like all federal crimes, this is an important one, but this is a statute that could be quite broad in its application. We see that here that prosecutors in exercising their discretion typically apply only when there’s a real harm that’s done, when your investigation really gets screwed up because someone lies. And before we get into the specifics, I think it’s worth underlining a point that you made about how the Durham investigation has gone on for longer than the Mueller investigation. Mueller indicted 34 individuals. He indicted three Russian businesses. And so as we look at this sort of late brought complaint in the Durham investigation, it’s worth thinking about what sort of good it’s doing the American people.

Preet Bharara:

Yeah. I just want to be clear that as we’ll discuss, I think we’re both of the mind that the indictment is fairly weak, but I want to be very clear that I don’t view this as some of the Trump folks have said before with respect to other charges brought by Mueller and other offices, that this is a mere process crime. Making a false statement, a material false statement in connection with a federal investigation, I don’t consider it to be a mere process crime. If it’s well brought and provable, it’s a serious crime. So I’m not minimizing the crime at all. I just have concerns about the proof in this case and whether or not that burden of proof can actually be met.

Joyce Vance:

Something that you always have to think about when you’re looking just at an indictment, that’s all that’s happened in this case so far as the indictment has been filed. You don’t know what all of the government’s evidence is. So we might look at this case and think it looks weak, and I do. It’s possible that the government has more evidence that makes the case stronger, but in this situation, well, I was going to say, right? A 27 page indictment that complains a lot of superficial detail, some of it that seems far more inflammatory than explanatory to me. So it’s hard to think that the government was holding any of its good cards back.

Preet Bharara:

Yeah. And just the context here is there seems to be an effort to portray certain people, and it may be true for all we know. It doesn’t mean it’s necessarily a crime, that there were folks at the FBI and folks certainly working at the behest of the Clinton campaign who are trying to link Trump and the Kremlin, and they were going about their business in a way to get that done and crossed certain lines. And so here, the defendant in the case, Michael Sussmann who’s a lawyer, long-time lawyer, on his own voluntarily, this was not a custodial interview. This was not a situation where Michael Sussmann was being investigated and made a false statement when he was being interviewed like in the Michael Flynn case. But rather Michael Sussmann himself went not to an FBI agent, rank and file, but to the general counsel of the FBI itself, Jim Baker, and brought him information that came to him from a cybersecurity expert, as I said earlier, that looked like they were communications between the Trump organization and Alpha Bank.

Preet Bharara:

Now, whether or not that’s true, whether or not there was something nefarious there, the FBI ultimately said no, that that didn’t seem to be the case, but there’s no allegation that Sussmann was lying about that and was lying about the findings. The sole allegation, the false statement as the indictment lays out is that Sussmann claimed that he wasn’t having the conversation with Jim Baker on behalf of any client. That he wasn’t representing any client in connection with that conversation, which is odd because as the indictment also makes clear and as public records made clear, it was well-known generally to the public and to the FBI that Sussmann had represented the DNC. But the narrow claim in the cases, the material false statement he made was he wasn’t doing it in connection with the representation of a client. And they had one fact on their side, if it’s true that he made that statement and that is in question, and we’ll get to that in a moment.

Preet Bharara:

And it turns out that the billing records reflect that Michael Sussmann did bill much of this work and the work that connected Alpha Bank to the Trump organization that was built to the Hillary Clinton campaign. Do I have that right?

Joyce Vance:

I think you do. But what I don’t see in the complaint is something that suggests that he built this particular meeting. Certainly he took a car, got to the meeting somehow. I would have expected to see documentation or an allegation that this particular meeting was billed to the DNC, and we don’t get that in this complaint.

Preet Bharara:

We don’t. Now, take a step back and talk about the general kind of thousand and one false statement case that you get. Usually, there’s a little bit more proof of what the statement was because the whole case rises and falls on the fact of a statement that has to be provably false. Now, my understanding is that Sussmann denies or will deny that he made the claim that he wasn’t doing this meeting in connection with the representation of a client. What do you have? There’s no recording, there’s no even notes taken by Jim Baker. Ordinarily in a case like this, like in the Michael Flynn case, FBI agents are trained when they interview people to fill out a report called a 302, and in every thousand and one case that I ever bought, even if there wasn’t a recording and often there was, there were two or more agents who could corroborate each other as to the purported lie. You don’t have that here. So just as an initial matter, on the most fundamental level, do you think there’s a difficulty in proving a he said, he said case here?

Joyce Vance:

Well, that’s always the problem, right? If you’re the government, you bear the burden of proof beyond a reasonable doubt. So the tie should go to the defendant and we can talk a bit about how we think the government might try to prove the statement, but the fact that this wasn’t a typical thousand and one situation where you’ve got someone under investigation or an important witness talking to two agents who are either taping the statement, or at least filing a 302, that highlights just how unusual this is. This is a former DOJ lawyer, a cybersecurity guy sitting down with Jim Baker. I feel certain that they had a preexisting relationship or knew each other, and it in many ways takes the form of a heads up. Here’s what we’re looking at. So you have this very unusual conversation between two lawyers that forms the basis for this statement. And that’s why there may well be a fatal proof issue just in proving that the statement is as alleged in the indictment.

Preet Bharara:

Yeah. And it gets even worse. So the general counsel, the FBI, Jim Baker, who was the person who heard the statement purportedly, he himself didn’t take any notes. And he himself has said later in closed door meetings with Congress that he didn’t really recall whether Sussmann had represented himself as working on behalf of the Democratic Party or Hillary Clinton’s presidential campaign. And it’s not clear to me also how Jim Baker feels about the charge. It wasn’t his decision to make and it’s far from clear that he’s going to be a good or reliable witness on this. What we’ve left out so far and what I guess the John Durham folks think helps them, even though Jim Baker himself didn’t take notes. After he left the meeting with Michael Sussmann, he ran into another FBI official and told that other official about the meeting and that other official then around that time took notes.

Preet Bharara:

And the government is saying that this other person’s notes, which if you’re following along would be double hearsay, that other officials notes are a contemporaneous record of the meeting and that supports the claim that the lie was told. And for folks and [inaudible] people out there, hearsay is a term that’s thrown around I think very casually, but essentially it’s an out of court statement that is being offered for the truth of what the statement reflects. And for lots of reasons, based on the unreliability of the statement, it’s generally not admissible as evidence, but there are a number of exceptions to that and the question is whether or not any of those exceptions will apply here. So in this particular case, the question is, what did Michael Sussmann say? That’s the evidence and if you had a tape of it, that would be direct evidence of what he said. The fact that Jim Baker might be able to testify about what he said is a form of hearsay.

Preet Bharara:

It could be an exception for that for admissibility purposes. And then the fact that some other person to whom Jim Baker had a discussion about the conversation, that would be double hearsay.

Joyce Vance:

There’s a fight here over whether that evidence of, I think it’s Bill Priestap’s notes from FBI’s national security division, whether they’re even admissible. A lot of people have speculated that they’re hearsay. I tend to think that there are some good exceptions to the hearsay rule that would permit these to come into evidence. But these decisions about whether evidence is admissible are in the discretion of the trial judge. And those sorts of decisions are very rarely disturbed on appeal by appellate courts. They give a lot of deference to the district judge, the trial judge’s decision. So if that’s the case, DOJ has staked its whole case on a ruling about admissibility of evidence. That seems a little bit dangerous. And so Preet, you talked about whether or not Jim Baker is a friendly witness for the government. I honestly don’t see how you indict this case, unless you have some way of rehabilitating Baker, given his prior statement, which is harmful to your case, right?

Joyce Vance:

There’s prior statement where he doesn’t have a recollection. Everything here looks real dicey as a prosecutor. I’m just not sure that you or I would have brought this case. I tend to think we would not have brought it.

Preet Bharara:

Yeah. And it gets even worse because those notes-

Joyce Vance:

You keep saying that, right? I mean, that’s the truth that this indictment, it keeps getting worse.

Preet Bharara:

Yeah. And again, I’m trying to be fair about it and not be dismissive and not appear biased, but I’m trying to put on my lawyer’s hat and looking at this, the other FBI official’s notes, even if they come in and as you said, there will be a fight about it. And they may not come in, which is, I think, near fatal to the case as a whole, as our friend and colleague, Barb McQuade, put it in a great piece for MSNBC. She said, “Look, there’s a problem with what the notes say.” And the notes, state, quote, referring to Sussmann said not doing this for any client. Now, when people speak colloquially, listeners take various meanings from what words are used. When you’re going to have a criminal case of this nature, every word is going to be analyzed and over-analyzed and parsed to death. And as a few people have pointed out, what does this mean? Not doing this? Is this having the meeting, not doing this meeting on behalf of a client? Is this deciding to come forward about some information on behalf of a client?

Preet Bharara:

It’s not even clear what this is, and that that may not seem important to people, but you put that kind of ambiguity in the hands of capable defense lawyers, they can drive a truck through it, don’t you think?

Joyce Vance:

Well, they can. And it may mean that if there is a trial and if the evidence comes out like this and if the government doesn’t have more, that this case never even goes to a jury because a good defense lawyer would file a rule 29 motion saying that the government simply doesn’t have sufficient evidence to establish beyond a reasonable doubt that there’s a false statement, right? Let’s just give it the construction, this is the meeting. And unless there’s proof that he’s billing for that meeting and that he really was representing a client, the government’s cases is over right there. So it may never hit a jury.

Preet Bharara:

And then it gets even worse, Joyce. Can we mention something else?

Joyce Vance:

Yeah.

Preet Bharara:

A false statement is not sufficient to sustain a charge or a conviction. It has to be a material false statement. In other words, it has to be directly relevant to the investigation or have harmed the investigation in some way. So if Michael Sussmann went into the meeting and said he was an Olympic bobsled gold medalist, that’s demonstrably false, as far as I know, and it’s a lie and it’s a false statement, but it’s not material. Whether he was or was not an Olympic gold medal winner doesn’t matter. So there’s this materiality test that’s applied. And the question is, well, if it’s true that he lied about doing this on behalf of a client or not, does that matter. And it doesn’t seem from a common sense point of view how it would have mattered because they knew generally that he was a Democratic lawyer. So you have to take things that he’s saying with a grain of salt if you think people are motivated by politics.

Preet Bharara:

And then worse yet, Jim Baker was asked in congressional testimony back in 2018 whether it would have mattered if Sussmann had said he was there on behalf of the Clinton campaign, as opposed to lying as the indictment alleges. And apparently Baker said, no, it wouldn’t have mattered. And in any event, I’m not sure what that alleged lie, what effect that would have had on the FBI’s investigation. They looked at the connection between Alpha Bank and the Trump organization. And I don’t know what different kinds of investigation they would have done, different questions they would have asked, different people they would have interviewed based on the lie or not.

Joyce Vance:

I think that that’s right. This information could have come to the FBI from Putin himself and if it had enough of a basis, they would have continued to investigate. But I think the problem that we have with finding some sort of materiality here highlights the choice of false statement that was made here, right? Because this is not a false statement alleging that Sussmann was lying about connections between the Trump servers and Alpha Bank. And if that had been a lion, if it was made, then that might really give this indictment some more teeth. The problem is just this very weak allegation about, well, he misrepresented who his client was, or the fact that he had a client who sort of had a dog in the fight here. It’s why you keep saying and it gets weaker, because it does. At every step of the way, even if this case is one that could have technically been brought, even if it technically gets to a jury, this just looks like a poor exercise of prosecutorial discretion given all the cases out there that require DOJ’s resources.

Joyce Vance:

And this very weak case with virtually no materiality is how John Durham chooses to expend his resources.

Preet Bharara:

Can I say it again?

Joyce Vance:

Yeah.

Preet Bharara:

And it gets worse. Well, it doesn’t get worse, but at sort of the outset, the background atmosphere is not good because throughout the whole duration of the Durham investigation, there has been the spectrum of politics, right? Donald Trump himself over and over again from his public platform as president was encouraging John Durham to finish his investigation, to bring charges. There’s a chorus of people who support Donald Trump, elected officials and others who were kind of openly saying charge people, charged people, charge people. That’s not a great atmosphere for ultimately bringing a charge. And so against the backdrop of direct political pressure to bring charges, you would think in that context, if you’re going to bring a charge, it better be a strong one and this is not that.

Joyce Vance:

This is anything but that. I mean the real problem here, leaving aside the case and the fact that perhaps these charges should not have been brought against Mr. Sussmann is how this impacts DOJ at a time where we have an attorney general who’s making a lot of sacrifices to try to restore credibility to the institution. This does not restore credibility.

Preet Bharara:

So there’s another case underway, Joyce. Is it possible that we have not yet talked about the trial of Elizabeth Holmes, the CEO of Theranos?

Joyce Vance:

It’s amazing that we haven’t yet discussed it, but this week we have not one but two indictments to talk about. I went back last night, I think you did too, to reread this indictment and here we are a couple of weeks into the trial already.

Preet Bharara:

So as background, first of all, this is a case that a lot of people are following very closely and have followed for a while. There was a book called Bad Blood by John Carreyrou, reporter for the Wall Street Journal. And it was Wall Street Journal reporting, I think, that led to a federal investigation of this woman and her former boyfriend, Elizabeth Holmes and Sunny Balwani, who in the indictment are charged with between the two of them, 12 counts of wire fraud or conspiracy to commit wire fraud in connection with their promotion of their investment in their company, Theranos. And the supposed genius of Theranos, the company was that they developed a method for drawing only a few drops of blood from a patient’s finger and were able to do many, many, many diagnostic medical tests on the blood. So something that was quick and easy, much wanted and desired in the market. And the feds allege following Wall Street Journal allegations and this book’s allegations that it was kind of made up.

Preet Bharara:

That the test didn’t really work and not only did the test not really work, but that the representations about the financial standing of the company were also false. So the allegations, there are two groups of victims, both investors and patients. Theranos was a company that at one time had a valuation in the neighborhood of $9 billion and a woman who was very compelling in her personal story. I remember having friends talking about her in a laudatory way when it looked like she uniquely in a very male dominated world was a very hyped CEO in her own right. And I will say it was very disturbing to a lot of people that it turns out it was essentially a fraud.

Joyce Vance:

This is an interesting trial in a lot of different ways. But what I’ve always focused on here is whether the fall of Elizabeth Holmes was a take down for good reason or for bad reason. And that’s sort of the defense’s strategy here. They’re saying that she had a good idea and she wasn’t able to execute it, but it never crossed over the line into fraud. And so the argument that I thought we would hear, the defense I thought we would hear at this trial was exactly that, right? That this wasn’t fraudulent, that there was no intent. That’s often the issue in white collar cases. But it turns out that Elizabeth Holmes has a different defense in mind, maybe in addition to arguing that the government can’t meet its burdens of proof on intent, but there’s another interesting defense going on here, right?

Preet Bharara:

Yeah. I mean, they are still sticking with, she didn’t believe it was a fraud. She just tried very, very hard and failure at a business after giving it your all is not a basis for a fraud charge. But then she’s also arguing, and I think this is what you’re getting at, that she was abused in some way by the person who became her lieutenant, Sunny Balwani, and that abusive relationship to the extent it caused her to do bad things or engage in fraudulent conduct. That’s why. Now, there are all sorts of defenses you can make based on mental state. This is not one that I’m familiar with. It’s very odd to me and I don’t know all the details of it and I think experts are being allowed to testify about it, but in connection with the financial fraud where the whole idea of the business originated with you, meaning Elizabeth Holmes and Elizabeth Holmes is the CEO. And Elizabeth Holmes sort of orchestrated all of this.

Preet Bharara:

The idea that she was somehow in the thrall of Sunny Balwani, who admittedly was much older and much more experienced and had run a company and sold a company previously, that the fact that you had a bad relationship with an older man absolves you of guilt in making false statements about your product and about your financial wherewithal at the company. Am I missing something? I don’t see how that flies.

Joyce Vance:

I don’t think you are. And I think it’s ultimately going to play as very offensive to women. Here you have this very strong CEO figure, sort of the female Steve jobs. And suddenly, she saying, well, but I was never really in control because a man was telling me what to do. The reason that we know she’s going to allege this as her defense, it sort of comes up in pretrial motions, Holmes and Balwani are indicted together, but they’re going to have separate trials. His trial won’t take place until after the first of the year and that’s because she’s raising this defense and Balwani’s legal team is concerned when she makes allegations that she’s not responsible because he was in essence abusing her that she had a battered intimate partner syndrome, that that would be prejudicial to him. So that’s why we know this will be her defense. That’s why we’ve got two separate trials in the offing.

Joyce Vance:

I haven’t looked at the makeup of this jury, the composition of this jury, but I’m not sure that this is a defense it’s legal merits aside that is going to land well with all of the jurors.

Preet Bharara:

No, I don’t think so either. One thing that occurs to me with respect to this case and that I’ve asked myself and other people have asked me, and have asked me in other contexts where you have brazen frauds committed basically out in public view, is how does it happen? How do you get so far? How do you get a company up to $9 billion? And it’s a complicated question and I have a couple of thoughts on that. One is it’s another reason why I think that this defense of the abusive relationship will not work. It was Elizabeth Holmes herself who recruited very, very famous, largely older white men to be supporters of the company and to the board of directors, and they include people like former secretary of state, George Shultz, Henry Kissinger, former Senate majority leader, Bill Frist, Jim Mattis, mad dog Mattis, and other people who in a kind of reputational Ponzi scheme, every time you go to an investor and you say, look, here’s our product, they also ask, well, who are the other people who are supportive of the company, and you point to a who’s who.

Preet Bharara:

Of military and other leaders, that gives people a feeling of comfort that, well, I guess those guys aren’t morons, but then you realize over time, if you’ve been in this business long enough of investigating and prosecuting fraud, yeah, people can be duped and they can be duped by a very, very strong pitch. And the more sort of significant reputationally strong people you collect along the way, other people are prepared to part with their money because they think it’s a good deal. And this is a lesson to everyone, if you plan to invest in something, the singular insight about this is, yeah, you had these people like Henry Kissinger and Bill Frist and whatever you think of them, none of them had expertise in blood testing, not one of these people, and that’s what was missing.

Joyce Vance:

I think any time you see a board like this, and of course, hindsight is always 2020 to be fair, but anytime you see this sort of a celebrity board that lacks people with substance of expertise or people with startup expertise, I think that’s a real red flag. So although you use that sort of Ponzi scheme, as you say, of names to attract new investors, looking at this from the outside, she never had real oversight from her board. She just had a lot of [inaudible].

Preet Bharara:

No, that’s completely correct. And here’s the other dynamic that I’ve seen over and over and over again, it’s not just that investors gave her money, she had very lucrative contracts with chain drug stores, including Walgreens. There were a lot of red flags here and blood tests were not able to be replicated. And there were a lot of reasons to doubt the hype that Elizabeth Holmes was stating about her own company. And I think a lot of fraud and fraud enabling comes from a very simple concept, FOMO. You know what FOMO is?

Joyce Vance:

No. What’s FOMO?

Preet Bharara:

FOMO is fear of missing out. And in this case, as I understand it, you had executives at Walgreens. Should we engage in this contract or not? And they had real doubts because there were real red flags as I recall reading. But there was a possibility that it wasn’t too good to be true and this technology was workable and was going to be very lucrative. And the idea that some other chain, some other drugstore chain would come in if Walgreens said no and engage in the contract and they would have to sit and watch that other company reap all the benefits was too much for the Walgreens executives. So time after time, you find people, whether it’s in the Bernie Madoff scheme or something else who against better judgment and against the presence of red flags and other issues do the thing anyway because the idea of missing out on something that might seem too good to be true is too much to bear.

Joyce Vance:

And of course that works on both sides, right? Because at some point, Elizabeth Holmes is so far into this that the choice she faces is acknowledging that her Edison box, her genius plan is not working the way she’s been trying to get it to work for 10 years or to just keep going and hope things will work out. I mean, at some point, not just Walgreens, but Safeway, they’re both building wellness centers in their facility. Safeway has $350 million invested in these wellness centers and they’re testing people. And I think the point at which her defense is going to fail quite frankly is the point at which as you say, they’re the two separate conspiracies and the two separate types of wire fraud. One involves investors, the other involves doctors and patients. But it reaches a point where there are patients whose lives are being impacted by the failure of these tests, by the fact that they are false positives or false negatives and that’s the point at which her defense that this was just a longtime project that didn’t work out I suspect we’ll fail.

Preet Bharara:

We’ll see what happens. You never know what a jury will do. There are lots of particulars of the fraud. There were investors who gave blood samples and were made to believe that it was their own blood that was being tested and it wasn’t actually their own blood being tested, which had to have been, and certainly was known until Elizabeth Holmes, that seems to be a fairly clear example of fraud. But I think what she’s relying upon is the thing that you mentioned already, garnering some sympathy because she was allegedly in an abusive relationship. And also by the way, the trial was delayed first because of COVID and also I believe in part because she was pregnant. Was having a baby and in opening statements, her lawyer pointed out, and this I think the defense lawyers do all the time to humanize their clients, pointed out that she’s a young mom.

Joyce Vance:

In this case, I mean, that highlights how real this is. What the defense strategy here is, is jury nullification. Sure, she did something wrong, but we need to give her a break because she’s a young mom.

Preet Bharara:

So the trial was severed because there are conflicting defenses between Elizabeth Holmes and Sunny Balwani. So Sunny Balwani’s trial will happen second. So whatever happens in the first trial, do you believe that as a strategic matter, that Balwani as the second defendant has some advantage?

Joyce Vance:

So that’s an interesting question. As a prosecutor, I obviously want to try them both together and let them point the finger at each other and have some fun with that situation. If she’s convicted here, does he have the ability to argue that it was all her and he wasn’t involved? I think that’s an evidentiary matter so I’m not sure he benefits as much here as a defendant might normally. In some ways, I think he could even be prejudiced because she could perhaps, if she gets convicted, cut a deal with the government to testify against him in an effort to limit her exposure. I’m not as convinced here that this plays for him.

Preet Bharara:

Yeah. I mean, my view always is to the extent you get to preview the arguments made by the prosecution, and many of the arguments will be the same, and how they view the documents and how they argue from the documents and the communications and the financial statements, there’s less surprise for you if you’re second. And I guess the other question is, Elizabeth Holmes, will she testify? Her lawyers indicated that she will and I wonder how that’s going to go. And I think back to the book, Bad Blood that I’ve mentioned before, there’s a very compelling scene in it where there comes a point where members of the board and other supporters of the company have doubts because of red flags, about the efficacy of the technology. And it looks like things are going south. And Elizabeth Holmes, which is another reason why I think this abusive relationship defense doesn’t really work because she was the mastermind in many ways, at least as portrayed in that investigative reporting of the book.

Preet Bharara:

And she summons up all her persuasive ability and her charm and her personality and she goes into the boardroom and she turns it around on the strength of her words. And I don’t know if this has been your experience in fraud cases. I think there’s a certain kind of fraud case where the defendant is more likely to testify because they believe rightly or wrongly that they can talk their way out of things, because that’s how they talk their way into a lucrative fraud, that they have a certain charm and charisma that got people like George Shultz to join the company in the first place based on sort of the house of cards. If they can do it with George Shultz and others, the reasoning goes, they can do it to a jury of 12 people. What do you think of that?

Joyce Vance:

This is a dangerous strategy. If I’m her lawyer, she doesn’t take the witness stand unless there’s no hope otherwise, because on her direct examination where she is trying to charm the jury, they will certainly see traits on full display that the prosecution will argue and in closing argument are the traits that allowed her to perpetuate the fraud. And she’ll face something that didn’t happen in that board meeting, where she talked her way out of trouble. She’ll face cross examination by a skilled, experienced federal prosecutor. She will not be able to explain if the prosecutor handles that cross-examination in the typical fashion where they will simply point blank her on some of the key points, isn’t it true that, and she will be forced to acknowledge if the prosecution does this the way that you would expect in a case like this. Some of the most significant evidence that shows that she in charge, that it was her not Balwani, and that she had the necessary intent to execute a fraud.

Preet Bharara:

Yes. No, excellent point.

Joyce Vance:

I mean, would you put her on the stand? It really is an interesting question. It may be her best and only hope. Maybe they want her to be perceived as sympathetic. I’m just not sure she’s going to come off that way.

Preet Bharara:

Yeah. Well, I think everything you said is right on point, but the key, what you said is unless there’s no hope. And in an overwhelming case where you’re trying to get sympathy and where you’re hoping not necessarily for jury nullification by all the jurors. But remember, in a criminal case, you just got to convince one and then you can live to fight another day. And if she threw whatever charm or charisma or victim status she can put forward and be persuasive about, you get one of those jurors to say, you know what? I don’t think she should go to prison for this. And whether it’s based on the evidence or based on something extraneous, I’m not going to convict. That’s all you need. So testifying in this case, I agree is a Hail Mary pass, but it might be necessary as you say, if it’s her only hope.

Joyce Vance:

Well, maybe she can be Doug Flutie.

Preet Bharara:

Maybe she can. So finally, Joyce, recovering the ongoing saga with a bill called SB8, the Texas Heartbeat Act, we’ve discussed and I’m sure everyone has read other people talking about basically that [inaudible] functionally has been overwritten in Texas and anyone who wants to have an abortion after six weeks can’t get one. And if they do, anyone who performed the abortion or aided and embedded in the performance of the abortion is subject to suit by pretty much anyone anywhere for any reason and they can collect a $10,000 bounty. And you and I discussed, maybe the strategy here was just to chill abortion services and that’s enough and not have anyone actually sue because the mission was accomplished just by having the law in place. And you and I wondered aloud how come there hadn’t been a suit yet? Well, now just yesterday or in the last couple of days, there are at least at the time of this recording two lawsuits.

Preet Bharara:

They came after an abortion provider, a Dr. Alan Braid publicly announced that he had performed an abortion in violation of SB8 in Texas, and the lawsuits have begun. Joyce, could you describe the quality of the lawsuits?

Joyce Vance:

Well, if we describe the Sussmann indictment as a dog, we’re going to have to go about 10 circles of hell lower. I mean-

Preet Bharara:

We will laugh a few times in describing this, and I just want to say at the outset, this is not a laughing matter. It’s a very serious constitutional right that’s being abridged, but boy, this is some peculiar stuff, right?

Joyce Vance:

This just highlights the utter, what my people would call the meshugas of this law that the folks in Texas…

Preet Bharara:

My people say meshugas too.

Joyce Vance:

I think everybody says meshugas at this point, right? It might as well be English. So Texas adopts, and I know everyone remembers this, this just whack job procedure. Can I say whack job on a podcast? This-

Preet Bharara:

Not only can you, but you must.

Joyce Vance:

I just did This procedure that lets anybody, anybody in the country, and we now know that that’s the case because we’ve got two men from outside of Texas who filed these first two lawsuits. Anybody can go after someone who provides or who aids and abets and provision of an abortion to a woman in Texas and can sue them for monetary damages. So this first one, there are two, but I think it’s the first one that’s my favorite Preet. This is a guy named Oscar Stilley, and he brings this action against Dr. Braid, who has admittedly performed an abortion that violates SB8, and he gives us a lot of gratuitous information about himself before saying that since Texas has said that anybody can have 10,000 bucks, he would actually like $100,000, but at minimum, he wants $10,000. And his personal history is absolutely fascinating. Convicted felon in the federal system. Please, why don’t you go ahead and read his description of his background?

Preet Bharara:

He says, paragraph three referring to himself, quote, plaintiff is a disbarred and disgraced former Arkansas lawyer residing at the address at fourth of the bottom of this complaint.

Joyce Vance:

This one goes down in history, right? It’s a standard part of a pleading that you have to describe who the parties are. I’ve never seen a self-description quite this … and interesting.

Preet Bharara:

Look, it’s a self-awareness thing, which I think will help him a lot in this court proceeding. He goes on to say, paragraph four, quote, plaintiff is currently on home confinement in the custody of the United States Department of Justice, Federal Bureau of Prisons, serving the 12 year of a 15 year federal sentence on utterly fraudulent federal charges of tax evasion and conspiracy.

Joyce Vance:

It’s sort of like he’s trying to file a 2255, right? A habeas motion saying, and by the way, the charges against me should be dismissed because they were fraudulent.

Preet Bharara:

It says later, paragraph six, quote, plaintiff currently carries the Appalachian federal felon, but remains confident that he will eventually receive total exoneration of all counts of conviction, end quote. I’m not sure why that’s relevant, but he seeks to describe himself. And one of my favorite lines is in paragraph seven, quote, plaintiff, despite all his legal troubles is not, capital N-O-T, boldfaced and italicized, is not an officer or employee of any state or local governmental entity of the great state of Texas, end quote. And by the way, arguably, that’s something he has to plead because the statute makes very clear that no officer or employee of a governmental entity is allowed to sue. So he’s making it clear that he has standing because he’s not such a person.

Joyce Vance:

But I love the way he does it. He does it almost as if to say no matter how low I have fallen, I am not an officer of the great state of Texas.

Preet Bharara:

And then finally, there’s this paragraph that kind of crystallizes how absurd the broad standing is pursuant to SB8. He states Senate Bill 8 confers a private right of action upon, quote, any person, end quote, without limitation as to residency or citizenship in the state of Texas, status as a felon, condition of official detention, disbarment from the practice of law, public disgrace, difficulties getting due process, et cetera. So he’s crystallizing the idea that anybody for any reason, whether they have anything to do with the provision of the abortion can sue and that’s nutso. And this nutso complaint kind of makes that clear.

Joyce Vance:

I think that says it all about this one.

Preet Bharara:

There’s another lawsuit. Do you want to talk about that one?

Joyce Vance:

This one is from Philippe Gomez. This is sort of, I would characterize this as friendly fire. And I’m reading this complaint for the first time and Gomez is making the right kind of allegations, but then it turns out that this is really a request to have the state of Texas declare SBA unconstitutional, as opposed to a suit for damages. Am I characterizing it fairly?

Preet Bharara:

Yeah. It’s a little weird. In the caption itself, you have to smile because it says Felipe and Gomez pro-choice plaintiff, which is not something you usually see in a caption, versus Dr. Allen Braid, pro-choice defendant. And as you say, it’s a complaint being brought for the purpose of allowing there to be an adjudication to find SB8 unconstitutional, but he’s not really playing the game properly. You have to play the game under the terms of the statute. And here, the relief that the plaintiff seeks is that the court declared the act to be illegal as written and or as applied to the instant facts. So I don’t know if that’s a fatal flaw or not.

Joyce Vance:

This fire may be a little bit too friendly.

Preet Bharara:

Yeah. Look, it’s just a real world example of how this bill, SB8, is too cute for its own good. It doesn’t make a lot of sense. It bridges a fundamental, longstanding constitutional right on the part of women in this country. And I think you’ll see suit after suit after suit, but the upshot is now this can go back up the chain of federal courts, because unlike before when the Supreme Court basically said enforcement is speculative, there’s nothing we can do. Enforcement is no longer speculative. It has happened.

Joyce Vance:

Right. There are two primary ways that people challenge the constitutionality of laws. One is a facial challenge. That’s just a challenge to the statute as it’s written saying that it’s void on its face. And that’s what the challenges to SB8 so far have been, both DOJ’s challenge and the challenge from Whole Woman’s Health. Now though, we’re seeing this law applied. And that means that both of those parties could, for instance, amend their complaints and bring as applied challenges. And that’s a little bit easier for plaintiffs. Those are challenges to the constitutionality of the statute that say as it’s being applied, it’s violating constitutional rights. And here we have a clear violation of Roe vs. Wade. And you’ll recall that that’s where Texas is SB8 skated past the Supreme Court. The Supreme Court said, well, we know that there are some allegations that are being raised about violation of rights guaranteed … but we can’t figure out who we’re supposed to enjoin.

Joyce Vance:

That argument for a preliminary injunction that says that SBA should be blocked from staying in effect while its constitutional merits are being litigated, that now becomes I think a bit easier of an argument, particularly for DOJ, which has skilled in making this kind of argument for them to make.

Preet Bharara:

Yeah. I think that’s right. So we’ll see how it plays out. All right, Joyce. Good luck with the dog. Folks, you should send your questions and/or dog breeds suggestions to letters@cafe.com.

Joyce Vance:

I’m really looking forward to your suggestions and we’ll do our best to answer your questions.

Preet Bharara:

That’s it for this week. CAFE Insider is presented by Cafe Studios and the Vox Media Podcast Network. Your hosts are Preet Bharara and Joyce Vance. The executive producer is Tamara Sepper. The senior producer is Adam Waller. The technical director is David Tatasciore, and the CAFE team is Matthew Billy, David Kurlander, Sam Ozer-Staton, Noa Azulai, Nat Weiner, Jake Kaplan, Chris Boylan and Sean Walsh. Our music is by Andrew Dost. Thank you for being a part of the CAFE Insider community.