Saturday, October 23, 2021

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Jury gets chance to hear Elizabeth Holmes’ bold promises



 In this Tuesday, Aug. 31, 2021, file photo, Elizabeth Holmes, founder and CEO of Theranos, arrives at the federal courthouse for jury selection in her trial, in San Jose, Calif. A jury weighing the fate of fallen Silicon Valley star Holmes got its first chance Friday, Oct. 22, to listen to recordings of her boasting to investors about purported breakthroughs in a blood-testing technology. (AP Photo/Nic Coury, File)

SAN JOSE, Calif. (AP) — A jury weighing the fate of fallen Silicon Valley star Elizabeth Holmes got its first chance Friday to listen to recordings of her boasting to investors about purported breakthroughs in a blood-testing technology.

The technology heralded as a quantum leap in blood testing, however, later dissolved into a scandal that now threatens to send her to prison.

The drama unfolded in a San Jose, California, courtroom with federal prosecutors playing a series of recordings from a December 2013 conference call that Holmes held with investors in Theranos, the company she started in 2003 after dropping out of college at 19 in hopes of becoming a revered visionary in the mold of Apple co-founder Steve Jobs.

The audio clips of Holmes capped the sixth week of a high-profile trial revolving around allegations that Holmes duped sophisticated investors and major retailers with bogus promises about a Theranos device dubbed Edison. The company’s machine was supposed to be able to quickly scan for hundreds of potential health problems with a few drops of blood taken with a finger prick.

In the recordings, Holmes — speaking in a husky voice that some critics said she adopted to sound more authoritative — boasted about partnerships with big pharmaceutical companies such as Pfizer that evidence in the trial has revealed didn’t pan out. She also mentioned contracts that never materialized because Theranos couldn’t get the Edison to work properly. The device’s repeated failures disillusioned former U.S. Defense Secretary James Mattis, a former Theranos board member ally who testified earlier in the trial.

“We could establish what has the opportunity to be the largest lab in the country,” Holmes told investors in one of the clips played Friday. She laid out that ambition just a few months after Theranos had struck a deal to set up blood-testing “wellness centers” in Walgreens stores across the country.

But Theranos wound up in only 40 Walgreens stores. After investing $140 million in Theranos, Walgreens wound up ending the Theranos alliance in 2016, not long after a series of explosive articles in The Wall Street Journal and regulatory audits exposed chronic flaws in the blood-testing technology.

Before everything blew up, Holmes raised hundreds of millions of dollars from a list of investors that included billionaires such as media mogul Rupert Murdoch, the Walton family behind Walmart, and Oracle co-founder Larry Ellison. The clips played Friday were recorded by Bryan Tolbert, an adviser to Dallas real estate developer Carl Hall, who invested $7 million in Theranos.

The flurry of investments at one point valued privately held Theranos at $9 billion, including a $4.5 billion stake owned by Holmes. Now she is facing up to 20 years in prison if she is convicted in a trial that is scheduled to continue until late this year.

As she has done throughout the trial, Holmes on Friday sat stoically alongside her lawyers while her voice filled the courtroom. She has yet to have a reason to speak during the trial, though her attorneys have signaled she make eventually take the witness stand to defend her actions as Theranos’ CEO.

Holmes, 37, has denied any wrongdoing, and blamed any misconduct on her former boyfriend, Ramesh “Sunny” Bulwani, who was Theranos’ chief operating officer. In court documents, Holmes’ lawyers have asserted she was manipulated by Bulwani, a charge his lawyer has vehemently denied. Bulwani faces a separate trial next year.

The jury that listened raptly to the recordings of Holmes was whittled down Friday when U.S. District Judge Edward Davila dismissed one member for an undisclosed reason. Originally composed of 17 people, including five alternates, the jury is now down to 10 men and four women.


Elizabeth Holmes trial Week 7 recap: a $1 billion IPO plan, and a former staffer testifies he was told to change numbers to make test results seem normal


Theranos founder Elizabeth Holmes and her partner Billy Evans stand outside a courtroom with a crowd of people nearby
Theranos founder Elizabeth Holmes and her partner Billy Evans leaves the Robert F. Peckham U.S. Courthouse after the delivery of opening arguments in her trial, in San Jose, California, U.S., September 8, 2021. Peter DaSilva/Reuters
  • The seventh week of Theranos founder Elizabeth Holmes' fraud trial has come and gone.

  • It featured revelations on plans for a $1 billion IPO and ways staff tried to skirt testing issues.

  • Here's everything that happened in the trial in its seventh week.

How Theranos tried to make unusual test results seem normal

Daniel Edlin, a college friend of Elizabeth Holmes' brother, Christian, and Theranos' former senior product manager, was pressed on his previous testimony about measures taken when guests like investors or business partners wanted to see the devices in action.

He spoke of a "demo app" that hid Theranos machine errors from view during demonstrations, as well as "null protocol," which meant the machines didn't actually analyze the samples, according to The New York Times. Edlin testified that, from there, Theranos staff would tell the guests their samples needed further analysis, and the blood would be sent to a lab, as Insider's Adam Lashinsky reported.

Jurors also saw emails from 2013 between Edlin, Holmes, former Theranos vice president Daniel Young, and former Theranos COO and president Ramesh "Sunny" Balwani.

In one email, Edlin pointed out a discrepancy in test results. Holmes replied, "The discrepancy will be a problem. We need to see if we can correct for it." Young asked Edlin to change the reference ranges on some of the results, which made results appear to fall within the normal range when they were actually abnormal.

Plans for a $1 billion IPO

Bryan Tolbert, the vice president of finance at investment firm Hall Group, which had invested $5 million in Theranos in 2013, testified that he had gathered from a meeting with Holmes that Theranos had raised $16 million in its first round, according to Law360 reporter Dorothy Atkins. His meeting notes also showed Theranos expected to raise $30 million in a second funding round with an eventual plan to go public in 2008 via an IPO valued at $1 billion.

Former Pfizer scientist unsure who approved Theranos' use of logo

Shane Weber, a former director of diagnostics at Pfizer, testified that he discouraged any deals with Theranos in a report about the now-defunct startup.

"Theranos unconvincingly argues the case for having accomplished tasks of interest to Pfizer," he wrote, according to The Wall Street Journal. Holmes' attorneys had repeatedly asked Judge Edward Davila to keep jurors from seeing the report, but Davila ultimately allowed prosecutors to present it.

Weber also wrote that Theranos was "non-informative, tangential, deflective or evasive" in its answers to due diligence questions.

Jurors also heard about Theranos' use of Pfizer's logo in a company report, implying that Pfizer had validated and supported Theranos' technology. The report boasted about Theranos machines' "superior performance," but Weber said he had never authorized the Pfizer logo use, and he didn't know of anyone at Pfizer who had, according to the East Bay Times. The report was later shared with Walgreens and other investors.

Theranos technology put to the test for possible use in the military

Some Theranos machines were sent to Africa to see if they could withstand high temperatures common in combat. Theranos had been having discussions with the Defense Department about possible uses of the company's machines in the military.

Theranos employees' emails, however, said the machines "did not have a way to cool down" and might run into performance issues if they operated outside of the range between 72 and 82 degrees, according to The Wall Street Journal.

A third juror departs

Yet another member of the 12-person jury has been dismissed. On Friday, a juror was excused and replaced with an alternate. This is the third juror to depart the trial; two of five alternates now remain with the case at roughly its halfway point. Judge Davila said there was "good cause" to excuse the juror but didn't provide a specific reason, according to CNBC. Each departure raises concerns about a possible mistrial.

You can catch up on Week 1 hereWeek 2 hereWeek 3 hereWeek 4 hereWeek 5 here, and Week 6 here. You can read how Holmes wound up on trial here and see the list of potential witnesses hereEverything else you need to know about the case is here.

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