Elizabeth Holmes case draws closer to end as government says it will rest next week

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  • Prosecutors at Elizabeth Holmes’ trial said they will likely rest their case next week.
  • Alan Eisenman, who has invested more than $1 million in Theranos, testified on Wednesday.
  • Eisenman told jurors that there was “frustration from trying to obtain information about the company”, which was a “sign of trouble”.

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San Jose, Calif. — In a surprise announcement, the government said Wednesday that it would next week rest its case in the criminal fraud trial against former Theranos CEO Elizabeth Holmes.

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“It is likely that the government will relax next week,” said Jeffrey Schenk, an assistant US attorney. He said the government would not have enough witnesses to cover the week.

The announcement came a day after Theranos investor Alan Eisenman, the government’s 24th witness in the case, testified. Eisenman, who the government says is a key witness, testified that he suspected he was not being given accurate information about the company’s technology.

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“I suspected things weren’t as they were told,” said a retired Texas financial planner who invested about $1.2 million in Theranos in 2006. Eisenman’s investment reduces one count of wire fraud in the case. Holmes pleaded not guilty to all twelve counts of wire fraud and conspiracy to commit wire fraud.

He and his wife shared an investment of $900,000, and they invested $90,000 for each of their three children. Eisenman said he was introduced to the company by David Harris, a financial advisor to the Holmes family.

“She told me Elizabeth was fabulous,” Eisenman said. “That she was leaving school to start a company and that she was partly on her way.”

Eisenman’s primary source of information was initially Holmes, and he testified that he often spoke face-to-face with other investors in addition to quarterly calls. But in mid-2010 those calls “fell to zero.”

Eisenman said he knew Theranos was an early seed-stage startup, but “understood the technology far enough for an early-stage company.” He testified that he was impressed that Oracle founder Larry Ellison was involved with the company and was told that Theranos had contracts with six international pharmaceutical companies, including Pfizer and Novartis.

“It was an impressive list of companies,” Eisenman said. “For me that puts an additional seal of approval for an investment.”

Eisenman recalled that Holmes said he expected $50 to $60 million in revenue in 2007 and estimated $200 million in revenue in 2008. Eisenman testified that at the time of his investment, Holmes had told him that “they were talking to Morgan Stanley about an IPO”. 18 months. “Which was another reason that compelled me to make my investment,” he said.

Eisenman told jurors that he became increasingly frustrated after a series of talks about the liquidity event that never happened.

“All investors will want to exit at some point,” Eisenman said. “If a company says something and it changes that’s fine, but if it keeps changing from year to year it raises doubts.”

“There was frustration with me trying to get information about the company,” Eisenman said. “And there was just a limited amount of information, no information coming to me from the company. That’s a sign of trouble.”

Eisenman wrote to Holmes in November of 2012. The email began: “Elizabeth, it’s been over 2 years since you communicated with your investors…”

Despite this, in 2013 Eisenman considered another investment in Theranos after receiving an email about fundraising. The email read: “With our launch for consumer healthcare this year, we are growing rapidly to establish a national footprint.”

Eisenman said he believed the latest fundraising was to help Theranos market grow. He recalled a conversation with the company’s chairman and COO Ramesh “Sunny” Balwani.

“The call was unusually favorable after a period of very strong hostilities in retrospect,” Eisenman said. “They were raising money and when you’re raising money sometimes you put on a different face.”

Eisenman said he had a contentious relationship with Balwani until he began talks to invest more money in the company.

,[Balwani] Was hostile for an extended period and not only non-responsive but also really aggressive in my communication with me,” Eisenman said. “It was a 180-degree change.”

Despite his disappointment with Holmes and Balvani, Eisenman invested another $99,990 in Theranos.

“We call this the seat at the table,” Eisenman told the jury.

His testimony continues on Monday.

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