- Brian Grossman, whose hedge fund poured $96 million into Theranos and later sued the company, took the stand in Elizabeth Holmes’ lawsuit.
- Grossman told jurors that he had his blood drawn at Walgreens as part of his due diligence.
- A lawyer for Holmes would not say whether the defense would present a case after the government rested.
San Jose, Calif. A hedge fund manager who invested $96 million in Theranos said he thoroughly investigated the company, but CEO Elizabeth Holmes was still misled about its blood-testing technology.
Brian GrossmanPFM Health Sciences’ chief investment officer told jurors in Holmes’ criminal trial on Tuesday that in 2014, as part of his due diligence, he drew his blood from a Theranos machine at a Walgreens pharmacy.
“I had my blood drawn with a venous draw, not with a finger prick,” Grossman said, adding that the experience had told him about Theranos.
Grossman said he met Holmes and his top executive, Ramesh “Sunny” Balwani, in December 2013 at their office in Palo Alto, Calif. He said Holmes did most of the conversation, and he and his colleagues were told Theranos could run 1,000 blood tests on its proprietary technology.
“Ms. Holmes was actually very clear that she could match any test on LabCorp and the Quest menu of tests,” Grossman said. He told the jurors that “it was a really big statement of how much they had achieved, where the technology was at the time.”
Earlier witnesses, including lab colleague Erica Cheung, testified that the Theranos devices could not run more than 12 different tests, contrary to the company’s public announcements.
Grossman said that at the meeting he was told that Theranos was working with the military and that its technology was being used on the Medivac on the battlefield.
“What better application for this kind of technology than in a military setting in harsh conditions like Afghanistan or Iraq?” Grossman said. Theranos indicated there was “something over $200 million in revenue from the Department of Defense,” he said.
Daniel Adeline, a former Theranos employee, told jurors last month that, to his knowledge, blood testing equipment had never been used in the Middle East.
Grossman said that after his initial meeting with Holmes and Balwani, he sent them an e-mail in January 2014 with the subject: “Due diligence question.”
His questions from PFM fall into seven categories. He wanted more details on issues such as the accuracy and speed of tests, limitations of the technology, and whether the Walgreens relationship was exclusive compared to traditional vendors.
“As a group we came up with questions that we wanted to get to understand the business better,” Grossman said. “We wanted to ask the same question in as many ways as possible so that there is no ambiguity and no confusion about what the technology is doing.,
PFM met with Holmes and Balwani for the second time. Grossman testified that Holmes almost halfway through the meeting. Theranos officials told them at the time that it could receive test results within four hours in retail stores and within one hour in hospitals.
Grossman told the jury that Holmes never told him that the company was using third-party machines to run blood tests. Regarding his experience at Walgreens, Grossman said he was surprised to learn that he had blood drawn from his hand and said it took more than four hours for his test results to take place.
“I asked [Balwani] Why didn’t I get a finger prick and why it was a venous draw,” Grossman said. “I also asked him why it took more than four hours for my test results to come back.”
Grossman said Balwani reassured him because his doctor had ordered the abnormal test.
Nevertheless, PFM invested $96.1 million in Theranos in February 2014. That investment included $2.2 million from friends and family funds, which Grossman said was money from low-income people.
pfm finally Settled The lawsuit against Theranos comes after the company was accused of securities fraud.
Holmes pleaded not guilty to 12 counts of wire fraud and conspiracy to commit wire fraud. As a prosecution witness, Grossman’s testimony underlies one of the wire fraud cases.
As government witnesses testified, Holmes has been sitting at the defense table for 11 weeks. An important question is whether the defense will present the case after the prosecution has rested.
“We don’t even know if there’s a defense case and what might be,” Holmes’ attorney, Lance Wade, said before the jury entered the courtroom. “We’re still in the government’s case.”
Last week, Holmes’ defense team provided the government with a list of potential witnesses. However, Wade said, “we are not saying that we are presenting a defense case by giving them the sense of witnesses.”
Watch: Confession tapes from Elizabeth Holmes trial