What the Elizabeth Holmes Trial Is Revealing About Theranos

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Jurors are exposed to forged documents, massive fundraising numbers and other new information that was not widely known

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Ms Holmes, 37, is accused of defrauding patients and investors, with the top charges carrying a maximum federal prison sentence of 20 years. He has pleaded not guilty.

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Here are some of the revelations we’ve heard so far in testimony or seen in court demonstrations.

A major source revealed

Former Theranos Lab director Adam Rosendorff not only emerged as a key witness for the prosecution during five days of testimony, but also as one of the Wall Street Journal’s original sources in 2015 reporting failures at the company .

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Dr. Rosendorff said during interrogation with prosecutors that he received a call from then-Journal reporter John Carrero and decided to talk to the record about his time at Theranos.

“Even months after leaving the company, I felt obliged from a moral and ethical standpoint to alert the public,” Dr. Rosendorff testified on September 28. He said he didn’t know how to do it, “but when this opportunity presented itself, I took advantage of it.”

Mr Carrerou, who left the Journal in 2019, later confirmed that Dr. Rosendorff was his “first and foremost source” and added that, “without him, I would not have been able to break the Theranos story.”

Safeway was promised 20-minute trials, $10 per-trial benefit

When the former Safeway Inc. Chief Executive Steven Bird sided with a witness in the trial, the full extent of the promises Theranos made to the grocery store chain finally became clear.

As the two companies struck a deal in 2010 that would put blood-testing devices in hundreds of grocery stores, Theranos guaranteed Safeway a $10-per-test profit, Mr. Bird testified in October. A profit seemed plausible at the time, Mr. Bird recalled, as Elizabeth Holmes told Safeway that Theranos projected $223 million in revenue and $167 million in operating expenses in 2011, with an adjusted profit of $56 million. Was. In fact, the company had little revenue and substantial losses until the closure, court testimony showed.

For Theranos, the Safeway partnership was an important way to increase its reach to consumers. Mr Bird said he had long been interested in improving healthcare and also saw it as a way to boost the grocer’s low profit margins.

Safeway first met Theranos around March 2010, Bird testified, and in September struck a deal in which Safeway invested $85 million. Safeway spent more than $350 million on the failed partnership, an amount prosecutors say the company was victimized by Theranos, but Ms. Holmes’ lawyers say is roughly the money Theranos never wanted them to spend. said.

Mr Bird testified that Theranos told Safeway that its equipment could perform 95% of all blood tests and that the results would be available to customers in 20 to 30 minutes, which he said was important so that buyers can share their results with that. can be retrieved back in time, when they were taken. buy groceries. Theranos gave Ms. Holmes a Ph.D. at Stanford University. student in chemical and electrical engineering, according to a 2010 presentation shown in court; It did not mention that Ms. Holmes dropped out of Stanford after a year of graduate study.

The partnership was set for a full Safeway-wide launch in mid-2011. By the time Mr. Bird retired in May 2013, he testified, Theranos blood testing equipment was still not in his grocery stores.

Mattis personally invested

Former US Secretary of Defense Jim Mattis revealed on the stand that he was not only a board member and longtime supporter of Ms Holmes, but that he invested $85,000 of his personal wealth in January 2014 to give himself a “skin in the game”. had done for

“And was that a significant investment for you at the time?” Assistant U.S. Attorney John Bostic asked.

“For someone who had been in government service for 40 years, yes,” replied the retired general.

blind board

Emails shown in court during Mr Mattis’ testimony showed that the Theranos board had publicly expressed support for Holmes after the Journal’s initial reporting in 2015, privately pushing for answers. .

“At this time, how many of our customer submissions are being tested on lab equipment versus Edison?” Richard Kovacevich, former Wells Fargo CEO, asked in an email to board members and Ms. Holmes, referring to the Theranos-owned blood-testing device.

On the witness’s stand, Mr Mattis said he shared the concerns raised by Mr Kovacevich.

A few weeks later, Theranos’ attorney circulated a supporting statement the company planned to issue on behalf of the board.

Mr Kovacevich pushed back words, writing that calling the board “‘familiar with technology’ is a stretch.” Gary Raghead, a former US Navy officer and board member, sent an email saying he agreed. The line came out

Ramesh “Sunny” Balwani, former No. 2 of Theranos, told the board that there were plans to conduct three studies, one comparing finger-stick performance to a traditional blood draw, and seeking publication of the results in peer-reviewed journals. includes doing.

For William Frist, a former U.S. senator and, as a surgeon, the only board member with significant medical experience, the promises weren’t enough.

“The integrity of laboratory data is at the heart of everything,” he wrote to the group. “It would have been a good strategy months ago and is still suitable but what we need is proof of accuracy.”

The same day, Theranos issued a joint statement from the board, which said, “Theranos’ technology is both transformative and transparent.” It continued: “As a group, we accept this promise and stand with Theranos.”

forged documents

During the opening statements, prosecutor Robert Leach described how Ms. Holmes told investors that Theranos’ technology was validated by 10 of the 15 largest pharmaceutical companies, saying the claim was completely false.

Mr Leach showed jurors a document with the Pfizer logo in which he said Ms Holmes portrayed investors as evidence of her endorsement of the pharmaceutical giant. In fact, he said, it was a forged document.

“Pfizer did not write this. Pfizer did not put its logo on it. Pfizer did not allow its logo to be put on it. Pfizer did not conclude in this report,” Mr. Leach said in court last week.

He said that Pfizer had a contract worth $900,000 prior to 2009, but after looking at initial reports from Theranos concluded it had no use for Theranos’ technology and never did business with the company again.

A Pfizer spokesperson said it would not be appropriate to comment on the ongoing criminal trial, but that the company “has fully cooperated with prosecutors throughout this process.”

losses are rising

Theranos’ longtime corporate controller, Dennis Yam, who was the top financial officer for several years, testified that the company had accumulated losses of more than $585 million from 2003 to 2015. The company reported that number to the IRS on its 2015 tax return, jurors. were shown.

Ms. Yam talked about the years when the company didn’t bring in any money at all, and about the period when they burned from $1 million to $2 million a week. At cross-examination by one of Ms. Holmes’ attorneys, Ms. Yam, also known as So Han Spivey, said the biggest expense over many years was research and development costs.

more investment than previously thought

Investors poured more money into the company than previously known: $944.56 million in six investment rounds, as of March 15, 2015, reports a firm called Aranka, which was repeatedly hired to value the company .

Ms. Yam testified that she had given Aranka internal financial information to help her assess Theranos’ valuation. Later, prosecutors showed that the revenue projections Ms. Yam had given to Aranka were much higher than what Ms. Yam had given to potential investors, something Ms. Yam said she could not explain. In one example, Theranos asked investors to expect $990 million in revenue in 2015, while the company told Aranca that it would have $113 million or less in revenue.

potential business lines

In addition to its renowned partnership with Walgreens Boots Alliance Inc.

Theranos, which set up Theranos testing centers at Walgreens pharmacies, discovered some partnerships that had not previously come to light.

An April 2015 text message included in the court filing shows that Theranos had partnered with Highmark Inc., a healthcare company in Pittsburgh. Ms. Holmes texted Mr. Balvani, “Highmark CEO 100% deal done,” and another Highmark executive apologized for not working with Theranos, admitting it was “a huge mistake.”

Theranos never started a blood testing partnership with Highmark. Highmark spokesman Aaron Bilger said, “We were presented with an offer – like the many offers we receive annually on new ventures. Upon further review, the decision was made not to invest.”

Ms Yam’s testimony also brought to light that Theranos had a $288,000 contract in its early years to provide cartridges and equipment to the American Burn Association, a group that helps burn victims through research and services. . On cross-examination, Ms. Yama said that the work…


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