Key takeaways from Week 7 of the Elizabeth Holmes trial.
Prosecutors focused on her alleged deceptions, trying to make the case that she intentionally misled Theranos’s investors and commercial partners.,
Key takeaways from Week 7 of the Elizabeth Holmes trial.
The Theranos founder Elizabeth Holmes, center, with her partner, Billy Evans, and mother, Noel Holmes, this month.Credit…John G Mabanglo/EPA, via Shutterstock
SAN JOSE, Calif. — In the seventh week of the fraud trial of Elizabeth Holmes, the founder of the failed blood-testing start-up Theranos, testimony moved away from science and into discussions of faked demonstrations and misleading marketing.
In previous weeks, jurors heard from former Theranos lab employees who detailed the blood-testing technology and retail partners who testified about how the start-up had failed to hit deadlines or achieve agreed-upon goals.
This week, prosecutors focused on Ms. Holmes’s alleged deceptions, trying to make the case that she intentionally misled Theranos’s investors, commercial partners and the United States military. Ms. Holmes faces 12 counts of wire fraud and conspiracy to commit wire fraud.
Here are the key takeaways from the week’s proceedings.
This week’s star witness was Daniel Edlin, a college friend of Ms. Holmes’s brother who became a senior product manager at Theranos. Mr. Edlin testified that Theranos sometimes hid failures or didn’t even try to analyze a blood sample during technology demonstrations.
In some cases, he said, Theranos also removed abnormal results before sending out reports to investors who had tested the company’s technology, such as Rupert Murdoch, the media mogul. Mr. Murdoch had his blood drawn in a demonstration in January 2015. Afterward, he emailed Ms. Holmes: “Enjoyed every minute of it. Any blood results?”
According to an email sent to Mr. Edlin, Mr. Murdoch’s test results came back with various issues. Mr. Edlin said a Theranos executive had instructed him to remove some results before sending Mr. Murdoch his report. He copied Ms. Holmes on the email, he said.
Misleading marketing materials
Other questions concerned Theranos’s marketing. In emails shown to jurors, the start-up’s lawyer, Kate Beardsley, marked draft website copy as potentially misleading. An example was language claiming that Theranos’s machines could run “any test available in central labs” using blood only “1/1,000 the size of a typical blood draw.”
But similar language made it to investor presentations, documents showed. Mr. Edlin testified that Ms. Holmes had been “very involved and detail oriented” in reviewing and approving all marketing and investor materials.
On cross-examination, Ms. Holmes’s lawyer pointed out instances when she encouraged transparency in Theranos’s marketing language. In a November 2013 email, she wrote that a line acknowledging that Theranos used venous draws — the typical method of blood testing that Theranos had promised to disrupt by using a single drop of blood — should be moved from a footnote to the main text.
Prosecutors said that was still misleading, since the line said Theranos’s use of venous draws was “uncommon.” Earlier testimony showed that Theranos used venous draws in about 40 percent of its tests for Walgreens.
‘She was the C.E.O.’
To convict Ms. Holmes, the government will have to prove that she — and not Sunny Balwani, Theranos’s former chief operating officer and her former boyfriend — was the one calling the shots.
Their relationship is key. Ms. Holmes’s lawyers have indicated in filings that they may argue Mr. Balwani abused Ms. Holmes. Mr. Balwani, who faces a separate trial next year, has denied these allegations.
This week, Mr. Edlin testified that he had seen Mr. Balwani defer to Ms. Holmes over disagreements.
“Generally, she was the C.E.O., so she had the final decision-making authority,” he said.
Because of his friendship with Ms. Holmes’s brother, Mr. Edlin also knew of Ms. Holmes’s and Mr. Balwani’s romantic relationship, which they kept secret. Ms. Holmes and Mr. Balwani were “much more relaxed” and “social” outside working hours, but “nothing in particular” stood out about their dynamic, Mr. Edlin said.
‘Tangential, deflective or evasive’
On Friday, prosecutors delivered on a key point made at the trial’s start.
Shane Weber, a scientist at Pfizer, testified that after reviewing Theranos data and interviewing Ms. Holmes in 2008, he was not impressed. In emails introduced as evidence, Mr. Weber wrote to colleagues that the conclusions in Theranos’s reports were “not believable” and that the company’s answers to questions were “non-informative, tangential, deflective or evasive.” He recommended that Pfizer not work with Theranos.
That built on testimony from last week, when executives from Walgreens testified that Theranos had used a 55-page validation report to solicit an investment from the retailer. The report contained the logos of pharmaceutical companies including Pfizer and implied that they had endorsed Theranos’s technology.
A Theranos report implied endorsements from pharmaceutical companies including Schering-Plough and Pfizer
Mr. Weber said Theranos and Pfizer had no meaningful business after 2010, the period when Ms. Holmes sent the report to Walgreens and others. Despite the implication in the report, Pfizer never validated Theranos’s technology, he said, and came to the opposite conclusion.
Elizabeth Holmes speaks
On Friday, jurors heard the voice of Ms. Holmes for the first time. Bryan Tolbert, an investor at Hall Group, which invested $7 million in Theranos between 2006 and 2013, provided a recording of a phone call she held with investors in 2013.
Throughout the first six weeks of the trial, prosecutors have tried tying Ms. Holmes to the problems at Theranos by discussing her emails, text messages and conversations. But hearing her describe Theranos’s military work, technology and plans to transform the health care system could resonate more with jurors.
Mr. Tolbert said those promises — many of which prosecutors tried to show were false or misleading in earlier testimony — were key to his decision to invest in Theranos. On another portion of the call, Chris Lucas, a venture capital investor who introduced Hall Group to Theranos, described Ms. Holmes’s control over the company. “She has a firm grasp on the company,” he said. “Let there be no mistake.”
After the first recording played, Ms. Holmes briefly broke her straightforward gaze to glance in the direction of the jury.