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Parloff: “At some point she did say — and I was not supposed to be used in the piece, it was very sensitive — that it had been used by the military in Afghanistan.”
Parloff asks about military work. Holmes gives a long familiar speech about the device’s potential to save lives. “That’s something I’m personally very passionate about. I see it as our way to serve in whatever small way we can.”
Holmes’s description of what Theranos was doing: “The key advance was that they could do a tremendous number of blood tests with a finger stick instead of venipuncture.” They had miniaturized the whole lab process. The specifics of how this was done was all a trade secret.
Another Holmes word salad, “We talked about some of the potential for revolutionary impact in terms of the access points, and actionable information equally has the potential, we believe, to have a revolutionary impact.”
Parloff describes at length everything a Quest lab can do. “All of this is stuff you can do?” Holmes: “Yes.” Parloff: “OK. It’s so incredible.” Holmes: “Its one of those special things when you apply technology and software toward solving problems that humans otherwise did.”
There were already reports at that time that people were going to Walgreens and getting venous draws. Parloff pushes her on why they would use a nanotainer for tests it doesn’t do on the Theranos machines. She goes off the record to basically say, “that gets into a whole thing about how the devices work, which we don’t really want to get into.”
We hear another conversation where Parloff asks how many tests they can do. She says, “I think can we say more than 1,000.”
Parloff says he provided his recordings of his conversations with Ms. Holmes with the government in response to a subpoena. We hear a two-minute clip where he asks her whether Theranos can perform all the tests that Quest could. She says, “We can do all of those tests.”
Parloff had never visited a lab before so when he returned from Palo Alto, he arranged to visit a conventional lab for contrast. He agreed not to identify that lab.
Christian Holmes sent Parloff a presentation with “detailed clinical background” on Theranos’s science, which was encrypted and he no longer has access to it. We also see a PowerPoint that Holmes walked him through.
He toured Theranos’s office and the Newark lab. He also went to a Walgreens in downtown Palo Alto, arranged by Theranos.
We see an email from Parloff to Holmes with a long list of things he wants to do when he visits for the profile. He asks for a blood test and Theranos offers to get him a prescription for the test.
Parloff has been coughing a little and explains that he has a seasonal allergy that happens every November, “I’ve got three vaccines,” and the room laughs in relief.
Boies Schiller’s head of comms approached Parloff about writing an article about a patent lawsuit Theranos had won, but then told him “the real story was this remarkable company and its remarkable founder and C.E.O., Elizabeth Holmes.”
Parloff was at Fortune from 2004 to 2016. He wrote an article in 2014 that Holmes then sent to many investors while soliciting funding.
The U.S. has called Roger Parloff. Here we go.
Schenk blew through that testimony in less than 10 minutes! Mr. Ellsworth is dismissed.
Dr. Ellsworth, a dentist, had to get a PSA test before going on a long mission trip through his church to Asia. He testifies his first test, which was given on a fingerstick, returned a PSA level of 26.1, which was very high. “I’ve never exceeded a 2.”
Mehrl K. Ellsworth, the patient who was given the irregular PSA tests, is now on the stand.
Dr. Burnes is excused. Another “short” witness is coming after the break, likely another doctor or patient.
Jeff Schenk does redirect and asks Dr. Burnes whether one of the “specific harms” of getting a PSA test is that the test is inaccurate and the patient takes steps they shouldn’t have.
Dr. Burnes says PSA levels rise over time so, if you’re not paying close attention to the patient you could misinterpret a result.
It is a bizarre line of questioning considering Theranos’s entire mission was that people should get their blood tested all the time. Dr. Burnes says he disagrees with that guidance not to test for prostate cancer. Trefz is done.
Burnes testifies that he recommends male patients over 50 screen for prostate cancer every few years. Trefz says the American College of Physicians recommends men over 50 “discuss the specific harms” of the test with their doctor before screening.
Burnes says “slight variation” can happen on the same test but “they should be pretty close to each other — within 5% to 10% of the value.”
Trefz keeps using the word “harmonization” to describe results of tests between different methods and it is tripping up Dr. Burnes. “Do you understand that harmonization of results is challenging in that its using different methods.”
Burnes makes her repeat a question 3-4 times and doesn’t understand the point. Trefz notes his answer as, yes, there may be “slightly different” ranges on different tests, and Burnes emphasizes that its slight.
Trefz is using a similar line of questioning she used on Audra Zachman, the nurse practitioner who testified in the beginning of the trial. Essentially trying to say that different assays (tests) should be evaluated on different reference ranges.
Katie Trefz asks a series of questions about all the various ways lab errors can occur. Burnes says yes, he is aware, but notes that in his career they’ve been very rare.
We now see reports voiding the first and third PSA tests. And we see a 2017 PSA test from Labcorp, which was in the normal range. Burnes testifies that he believes the initial Theranos test was “invalid.” Prosecution finishes.
There’s an internal Theranos email summarizing a call smoothing things over with Burnes. Sunny Balwani forwards it to Elizabeth. Dr. Burnes asks Theranos to run a fourth test on his patient the traditional way with a venous draw and pay for it.
Someone inside Theranos writes in an email that they re-ran the samples and confirmed the inconsistent levels. Then the patient came in for a THIRD Theranos tests and the PSA level was elevated again.
We see an internal Theranos email discussing Dr. Burnes’s call concerning the inconsistent results. He suggests that one explanation is that the samples got mixed up and asks Theranos to re-run the samples.
Another subsequent Theranos test shows levels more in line with expectations. Note from the doctor says “clearly some form of lab error occurred.”
The test results show a “very significant rise” in PSA levels. The doctor wrote a note on it that it should be rechecked and might be a “lab error.”
Mr. Burnes had a patient who got a PSA test — detects prostate cancer — through Theranos. The doctor is testifying in a clear mask and I have to say it just conveys Bain vibes to me. Also hard to hear.
That’s it for Tompkins. The U.S. has called Dr. Mark Burnes.
Theranos test results told this woman she had HIV antibodies. Defense is trying to argue she didn’t understand the test results.
Trefz pulls up an HIV testing algorithm to show the patient. She asks the patient to break down the arrows pointing to terms like HIV-1/2 antigen/antibody combination immunoassay. … “You don’t know the meaning of these particular steps, correct?”
Tompkins is back on the stand being cross-examined by Holmes lawyer Katie Trefz. She says she attempted to get information about the testing from Theranos but was not provided any.
🩸 U.S. v. Holmes continues. 🩸 Today we’ll hear from Erin Tompkins, a patient, as well as Roger Parloff, a journalist. But first, for every one hour of testimony there are roughly three hours of lawyer bickering over the scope of the testimony and today is no different!
Trefz argues for expert testimony on the accuracy of the tests since they’ve been run on different methods. “If a patient is going to testify about their allegedly inaccurate tests, we should get to explore the depths of that patient’s knowledge as to what the test results mean.”
Bostic notes that he’s not certain whether the doctor will testify because they’re trying to “streamline” their case and the witness list because of time concerns.
Trefz is arguing that the confusion comes from the way the results were presented, not the actual results themselves. Bostic says her doctor’s concern about the accuracy of the results was “inadmissible hearsay.”
Sounds like Tompkins’s doctor is also going to testify. The judge has also made a not very pleased reference to the case’s “untoward delays.”
Bostic argues that he believes the doctor was in disbelief and had skepticism over the accuracy of the results. It wasn’t him saying that the results were accurate yet she wasn’t positive.
The jury and Tompkins have left. Trefz is arguing that the patient was told at the time by her doctor that this was not an indication of a positive test result.
We also see test results from August of this year that says she is negative. In cross-exam, Holmes lawyer Katie Trefz asks how much her Theranos test cost. Tompkins doesn’t remember but says she got a refund about two years later.
We see a copy of her Theranos blood test results stating that Ms. Tompkins had HIV antibodies. She testifies that she has never had HIV or AIDS, and a different test a few months later said negative. She tried to call Theranos to get more information but spoke to no one.
She chose Theranos for a blood test her doctor ordered because it was cheap and she didn’t have insurance. “Is there any benefit to you with blood test results that were not accurate or reliable?” Tompkins: “I can’t imagine, no.”
She testifies first saw an article about Theranos in Forbes, she said she also heard about it on Facebook — a rec from a friend who was trying to find affordable health care options for people without insurance.
The U.S. has called Erin Tompkins, a Theranos patient.
Leach: “Did you think one of the risks here was that the founder and C.E.O. was not being truthful to you?” Grossman: “We did not think that was one of the risks.” And that’s it for Grossman. Wowsy!
A major theme seems to be EXECUTION RISK. Was Theranos past the point of “proof of concept”? Should investors have anticipated the risk of the technology not working?
Talking about Moore’s law. The jury is getting such an education in business terminology. A PGM email discusses how Theranos plans to drive down costs of making its devices. That wouldn’t apply to third-party devices, Grossman said.
Leach pulls up the “bear case” projections (Wade had used the bull case projections) and asks: Have you ever seen a company miss its revenue projections by over $1 billion? BG: “It’s unusual.” Was that a risk you thought you were taking with this investment? BG: “Not in 2014, no.”
This is related to Wade’s argument that PFM’s revenue projections for Theranos were overly rosy. (Grossman has testified that they were based largely on Theranos’s own projections.)
Prosecutor Leach is back up for redirect. Leach asks: Who was in a better position to judge Theranos’s projected revenue for 2014 and 2015, you or the company? Grossman: The company.
Wade: Was part of investing in Theranos a part of your desire to get information for your investment in Walgreens? Grossman: No. Wade: Is it true that after you invested in Theranos you started trading Walgreens stock? Prosecution objects and is sustained. And that’s it, finally!
Wade is showing Grossman a slide deck presented by Theranos and is pointing out that many of the claims were “aspirational.”
OK, just before the break my laptop died, but Judge Davila expressed the most frustration I’ve ever seen over how long Wade’s cross-exam is lasting (6+ hours).
Wade points out that the presentation doesn’t include the accuracy risks or highlight the “limited operating experience” Theranos had.
So Grossman delivered a presentation to some other investors summarizing PFM’s own research about Theranos. It has Theranos’s logo on the front of it and Wade asks “did you get Theranos’s permission to use their logo?”
Grossman quotes from lower in the email that his firm’s expert continued to believe these risks were acceptable for investing. There’s also a cryptic email from Grossman to his teammates that simply says “real world.”
There’s another email where someone at the firm says Blue Cross Blue Shield did diligence on Theranos and said it doesn’t work. And another one where someone is saying again that there’s a chance it won’t pass FDA review.
Another email from Grossman’s internal expert outlining more risks on the tech. Says he doesn’t think Theranos has enough data to get FDA approval. The takeaway from these hours of cross-exam from Grossman seems to (still) be: You knew about all these risks and still invested.
We get another “if that’s your question, then yes.” Grossman is patiently describing in great, great detail all of the analysis PFM did on its financial models on Theranos. The room is getting restless. Not even sure Wade is enjoying this level of detail.
Wade tries to make the point that PFM’s revenue projections for Theranos were unrealistically high. Grossman says no and gives the example of Moderna. “They tend to be really important, open-ended technology, very disruptive, that have a big impact on society.”
A few more comps added to the analysis: Salesforce, Tesla and a few others I didn’t hear. Grossman repeats his line about “open-ended, disruptive technology platform companies”
(The third comp Grossman suggested is Illumina.)
Describing comps, Grossman testifies they were trying to find “open-ended, best-in-breed disruptive companies.” Wade then tries to call FB and GOOG “unicorns.” I feel personally trolled.
To justify the valuation they suggest using Google and Facebook as comps to Theranos!?!? To use a Grossman term… Wowzers
We see an email between Grossman and his partner James — no mention of bevies — where Grossman says the valuation and terms “are obviously tough to swallow.” But his call with Channing Robertson was “mind-blowing” and gave him a lot of confidence.
Post break, Wade is asking Grossman about his conversations with Channing Robertson. Grossman’s father-in-law, David Brady, knew Robertson, was a politics professor at Stanford and was involved with Hoover Institution. Brady also invested in Theranos.
We have spent … a lot of time going through every painstaking detail of Grossman’s diligence. It is a lot, and I’m not 100 percent sure what effect this is meant to have on the jury.
We see an email that shows PFM confirms that any device outside a CLIA lab needs to FDA clearance. Theranos often said they didn’t need FDA approval for their machines in stores because the “analysis” would be done in the cloud / in its CLIA lab.
Grossman has not been asked about why PFM ultimately decided to invest despite all of his very diligent diligence and the doubts raised inside the firm.
The email also notes that Theranos’s projections are “a bit aggressive” but “with excellent execution are doable and can be exceeded.” Point to show that Grossman knew the risks of backing Theranos.
More internal PFM emails! This one is about a health care conference where PFM’s tech expert planned to vet Theranos’s tech with others in the industry without violating NDA. Also says he thinks Theranos’s technology is “very good” and has IP and competition concerns.
To get around this Grossman answers a lot of Wade’s questions with “If the question is X [narrator: it is not], then the answer is Y.”
Lance Wade is questioning Grossman about a certain document that is not in evidence and Grossman is refusing to acknowledge that it “refreshes his recollection” because he believes Wade’s questions are misleading.
🩸 It’s U.S. v. Holmes again. 🩸 Brian Grossman, managing director at PFM Health Sciences, which backed Theranos, will continue cross-examination today.
Grossman and jury are dismissed for the day and its time for our usual lawyer chat. Downey wants to talk about an issue in camera and the judge is lightly ribbing Wade for how long his cross-exam is going. Back tomorrow!
Wade continues to press this point which is a question I have too — Grossman did all the right stuff regarding diligence, and yet he still invested.
Wade hits Grossman over the fact that he invested in Theranos even after the refused to let him talk to Walgreens or United in diligence. Grossman says that forced his firm to rely on information from Theranos.
We now see a PFM email summarizing the Theranos discussion during a Walgreens earnings call. Point being that PFM took other information into account beyond what Holmes said to decide on the investment.
We got a brief glimpse of an email from Grossman re WAG and Theranos: “Wowzer. That’s quite an endorsement.”
We see some emails between Grossman and some of his analysts about Walgreens and Theranos. They are discussing Cowen’s take on the Theranos / WAG partnership. Wade suggests Cowen analyst reports are a respected source of information. Grossman says that’s “debatable.”
Elsewhere on this email thread Grossman asks his partner, “What time u picking us up? U want us to brink bevies for the drive?”
Wade is now taking Grossman through the team of people at PFM who worked on the deal, explaining their expertise. He mentions Philippe Laffont of Coatue, who introduced PFM to Theranos. We see an email from Laffont to Chris James, an investor at PFM, saying Theranos is “one of the most impressive boards I’ve ever seen.” James forwards the email to Grossman with one word: “Wowsy”
Wade appears to be doing his bore-em-to-death thing going into tedious detail about the mechanics of private market investments.
Wade asks Grossman to define a hedge fund and he runs down all the various attributes ending with “and obviously, a hedge fund can hedge.” Somewhere Carol Loomis is smiling.
Lance Wade is up for cross-exam. Unlike with past investors, who Wade attempted to discredit by criticizing their lack of diligence, the strategy here seems to be building up how much diligence Grossman’s firm did.
At the very end we saw that Grossman’s firm invested $96 million across several funds.
We see internal Theranos emails discussing Grossman’s results. He is a “VIP” and they push to get his results out quickly. The results appear to be run on a third party machine, which Balwani never told him about.
Balwani blamed a rare test and a lab failure. Thanked him for “highlighting this issue.”
I believe Grossman is the only investor we’ve heard from who went to a Walgreens to get his blood tested on his own. Afterward he asked Balwani why he had to have a venous draw (no fingerstick) and why it took more than 4 hours.
Grossman spoke to Channing Robertson (Theranos board member, former Stanford professor) twice. Robertson said Theranos had no technical risk and that its technology inside the MiniLab was sound.
Grossman also wanted to talk to United Healthcare, which (apparently) had a contract with Theranos. Similar to Walgreens, Balwani said no. “It will look badly on us, if investors are asking to speak to someone at the company.”
Grossman asked to talk to Walgreens and Sunny Balwani told him he was “very uncomfortable” with that. He told Grossman it “would be a strange conversation, they have a great relationship, it wouldn’t look good.” “He had a series of responses along those lines.”
So we have walked through the same slideshow that Theranos presented to most of its investors including being “comprehensively validated by pharma companies.
Grossman: “They were emphatic that this was not another point of care testing company. This was the entire laboratory shrunk down into a box.”
Grossman said he saw various different versions of the Theranos blood testing machines at their manufacturing facility in Newark, at their CLIA lab in Palo Alto and in the lobby of their California St. office.
Or at least attempted diligence. Holmes and Balwani answered the questions in meetings. It appears we are going to go through their spoken answers on every one of these questions (there are many…).
Grossman had three analysts working on the deal and says “there’s a lot of analytic labor” that goes into his firm’s modeling. This appears to be the most diligence that any Theranos investor has done so far…
We see an email from Grossman to Holmes and Balwani containing due diligence questions. There are seven areas of question (technology, IP + barriers to entry, Regulatory, Financial Model/Projections, etc.) with lonnnnnng lists of detailed questions for each.
Grossman testifies: “Ms. Holmes was actually very clear that they could match every test on the Labcorp and Quest menu of tests.”
Grossman goes into a very long and detailed tale of the claims Holmes made to him about Theranos’s technology and business. She told him the usual: Theranos was more reliable than Labcorp/Quest and they worked with pharma companies and on medevacs on the battlefield.
Grossman met with Balwani and Theranos at its lab in December 2013. He testifies that the security to enter the building, including its NDAs, was unusually strict.
Grossman offers up a little lesson on limited partners. PFM’s include pension funds. Hey jury, it’s not just rich people who were burned by Theranos!
Yam is excused. The U.S. has called Brian Grossman, a managing partner at PFM Health Sciences, a San Francisco firm that runs a hedge fund and growth equity fund.
Lance Wade is questioning Yam on whether the wire transfers discussed in the email actually happened. Can’t we just … verify that somewhere?
$1.1 million to be precise, wired to Horizon Media, the marketing firm. This is one of the wire fraud counts outlined in the indictment.
We see a late 2015 email regarding expenses for an ad campaign (TV, print, etc.) in the millions of dollars in Arizona.
The prosecution has called Danise Yam, a.k.a. So Han Spivey, likely to reintroduce a certain email.
And Alan Eisenman has left town. So we will be getting a new witness this morning.
Judge Davila says he sees nothing to disturb the court’s previous ruling on this issue. Glad we just spent an hour debating it!!
Bostic further argues that Holmes had “better sources of information” about Theranos results … from her own lab. And “if positive information is admissible just because Holmes saw it, then negative information that Holmes saw should also be admissible,” i.e., the 2015 WSJ article.
Judge further notes that there are lots of comments from phlebotomists, who were employees of Theranos. John Bostic argues that the patient reviews aren’t relevant. The reports were only sent to Holmes in 2015, and the majority of the investments in the case happened before that.
Judge Davila is skeptical. He said the majority of the customer comments talk about pricing because they had no health insurance. Or they were given $100 gift cards by doctors. Not about the accuracy of the tests.
Now Holmes lawyer Richard Cleary is arguing the defense should be able to include testimony of positive reviews / surveys of Theranos tests.
🩸U.S. v. Holmes again. 🩸 The lawyers are fighting about whether to discuss the lost database of Theranos tests.
Ok that’s it for today — short day. Buckling in for four more days of testimony!
We’re not done with Eisenman as there is still a matter to debate about his notes. The defense wants a color copy so they can examine all the various inks used. 🎨
In cross-exam Downey had discussed how much Eisenman’s stock in Theranos was worth. In redirect, Bostic asks: What is your understanding that your stock in Theranos is worth today? Eisenman: “It’s not an understanding, it’s a conclusion. It’s worth zero.”
In redirect Eisenman speaks about the contrast between the Theranos hype — all their progress and demand in the market — and the legal disclaimers that come with investing (this is a high risk growth company, you could lose all your money, etc., etc.). The power of hype is strong!
Downey says that Eisenman has asked government agents to look into a different investment where he lost money. Judge sustains objection and that is the end of cross-exam of Eisenman.
Eisenman says, “It’s a little misleading — we are on the same page because I feel that I was lied to and cheated from the company.”
Downey asked Eisenman about his relationship with the prosecution. He gives squirrely answers and we eventually see an email from 2018 where Eisenman says “You know that I am a faithful part of your team and will do all that I can to help your case.”
We are back to the legal boilerplate fight. Eisenman refuses to answer yes/no questions about it. And remember: legal disclaimers are there for a reason! They will be used against you in court!
Defense counsel Downey: “As I suspected there are some indications in the notes that the notes are not what Mr. Eisenman described in his direct examination. … At some point additional info has been inserted in a different color ink.”
During our break (is it too early for lunch?), the lawyers from both sides are going to review the notes that defense filed a subpoena for in a side room.
Another scathing email from Balwani. Eisenman emailed about a news article that says Theranos could become obsolete. Balwani: “I think these emails are beyond ridiculous.”
Downey makes the point that Eisenman chose to invest more into Theranos, despite the fact that Balwani had “ignored or intimidated” him.
Lots of cross-talk chaos between Eisenman, Downey, the court reporter and Judge Davila, who jumps in: “Let’s reset. It goes by question and answer. The lawyers get to ask the questions and it’s your privilege to answer them.”
It is not great to have examples of government agents telling Eisenman “do not contact us” juxtaposed with emails from Holmes telling him “do not contact us.”
Over the weekend defense subpoenaed Eisenman for his notes about the Theranos investment and Downey demands he gives them to the court admin. Eisenman wants more info on the process.
Eisenman: “I’m a smart guy.” Downey: “Did the government agree with that smart judgment?” (prosecution objects)
Agent Hernandez called Eisenman and said to not communicate with the government about the substance of the trial. Eisenman then apparently sent another email to the government the next morning and the government called *again* with Mr. Bostic, saying not to communicate with them.
We were going to see the email he sent to Agent Hernandez on the prosecution’s team offering “some reflections” on his testimony, but prosecution objected to admitting evidence that was 90% redacted.
Downey: “How long did it take you to violate that directive? Was it less than about 15 hours?” Eisenman: “I don’t recall.” 😬
Uh ohhh, Downey points out that Eisenman flew back to Houston after his initial testimony Wednesday evening and immediately violated his directive to not discuss the trial with anyone.
Eisenman also reached out to Bill Frist through his father-in-law, Joel Gordon, a wealthy political donor in Tennessee. Downey asks why he wanted that outreach to be secret. Eisenman says that comment is “misleading.”
We see an email from Holmes to Eisenman from 2012, after he reached out to Don Lucas: “No, Alan it has been about that long since you decided to start harassing our chairman.” Eisenman says that is a “total mischaracterization.”
The email about Larry Ellison was meant to show that Theranos was providing general information to all investors. Eisenman pushes back there, too. “There was no communication to investors generally, either” and “I don’t think they communicated that to their investor base.”
Downey is trying to make the point that Eisenman was demanding special information. He asked whether Eisenman knows that Theranos had no legal obligation to update him with “specific” and “individual” information he was requesting.
In 2020 Eisenman emailed Holmes asking why Larry Ellison was no longer on the board. Holmes responded: “There is no new information to be shared with our investor base.”
Eisenman testifies that he believes Holmes was hiding information from him. Downey tries to strike that, too, and the judge says no — “that was his understanding of his opinion.”
The same dynamic is happening today. Downey asks about general rules around sharing information with investors and he pushes back about NDAs and the specific situation at Theranos. Downey strikes several attempted answers.
Eisenman’s direct testimony also brought up some pretty wild emails between him and Holmes+Balwani. They basically treated him like a stalker for asking for more info and threatened legal action. And then, incredibly, he still invested more $$ after that!
Eisenman was a difficult witness for the defense lawyers. He refused to go along with some of Kevin Downey’s yes/no questions and it got testy.
🩸 “Our Holmes Matter” continues. 🩸 Full week of testimony in U.S. v. Holmes after last week’s announcement that the prosecution is likely to rest soon. Alan Eisenman, a Theranos investor, returns to the stand for cross-exam.
Wrapping up. That’s all the blood for the week. Next week we’re going all five days! 🩸🩸🩸🩸🩸🩸🩸🩸🩸🩸🩸🩸🩸
This is why boilerplate exists! It can (and will) be used as a weapon in court.
Twice in a row, Eisenman goes on a rant that “this is what they call a boilerplate as you know” and Judge Davila cuts him off, telling him to answer the question asked. “I’m trying,” Eisenman says.
Downey pulls up Eisenman’s investment agreement with Theranos which contains a legal disclaimer saying the company made “no assurances” it would ever go public. Eisenman pushes back that Holmes told him Theranos was talking to Morgan Stanley about an IPO in the next year.
Eisenman: “Can I ask you what a ‘service frame agreement’ is? I don’t know what that means” Downey: “You cannot.”
Kevin Downey, Holmes’s lawyer, is cross-examining Eisenman. Raising his voice a bit asking about his investment experience and about his conversations with Holmes. Pointing out that Eisenman only had one short call with Holmes before investing.
Eisenman emails again asking for more info about potentially selling his shares. Balwani’s response: “Your emails are insulting full of inaccurate statements and wasteful of our time. Our next response to this email and all your future emails will come from our counsel.”
Guy was told an IPO was coming almost a decade earlier and now can’t get a call back. He is now sending emails with PLEASE RESPOND!!! in the subject lines. And Balwani responds with “I already responded to you”
Eisenman responds asking for more info and Balwani responds with this: Alan. I have no intention of responding to this email and explaining the tech and processes. Please stop sending me with emails everyday. thanks.
Eisenman emails Holmes and Balwani a negative UBS report about Theranos. Balwani responds that it “sounds like an uninformed consultant”
And despite all that, Eisenman STILL invested $99,990 into Theranos in 2013. Why? “This is called a seat at the table.”
Before it was fundraising, Eisenman testifies that Sunny Balwani was “not only nonresponsive but aggressive with me.” “To say minimally, he was hostile for an extended period of time.”
Then Theranos was raising money again and it sounds like *despite all of this drama* Eisenman was willing to invest more money!
He responded: “It has been over 2 years since you have communicated with your investors. … Does this mean that you can’t or won’t communicate with me or the other investors?
From there things got spicy. Eisenman reached out Don Lucas asking for information. Lucas forwarded it to Holmes and she responded: “Alan, we have communicated about this multiple times before yet you choose to continue going down this path. Elizabeth”
In a May 2010 email, Eisenman asks Holmes whether the company hit the $200m revenue it predicted for 2009. In a later email, he testifies, Holmes said that goal was “stretched another year.”
His push for more information about Theranos’s performance frustrated Holmes. “I was more proactive than most. … Management didn’t like the fact that I was trying to communicate and get information.” To solve that problem, Holmes offered to buy him out at a 5x return.
Over time Eisenman asked Holmes to keep her quarterly updates coming and was denied. “There was no information coming from the company. To me that’s a sign of trouble.”
Theranos told investors it would become cash flow positive by the end of ’08. Now we’re going on a break.
In ’09 Theranos was telling Eisenman about huge demand for its cartridges. “These are numbers that are pretty astounding and create a pretty significant value for this company,” he said.
Altogether Eisenman’s family invested just under $1.2m into Theranos. ($900k for him and his wife, $90k for each of three kids) His testimony follows a pattern that is very familiar by now: What he understood about what Theranos’s technology could do and how he learned it.
Eisenman had many one-on-one calls with Holmes and she was the main source of info on the company. In 2006 Holmes was already saying she was talking to bankers about an IPO in the next 12-18 months and claiming $50m-60m in revenue in ’07 and $200m in ’08.
Eisenman testifies that, around 2006, he was told that Larry Ellison was on Theranos’s board and was taking $20 million of an upcoming $30 million fundraise. “My understanding was these international pharma companies had adopted this tech in some of their clinical trails.”
Alan Eisenman, a Theranos investor, is now on the stand. He was introduced to the company by the Holmes family’s financial adviser in Houston.
Das testimony ends with a very awkward exchange where Wade prompted him to recall a quote from the Best Exotic Marigold Hotel. “Everything will be alright in the end and if it’s not alright, it’s not yet the end.” Why was that relevant? I dunno.
Defense has spent time in testimony painting Holmes as an inexperienced person who could never have understood the details of how a lab works. Prosecution pointed out that she was CEO of the company and touted the patents she claimed to have written.
We also heard more about the Holmes excuse for the lab problems — she blamed it on quality control issues, not the machines. Apparently that excuse was given to CMS in a letter that Das signed, even though he disagreed with that part.
Dr. Das was asked in cross-exam about whether his decision to void the tests was “conservative.” In redirect, he was asked about it again and he said, “I was just following the data.”
Back to cross-exam. We see an email in April 2016 from Dr. Das to Holmes titled “some good news, for once” — data from two valuations looked “excellent” he wrote, even though he was not “a fan of the studies themselves.”
Now they’re doing a sidebar about scheduling, which I really wish would be a main bar so the press could have any sense whatsoever of what to expect and plan around…
One issue: Eisenman, who invested in Theranos, apparently said something about punishment of Holmes in the hallway and defense is concerned about that. And secondly, they’re redacting a line from an email that says he had most of his net worth (‼️) tied up in Theranos
During a break the lawyers are fighting over the upcoming testimony of Alan Eisenman.
Wade makes it seem like Theranos was heroic for voiding the tests, given media scrutiny and stakes: It was a big decision to make to void all of the assays for their analyzers? It wasn’t necessarily something anyone wanted to do? The preference would be not to have to do that?
Now Wade attempts to blame former lab director Adam Rosendorff (without mentioning that he resigned in frustration and leaked to WSJ). You recall the laboratory was not well-run when you joined? And that was why you were working to improve it?
Now Wade blames Das: You’re familiar with Holmes’s background and training? She wouldn’t be qualified to serve as a lab director in a high complexity lab? But you were qualified? Ultimately the judgments were yours? You were responsible for the people working under you?
We talk about all the people working on addressing the problems. Wade: “All these people were working hard and in good faith as they were undertaking these efforts, is that fair?” Das says yes (obviously).
Wade is deflecting blame to Sunny Balwani, who was in charge of the lab. Before Dr. Das, lab directors reported to Balwani. When Das joined, he reported directly to Holmes, and Wade elicits testimony that this was a change designed to address the issues.
Before Dr. Das joined Theranos, CMS inspected Theranos’s labs and issued a damning report about lab deficiencies, which we saw yesterday.
🩸 “Our Holmes Matter” continues in San Jose. 🩸Holmes lawyer Lance Wade is questioning Dr. Das, Theranos’s final lab director. Yesterday he testified that he decided to void as many as 60k Theranos tests.