Theranos took shortcuts as blood-testing technology failed, prosecutors say

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Theranos founder Elizabeth Holmes is on trial on criminal fraud charges

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more than seven weeks in Elizabeth Holmes’ criminal fraud trial, prosecutors have shown that its startup Theranos Inc. took shortcuts during its revolutionary blood test claims Technology Turned out to be scientifically unfeasible and employees feared retaliation for expressing concern.

About halfway into the trial, scheduled to run until mid-December, jurors have heard from a patient who said the Theranos blood test had led him wrong. believe she was having an abortion, an investor who was swept away give $5 million By the false claim that Theranos equipment would help save soldiers’ lives, and by a former government official and the chief executive of a supermarket who lost faith In an entrepreneur he once enthusiastically supported.

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Former Defense Secretary Jim Mattis testified, “There just came a point where I didn’t know what to believe about Theranos anymore.” his time as a board member.

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One by one, witnesses have said that their belief in Theranos’ potential and the claims made by its founder and CEO, Ms. Holmes, became clear once the company was in fact using a commercial analyzer to run most of its blood tests. And Theranos’ errors on proprietary equipment – requiring a few drops of blood from the prick of a finger – were common.

To secure a conviction in the dozen conspiracy and wire fraud cases brought against Ms. Holmes, prosecutors must do more than show that she led a startup that is on its mission to create a new type of blood test. failed in They Must prove that Ms. Holmes knowingly lied To raise hundreds of millions of dollars to investors, and deliberately mislead the public into attracting patients to their blood testing centers.

Ms. Holmes’ lawyers have said the entrepreneur devoted 15 years to Theranos’ mission and that her only crime was being a startup that failed, as do many. Once the prosecution rests, Defense can call its witnesses Or the jurors should deliberate based on what they heard. So far, defense has used cross-examination of prosecution witnesses to try to refute the government’s allegations, including instances when Theranos officials responded quickly When issues were raised by lab staff.

The first 17 witnesses to take the stand describe several examples of the deception prosecutors are trying to prove: Theranos to the doctors excuses for abnormal blood test results Instead of accepting the error; In 2015, investors were promised revenue of about $1 billion, when an internal estimate was closer to $113 million; Theranos manipulated the data Continuing to run patient blood samples on unreliable equipment; and startup forged documents The pharmaceutical giant is saying pfizer Inc. validated its technology when it did not.

“What the government has shown was not just defrauding a few investors. It was totally broad,” said Richard Greenfield, a Philadelphia-based attorney specializing in shareholder lawsuits who is following the lawsuit.

Few witnesses to testify so far have spoken directly of Holmes’ intent during the years of the alleged conspiracy, although on Friday jurors heard her voice directly for the first time in an audio clip from a 2013 investor call. Ms Holmes told investors that Theranos can run “any combination of laboratory tests” on the prick of a finger’s blood. He repeatedly claimed that Theranos was working with the military in Afghanistan and that its blood testing equipment could be used in Medvex to understate the deaths of soldiers, which jurors heard investor Brian Tolbert told.

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“It was about the opportunity to make money, but to do what was beneficial to many and many people,” said Mr. Tolbert, investor who recorded the phone call, said in court. His brother served with the Marines in Afghanistan.

At a separate point, Assistant U.S. Attorney John Bostic asked Daniel Adeline, former Theranos product manager, “Was the Theranos analyzer ever used medically in the treatment of soldiers deployed by the military?”

“Not to my knowledge,” replied Mr. Adeline, who helped manage the Defense Department’s relations.

US District Judge Edward Davila this month pardoned a juror because he expressed concern that his Buddhist beliefs would prevent him from returning the verdict. it provided a rare glimpse How would some of the jury members be looking at Ms. Holmes?, a new mother whose partner and mother often accompany her to court.

The juror said that if Ms Holmes is given a prison sentence, “I think it is my fault and I feel guilty for it.” The alternate jury member chosen to fill the seat later told the judge that he had similar hesitations.

“This is her future,” said the jury, pointing to Ms. Holmes in the courtroom. “She’s too young.” Ms. Holmes, now 37, was 19 when she started Theranos. Another juror was pardoned on Friday after the judge and lawyers regularly knew him Number game Sudoku played during testimony.

Judge Davila has stressed to the jurors that their job is not to consider sentencing, only whether Ms. Holmes is guilty of the crimes. Criminal-defense lawyers say it can be difficult for jurors to separate the two.

The defense has not said whether Ms. Holmes will testify and may wait for the prosecution to make a final decision until the rest. During a recent hearing, John Kline, an attorney for Ms. Holmes, was noncommittal: “We can’t put up a case. We can call Ms. Holmes, we can’t.”

If Ms. Holmes decides to take the stand, the jurors’ opinion may change now. White-collar trials can often turn up the testimony of defendants, said Ropes & Gray LLP partner Brian Blass, who spent 11 years as a federal prosecutor in New York.

“If she testifies, it’s the make-or-break of the trial, whatever the three months before that,” Mr Blass said. Hearing her side of the story can help build empathy with the jurors, but it also opens up the risk of a harmful cross-examination.

In court filings, Ms. Holmes’s lawyers have stated that they could argue that she was the victim of abuse by Ramesh “Sunny” Balwani, former number-two in the company and her boyfriend for over a decade. Her lawyers have stated that the psychological, emotional and sexual abuse she faced left her under Mr. Balwani’s control, Strong denial of Mr. Balwani’s lawyer’s claim.

The jurors have so far not heard any allegations of misconduct, and after the proceedings, lawyers said it would almost certainly require Ms. Holmes to take the stand in order to successfully bring the defense.

Defense attorneys have so far worked to wean Ms. Holmes away from decision-making at her company, by receiving testimony from some witnesses who said they barely interacted with her.

Through lengthy and sometimes aggressive cross-examination, Ms. Holmes’s lawyers have attempted to point to Mr. Balwani as the source of the instructions given to employees and the information provided to investors. Mr. Balwani’s name has been invoked dozens of times by both sides; He pleaded not guilty to the same charges as Ms Holmes and faces a separate trial.

During the interrogation of the first witness, an email from a lawyer for Ms. Holmes, a former Theranos financial controller, showed that “Sunny’s estimates” had been used to give the highly rosy financial projections used to value the company. . The controller testified that Theranos lost more than $585 million over nearly a dozen years.

Prosecutors have read aloud private text messages between Ms. Holmes and Mr. Balwani in court, in which Mr. Balwani expressed concern about Theranos to Ms. Holmes and insisted on corrective measures.

“There’s a lot of hype around Theranos and you guys. FYI, I’m concerned about the overexposure to solids, which is lacking right now,” Mr. Balwani wrote in a message. In another text, he told her that he needed approval from the Food and Drug Administration for a blood test.

The defense has tried to discredit witnesses several times, most notably during the four-day cross-examination of former laboratory director Adam Rosendorff. Attorney Lance Wade almost began yelling at the witness, attempting to show the laboratory director was trained in his reactions and omitted their answers from the earlier affidavits.

Mr. Wade also tried to blame Dr. Rosendorff for any problems in the laboratory. that line of reasoning did not hold When the next person to hold the title of laboratory director took the stand. Sunil Dhawan testified that he was Mr. Balwani’s dermatologist and did virtually no concrete work for Theranos and rarely appeared in the company’s offices while listed in the documents as laboratory director.

Prosecutors are expected to convene witnesses for the coming weeks, pulling from a list of more than 180 possible names told to the court. Now that jurors know the broader traumas of Theranos’ rise and fall, they are likely to hear more from the two camps that prosecutors say are victims in the case: patients and investors.

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In taking her case to trial, Ms. Holmes is in the minority. According to an analysis by the Pew Research Center of Fiscal Year 2018 data, nearly 90% of defendants charged with felony or serious crimes in federal court pleaded guilty, with 8% of cases dismissed and 2% going to trial. Went.

Most of those who went to trial were found guilty.

This article first appeared in the Wall Street Journal


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