Thread by @doratki

It’s 6 a.m. and I’m outside the federal courthouse in San Jose, where there is a lively crowd of press and random members of the public who showed up for openings in U.S. v Elizabeth Holmes today. The word is Holmes arrived at 1:30 am - likely to avoid all these cameras.

John Carreyrou is here, eating a muffin, as are a few college kids who are interested in trials and the case. There are about 20-30 members of the press and many of them are chit-chatting. I’m still waiting for my coffee to kick in.

The courthouse gates opened and to my surprise everybody seems to have complied with the number system that one early riser came up with to keep the line fair. So far, this has been much more civilized than the ruthless chaos of the press line before day 1 of jury selection.

There are three women in front of me in line with blonde hair wearing black business suits. When asked why they’re here, one replied “we’re fans,” and they declined to comment further.

The courthouse is about to open and the line is much, much longer than an hour ago.

Holmes’ defense attorneys have all arrived at the courthouse - there’s no sign of Elizabeth Holmes herself, aside from the three look-alikes in front of me.

Elizabeth Holmes has arrived at the courthouse and is surrounded by cameras. Three of her fans try to catch a glimpse without losing their spot in line.

6 am apparently wasn’t early enough to get a seat in the main courtroom but at least the overflow room has outlets. The three black-suited women made it in.

Judge Davila is on the bench. He's reminding each side that they need to object during trial and not outside the presence of the jury. The judge sounds congested, but maybe that's just me...

Prosecutors say they expect their opening statements today to go 45-50 minutes, while Holmes' counsel say openings will be "about two hours."

The judge is taking a quick break to call in the jury. Meanwhile, the line outside is still very long. Many of these folks will be turned away because there aren’t enough seats in either courtroom.

Judge Davila is back on the bench. He says juror number 7 - who is 19-years-old - said her employer won't pay her for jury service. The judge called her into the courtroom and she says she has to work to help her mom pay bills.

This particular juror said during voir dire her father died four years ago. She's now telling the judge she works part-time in customer service, and the judge is pressing her, but she says she doesn't think she can't shift her schedule.

The attorneys suggest that Juror No. 7 continue to serve today and decide at the end of the day whether to excuse her. The judge agrees and says he'll ask the juror to call her boss during a break to try to shift her schedule. "Maybe that will solve things," the judge says.

The judge called in the jury and he's instructing them, which should take a few before openings. Holmes is at defense counsel table, wearing a grey (black?) jacket and mask and she's sitting up straight, holding her hands together, resting them on top of the table.

The judge wraps jury instructions noting that the jury should not speculate why the gov't case against Balwani is not at issue in this trial. With that, prosecutor Robert Leach is up with openings.

Prosecutor says Holmes was "out of time and out of money" in 2009 w/ not enough cash to pay Theranos workers, so "Elizabeth Holmes decided to lie" to Walgreens and Safeway in order get money they "desperately needed."

Prosecutor says Holmes sold the idea of miniature blood-testing devices to Safeway and Walgreens, even though FDA was 'nowhere near' approving Theranos' devices. So instead, Theranos used Siemens Advia 1800 machines, which cost $100k to do the tests.

Prosecutor says in 2013, Theranos only had $15 million in cash and was spending $1-2 million weekly. Instead of delaying the device launch, he says Holmes and Balwani went ahead with the launch and got the WSJ to run a 'false and misleading' story on the devices in Sept 2013.

Prosecutor says Holmes and Balwani "reviewed and approved" a Wall Street Journal article on Theranos' blood-testing technology in 2013, and then went on to raise hundreds of millions of dollars in two years, in part by 'enginer[ing]' news articles hyping the company's tech.

Prosecutor says Holmes and Balwani lied to investors about Theranos providing miniature blood analyzers to the military to be used on military helicopters in remote parts of the world. He says Theranos only ever had 1 $250k military contract in 2010 for a burn study in Texas.

Prosecutor says Holmes doctored a Pfizer report about Theranos devices claiming it had "superior performance" to draw in investors, even though Pfizer never made the report. He says the co made zero revenues in 2012 and 2013, and only $150k in 2014.

Prosecutor says despite the low revs, Holmes was telling investors as late as Oct 2014 that Theranos would raise $140 million that year, "but Theranos ... was nowhere near achieving the revenue projections defendant was peddling."

Prosecutor says in June 2014, Holmes appeared on the cover of Fortune Magazine and was profiled in a story called "Out for Blood" before "a number of investments you’ll hear about." That article helped her and Balwani raise more money, he says.

Prosecutor says the jury will hear from ex-Theranos workers who saw problems with the blood-tests and reported the issues to CMS. They will also hear from women who received false pregnancy test results and evidence that "Elizabeth Holmes was well aware of the problem," he says.

Prosecutor says Holmes was "not an absentee CEO, she sweated the details," and she was in a relationship with Sunny Balwani, the COO, who lent the company money in 2009 to stay open.

Prosecutor says the jury will hear from Theranos' 3 former lab directors: Adam Rosendorff, "who Balwani forced out," Sunil Dhawan "Balwani's dermitologist," and Kingshuk Das, who was hired after "investors started asking questions."

With that, the gov't wrapped its opening statement. For the feds to have a 181-person witness list, I'm pretty surprised openings were under an hour.

Lance Wade is up for Holmes. He starts saying "Elizabeth Holmes did not go to work every day to lie, cheat and steal. The government would have you believe that her company - that her entire life - is a fraud. That is wrong. That is not true."

Wade: "Elizabeth Holmes worked herself to the bone for 15 years trying to make lab testing cheaper and more accessible. She poured her heart and soul into that effort. In the end, Theranos failed and Ms. Holmes walked away with nothing, but failure is not a crime."

Wade recalls that Holmes started Theranos at 19, and he shows the jury a picture of a presumably 19-yr-old Holmes smiling. (She looks like she has red hair in the pic for some reason.)

Wade says Holmes "was not alone," and she was surrounded by a team of talented individuals who worked to revolutionize blood testing. He says Theranos hired many people, obtained 176 patents and created 235 specialized tests that could be run on small samples of blood.

Wade says Theranos conducted 8 mil blood tests at a fraction of the cost competitors charged. He points to testimonials praising the tests for being affordable, and says 98% surveyed said they'd use it again. "It was real, it was innovative, and Theranos became a valuable co."

Wade says Holmes was "all in" on Theranos, motivated by its mission, "not money," and she never sold a single Theranos share, even though she could have cashed out at any moment.

Wade repeatedly says failure is not a crime, and "Ms. Holmes made mistakes," by "naively underestimating" business obstacles Theranos couldn't overcome, "but mistakes are not a crime."

Wade says the government is looking at Theranos "through a dirty lens" but the reality is "far more complicated," "far more human, more real and ... technical and complicated and boring."

Wade on the presumption of innocence: "Ms. Holmes sits there today in this courtroom innocent. She’s innocent... whatever is written or said about her before today is gone."

The court is taking the usual 11 a.m. break. Standby...

During the trial break, I discovered I missed the meter maid by 5 minutes and got a parking ticket because of course I did. "Sir, I object."

We're back, and juror 7 told the clerk her boss won't be back until Friday. "We'll chat with her again at the break when we finish," the judge says and calls in the jury. Judge Davila definitely sounds like he's congested, wondering if he is fighting er, um a cold.

Wade says Holmes isn't from Silicon Valley, but lives here now w/ her partner, "Billy," who is in the courtroom, and her child. Her mom is also in the courtroom. (It's unclear to me if Holmes' baby is in the courtroom - I'm in the overflow room & can't see who's in the gallery.)

Wade makes a brief reference to Mark Zuckerberg, and says Holmes moved to Silicon Valley as a Stanford University undergrad in the fall of 2002 and "this was an obvious destination for someone with her interests."

Wade says during college, Holmes worked abroad doing "entry level work" on the SARS virus that was "not glamorous" at the Genome Institute. When she returned, she filed a patent app in sept 2003 for genome testing, he says.

Wade says Holmes met Sunny Balwani when Holmes was 18-years-old in China and Balwani was 37. "You'll hear certain aspects of that relationship had an impact on Ms. Holmes," Wade says. He adds that "trusting and relying on Balwani as her primary advisor was one of her mistakes."

Wade says Theranos developed assays, hardware and software "from scratch." He says people take app dev for granted, b/c nowadays "teenage kids are doing it in their bedroom, but back then apps were new," and it took Theranos years to develop software needed to run the devices.

Wade is hinting at Holmes' abuse defense. He says Balwani's "drive helped push the company forward." But he had a temper, and would "lash out," which led many Theranos employees to leave the company "oftentimes on bad terms," Wade sense.

Wade says Theranos had no retail experience or regulatory approvals, and Holmes had an idea, but was only 25-years-old. "Most retailers could see that," he says, but Walgreens and Safeway "were more daring, or maybe more desperate to go after these services."

Wade says investors funded Theranos "largely b/c they saw the Walgreens partnership as an endorsement of this young company, but you’ll learn that [Walgreens'] two-phase approach required Theranos to do too much too fast, far beyond it’s expertise. A mistake. Not a fraud."

Wade says the evidence will show that the investors in this case were "incredibly sophisticated and new the risks." The investors were millionaires and many -- like Rupert Murdoch, the heirs to the Walmart fortune and the DeVos family -- were billionaires, he says.

Wade notes that many investors pushed others to invest in Theranos, including Brian Grossman, the manager of the hedge fund PFM LP. "They knew the risks. They knew it was a gamble," he says.

Wade says Holmes used Theranos tests and relied on Balwani and Theranos' "internal experts to ensure that things were being done properly." He says lab directors decide whether tests work and can be used in patient testing, not CEOs like Holmes who had "about a year of college."

I'll be updating this story at the end of the day w/ more details, but in case y'all want to read about this morning in US v Holmes, here's my "hey, I wrote this story during a trial break" recap: law360.com/articles/14196…

Wade says the patients and doctors who will testify about bogus Theranos tests represent .00025% of the 8 million test results performed. "How does that compare to typical error rates in a lab? Is that really meaningful evidence of fraud?" he asks.

Btw, one of the reasons they don't have results to Wade's question is b/c Theranos' counsel at WilmerHale lost the key to unlock the database that held all Theranos test results. law360.com/articles/14099…

Wade tells jurors to remember that when ex-Theranos lab director Dr. Kingshuk Das criticizes Theranos' blood tests at trial, Holmes was the one who hired him to "try to get him to the bottom of every issue." (Last month, Holmes had tried to get him barred from trial, but lost.)

Wade wrapped openings. The government calls its first witness: Theranos' controller So Han Spivey, aka. Danise Yam.

The judge whispered to his clerk "do you need to tell them how to put a mask on? Is it self explanatory?" Yam says she doesn't want to put the clear mask on.

There's some confusion, Yam puts on a clear faceshield, no mask. Robert Leach is up on direct examination. The surround sound audio in the overflow room cut out. Sheesh.

Took court staff ~10 minutes to get the audio back up, but it's back. (No sweat. All good. Nothing stressful about this at all.) Yam is explaining that at Theranos she prepared financial statements and balance sheets until 2017 when she and the accounting team was laid off.

Yam says Theranos didn't have outside firms like KPMG audit its financial statements, which she said is unusual b/c annual third-party audits usually make small businesses more credible. She also says Theranos couldn't pay all of its vendors in early 2009.

Yam says in 2010 Theranos raised $45 million from investors and now she wants to take the faceshield off because she says she can hardly see.

Yam is reviewing an Excel spreadsheet she sent in April 2012 w/ many tabs and stats on Theranos' income in 2009, 2010 and 2011. She's not wearing a mask or faceshield, but the witness box has plexiglass, so that's good?

The prosecutor wrapped trial for the day by pointing out Theranos' losses were $11.46 million in 2009, $16.2 million in 2010 and $27.5 million in 2011. The judge is admonishing the jury, asking them to disable notifications on their phone to avoid unwanted 'exposure to info.'

Judge Davila keeps juror no 7. The juror says she shifted her Fri schedule and hopes to talk to her boss about moving it for the rest of trial. "It looks like she's making great efforts to see if she can rearrange things, we'll see what happens on Friday," the judge says.

In case you want to read a full-fledged story recounting today's events and not just a bunch of piecemeal tweets, here's my updated story on opening statements in U.S. v. Elizabeth Holmes. The upshot? Both sides came out swinging: law360.com/articles/14196…