Thread by @doratki

Good morning! It’s another day waiting in line outside the San Jose federal courthouse for US v Elizabeth Holmes. Holmes’ attorneys have arrived, and Balwani’s counsel are in line. There seem to be fewer reporters today and more unfamiliar faces. Mostly spectators, I assume.

A young couple in front of me are being interviewed. The husband - who’s an RN - said he had vacation days and came to “check it out” with his wife who read Carreyrou’s book and heard a podcast about Theranos. They were here yesterday too.

The husband said when he heard about the bogus blood tests he thought it was ridiculous. The wife took work off to watch the trial and she said it was worth it. “I’m so obsessed with it,” she says.

Two college students from UC Santa Cruz were also interviewed behind me who came to watch. One of them had read and watched a bunch of Theranos stories so wanted to check the trial out IRL.

Elizabeth Holmes has arrived to the courthouse with her mother. They’re holding hands. This is the first time she’s showed up alone with her mom and no attorneys or men with her.

It’s remarkable how often I’ve overheard certain members of the press outside the courthouse saying Holmes committed fraud w/o qualifying their statements in any way.

Few know this, but the overflow courtroom is the luxury suite of the Robert F. Peckham federal courthouse.

Judge Davila is back on the bench to hear arguments on whether Erika Cheung's Theranos emails constitute business records and are admissible. (Get ready legal nerds, it's our time to shine!)

Prosecutor John Bostic says Holmes' counsel cites a 9th Circ. 1994 case - Monotype Corp. PLC v. Int’l Typeface Corp. - to support its arg that emails aren't business records, but times have changed. "I don’t think I had a computer in 1994," he says.

Bostic says the 9th Circ's ruling this year in United States v. Lischewski made clear that emails can be business records, but Holmes' counsel Lance Wade points out that Lischewski ruling is an unpublished decision and not precedential.

Holmes' counsel says the Lischewski case involved two emails, but the feds want dozens of emails, including casual exchanges, and that's overbroad. Bostic replies that Wade's arguments are "premature and they miss the point" b/c Cheung will lay a foundation for the emails.

Judge Davila "we have come a long way haven’t we," and he recalls the days of when notes were delivered via "pneumatic tubes." (wat) He thinks some emails are biz records and don’t fit in the casual conversation standard, but the gov't still has to lay a foundation.

Wade says he understands the court's ruling, but he wants to flag a Cheung email that Holmes wasn't on in which Balwani says "I am already extremely irritated."
The docs don’t go to our client, he says adding "this is a wire fraud case and not a deficient lab practice case."

Wade also wants emails between Erika Cheung and the now deceased ex-Theranos board member and ex-Sec of State George Shultz and his grandson Tyler excluded, b/c they're multiple levels of hearsay.

Holmes' counsel says "All of those involve multiple levels of hearsay that would be a great law school question," but they're not admissible. Wade says if the gov't wants the evidence in, they can't "smuggle" it in through Cheung's emails. They need to call Schultz.

Prosecutor wants Cheung's emails in b/c he says it's relevant to why she reported Theranos to CMS and it speaks to her "state of mind." Holmes' atty says Cheung's state of mind and that her "hopes and dreams were dashed" is irrelevant to Holmes' wire fraud case.

Holmes' atty says Cheung's examination is designed to pull out "highly inflammatory" emotional testimony from Cheung. "This is in the cheapest seats in the house w/ respect to our client, if Theranos itself were on trial it would be one thing but it’s not, our client is on trial"

Prosecutor says the gov't is not trying to elicit emotional testimony from Ericka Cheung, but he notes that witnesses "don’t need to testify as automatons" and they should be able tell their story.

Judge Davila says he agrees w/ Wade that the gov't shouldn't try to elicit emotional testimony from Cheung, but "she doesn’t seem to be the kind of person who is going to do that." Wade also points out that there are other gov't witnesses who can speak to Theranos whistleblowing.

After about an hour of args, Judge Davila doesn't exclude any of Cheung's emails outright, and he called in the jury. Sounds like we have a lot of objections ahead of us today.

The jury is back, and Erika Cheung is on the stand. Prosecutor John Bostic continues her examination with - big surprise here - emails!

Cheung is testifying on emails explaining her responsibilities as a lab technician and the process of how Theranos teams used different Theranos and non-Theranos devices to test blood samples. So far, testimony is pretty technical and unemotional.

Cheung says blood analyzers failed quality control tests frequently and Theranos deleted two outlier data points for QC tests to pass. There was no standard protocol for outlier deletion & "this is essentially cherry picking," she says, to suggest the data is better than it is.

Cheung testifies that Sunny Balwani instructed her via email not to share Theranos' device quality control issues with other teams. She said she raised her QC concerns with her bosses, including the medical director and VP Daniel Young.

Cheung says she told Young that Theranos' Edison device didn't work, and it "wasn't performing reliably or effectively for standards that you would typically see for medical diagnostics. That was the obvious explanation of why the QCs were failing."

Cheung says Theranos didn't define an outlier, or have rules or standard procedures regarding what outliers can be removed, but it was "something kind of stated you can remove 2 out of the 6 data points," so that Theranos quality control data was better than it was.

Prosecutor wants to show the jury some more Cheung emails and Holmes' counsel raises their first objection. The judge allows the gov't to proceed. Cheung's email says "I don't feel comfortable running the patient sample. You're going to have to find someone else to do it."

We're taking a ~40 minute break. Today's trial is going to go longer than usual and will break around 3. Brb

I wonder if I keep making the joke that at 1 p.m. cocktails are served in the overflow courtroom it will happen one day...

We're back. Erika Cheung is back on the stand, testifying about Theranos' proficiency tests and her conversations with Tyler Shultz, the whistleblower and grandson of former Secretary of State George Shultz who served on Theranos' board.

Cheung sent Tyler Shultz the results of Theranos' proficiency tests, which she says showed that Theranos' Edison devices gave "two very different results" when tests were performed more than once.

Cheung says she shared the results of Theranos' proficiency tests and her concerns with Theranos' medical director, quality control director and "eventually" Sunny Balwani, but she doesn't mention Holmes.

Prosecutor points to data showing that 25.6% of certain Theranos quality control assay tests failed in March 2014. Cheung says that failure rate was "pretty standard" for Theranos, and it was "very uncommon" for those tests to fail on other non-Theranos devices.

Cheung says the proficiency testing issues were just a sample of the problems she saw at Theranos, which led her to resign in 2014.

Prosecutor asks Cheung how she felt when she decided to quit. Holmes' counsel objects, but the judge overrules the objection.

Erika Cheung testifies that "It was starting to get very uncomfortable, and very stressful for me working at the company" b/c of Theranos' quality control issues. "I was attempting to tell as many people as I could, but just not seeming to get through to people."

Cheung said she quit after she met w/ Balwani in his office to express her concerns. "He seemed irritated that I was raising the issue again"..."He was more irritated and angry that I was bringing up this information," and said what do you know about stats or lab diagnostics?

Cheung said she quit Theranos, which was her first job out of undergrad and paid $19 per hour, and didn't have another job lined up. She said she never thought to contact Elizabeth Holmes directly b/c she thought Tyler Shultz was "basically communicating with her."

Over objections, gov't shows Cheung a lengthy email that Tyler Shultz wrote Elizabeth Holmes. The upshot is she thinks Tyler was telling Holmes the tests had problems. (It's kinda surprising the judge is letting Cheung testify about what she thinks Shultz's email means.)

Over more objections and an overruled request to strike testimony, Erika Cheung recalls meeting George Shultz, telling him about the problems with the tests and that the people who were doing them were "not very experienced."

Over more objections, Erika Cheung testifies that in June 2015, a man was waiting in a car outside her job then, and when her co-workers walked with her to her car, "the man jumped out of a car and handed me this letter warning from Theranos’ lawyer David Boies."

Cheung said the letter threatened litigation against her and accused her of disclosing Theranos' trade secrets to then-WSJ reporter John Carreyrou, and defamed Theranos. Almost immediately after, she said she reported Theranos to CMS and filed a complaint a few months later.

Prosecutor wants to ask Erika Cheung what her current job is. (She launched her own nonprofit called "Ethics in Entrepreneurship" in response to the Theranos debacle.) Defense counsel objects on relevancy grounds, and the judge is holding a sidebar.

One legal point that may be worth noting and which the judge mentioned this morning, when Erika Cheung filed her complaint against Theranos, CMS was already investigating the company.

After a short sidebar, the judge appears to have sustained Holmes' objection and prosecutors wrap Cheung's examination without getting her to mention she now runs her own nonprofit focusing on ethics. Lance Wade is up now for Holmes.

Wade begins Erika Cheung's examination by asking her to explain who was on her 'core EILSA' team and who was her direct report. After some confusion, she's naming the 14 people who worked on the team, which includes a few folks with PhDs.

Cheung describes an 11-member Theranos team - called the "binders" - which included Tyler Shultz. Before moving on, the judge called a lunch break. We'll be back in 45!

We're back. The jury is in the courtroom and Erika Cheung is on the stand. Cheung picks up where she left off, naming the multiple folks on the various Theranos testing teams and their leaders.

Wade asks Cheung who her managers were. She says lab directors Mark Pandori, who has a Phd, and Adam Rosendorff, who is a medical degree. Both of their LinkedIn pages don't name Theranos as their former employer.

Cheung acknowledges that Theranos had a CLIA certified lab and its lab directors had special qualifications they needed under fed regs, but she doesn't know the specifics. She adds that her job in the lab was "very low level," doing the "basic operations" of running lab tests.

Holmes' counsel Lance Wade is asking Cheung about the qualifications of her supervisors, including Daniel L. Young, who went to MIT or "the Good Will Hunting school," says Wade. Cheung responds she doesn't know.

After Cheung mentioned she knew Young had a dissertation, Wade asks Cheung if she knows what the dissertation was on. "I don’t remember," she replies. "Something complicated?" Wade asks. "Yes," she says.

Wade's line of questioning seems to be trying to call into question Erika Cheung's lab experience and qualifications.

Wade has asked Cheung a series of questions about specific regulations regarding certified labs and tests. He's not nearly as aggressive as some attorneys I've seen during cross, telling her at one point "don't sell yourself so short," and "I know it's been a long time."

Wade points to documents prepared in the CLIA lab that were signed by Theranos' lab directors indicating that the assay tests were validated. Most of the documents include a note disclosing that "obvious outliers" were excluded from calculations and it explains those outliers.

Wade pulled up Theranos' 21-page policy document and is walking through the "responsibilities" of lab operators and the company's policy for testing quality control daily, and gets Cheung to acknowledge that the QC tests weren't using human blood samples.

Wade wraps today's trial testimony by getting Cheung to acknowledge that Theranos had a procedure in place re. what to do if quality control tests fail: "You weren’t responsible for creating that procedure?" "No," she replies. "Do you know who was?" Wade asks. "No."

With that, trial recessed for the day. We'll be back in court Friday continuing with Erika Cheung's cross examination.

Whistleblower Erika Chang testified in US v Elizabeth Holmes today on her many concerns w/ Theranos' quality control, quitting after talking to an 'irritated' Sunny Balwani and receiving litigation threats from David Boies. Specifics on Holmes were sparse.
law360.com/articles/14220…