Thread by @doratki

I'm back in court for day 6 and hopefully the final day of ex-Theranos lab director Adam Rosendorff's examination. Judge Ed Davila is on the bench. Former Safeway CEO Steven A. Burd will testify after Rosendorff.

Holmes' counsel Kevin Downey wants Judge Davila to prohibit Burd from testifying that Safeway spent "hundreds of millions of dollars" renovating its stores for Theranos blood tests. Downey says renovations don't legally constitute property or an investment.

Prosecutor Robert Leach says Burd should be able to testify that Safeway spent $300 million "building out" its stores for Theranos testing devices, b/c it's directly relevant to the materiality of Holmes' representations to Safeway.

Downey fires back that Safeway’s decision to build out stores has nothing to do w/ Theranos, & Safeway uses the space now for other blood testing services. "To get into this issue is more witnesses and more days when its conceded that its property that’s not deprived," he says.

Judge doesn't rule on the issue yet. But he notes that a juror has expressed concerns to the clerk about "punishment" (in the religious sense) if she continues serving on trial, and she wants to talk to the judge.

Juror No. 4 is in the courtroom and says she is a Buddhist, which teaches forgiveness. She says in the beginning of trial she thought she could be fair to both sides, but now she's worried about Holmes' future.

Juror No. 4 says "Now I’m thinking what happens if [Elizabeth Holmes] has to be in [prison] for a very, very long time and I feel guilty and it’s my fault."

Judge Davila notes jurors can't consider Holmes' punishment in deliberations. But she says she still thinks about it "all the time." "It will stay with me. I keep thinking about that, every day of my life." She adds she'll stay on only "if I don’t have to vote. I'd be ok."

Prosecutors want the juror excused, b/c her beliefs seem sincere. Defense counsel doesn't ask for her to go, but also doesn't object. The judge excuses her.

Judge Davila is on the bench. He says Juror Alternate No. 2 who would have replaced Juror No. 4 also expressed "similar concerns" to the clerk about continuing service, she they're going to call that juror in for some q's.

Juror Alternate No. 2 asks to speak to the judge alone. He says no. She says English is not her first language and "it’s [Holmes'] future. I don’t know if I’m 100% ready to participate in something like this, being English not my first language and I could make a mistake."

Judge Davila notes that the community respects the "rich rich collection of individuals" who come to the Bay Area. He recognizes English isn't her first language, and the lawyers know they can't use complicated words so that the jury understand the evidence.

He also says repeatedly that jurors are not allowed to consider Elizabeth Holmes' punishment "at all" in their deliberations. She says she understands, and agrees it gives her more confidence in sitting on the jury.

Neither prosecutors nor defense counsel want the juror to go, so the judge is keeping her on the panel and putting her in Juror No. 4's seat. Rosendorff is heading back to the stand. Now, let's get this show on the road!

Prosecutor John Bostic begins Rosendorff's redirect showing him quality control data that shows QC tests on Theranos' blood-testing devices failed 3 times more often than non-Theranos devices.

Rosendorff: "At times I didn’t fully trust the data that was coming out of [Theranos] R&D for troubleshooting," b/c there were too many "anomalies" coming out of the lab.

Prosecutor John Bostic focuses on defense counsel's term "soft launch" used to describe Theranos' commercial launch in Sept 2013. Bostic points to Holmes' email to Jim Mattis announcing the launch & her email to investors, as well as Safeway's PR release. None say 'soft launch.'

Rosendorff says he didn't know what Holmes' brother Christian thought could be escalated to him when he was responding to drs. "I assumed if there were medical issues at play he'd forward them to me. I wasn’t clear what Christian had communicated to drs on multiple occasions."

Prosecutor shows a Dec 2013 email from Theranos exec Daniel Young to Rosendorff re CMS' lab inspection. Young: "Let’s not remind her about the downstairs lab unless she asks again. Just simpler if we can just show her the lab upstairs," where modified Siemens devices were.

Rosendorff: "It troubled me that we weren’t talking about the downstairs lab. It appeared to me that [the inspector] asked about it."

Prosecutor notes that Rosendorff said during cross he couldn't answer "yes or no" when asked whether Theranos cared about customer service. Rosendorff explains: "I think if customer service was truly important to the company it would’ve been much more transparent to the public."

Rosendorff says Sunny Balwani had "a strong hand in operational labs" and made decisions behind his back, along with VP Daniel Young. "And Ms. Holmes was aware of all of that," Rosendorff says.

Prosecutors wrapped Rosendorff's redirect. We're taking a 45 min break and then defense counsel has some recross (shocking). Wade says prosecutor's qs "opened the door" for him to go into all 6 other labs that he worked at "it's only fair to allow defense to go into that."

Judge Davila says there's a difference been a "turn of knob versus opening the door" and he isn't allowing defense to go into federal investigations into the other labs. "I may allow you to probe a little bit," but "we're not going to get into a mini trial" on all the other jobs.

Wade sounds pissed. He says he was very careful yesterday not to get into Rosendorff's other jobs based on the judge's comments and the prosecutor blew open the door by ending redirect by asking Rosendorff to compare lab issues at Theranos to all of his other labs.

The judge suggests he can strike the last answer. Prosecutor defends the q, but says they would be ok w/ striking the q to make it easier. Wade says striking testimony isn't an adequate remedy and he can't "unring the bell." But the judge says striking it is "sufficient."

We're back. Defense counsel Lance Wade tells the judge he doesn't think striking the question is sufficient and he wants to ask Rosendorff about his 6 other jobs. The judge sounds annoyed.

The judge says Rosendorff could give examples of how other labs were better than Theranos. "I think there's great peril for Ms. Holmes" and jurors "might then inappropriately use that to judge your client in this case..I see this as a mini trial that doesn't benefit either side."

Judge Davila adds that although the topic was inappropriate, he doesn't want to hold mini trials on the Rosendorff's other labs, because "then we start ringing most of the bells." He agrees to give the jury an instruction so that they can "move on."

The jury files in, and the judge tells jurors not to consider the government's question or answer about Rosendorff's other labs. Wade's up on recross, and slowly but surely we're moving on.

Wade begins by pointing to a June 2014 email that Balwani wrote Rosendorff before Rosendorff went on vacation: "Until we find VP of ops, I'm taking over the CLIA lab operations 100%. Since you are out for the next few days, this is needed no matter what."

Balwani wrote in his email to Rosendorff: "I am uniquely gifted at organizational structures and ops." Rosendorff responded to Balwani "Ok- thanks." Rosendorff testifies that his response was just acknowledging the email and "I didn’t say, 'Ok, go ahead take over the CLIA lab.'"

Rosendorff tells Wade he objects to the attorney's inference that he was responsible for all of the issues with Theranos' blood tests. Wade goes on that Holmes never directed him "to do things" or overruled "on things." He replies, no, she didn't.

Rosendorff tells the judge that he has to pick up his daughter at 3:45 and "respectfully" asks to be excused by 2 p.m. Wade says he should be done with Rosendorff "well before that." (Good grief, it's been six days. Let's hope so.)

Rosendorff is getting impatient. He tells Wade: "I believe we've gone over this email before. Is it necessary to revisit it?"

Wade: "Your objection is noted." He continues asking him q's about it.

Wade asks Rosendorff about a series of emails and says May instead of March. Rosendorff points out March is before May.

Wade: Ah, I'm mixing up my months.

Rosendorff: You really are.

(I feel like Bill Murray in a really boring remake of Groundhog Day.)

And Wade wrapped Adam Rosendorff's cross. Prosecutors have no redirect. After six days of examination, the judge excused Rosendorff. Next up: ex-Safeway CEO Steven A. Burd.

Burd is on the stand, he says he served as Safeway's CEO for 20 years from May 1993 until he retired in 2013. He says Safeway is a public company and it earned $45 billion in sales, operating in 22 U.S. states and Canada and it was a 49% owner in the Mexican grocer Casa Ley.

Burd has a masters' degree in economics, and says he was fascinated by Theranos when he learned about the company in March 2010 and he wanted to meet Holmes. "What I had been told about Elizabeth Holmes, I was eager to meet her."

Burd on Holmes: "I was very impressed. There are v. few people that I have met in business that I would say is charismatic. She was clearly charismatic she was clearly smart. She was doing one of the hardest things you can do in business, which is create a startup from scratch."

Burd says Theranos' tech was appealing, b/c Safeway could put it in its stores, it was small, and patients waiting on blood-tests could shop in Safeway while waiting for their results.

Burd: "This notion of getting results and getting a prescription possibly before leaving the store, we knew it would be appealing to customers."

Burd says Theranos' accuracy was impt b/c "People are going to come back for us if they got a number that didn’t make sense to a customer. It’s always true in business you want to always deal with first rate companies, particularly when you are always in the same environment."

Burd says "we were consistently told" that Theranos' small blood-testing devices "essentially replaces a full blown lab."

Burd says Theranos claimed its blood tests would cost 40-70% less than two dominant competitors. "It’s much easier to take market share from competitors if your price is lower" and it's also attractive to insurance companies processing claims, he says.

Burd says Theranos claimed they were "cash flow neutral," and "the fact that they were cash flow neutral suggested that they had a revenue stream."

Prosecutor: That they were ready to scale up now?

Burd: That they were ready to go.

Trial is taking a 15-minute break. Brb...

We're back. Prosecutor Robert Leach is going through presentation Burd showed Safeway's board. Burd said he made the presentation after running it by Theranos. It includes a "rollout strategy" slide, which includes "build a network of mini-labs and prepare for launch."

The presentation was made in May 2010 and the time-line for the roll-out was that Safeway and Theranos' contract would close by the second quarter of 2010. But Burd said the timeline "continuously changed.”

Prosecutor shows Burd a July 30, 2010 email Holmes sent to him, Safeway's CFO and Balwani. Holmes wrote the email included "high-level" financial projections attached, which Burd said Safeway asked for to "understand how fast the business would ramp up."

Burd says Safeway asked for the projections because "If they weren’t going to be profitable, the business relationship wouldn’t last long."

The attachment projected Theranos' 2011 revs would be $223 million, w/ $167M expenses, giving it a "cash flow" of $56M, and growing annually from there. Burd notes that the doc didn't include 2010 info so Safeway had no way to confirm Theranos was cash flow neutral that year.

Back to the presentation now, it says Safeway was "guaranteed" an average $10 gross margin per Theranos test. Burd says Safeway would invest $55 million in cash in Theranos, and it would spend $30 million to remodel stores, which Burd notes turned out to be a "v low" estimate.

Burd says he negotiated Safeway's Sept 2010 deal "almost exclusively" w/ Elizabeth Holmes. "What was unusual about it was that we never saw an attorney.
Elizabeth appeared to be negotiating completely on her own, probably talking to counsel online but I had never seen that done."

Prosecutor Robert Leach is walking through the various terms of Safeway's contract w/ Theranos. Burd says he thought the blood-tests were done on Theranos' devices, and not third-party devices.

Burd says Elizabeth Holmes was his point of contact, and even when Sunny Balwani was there, Holmes seemed to be in charge. "She never looked over at Sunny to see what he might be thinking, she answered these questions herself."

Burd says Holmes "was always decisive. Whenever she was talking, she owned the room," & her "style" was warm. "I always thought she was a good listener." He says he wasn't aware Holmes had a romantic relationship w/ Balwani. "It just raises the question of what else is hidden."

Burd says he thought Theranos' tests had been proven and he was relying on statements in Theranos' presentations, including quotes in the presentation of Glaxoklinesmith's praise of the technology.

Prosecutor shows a bank statement showing Safeway gave Theranos $30 million in 2011, and a $10 million convertible promissory note in December 2011.

Burd says by 2012, the devices weren't ready for Safeway and he was getting frustrated. "Deadlines were continuing to be missed. We often weren’t given explanation for that. I kept asking, 'Give me some details here, we’re a big company with lots of resources, may be can help.'"

Burd says the only technical issue he can remember was that Theranos was having problems with heat generated when they stack six machines together and he offered Safeway's engineering team to help.

Burd says he thought Theranos' blood tests had been validated years earlier, and he offered Safeway's resources to help, but Holmes expressed concerns about keeping Theranos' trade secrets concealed.

Burd wrote Elizabeth Holmes in a Dec 2012 email that "it is crystal clear that either the most recently committed dates.. were far too ambitious, or there have been some overwhelming surprises along the way..."

Burd's email went on "...I also worry that the demand of your core business or the newly acquired DOD business are consumer resources that would otherwise be committed to launch." Burd says Holmes told him Theranos was in a "confidential" DOD deal to use devices in medevac.

Burd testifies that Holmes "said it was very confidential
I was bothered by it. I was disappointed. It seemed plausible. It just seemed like one more delay to us," but "It made sense." W/ that, trial recessed until Tuesday. That's all folks!

Former Theranos CEO Elizabeth Holmes had a rough day in court today. A juror was excused and former Safeway CEO Steve Burd testified that Theranos didn't deliver on its $55 million deal. Trial is on a break until Tuesday (and so am I ✌️). law360.com/articles/14287…