Thread by @MilesGCohen

#ElizabethHolmes Trial Day 13 — we're back at Robert F. Peckham Federal Courthouse.

The lawyers are discussing whether the jury should hear about the "monetary sums for the development of Safeway stores."

AKA $300 - $400 million

"That might be more prejudicial than probative," Davila said, noting the jurors will likely fixate on the large number.

Judge Davila ruled: no mention allowed of the $300-400 million.

But Davila will allow prosecutor Robert Leach to ask questions about the development of the Safeway stores.

"Be careful of doors," the judge warned the attorneys.

#ElizabethHolmes

Leach began his direct by asking the former Safeway executive about how he felt about the pace of the Theranos rollout to Safeway stores in Aug. 2012.

"I was disappointed... the dates kept being pushed back," Burd testified.

#ElizabethHolmes

We are looking at a powerpoint Burd created for his board around Aug. 2012, with plans for the rollout. We heard last week that he often consulted with #ElizabethHolmes on the info he included.

One slide titled was "Launch with heavy PR effort"


“Elizabeth will meet with the editorial boards of all local newspapers,” read one bullet


“A WSJ article be released the day of our launch,”read another.

Burd said he got this info from #Theranos

Now we look at an email Burd sent #ElizabethHolmes on Sept. 12, 2012.

"We didn't get the lab unit from Theranos. We ended up drawing blood — I believe it was mostly vein draws...," Burd testified about the email.

“I am genuinely concerned that Safeways lab reputation gets worse by the day… The sooner we get to “finger stick” the better we will be,” Burd wrote in the email.

#ElizabethHolmes

"Whenever you start something new your gonna have rough spots, but we continued to have rough spots," Burd testified.

"We had samples that were lost. We had results that didn't make any sense."

Burd wanted the mini-labs (Edisons) in the Safeway facility. He told Leach the reason they didn't end up with "a theranos unit in the building," was because #ElizabethHolmes thought there was a risk that their tech could get out to other competitors

Leach is leading Burd through his fall 2012 frustrations, expressed to #ElizabethHolmes directly via email.

"I feel like a jogger running in place waiting for the stop light to turn green," Burd wrote in one.

"We were completely ready. We were just waiting on Theranos."

#ElizabethHolmes wrote Burd back Nov. 12, 2012, telling him "don't be discouraged."

"I’m one of the most positive people you’ll meet," Burd testified. "I don’t get discouraged."

Burd remained cordial in his emails with Holmes — even after expressing his concerns to the #Theranos CEO.

“I am sorry if this sounds a bit blunt. Chalk it up to the limitations of email,” he wrote at the end of one long note.

"I believe in you. I believe in your company. And I share your vision. I want so much to help you change the world. We are so good together when we collaborate. But I have never been more frustrated," Burd wrote Holmes in Jan. 2013.

#ElizabethHolmes #Theranos

Leach ended his direct by asking Burd if #ElizabethHolmes ever proposed using third party devices — no, he said.

"Would that have been of interest to you?" the prosecutor asked

"No," Burd testified

Defense attorney Kevin Downey is on for cross. #ElizabethHolmes

"People think because you are the CEO you are the top guy," Downey began.

"But in fact you had a board of directors you had to report to, right?

"And they were sophisticated people?"

Now Downey is going through the organization of Safeway.

The strength of his team.

“You had become a pretty sophisticated negotiator is that right?" Downey asked Burd.

"I think I was pretty good at it…I had people negotiate for me,” he noted.

Downey elicited that Burd was an advisor for a private equity firm for nearly 10 years pre-safeway.

Downey is going through how Burd came to know about Theranos and it's tech.

"You knew at the time [ElizabethHolmes] was a very young entrepreneur?" Downey asked, noting Holmes was in her 20s.

#ElizabethHolmes

Downey's line:

"You understood that Safeway or Walgreens — this would be their first consumer based deployment of tech correct"

"You understood as a result that they had never scaled this technology on a broad basis"

"Nevertheless, you were impressed with Ms. Holmes"

We’re now looking at a letter Burd wrote to Holmes dated March 31, 2010 — a followup to the pair's first meeting.

Burd said he was impressed with the Theranos blood analyzer and proposed an agreement for exclusive retail rights.

#Elizabethholmes

Burd continued:

"First we will arrange a meeting between you and UCSF so that they can verify that the blood analyzer can perform at least 85% of the blood work done by a standard retail lab today."

That meeting never occurred until 2011, Burd testified.

#ElizabethHolmes

Burd testified he personally has been a generous donor to UCSF.

#ElizabethHolmes

Burd wanted to know what one UCSF doctor thought of the Theranos tech.

Downey asked Burd if he was aware that Holmes brought the Theranos blood analyzer to UCSF at that time — he wasn't.

Downey gets Burd to testify Safeway did not make an "equity investment" in Theranos, and that they never got a board seat at the tech company.

#ElizabethHolmes

Burd doesn't remember ever asking Holmes, or ever hearing from one of his team members, how much money she put into the development of the Theranos technology.

Burd testified his team put in at least 100 hours of due diligence, when vetting Theranos. #elizabethholmes

“Safeway has spent hundreds of hours on its own due diligence and has communicated almost daily with Elizabeth and Theranos for more than one year," Burd wrote in a July 2011 email.

Burd confirmed this is an accurate statement.

More on the diligence process from Downey:

Do you recall whether any assay dev reports were sent from Theranos to Safeway as part of the diligence process?

I don't recall.

We are looking at an email between #ElizabethHolmes and Johns Hopkins Oncologist Dr. Jonathan Simons, cc'ing Burd.

"We have had the opportunity to present the valuation data on the technology platform and on the broad range of assays at Hopkins," Holmes wrote.

Downey's line:

How familiar were you w/ the blood testing business before you started talking w/ Theranos in 2010?

Did you actually know how the medical process of blood testing worked?

Were you familiar with the term assay before discussion with Theranos?

Did you understand... that Theranos had not developed an assay for each assay that could potentially be offered?

"We thought theranos had assays for almost all…we were relying on the fact that they said they could do virtually all assay types."

#ElizabethHolmes

"Do you know that Ms. Holmes told Brad Wolfsen (Then president of Safeway Health) by email that Theranos was not presently capable of performing all of the tests?" Downey asked

Then brought up the April 2010 email chain he was referring to.

#ElizabethHolmes

This is the correspondence:

First an email from Wolfsen:

Elizabeth, I’ve received a request from our lawyers to send the “Selected Assays from the Theranos Assay Library” to our outside counsel...

Then a response from Elizabeth:

“This is fine, but that list is not an accurate reflection on the tests we will actually make available in the stores — that list is the library we provide for our pharmaceutical clients clinical trials.”

Then Wolfsen:

Thank you for the clarification. I had forgotten that that list was the composite of current future tests.

"Ms Holmes never said we have a CLIA certification," (in 2010), Downey asked

"No she did not but she was expecting to get one," Burd answered.

#ElizabethHolmes never told you during 2010 they had approvals from the FDA?

I don’t recall her telling me that

Downey asked if they [Theranos/Holmes] told Burd anything about having a regulatory approval that he thought was false

He did not recall anything.

Downey is asking Burd questions about the Sept. 2012 agreement that Safeway ultimately made with Theranos after months of talks.

The government also went through the agreement.

Downey draws Burd's attention to the "Pilot program" section. His understanding was there would be three periods (as denoted in the agreement)

1. pre-pilot
2. pilot
3. the launch.

On direct Burd had testified Theranos missed a pilot deadline

#ElizabethHolmes

Downey went through the 9 bullets in the "pre-pilot period," which included provisions to be completed by both sides

"If Safeway were unsatisfied with Theranos performance, it could terminate the agreement?" Downey asked.

#ElizabethHolmes

He went on to do the same with #2 the pilot program

"If Safeway were unsatisfied with Theranos performance, it could terminate the agreement?" Downey asked again.

The "Termination without Cause" provision of the agreement, says that if Safeway chose to terminate the agreement (which they could do at any time and w/o cause), Theranos would "promptly return all prepayment amounts"

That prepayment number was $10 million, Burd testified.

Downey addresses Burd's frustration with the slow rollout process.

"There were no particular deadlines in this agreement were they?" Wade asked

"No deadlines.. bc all the other puzzle pieces needed to get done," Burd said

Downey asked if he understood the delays to have to do with the development of the Theranos technology.

Burd did not concede.

#ElizabethHolmes

"Safeway had its termination rights the whole time — and could have terminated the agreement."

"Correct."

In Jan 2012 Holmes told Burd Theranos was no longer in a position to place their proprietary tech into Safeway stores, Burd testified.

In a late Jan 2012 email Burd wrote to Holmes he was concerned about "showing network partners" plans to launch with a mere fingerstick.

(The pair had discussed a courier network instead where blood would be taken from Safeway stores to a central Theranos Lab)

More emails between Burd and #ElizabethHolmes

On July 27 2011, at 9:13p.m. Burd wrote to the top Theranos boss:

Subject: Plan Launch

"You were pushing Ms. Holmes in this email on branding a market. The gist of this email was there was a lot of work [left] to do?"

Correct

Holmes replied with Theranos' main priority which was to "[scale] up our infrastructure to establish our footprint and go live nationwide," as she wrote in an email.

She gently told Burd she didn't have time to worry about the marketing he had brought up

Downey highlights the following sentences In a Sept. 2012 email Holmes sent to Burd (in reply to some of his concerns.)

As you know we were not eager to start the mandate for all employees for this reason

As you also know, we do not have all tests run in our lab onsite

Downey is asking Burd about his departure from Safeway in May 2013.

#ElizabethHolmes

"You had been the person at Safeway who had really championed the #theranos project, correct?"

Burd said he was the sponsor.

"I hold myself responsible for getting this deal done and executing."

Downey asked him if he remembers Safeway's stock underperforming in 2012. Burd doesn't recall.

Here come the documents —

Exhibit 10568 and 10569 — Bloomberg stock charts.

The first depicts the Safeway stock price between July 2010 to January 2013.

In the period, the graph shows the Safeway stock fluctuating between 22.5 bucks to around 13 bucks per share.

Downey points out one significant drop between 1/3/2012 and 8/06/2012

The share price dropped from around $19 to around $14 in that period.

"Did you believe the relationship between Safeway and Theranos had any relationship with the value of Safeway's stock?" Downey asked

“Did you communicate with Ms. holmes by text or otherwise and tell her that you thought the stock price of Safeway would improve if you could announce a launch of a Theranos product in Safeway stores?" Downey asked.

"I cant say for certain," Burd replied.

#ElizabethHolmes

Downey brings up Theranos' dealings with the Department of Defense. On direct, Burd said:

"[ElizabethHolmes] told me they had been doing work for the DoD, that her device was in medivac units around the world."

"Did Ms holmes tell you as part of any convo that theranos had entered into a contract with the DoD in late 2012 to test its devices by central command in Afghanistan"

"No."

Downey concluded his cross. Leach back on for redirect.

Leach distinguished Theranos from other new startups by bringing up how long it had been around prior to Burd's talks with the company — around 7 years.

He also rehashed "cash flow neutrality" which on direct he got Burd to testify was an impression he had of #Theranos that he found not to be true.

"It made us feel better about the company," Burd said of the supposition.

Leach pulls up the Aug 2012 Safeway Board meeting presentation prepared by Burd.He goes back to the "Operational Logistics" slides

"One cartridge will satisfy 95% of all CPT codes"

Burd testified said he got this info from #ElizabethHolmes

Burd thought when #ElizabethHolmes called him and told him #Theranos got their CLIA license it meant approval of the minilab — and of the assays run on the device, he testified.

Back to the "mere finger stick" message.

Leach has Burd add context.

"We anticipated when we launched that we would be doing finger stick."

Holmes' team forgot to redact an email before they admitted it into evidence which contained the $275 million amount that had been debated, and subsequently excluded by the judge.

“I also want to maximize my return on my 275 million dollar remodel investment,” Burd wrote.

So Leach went ahead and flagged it to Burd.

"Was that money you gave to theranos?" Leach asked

"That was money we used to remodel the stores," Burd replied

Downey on for recross —

Burd has been excused. He lasted much shorter than Dr. Rosendorff, to say the least.

#ElizabethHolmes

A government agent just left to get the next witness.

#elizabethholmes