I'm back in San Jose for day 13 of Elizabeth Holmes' criminal fraud trial. Ex-Safeway CEO Steve Burd is expected to get back on the stand for some more q's on direct before cross. Judge Davila is on the bench.
Judge Davila says he wants trial to go until 3 p.m. today, 4 p.m. tomorrow and 1 p.m. Friday. The parties expect Burd's examination to wrap this afternoon, so it sounds like there'll be another witness this p.m.
Judge Davila says he wants to question jurors about publicly filing their questionnaires in response to a media coalition's request. Defense counsel wants to be present for the questioning, but prosecutors say the defense has no constitutional right to be present for the q's.
Judge Davila says he doesn't think questioning jurors re. their questionnaires implicates Holmes' constitutional rights, but suggested her defense attorneys could file a "script" or brief on it, if they want. Defense counsel sounds like they're passing on the offer.
Judge Davila reiterates concerns he expressed last week that having attorneys present during juror questioning w/ the judge could be intimidating. He adds "it’s not that I don’t like counsel, I enjoy counsel," but it could intimidate them and the issue is "ancillary" to trial.
Judge Davila turns to another issue: Whether Burd can say Safeway spent $380 million - $400 million (this number keeps growing) on renovating their stores for Theranos' devices. Holmes' counsel says the stat should be excluded in part, bc Safeway uses the renovated spaces today.
Prosecutors say Safeway's renovation costs are in a few exhibits and should be shown to the jury, b/c it shows Safeway's commitment to Theranos and the impact of Holmes' alleged fraudulent statements to the retailer.
The judge says the stat is more prejudicial than probative and Burd can discuss renos but not specific dollar amounts: The $55M Safeway invested in Theranos "would be dwarfed by the expenditure that they made in all their stores. I have concern that [jurors] would focus on that"
The jury is in the courtroom and ex-Safeway CEO Steve Burd is back on the stand. Robert Leach is up for the government, and begins by asking Burd about 2012 statements Elizabeth Holmes made to him about the military.
Prosecutor Robert Leach points to an Aug 2012 Safeway presentation that Burd and Holmes prepared for Safeway's board about Theranos' rollout. Burd says at the time, Theranos had already missed one pilot deadline in the 1st quarter that year.
The Aug 2012 presentation says Safeway completed 98% of construction on 969 units, which Burd says was also used for vaccinations. It also says Elizabeth Holmes would meet with "editorial board of all local newspapers" and a "WSJ article will be released the day of our launch."
The presentation also says one Theranos cartridge "will satisfy 95% of all CPT codes." Burd says that was "great news," b/c Safeway had to inventory them and he thought one cartridge could perform most blood tests. He says the only tech issue he knew of was heat management.
Prosecutor points to a Sep 2012 email that Burd wrote Holmes: “I am genuinely concerned that Safeway’s [Theranos] lab reputation gets worse by the day. Keep in mind I have now required that our employees and their nearby dependents use this lab.”
Burd explains that Theranos' blood tests had multiple problems at that point, including blood samples that were lost, temp control issues and "results that didn’t make any sense."
Burd's Sept 2012 email adds that his staff has said Theranos' tests had improved over the previous 3 months but it is "no where close to Quest," which was Theranos' competitor.
In another Sept 25, 2012 email, Burd wrote Holmes that he needed to know if the soft launch was going to be delayed, so Safeway could slow hiring staff, and he heard that Theranos was doing their tests in Utah, and not on site in Calif.
In a Nov 2012 email, Burd wrote Holmes: "If we don’t pick a launch date soon, we can forget about launching even six stores in 2012..I feel like a jogger running in place waiting for the stop light to turn green." Safeway was ready and waiting on Theranos, he says.
Burd wrote another email to Holmes in Nov 2012 titled "Becoming discouraged." In the email, he says as a optimistic person, he can only recall having been discouraged "once in the last 62 years. That said I am getting close to my second event."
Burd explains that Safeway had 185k employees and he thought Safeway could have helped Theranos remove some obstacles, but deadlines weren't being met and Theranos wasn't always taking Safeway up on its offers to help.
In a Jan 2013 email, Burd wrote Holmes that "I cannot begin to tell you how disappointed I am that you redesigned [Theranos'] wordmark without ever telling us you were doing it... I don’t mind passing the batton… what I mind is having it ripped from my hands."
Burd's email went on: "I do not like wasting time. This does not feel like a partnership." He explains that the decision "wasn’t as collaborative as I thought it should be," given that Safeway did marketing research on brand logos and he would have at least liked a courtesy call.
Burd's email to Holmes: "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. I want to help, but you are making it difficult."
Burd explains that it had been almost two years at that point and Theranos still hadn't launched blood-testing devices in the stores. Burd says when he retired from Safeway in May 2013, Theranos had never launched in its stores.
Prosecutors wrapped Burd's direct examination. Kevin Downey is up for Elizabeth Holmes. He begins cross by getting Burd to acknowledge Safeway made billions annually and had high-profile experienced board members, including ex-Wells Fargo chief, ex-AT&T CEO and ex-Macy's exec.
Holmes' counsel points out that Safeway's CFO had a relationship with a Theranos board member. He also gets Burd to acknowledge that he knew Holmes was a "young entrepreneur" in her mid-20s.
Holmes' atty points to a March 2010 letter in which he said Safeway would arrange a meeting for Theranos with UCSF about Theranos' tests. Defense counsel gets Burd to concede he was interested in getting UCSF's opinion on Theranos' technology at the time.
Defense counsel gets Burd to acknowledge that the May 2010 Safeway board presentation about Theranos included $25m equity for 2.8% of the co and a board seat, which never happened. The presentation also includes a slide on Theranos' "risks," including reg risks and CLIA.
Defense counsel gets Burd to concede that Safeway hired outside lawyers to conduct "hundreds of hours" of due diligence into its deal w/ Theranos before the companies entered into the agreement.
Burd says any scientific tech or assay development info from Theranos would have been evaluated by Safeway's head of health and its head of pharmacy. He adds that he spoke to lab directors at John Hopkins and UCSF about Theranos' tech.
Burd says that he introduced Elizabeth Holmes to Dr. Jonathan Simons, a lab head of John Hopkins. But he notes that "Obviously Jon was in no position at a dinner meeting to evaluate this technology. He thought if Theranos could do this it would be a bit of a game changer."
Burd says in 2010, a lab director reviewed Theranos' device but told Burd that they didn't have "the box" long enough to determine the tests' validity, because Theranos took it back.
Holmes' counsel points to a 2010 email in which Safeway exec Brad Wolfsen wrote Holmes re assay tests. Holmes replied the list "is not an accurate reflection" of tests we will make available in stores - the list is the library provided to pharma clients clinical trials.
Burd wasn't aware of the communication, but says it's "apples and oranges" and Safeway was consistently told that Theranos' devices could do an assortment of tests.
Burd says Safeway's outside counsel was Latham & Watkins, and the firm has counseled him before testifying today. We're going to take a 30 minute trial break.
Before breaking, Judge Davila is telling the jury that a media coalition (which includes me and in the judge's words "Law three-six-zero") has asked to unseal their jury questionnaires, even though he told them they would be confidential and sealed.
Judge Davila says he will give jurors their questionnaires back to them so they can review their answers and tmr he'll have individual convos w/ each juror w/ attys in the room about unsealing them: "My goal is not to make this intimidating at all, because it shouldn't be."
We’re on a break, and I think from here on out I’m going to introduce myself as “a reporter for Law three, six, zero.”
It's almost noon and I'm surprised Judge Davila has not yet mentioned the Giants' win last night against the Dodgers.
We're back! Elizabeth Holmes' counsel Kevin Downey pulled up Theranos' agreement with Safeway to launch its blood-testing devices in Safeway stores. We're looking at specific terms of the contract now.
Holmes' counsel points to provisions in Safeway's contract that gives Safeway the exclusive right to deploy Theranos devices in the "food retail channel," but that Walgreens and Safeway would run a pilot program simultaneously.
Holmes' counsel points out that multiple provisions of Safeway's agreement with Theranos gave Safeway the right to end their agreement without cause w/ 30 days notice, including in the event that the FDA took action against Theranos.
Holmes' attorney notes that under the agreement, Safeway agreed to pay $10 million to "pre-purchase" cartridges. Burd also concedes there were no specific deadlines in Theranos' contract: "We knew we were dealing with technology and it’s sometimes difficult to nail that down."
Burd says Safeway and Theranos has a plan he called "shock and awe" in which they would roll out Theranos' blood-testing devices in more than 900 stores in 22 states, but it never happened.
Holmes atty pulls up Steve Burd's Sept 2012 email to Holmes complaining about Theranos' performance. Holmes replied to Burd: "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.”
Holmes' email to Burd went on: "as you know" the Safeway lab process "does not translate to the Theranos testing process," and it does not make sense for Theranos to invest in "a full service dinosaur lab" just to accommodate Safeway workers' tests.
Holmes' counsel turns to Bloomberg charts showing that Safeway's stock dropped from Jan 2012 to July 2012 ~$19 to ~$14 per share. (Safeway went private in a deal that closed in early 2015.)
Holmes' counsel asks Burd if he remembers texting Elizabeth Holmes in July 2012 that if they launched Theranos devices in stores it would improve Safeway's stock price. He says he doesn't recall, but he agrees Safeway's stock would've gone up if the launch happened.
Defense wrapped Burd's cross, and Leach is back up for the government on redirect and asks Burd's opinion of Theranos in 2010. Burd says he thought Theranos had been around for 7-10 years and that it was cash-flow neutral.
Burd says there's "no magic line" between a startup and a small company, but when a company is generating enough revenues annually, they're no longer a startup.
Prosecutors wrap redirect asking about the investment Safeway made in remodeling store for Theranos devices. On re-cross, defense counsel points out that Quest Diagnostics currently uses the space in the stores for blood tests.
Holmes' atty points to a Jan 2012 email Burd wrote to Holmes: "I’m very concerned about allowing network partners or anyone else to launch with a mere fingerstick." Burd says he doesn't recall what prompted the email. W/ that, they wrapped w/ Burd & we're taking a 30 min break!
The jury is back in the courtroom, and Judge Davila is on the bench. There was a delay, and the judge says "in the spirit of disclosure we were getting my office ready, and we were moving boxes. I'll leave it at that."
Prosecutors call to the stand Jo-Ann Stores CEO Wade Miquelon, who served as the CFO of Walgreens from June 2006 to Aug 2014.
Miquelon says he first heard of Theranos in March 2010 when Walgreens was looking into labs to bring into Walgreens stores. He thought Theranos was the "farthest along and most relevant for what the company wanted to achieve."
Prosecutor Jeff Schenk is pointing to a March 2010 presentation that Holmes and Balwani showed Miquelon and other Walgreens execs. It says Theranos was launching to consumers in 2010.
Theranos' 2010 presentation also says its current/past clients include 10 of the top 15 major pharma companies, mid-sized bio pharmas, prominent research institutions and U.S. and foreign government health and military orgs. Miquelon said they weren't told details b/c of NDAs.
Miquelon says the presentation showed that 90-95% blood tests could be done on Theranos' Edison devices, which would have software that could upload results to the Cloud so that the data could be available in real time.
Miquelon said when he was at Walgreens in 2010, he didn't know the specific number of blood-tests Theranos' devices could do, but the plan was to roll out general chemistry, influenza and fertility tests by Q4.
Elizabeth Holmes sent Walgreens three reports that she wrote in her email were confidential independent reports from GlaxoSmithKline, Pfizer and Schering-Plough validating certain Theranos tests. The prosecutor notes one report misspelled institute as "Instituture"
In an April 2010, Miquelon wrote the Walgreens CEO about Theranos, calling the startup "disruptive technology that cuts the entire infrastructure of clinical lab," reducing expenses and costs of traditional lab tests by 60-70%.
Miquelon's email went on stating that a "$52 billion market" could be done on Theranos' tests and that the company had been around for 7 years with a "strong experienced management team (very well funded company)."
We're breaking for the day. Miquelon will be back on the stand first thing tomorrow morning. The judge notes that he's planning on speaking to some of the jurors "one-by-one" about their jury questionnaires before they leave for the day.
BigLaw got dragged into the latest day of testimony in Elizabeth Holmes' criminal trial. Latham Watkins helped vet Safeway's $55 million Theranos deal, according to former Safeway CEO Steve Burd. Here's my recap. law360.com/articles/14300…

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More from @doratki

13 Oct
Good morning from San Jose! The Giants lost last night to the Dodgers, but the series ain't over yet. In other news, I'm here for day 14 of Elizabeth Holmes' criminal fraud trial. Ex-Walgreens CFO Wade Miquelon will be back on the stand this a.m. Judge Davila is on the bench.
Holmes' counsel wants the court to limit certain testimony by ex-Walgreens exec Nimesh Jhaveri related to certain WSJ articles and Walgreens' decision to close certain stores. Prosecutor Jeff Schenk says they won't go deep into either issue during his direct.
Judge Davila says the juror questioning re unsealing their questionnaires yesterday took multiple hours and they only got through 9 of 15 jurors (which includes 3 alternates). Holmes' atty wants to finish convos w/ the remaining jurors before getting back to witness testimony.
Read 50 tweets
6 Oct
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.
Read 67 tweets
6 Oct
Fyi - yesterday, Judge Davila kicked @JohnCarreyrou's fight over trial access to Magistrate Judge Nathanael Cousins. As a magistrate, Judge Cousins presides over too many evidentiary and pretrial disputes to count, but he is very good at what he does.
Many moons ago, Judge Cousins presided over fights in this putative shareholder class action against Theranos. law360.com/articles/92780…
In that case, Judge Cousins refused to certify a group of indirect investors alleging securities fraud claims against Theranos, Holmes and Balwani, finding that weaknesses in the proposed class make individual actions preferable. The case later settled. law360.com/articles/10493…
Read 4 tweets
5 Oct
Hello! I'm in San Jose for day 11 of US v Elizabeth Holmes and day 4 of ex-Theranos lab director Adam Rosendorff's cross-examination. Judge Davila is on the bench, and Holmes' counsel Lance Wade is asking the judge to let him probe Rosendorff on his post-Theranos work.
Wade says Rosendorff is incompetent and was fired from one post-Theranos lab director job after 50k quality control tests failed. Another employer, uBiome was investigated for fraud, he says. Wade: "If he’s incompetent and didn’t do his job that’s exculpatory of Ms. Holmes."
Wade also argues that Rosendorff also lied on his resume and faces career pressure to go along with the government to avoid prosecution in other cases. Judge Davila notes that "this sounds like character evidence."
Read 59 tweets
1 Oct
Happy Friday from San Jose! I'm waiting for day 10 of Holmes' trial to start. No crowds today, but there's a new filing by @JohnCarreyrou who's gotten himself an atty. He's a possible witness and wants the judge to assure him he won't be barred from watching/covering the trial.
Judge Davila is on the bench, jurors are in their seats and ex-Theranos lab director Adam Rosendorff is back on the stand for the third (and hopefully last) day of his cross-examination.
Holmes' counsel Lance Wade begins by picking apart Rosendorff's testimony that Holmes and other execs rejected his request that Theranos use an alternative assessment procedure - or AAP - in its proficiency testing.
Read 31 tweets
29 Sep
Good morning from San Jose! I took a gamble and caught the late train this a.m. based on a hunch that not a lot of folks would show up for Adam Rosendorff's 2nd day of cross in US v Elizabeth Holmes. The gamble paid off - there was no line to get inside the courthouse.
Lance Wade is standing at the podium, reading through his notes. Holmes isn't in the courtroom yet. He said yesterday that he plans to bring up Rosendorff's post-Theranos work at other companies that have been investigated by the feds for alleged lab deficiencies.
Judge Davila is on the bench and ex-Theranos lab director Adam Rosendorff is on the stand. Elizabeth Holmes' attorney Lance Wade kicks off the day asking Rosendorff about Theranos' Dec 2013 inspection by Cali Dept of Public Health, which gives its inspection reports to the feds.
Read 62 tweets

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