Good morning from San Jose! Today marks the sixth week of Elizabeth Holmes' criminal fraud trial (more or less, depending on when you start counting) and we're (hopefully) about half-way through this thing. Holmes is in the courtroom.
Judge Davila is on the bench. He says the juror whose mother-in-law died suddenly last week wants to travel for a few days next week for the memorial service, so trial won't be in session next Friday, Oct. 29.
Holmes' counsel asks the judge to bar prosecutors from asking ex-Pfizer scientist Shane Weber about an internal Pfizer document that didn't go to "Holmes or Theranos at all." The doc doesn't evaluate Theranos' tech, but it also doesn't recommend Pfizer do biz w/ the startup.
Prosecutor Robert Leach says Weber's doc is highly probative of the alleged falsity of Holmes' statements. "Yes these are harsh words, but these are words he thought in the moment," Leach says.
Leach notes that Pfizer thought Holmes' "answers were deflective, evasive and not informative and they memorialized that" in the doc. He adds that "I understand it sounds forceful," and the gov won't suggest that Holmes saw the doc, "but the ‘why’ here is critical" to falsity.
Judge Davila notes that they probably won't get to this witness today, so he held off on ruling about excluding the Pfizer doc. Another issue: Holmes' counsel wants to exclude Holmes' presentations to the DOD and military.
Holmes' atty says the presentations are 18 months before the alleged investor fraud, and the gov't didn't allege DOD was a biz partner w/ Theranos for the fraud charges. Prosecutor John Bostic says the presentations are relevant to Holmes' alleged misrepresentations to investors.
The judge holds off on ruling on the DOD evidentiary objection too. Holmes' atty has one more issue: Prosecutors want to show jurors a spreadsheet sent to Balwani that includes a log of ~150 patient complaints as of Sept 2015, despite a pretrial order excluding the evidence.
Prosecutor John Bostic says the patient complaint log is relevant to claims Theranos was making at the time that its tests were getting positive reviews. But defense counsel says the log isn't a biz record, it's compiled from multiple sources, many which are hearsay.
Defense counsel says Holmes also never received the patient complaint log, but prosecutor says the log was directly sent to her alleged co-conspirator Balwani. The judge notes that that is a "different issue, isn't it?" Defense counsel agrees. The judge holds off on ruling.
The jury is back in the courtroom and ex-Theranos project manager Daniel Edlin is on the stand. Prosecutor John Bostic is up. We're still on direct. Bostic shows Edlin an email he sent to Balwani and Holmes in 2013 about a testing device 'stuck on 99%' for 8 mins during a demo.
Prosecutor points to another 2013 email in which Edlin said there were "some discrepancy b/w two infection panel runs" done for the same patient and the same assay on a Theranos' device. Theranos VP Daniel Young couldn't explain the discrepancy and looped in Elizabeth Holmes.
Prosecutor points to another email chain in which Theranos VP Daniel Young tells Balwani that they weren't planning running anything on the minilab devices, b/c "the general chemistry of assays are not performing." Balwani replies "very frustrating."
In various 2013 emails, which Holmes was included on, Young told Edlin to remove multiple blood-test results or to change certain results during the device demos. Edlin says he didn't have the expertise to judge Young's decisions to remove or change the data.
Ex-Theranos project manager Daniel Edlin emailed lab staff in Aug 2013 asking them to meet in the lab "for the hand off" so the lab could process six fingerstick samples from Walgreens execs. He says he doesn't know if the execs knew their samples were processed in the lab.
During a journalist's visit in Aug 2013, Edlin wrote Theranos' lab "for this demo we need to turn around these results faster than ever before ideally in 1 hour and no longer than 2 hours." He explains the demo happened mid-day as opposed to end-of-the-day.
A month before Theranos' commercial launch, Dan Edlin wrote Balwani that the devices' thyroid panel "appears to have had major issues again." Balwani responds "To say this is deeply disappointing would be a gross understatement."
In a Jan 6 2015 email, Elizabeth Holmes wrote Rupert Murdoch “it was wonderful to have you here today. I so look forward to the opportunity to continue our conversations, including one day a more detailed conversation on China. It would be an honor to have you be part of our co."
Rupert Murdoch replied the next day to Elizabeth Holmes: "Thanks Elizabeth. Enjoyed every minute of it. Any blood results? See you soon, Rupert."
Edlin says he helped prepare a binder of investor information for Rupert Murdoch. When asked who Murdoch is, Edlin says he doesn't know his exact title, but he's the "chairman of Fox."
Edlin's Jan 2015 email about Rupert Murdoch's Theranos test results says "ISEs are a bit low" and "is there any way for us to validate lipids in the future via some sort of formula?" Edlin notes they can't rerun the tests b/c they didn't draw a lot of blood from Murdoch.
In a Dec 2015 email, Christian Holmes tells his sister Elizabeth that a Forbes writer was "pleasant in person" but he "plans on writing about his experience." Another email says the writer's blood-test results were inconclusive and it wasn't human error.
Elizabeth tells her brother to tell the Forbes writer: "You can say we do run those assays, but were not able to run them on this sample, apparently due to a human error in sample handling. Invite him back."
During prepping an assay list for the Celgene clinical trial, Daniel Young told Edlin "we should not distinguish if we are using Theranos devices/chemistry or kits. We can just star some assays as one that will be run in the Theranos CLIA lab." Holmes signed off on the list.
Edlin says Holmes was "very involved and detailed oriented" in approving Theranos' marketing and there were "steps along the way" in which she may have been left out of communications, "But for stuff that went on the website, she did look at that."
In Sept 2013, Theranos spokesperson Jeffrey Blickman wrote they should change its website that said Theranos "can perform all lab tests on a sample 1/1,000 the size of a typical blood draw" b/c he said "We often use more than one drop." He suggested "a few drops is all it take."
Prosecutor points out that the website language never changed. Theranos attorney Kate Beardsley also wrote that the language on Theranos' draft website should change for many reasons listed in a four-page email.
Beardlsey wrote "please remove ‘all tests' and replace w/ ‘multiple or several,'" because "it is highly unlikely that the lab can perform every conceivable test, both from a logistical standpoint and b/c the CLIA cert designates specific specialties of tests the lab performs."
Holmes replied to Beardsley's email stating "They should not use the world 'unrivaled in accuracy' as we’ve discussed many times." We're breaking. Brb in ~40 min.
We're back! Daniel Edlin is back on the stand. Prosecutor John Bostic asks him about WSJ's Joseph Rago Sept 2013 article. Theranos' PR guy Jeff Blickman took issue w/ multiple lines in a draft of the article, including calling Holmes a "30-something chemical engineer."
Joseph Rago's article, called "Elizabeth Holmes: the breakthrough of instant diagnosis," ran in WSJ Sept 8 2013. wsj.com/articles/SB100…
Prosecutor turns to a May 2014 "to do" list w/ roughly two dozen items of info that Theranos planned to provide @rparloff when he was working on a Fortune Mag cover story on Theranos.
Edlin says Holmes was responsible for multiple items in the "to do" list. Prosecutor points to the purported Pfizer/Theranos study, which has both company's names and logos. Edlin says he doesn't know who made the study or where the doc came from.
Edlin says he communicated with investors and prepared binders for them, which included various docs on the co's bylaws, stock purchase agreements and confidential briefing on Theranos tech. Prosecutor pulls up a copy of the investor binder sent to Rupert Murdoch.
Murdoch's investor binder has a "cost savings" section that says Theranos' tech "yields higher integrity data" & "the actionable info you need 1/1k the size of a typical blood draw." It also says Theranos runs "any test available in central labs and processes all sample types."
The binder also says "Theranos offers tests with the highest levels of accuracy." Edlin says versions of the same presentation was sent to various investors. Shifting topics now to customer complaints...
One complaint from June 2014 involved a patient's inaccurate INR test. Holmes wrote to ex-project manager Max Fosque that "need you to triage this then come to me" and they can figure out what to do. Another complaint was from a Walgreens tech who received inaccurate hcG tests.
Daniel Edlin says he helped work on Theranos' proposals to the military. He says the idea was that Theranos would test the devices in multiple phases with the ultimate goal of using Theranos blood-testing devices and services on soldiers in the field.
Prosecutor points to a Jan 2012 email chain b/w Theranos project manager Dan Edlin and Major Steven Cook about the military using devices over a 12-month period to evaluate the technology. Edlin says at the time "I didn’t know which test could be performed and which couldn’t."
Prosecutor points to a memo given to the military that says "each Theranos device can run every test currently available through the traditional centralized or hospital laboratory infrastructure." Edlin said he assumed the statement was true and had no reason to think it wasn't.
Edlin says "everything in this document was reviewed and approved by Elizabeth." "She was highly involved, any substantive communication I had with the military, I either discussed it with her at the time or I sent it to her."
Theranos' presentation to the military said the devices could be used in Medevac to test and triage wounded soldiers at the time of impact and they had GPS to enable "full operability in the field." Edlin says he doesn't know what became of the devices sent to the military.
The jury is taking a 10 minute break so that the judge can discuss Holmes' objection to introducing Theranos' 2011 presentation to the military. Holmes' atty says it's not relevant to the conspiracy that's alleged in the indictment, which allegedly started 18 months later.
Prosecutor John Bostic says Holmes knew she told told the military the devices could do something they could not do in 2011 & that's relevant to what she later told investors re Theranos' partnership w/ the military. But defense counsel says that's multiple levels of inference.
Judge Davila overrules the objection, and allows Theranos' presentation to the military in saying it's relevant. He's calling the jury back in.
Prosecutor shows slides sent to the military for a burn study in 2012 that says Theranos offers "realtime" fingerstick blood-tests and its analyzers run "any test available in central laboratories." Edlin again says he didn't know if that was true, but had no reason to doubt it.
In a July 2013, CENTCOM military Martin Drake wrote Elizabeth Holmes "Regrettably the window of opportunity is closing for me to be able to continue to dedicate resources to this experiment. Funding is expiring and personnel are being re-directed to other ongoing projects."
In another email, Drake said the military would need a "firm commitment" from Theranos that it could provide devices in 2014 for testing for the military to request funding for it in the next year. Edlin replied Theranos could send the devices Aug 1 2014 per Holmes' direction.
Edlin says to his knowledge, Theranos' devices were never used in the Middle East. Prosecutor points out that Theranos' devices also had be kept under 82 degrees, but it gets hotter than that in the Middle East. Trial is taking a 30 minute break. brb
Trial's back in session. Prosecutor John Bostic asks Dan Edlin if anything about Sunny Balwani and Elizabeth Holmes' relationship stood out to him. Edlin says no, but he was aware they were romantically involved b/c in 2004 he was introduced as her bf.
Edlin says they were "much more relaxed" and social when they were around each other outside work, they had lunch together, and he can't recall an instance in which Balwani overruled Holmes' opinion.
Holmes' counsel Kevin Downey is up now on cross. He starts by asking Edlin about Theranos' various different blood-testing models.
Downey asks Edlin how many assays he saw "development tests" for. Edlin replies he doesn't remember specifics, but somewhere "north of 40." Edlin also says he doesn't recall any specific problems with the hcG blood tests.
Downey gets Edlin to acknowledge that he doesn't recall any of Theranos' programs with Celgene other than the email that was shown to him during direct. He also says he didn't play a large roll in the Celgene partnership.
Edlin agrees that he never thought he or Theranos was defrauding journalists or investors and he thought that the information he was providing them was true and accurate.
Trial broke for the day. We'll be going until 3 tmr The gov't says they planned to call Pfizer scientist Shane Weber and Lisa Peterson, who's testifying re certain investors, next, but Peterson is unavailable Fri and they have other witnesses lined up so she'll come next week.
The judge says the jury has complained someone in the gallery is using a non-silent keyboard and it's bothersome. The judge tells observers he'll call in the court marshal to monitor the gallery if he needs to, but no one can be in the courtroom w/o a silent keyboard.
A jury heard today that Elizabeth Holmes OK'ed websites and presentations shown to the military and investors that said Theranos' minilabs could run "any test available in central labs" despite in-house counsel's objections to the language. My recap! law360.com/articles/14323…
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