Thread by @doratki

I'm back in court for Elizabeth Holmes' criminal fraud trial. It's pouring rain outside and we have a long day of testimony ahead of us with a surprise witness line up and trial going until 4 p.m. Judge Davila is on the bench. Let's gooooo...

Holmes' atty wants the judge to bar prosecutors from mentioning a 2-page email from an investor that repeats allegations in a WSJ article that has already been excluded and it "doesn't add very much." Prosecutors want it in. Sounds like Bryan Tolbert will be called today.

Bryan Tolbert is an investor, and the gov't says he would agree to limit some q's depending on where cross examination goes. Defense says Tolbert's testimony isn't relevant to the alleged conspiracy after Dec 2015. Judge Davila: "Alright, well this is a stay tuned type of event."

Holmes' counsel says there may be more issues they want to raise related to a fourth witness, but they're not sure if they'll get to that fourth witness today.

Holmes' counsel brings up ex-Pfizer scientist Shane Weber's "pejorative" report that called Holmes "evasive." He wants it excluded. The judge says he understands the concern, but he notes "despite those criticisms and those terms, he says he thinks they should engage 6 months."

The judge is going to reserve his ruling on the report, but it can be used as a demonstrative for now. Sounds like Shane Weber will also be called to the stand today. Unclear who the third witness today will be...

Judge Davila says he has another matter to discuss w/ counsel that's "come up" w/ a juror. He says the court received an email from the juror, and they need to have an attorney from each side go into chambers and they'll speak with the juror "on the record" before trial begins.

The jury is back in the courtroom and Judge Ed Davila is on the bench. The judge excused Juror No. 5, moving up the third alternate to replace the juror. Both are women. No word on why the juror was excused.

The government calls its next witness, ex-Pfizer scientist Shane Weber. Prosecutor Robert Leach is up for the government on direct.

For those keeping score, the Elizabeth Holmes jury panel consists of 8 men and 4 women by my count. The two remaining alternates are men so if any other women on the panel are excused it will shift the gender make up further.

Weber has a Phd and was working at Pfizer as the director of diagnostics in 2009. He was assigned to review Theranos' tech and "diagnostic capability" in late 2008 and Holmes sent him "final" study reports in October 2008.

Prosecutor points out that the ~26 page report has a Theranos logo in the top right corner of the document as well as a "confidential" label and it's titled "Theranos Angiogenesis Study Report."

The report's conclusions include that Theranos' system performed w/ "superior performance to reference assays while running in a complex ambulatory environment," "intersystem accuracy is excellent," & "good correlations were seen to various commercially available gold standards."

Weber followed up w/ an email in Nov 2008 saying he wants more info and adds "I am interested more broadly as to what this instrument is and planned to be and not just in understanding the performance and utility of the Theranos system in the oncology study."

Weber explains he wanted more info, including a list of assays that are currently run on Theranos' devices, b/c he wanted to "make sure we’re both working with the same deck of cards" so there's not confusion and he could make a rec to Pfizer. He also read Theranos' patents.

In another Theranos report sent to Pfizer that tested VEGF and PGIF assays, the report concluded that Theranos' system performed in "an extremely rugged environment," "inter-system accuracy is excellent" & VEGF assay accuracy is good for some cancer patients.

After he received the reports, ex-Pfizer scientist Shane Weber had an hour-long conference call with Elizabeth Holmes to determine if Theranos’ technology matched Pfizer's clinical trials and then sent due diligence q's to Theranos. After he got answers, he prepared a rec report.

Weber's Dec '08 report says "Theranos does not at this time have any diagnostic or clinical interest to Pfizer," and he recommends "no further financial investment or clinical sample resources be extended to Theranos" b/c its tests weren't FDA approved or CLIA lab processed.

Weber wrote that going fwd Pfizer should have a phone call update w/ Theranos once every 6 month to see if there's been "a significant improvement to their platform." "The world changes, one never knows what the future might bring so a wait & watch approach seemed to be prudent."

Weber's report goes on to criticize Theranos' reports as "poorly prepared" and their conclusions are "not believable," and "Theranos has provided non-informative, tangential, deflective or evasive answers to a written set of technical due diligence questions."

The report says during Pfizer scientist Shane Weber's 1hr phone call w/ Elizabeth Holmes, "Theranos verbally provided oblique, deflective or evasive non-informative answers to [six] technical due diligence q's." The q's include how much would 100 devices cost for a clinical study

Weber wrote an email in Jan 2009 that he spoke with Holmes and explained to her that "Pfizer did not have at this time a foreseeable use for Theranos immunoassay device for at patient self use at home, but she and I agreed to stay in touch every six months..."

The email goes on "...I was polite, clear, crisp and patiently firm as she pushed back. She asked for other names at Pfizer to approach and I politely deflected." He explains Pfizer had made its determination and didn't want colleagues to be distracted from their clinical work.

The Jan 2009 email also says Shane Weber confirmed with Elizabeth Holmes that Pfizer had paid Theranos "in full" and owed Theranos nothing. He says they planned to check in with Theranos every 6 months, but no other business ever came of Pfizer's interaction w/ Theranos.

Prosecutor pulls up an email that Elizabeth Holmes sent to Walgreens execs a year later in April 2010 that includes a copy of Theranos' angiogenesis study, but it has a Pfizer logo on it. Weber says he never approved Theranos' use of Pfizer's logo and didn't endorse its tech.

Holmes' email to the Walgreens exec says the report was done was Pfizer's independent "own technical validation" of Theranos' tech and the document was saved as "Pfizer Theranos System Validation Final Report." Weber says he and Pfizer never validated Theranos' technology.

Prosecutor points out that the conclusions in the report labeled as a Pfizer and Theranos study and provided to Walgreens execs are identical to the conclusions in the report initially provided to Pfizer. Weber says no one at Pfizer reached those conclusions or OK'ed the report.

Ex-Pfizer scientist Shane Weber's direct exam wraps with him saying as far as he knew after Jan 2009 there was "no interaction in a meaningful way" b/w Theranos and Pfizer. Trial is taking a 30 min break before Weber's cross.

We're back! Holmes' counsel John Cline is up doing ex-Pfizer scientist Shane Weber's cross. He begins by pointing out that Weber only worked with Theranos for three months while he was at Pfizer.

Cline also points out that Weber was one member of eight different molecular medicine groups at Pfizer, and he had been hired at Pfizer a "few months" (in May 2008) before he was asked to review Theranos' tech in Nov 2008.

Cline gets Weber to acknowledge that Pfizer had been working with Theranos for years before Weber started working at Pfizer, and he thought Theranos' technology was only for in-home patient use.

Cline points out Weber didn't send his report to Holmes, Theranos or all of his Pfizer colleagues, and that Weber met w/ prosecutors, federal agents and Pfizer's lawyers early last year.

Cline keeps walking away from the mic, so his audio is cutting out and we can't hear all of his questions in the overflow room, which is slightly maddening. But he's focusing on the fact that Weber thought Theranos' devices were solely for home use.

Cline pulls up a Feb 2009 email that a Theranos employee sent to Shane Weber about Theranos' preeclampsia tests. Weber replied "Pfizer has no interest in preeclampsia. Best of luck, you are on to something good. Have a nice weekend."

Cline notes Weber was "let go" when Pfizer downsized in 2014, and gets Weber to acknowledge that he's not aware any of his colleagues or bosses had with Theranos after Feb 2009. W/ that he wrapped cross.

On redirect, prosecutor presses Weber on whether his bosses were aware of his understanding of Theranos' tech when he emailed them about talking to Holmes & ending Pfizer's work w/ Theranos. He agrees they were and "They were silent and they moved on. These are very busy people."

Prosecutors also point to a $900k line item in an Excel spreadsheet attributable to Pfizer. The spreadsheet presumably is Theranos' financial earnings from various pharma cos. W/ that Weber's examination wrapped. Hall Group investor Brian Tolbert is up next.

Hall Group investor John Bryan* Tolbert said he's worked at the firm since 1999 and he invested $5 million in Theranos. He's currently its VP of finance.

Tolbert says he first learned of Theranos in the summer of 2006 from his boss Craig Hall, and at the time there wasn't much information available on the company, so he set up a call with Elizabeth Holmes to do due diligence before investing.

Tolbert said his firm's preference was to invest directly in Theranos and not a third party, so in 2013 the firm became a direct investor, but in 2006 Hall Group invested in Theranos through Black Diamond Ventures, which is owned by Chris Lucas.

During Tolbert's meeting with Elizabeth Holmes, he took notes and his notes say that Theranos raised $16 million in its first round, and a 2nd round is expected to raise $30M "with a 125 million pre-money valuation" before a Q1 2008 IPO valued at $1 billion.

Tolbert said at that time (in 2006) he thought Theranos had a "functioning product." His notes say Theranos was spending $1M a month, w/ $3M in revenues for 2 contracts that have already been shipped, and Theranos expects to be "cash flow positive by 4Q of '07."

Before investing, Theranos gave Hall Group financial docs w/ revenue projections going from zero in the last quarter of 2006 to $4.6 million in Q1 of 2007; $12.2 in Q3 of '07; and $67M in Q4 of '08. Net income was projected to grow from -$4M in '06 to +$12M by Q4 '08.

Tolbert traveled from Texas to Cali. to meet Holmes in 2006, and he took home a cartridge, but he says he doesn't remember being shown Theranos' devices. After, he decided to invest $2 million in 2006 though Black Diamond Ventures.

Tolbert says there wasn't much information in the public of Theranos at the time, but he considered it a good thing. "It did feel like a revolutionary technology and you wanted to preserve a competitive advantage."

Chris Lucas wrote Tolbert in July 2013 that Theranos has new board members and "She is clearly assembling an impressive group. Hopefully this also means that we will start receiving more communication from the co." Tolbert says they had many convos about the lack of transparency

Tolbert says after a Theranos investor conference call in December 2013, Hall Group invested $5 million in Theranos at $75 per share. Tolbert recorded the call, b/c he and his boss "had some frustration we didn’t have the kind of financial info that we would normally have."

Tolbert says when he remembered he had a copy of the investor call that he taped, he gave it to his attorney who handed it over to the gov't. Prosecutor asks Tolbert if he recognized Elizabeth Holmes' voice on the call. He says he did. We're going to hear some clips now.

The parties are arguing over how the clips are played and the order of questioning. There are eight clips of the investor call that range between 2 mins and 7 minutes.

The first clip is of Holmes' deep voice and she says they've been working very hard for a long time to build infrastructure and they have contracts with the military where they can deploy the framework and use it in clinical trials. Trial is taking its 2nd break of the day. BRB.

We're back! Prosecutor points out that Holmes said on the call she knew it would take a long time to develop the tests. Tolbert says he thought if he knew that it couldn't do what they set out to do 7 years into the company then there wouldn't be a reason to invest.

In the second audio clip, Holmes says Theranos' devices can get "people tested frequently" without variability in results, and that Theranos uses "fresh" fingerstick blood & not "big series of tubes of blood sitting on a counter" that decay when they're sent to centralized labs.

In a third audio clip, Holmes says Theranos shares went from 82 per share to $75 and "We are already creating significant value. We’re just getting started." but she adds they're still spending a lot of time on "scaling" infrastructure & trying to "reactivate" its pharma deals.

Elizabeth Holmes used the words "synergy" and "synergistic" multiple times on this call with investors.

Tolbert says based Holmes' 2013** (corrected 2016 mistake) investor phone call, it sounded like the proceeds of this fundraising round was not about perfecting this technology. Instead it was about scaling up and rolling out the tech, he says.

In response to a q, Holmes says on the investor call that Theranos is valued at $7B and "It’s really now a question of how fast we will scale," "the fact that we will scale is a given," b/c retail partners have invested hundreds of mil in preparing the framework.

An investor asked Holmes about IPO, Theranos' partnership w/ the military & if any IP competitors are out there. She gives a kind of meandering response about the IPO, but notes the "military is a big deal for us."

Holmes goes on to explain why soldiers could benefit from quick real-time blood-tests in the field and eventually says that long-term the military is "significant for us" and adds it "may be symbolic."

Holmes says in regards to IP, Theranos' counsel and board member David Boies has helped Theranos sue a "patent troll" and "we will not settle on any intellectual property violation."

Holmes said Theranos blood-tests will cut Medicaid's reimbursement threshold and there'll be $150B out of pocket savings over 10 yrs. She goes on to talk about dif tests, including tests that assess iron levels for anemia (which ex-lab chief Dr. Adam Rosendorff said didn't work)

Tolbert says Holmes' military comments resonated w/ him b/c he has a brother who is a Marine who did a tour in Afghanistan, and it wasn't just about an opportunity to make money, but it also was about an opportunity "to do good."

Prosecutor points to a document that Tolbert signed stating the investment is "highly speculative and involved substantial risks," but he says he didn't think a risk included the potential of allegedly being lied to by Holmes.

The feds wrapped Tolbert's direct. Holmes' attorney Kevin Downey is up on cross, and gets Tolbert to acknowledge that Gary Nordheimer initially spoke with Tolbert's boss about Theranos, and he wasn't on those calls, but he was assigned the 'due diligence' task.

Tolbert acknowledges that he never tried to contact Theranos employees over those years aside from the initial meetings and the 2013 investor call and never asked for more financial projections.

Tolbert also acknowledges that Chris Lucas didn't provide rollout info about Theranos, and Tolbert never asked for it, and he never followed up asking Holmes to provide Theranos' contracts with the military and phara cos.

Tolbert says he thought the number of Theranos' blood tests went from hundreds of tests to "thousands of tests being done." Holmes' counsel asks if she ever said "thousand of tests." He says no, and admits "not on that call."

Holmes' counsel plays another clip from the 2013 investor call in which Chris Lucas says Holmes "has controlling interest in the co. She has a firm grasp on the co both legally" and how she manages it, and she maintains control so that she could override irresponsible investors.

Trial was supposed to break at 4 p.m. but they're going until 5 p.m. to wrap Tolbert's cross and redirect. Safe to say there will be no third witness today.

Holmes' counsel is pressing Tolbert on various things he didn't ask Theranos about before he invested in the company, including looking into its patent portfolio or asking about the specifics of its military and pharma co deals.

Holmes' atty wraps cross w/ Tolbert saying they thought they had all the info they needed to make the investment in Theranos. Prosecutor is back up for brief redirect, reading back Holmes' comment in the investor call that they paused "a large #" of contracts to focus on retail.

The parties wrapped with investor John Bryant Tolbert. Trial is about to break for the week, but the judge asks the jury to find out if they're available for trial for the five Mondays in Nov. from 9 a.m. to noon/1 p.m. and Nov 18 instead of Nov 24 (which is before T-day).

Holmes counsel Lance Wade notes that ECF/Pacer is "down this weekend" and if they need to file a motion, they could email the court.

Wade adds: "There may not be issues."

Judge quips: "I'm very confident there won't be."

I'm out ✌️.