Thread by @eringriffith

🩸 Back in court for the fraud trial of Elizabeth Holmes. It is rainy, the prosecution plans to call four witnesses today, and the press corp is typing every so carefully after being scolded for distracting a juror with our keyboards.

As usual, we are starting late because the lawyers are fighting over admitting a document and there is an issue with a juror.

Sounds like we'll be hearing from our first investor (aside from Walgreens): Brian Tolbert of the investment firm Hall Group is likely to testify today.

The US has called Shane Weber, who was a scientist at Pfizer.

He is speaking loudly and clearly into the mic and for that I thank him. 🙏

We begin with a series of emails establishing why Weber was involved with Theranos at Pfizer - his role was to make a recommendation to the company about its technology. "We were looking for diagnostic capabilities that would open the door for more effective intake of patients."

After talking with Elizabeth Holmes and reviewing a bunch of documents (including a patent), Weber created a summary report on the use of Theranos technology.

Believe this is the report the defense didn't want shown to jurors + Judge allowed Page 1.

Weber's recommendation: "Theranos does not at this time have any diagnostic or clinical interest to Pfizer."

(Recall that last week we saw a document with Pfizer's logo on it that implied that the company validated Theranos's technology, which Holmes used to solicit investment from Walgreens and others)

Further in his summary, Weber says Theranos's conclusions are "not believable" and calls the company's answers to due diligence questions "non-informative, tangential, deflective or evasive"

Most of Weber's answers have been very technical and full of jargon sure to confuse jurors but that list of adjectives hits pretty hard. (Defense tried to object)

The document further lists 6 technical due diligence questions that Weber asked Theranos execs on a phone call, and concludes their answers were "oblique, deflective or evasive non-informative answers."

Weber called Elizabeth Holmes to tell her Pfizer wasn't going to work with Theranos. In an email to a colleague, he said "I was polite clear crisp and patiently firm as she pushed back." Writes that Holmes asked for other names at Pfizer to talk to and he "politely deflected."

Now we see an email from Walgreens to Pfizer, which includes the validation report I mentioned above where Theranos put Pfizer's logo and implied its approval.

Weber said he hadn't seen this before the feds showed it to him.

We get a side by side of the report, one with Theranos logo on it and one with the Theranos and Pfizer logos on it.

Would it be fair to say in 2010 or after that Pfizer endorsed Theranos’s technology or comprehensively validated Theranos’s technology?

Weber: "No"

A funny thing about TV trials is that they explain the objections in normal language but in real life they say things like "objection, this is 702 territory" or "same 406 from last time your honor."

Did Pfizer and Theranos have any meaningful business dealings after 2010? No.

Do you agree with statement that Pfizer validated Theranos’s technology? No I do not.

You came to the opposite conclusion? I did.

That's it for direct. 🔚

Out of self respect I have decided to ditch Starbucks sandwiches. the local coffee shop filled my water bottle to the brim with cold brew so I am WIRED AND READY TO GO

Also this mochi cake which matches my shoes

On cross-examination of Shane Weber, Holmes lawyer John Cline hammers the point that Weber did not send his report about Theranos to Holmes.

The point (I assume) being that, without seeing the report, Theranos had no reason to keep thinking Pfizer liked its technology.

Next witness: Bryan Tolbert of Hall Group.

The firm invested $5m in Theranos in late 2013.

Point for team "Theranos is not a silicon valley company bc it didn't raise from traditional VCs": Hall Group was primarily a real estate investment firm.

Counterpoint: Hall Group was introduced to Theranos by Don Lucas.

We see a detailed financial projection from Theranos that shows the company becoming profitable in 2007. (narrator... it did not...)

After that Tolbert had dinner with Holmes and Lucas where they talked about Holmes' vision and also "heard some fun stories from Don Lucas about his investment career." He also visited Theranos's office and someone gave him a cartridge.

After that (2006) Tolbert decided to invest $2m via the investment fund of Don Lucas's son Chris.

Theranos had also promised investors it would go public in 2008. 🙃

We see an email from Chris Lucas to Hall Group in 2013 about Theranos adding board members. It says "Hopefully, this also means we will start receiving more communication from the company."

Tolbert said he'd been wanting more visibility into the company.

In 2013, Hall Group invested $5m into the company. The company had around 10 days to decide on the investment and the share price had jumped to $75 a share.

Tolbert recorded a pitch call with Holmes. Said he'd been frustrated about not having a lot of information abt Theranos.

We are going to listen to some recordings of a call Holmes had with investors. Before introducing them Prosecutor Schenk asked Tolbert if he had had the chance to "observe" Holmes' voice in meetings and on the call. 👀

Unfortunately I am not able to see the jurors faces upon hearing Holmes' voice for the first time.

In the recording, she is giving the usual pitch about Theranos's big vision of creating "the largest lab in the country" and to "change the reality of lab testing today."

Holmes glanced verrrrrry briefly over to the jury after the recording. Otherwise sitting up stick straight and not moving, as usual.

We're going till 4 today but I doubt we get to 3 let alone 4 witnesses. Tolbert testifies about the clip we just heard and his impression of what he thought Theranos was actually doing. (Blood testing machines - not a central lab.)

In a second recording, we hear Holmes describing the way Theranos disrupts traditional phlebotomy with its finger prick tests.

Tolbert testifies that that is why he invested.

In a third recording, Holmes describes the fundraise - in 2013 it issued shares at $75 a share - up from 82 cents a share when Hall Group and Chris Lucas's firm first invested in 2006.

I forgot to tweet that another juror got dismissed today for cause. Kinda worried I'm bad luck, every time I come back from missing a few days of the trial, another one bites the dust.

In the recording, Holmes says Theranos was growing on "cash from operations," aka profitably, since 2006.

Tolbert testifies he believed the proceeds of the 2013 fundraise would be used for retail expansion - not R&D or tech development.

Nice to know that private investor calls are exactly as chummy as public company earnings calls. One investor says "Hi Elizabeth, congratulations on all this progress." aka "Great quarter, guys."

We listen to a long recording of Holmes answering questions from investors about when the company will go public, whether it works with the military and its competition. Her answers, as the Pfizer guy eloquently put it, are “non-informative, tangential, deflective and evasive.”

IPO? Theranos has a very longterm mindset. "We plan on doing this for the next 20-30-40-50 years."

Military? Confidentially, it's "a big deal for us."

Competition? That's why we're so secretive.

How are prices so low? We are transforming the care process, ergo savings.

Tolbert says Theranos's purported military work was a big part of why he invested because it spoke to a greater mission. "Theranos wasn’t just about an opportunity to make money ... but to do so in a way that was beneficial for lots and lots and lots of people."

One thing mentioned on the investor call which has not been addressed - Holmes noted that there were some early investors who were looking for liquidity.

Wonder if we will learn details about whether anyone cashed out along the way and who they were.

We're now going through the technical process of describing how Hall Group wired its investment money to Theranos. This is, after all, a wire fraud case.

Crucial missing word in this tweet (deleting would break the thread) - Theranos had no reason NOT to keep thinking Pfizer liked the technology. They never saw the report, ergo, they didn't know how badly they'd struck out.

https://twitter.com/eringriffith/status/1451628278142226434

On cross-examination, defense replays some portions of the investor call. In this one, Holmes discusses how Theranos was pausing its work on military and pharmaceutical projects in order to focus entirely on the retail roll-out.

I'm not sure how well this clip actually makes the defense's case, since she immediately says the investment money will allow them to pick up work on those projects "in parallel."

Defense hits Tolbert for not asking following up q's after the call.

In many ways this trial boils down one central tension which is playing out in this cross-exam: Were these investors fools who did not do proper diligence? Or was their diligence tainted because Holmes fed them bad info?

The call in question was actually with Chris Lucas's investment fund and Holmes was only on part of it.

Defense plays a part of the tape where Lucas explains a stock split that gives Holmes full control: "She has a firm grasp on the company - let there be no mistake."

Defense asks whether the reputation of Don Lucas, the partnership with Walgreens, its patent portfolio and its big name board members were factors in his decision to invest. Tolbert says yes.

Cross exam wrapped up, my laptop just died and here is our summary of the week in theranos: nytimes.com/2021/10/22/tec…

W @erinkwoo

Ps. Sounds like we’re going to start doing bonus trial days on mondays. All blood all the time!! 💉🩸💉🩸💉🩸💉🩸💉🩸💉🩸💉🩸💉🩸💉🩸💉🩸💉🩸💉🩸💉🩸💉🩸💉🩸💉🩸💉🩸

WELP wsj.com/livecoverage/e…