Thread by @doratki

Hello from San Jose! It's the 30th (!) day of Elizabeth Holmes' criminal fraud trial. The parties expect to spend most of the day finishing the exam of Theranos' fourth and final lab director, Dr. Kingshuk Das. Judge Davila is on the bench.

Prosecutor Jeff Schenk says the gov't wants guidance on Theranos' LIS database and whether "the door has been opened" to discuss why it's "missing." (ICYMI, it's missing b/c WilmerHale helped lose a decryption key to the hard drive w/ the database.) law360.com/articles/14099…

Judge Davila says if part of the trial becomes who is responsible for losing the database, "then we’ll have litigation in front of the jury." He notes that "I can say my ears opened up a little more" when the topic was mentioned yesterday b/c "it is a controversial topic."

Holmes' counsel Lance Wade says he doesn't want the trial to go on longer than it has to, but he needs to review the transcript to determine if they plan to deeper into the topic. The judge: "I don’t want the trial to go into January. I don’t think we need to."

Judge Davila says court staff figured out "the bugs in our system" and so hopefully today will be productive. The judge made multiple comments about how he expects the gov't is "closer to the end than the beginning" of its case, but Schenk didn't say anything.

Thirty days into Elizabeth Holmes' criminal trial and we've gotten through fewer than 30 witnesses on the government's 181-member witness list.

The jury is in the courtroom, and Das is back on the stand. Holmes' counsel Lance Wade is up continuing his cross examination. Somewhat counterintuitively, Wade starts by highlighting Das' extensive medical credentials and consulting experience.

Wade shows Das' Dec 2015 email to Holmes: "I am so impressed by the vision of what you’ve accomplished already & your plans for the future. I imagine I’ve heard only about the tip of the iceberg so far, but even so I spent the rest of the weekend excited about the possibilities.”

On the stand, Das says he doesn't remember the specifics of what he and Holmes discussed in the meeting, but "I remember her being very charismatic. It was a very positive meeting."

Wade points out that when Dr. Das was hired at Theranos and started as its full time lab director in March 2016, it was the first time Theranos' lab directors reported directly to Elizabeth Holmes, and not Sunny Balwani.

Wade pulls up a Feb 2016 email that Das wrote stating Theranos' "CMS deficiency response is quite comprehensive, & addresses all the basic infrastructure that was missing (a LARGE undertaking) quite nicely -the clinical consultants and legal team did an outstanding job.."

In a March 2016 email, Das agreed that Theranos needed a "bulldog type of person" to ensure compliance and "Elizabeth and Sunny have been fully supportive so there’s absolutely no issues there. They share oversight, depending on the issue, and it’s been seamless, so no worries."

Wade points out that lab owners depend on lab directors to oversee CLIA high-complexity labs and lab directors have "a lot of responsibility" and need to be sure "everything is done right," and they do that by hiring qualified staff. Das agrees.

Wade tries to get Das to acknowledge that there's no "magic list" of QC tests an assay must pass. But he disagrees, and says "there are set of experiments that need to be met," which set a framework for the assay.

Wade asked Das about what he thought was wrong with Theranos' validation reports. Das says he doesn't thing the lab's standards were wrong, but Theranos inappropriately used standards to validate assays. "The gates that were set were wrong?" Wade summarizes. "Yes," Das replies.

Wade asks Das if others disagreed w/ his recommendation to void 50k-60k Theranos blood tests. He says "there was no disagreement about avoiding." Wade tries to get Das to acknowledge it was a big deal, but Das says he doesn't know & "I can’t speak to what they would have wanted."

Das says there was a disagreement over the reason why Theranos needed to void its assays, and he acknowledges that Holmes was getting different advice from David Young. We're taking a 30 minute break. Brb!

We're back! Holmes' counsel mentions that the next witness, investor Alan Eisenman, made a "statement made upon entering the courtroom," about wanting Holmes to go to prison, which he says is prejudicial, and Eisenman shouldn't "get a gold star for this behavior."

Prosecutor John Bostic says the gov't won't elicit that testimony from Eisenman, but it might come out. Judge Davila says the parties need to tread carefully around the topic, but it can be expected that an alleged victim of fraud might want the accused to go to prison.

Das is back on the stand. Wade is going through various emails Das sent in the spring of 2016 while he was reviewing Theranos' data and technology. In one April 2016 email giving an update on a test, Das titled the subject of the email "Some good news, for once"

Wade gets Das to acknowledge that Theranos put in place enhanced procedures and "tracer audits" to make sure procedures are followed when he was its lab director. He also corrected lab reports, he says.

Wade points to a March 2016 email in which Balwani asked Das whether a statement to WSJ "seems reasonable." The statement is Theranos "proprietary technologies have already been cleared for testing HSV-1 by the FDA. Separately, the majority of CMS deficiencies were not related.."

Das agrees that the statement seemed reasonable to him, and he signed off on a similar statement that Holmes asked him to review that same month.

A day after sending a "good news" email, Das wrote Holmes another email w/ the subject "“More bad news, sorry." He said he reviewed more data, and "I’m backed into a corner now." He recommended Theranos shut down its "BUGS lab." He says Holmes was "fully supportive" of his rec.

Wade asks Das if he thought Holmes had hired him to "uncover rocks" and do the types of investigations that could lead to shutting down Theranos' labs if necessary. He agrees that she did.

Wade pulls up an April 2016 email that Das wrote Holmes. He told her he discovered there was a BUGS lab employee who was "incompetent" & "appears to be dishonest as well" and "I can tolerate a certain amount of incompetence because w/ alignment and training it can be overcome.."

Das recommended firing the employee, and he testifies that Elizabeth Holmes was supportive of his decision.

Defense wrapped Das' cross. Prosecutor Robert Leach is up on redirect and he points out that Theranos' CLIA lab was operating for many years (since 2011) when Das was hired in Dec 2015.

Das says he didn't know that Theranos had done patient blood testing on modified non-Theranos devices and he didn't know the circumstances of Dr. Adam Rosendorff's departure. He also acknowledged that after he reviewed Theranos' quality control data "alarm bells" went off.

On recross now. Das acknowledges that when he was hired at Theranos in 2015, he knew that Elizabeth Holmes didn't have expertise in CLIA lab operations, pathology, validation benchmarks or "the way to run quality control programs."

Das' examination wraps with Lance Wade asking Das about his favorite quote from "The Best Exotic Marigold Hotel," which Das apparently mentioned during a meeting at Theranos. The quote is "Everything will be alright in the end, and if it’s not alright it’s not yet the end."

The government calls its next witness: retired money manager Alan Eisenman. Eisenman says he first invested in Theranos in 2006, and it was his first biotech investment.

Eisenman says he first heard about Elizabeth Holmes from a friend who told him a group of Houston investors were funding her startup. Hays e she was told she was "brilliant," and dropping out of Stanford to start her blood-testing business.

Eisenman says before he invested, he knew Theranos was an "early seed startup" but he was told Theranos had contracts with 5 or 6 pharmaceutical companies, including Pfizer, Bristol Myers Squibb and Navartis, and Oracle founder Larry Ellison was on its board.

Eisenman says his primary source of info was from Holmes, and initially she was "extremely accessible" and she held quarterly meetings by telephone. He said he took extensive notes during those phone calls, which is his general practice.

Eisenman says Holmes told him in ~2006 that Theranos was talking to Morgan Stanley about an IPO in a 12-18 month time period, and she anticipated Theranos' revenues to be $50-$60 million revenues coming year.

Eisenman says he and his wife invested $900k and each of his three kids invested $90k into Theranos, for a total of ~$1.2 million.

Trial took a 30 min break, but we’ll be back soon. Standby…

We're back! Right before the break, Eisenman said he was told Theranos would be cash flow positive around 2010. Prosecutor John Bostic points to a May 3 2010 email Eisenman wrote to Holmes asking to schedule a quarterly update call.

Eisenman wrote to Holmes that in March 2010, Theranos was manufacturing "about 500k cartridges, and selling about 400k at about $80 per cartridge. Can you share the same statistics for April and an estimate for May?" Holmes didn't respond so he followed up over a week later.

Holmes eventually responded to Eisenman "As you know, we don’t do quarterly calls w/ our other investors, many of whom invested much greater amounts than you did. I cannot commit to the exact quarterly schedule going forward..."

Holmes' email went on... that as they had discussed in march, "we cannot provide the level of communication you keep requesting. With the deals we are formalizing with retailers we are now obligated not to disclose our production volumes and cartridge sale prices..."

Holmes email to Eisenman... "I cannot provide the metrics you are requesting in your emails. At this point we also don’t have any plans to do an IPO anytime soon... Given your frustration level and our frustration level w/ our interaction" he should reconsider his investment.

Holmes offered Eisenman to liquidate his investment in Theranos and get "greater than five times" the amount he initially invested. He responded w/ a long email asking for more info on Theranos, but he says he never had further communication w/ Holmes.

Eisenman kept asking Theranos' chairman for info. In Nov 2012, Holmes wrote Eisenman, "Alan we have communicated about this multiple times before yet you choose to continue going down this path." He replied a lengthy email saying he didn't understand her email.

Prosecutor went through the WSJ's Sept 2013 article calling Theranos' tech a "breakthrough." Eisenman agrees the article reflects what he was told about Theranos' ability to revolutionize the industry, and he was never told the co used modified non-Theranos blood-testing devices.

Theranos sent an email to investors in Dec 2013 saying the co was scaling up and seeking another investor round. Eisenman thought it was good news, and it meant Theranos had proven itself.

Eisenman emailed Sunny Balwani that he was considering investing $1M. Balwani responded quickly and was available to talk anytime.

Eisenman says Balwani's tone was a 180-degree shift, bc Balwani had been "hostile" "for an extended period of time not only nonresponsive but also aggressive in his communication w/ me." Prosecutor asks if their relationship was "contentious." "That’s putting it mildly," he says.

Eisenman says despite his frustrations with Balwani and Holmes, he decided to invest in Theranos again, b/c he had a "seat at the table" as an early seed investor and thought he was getting shares at a discount.

In Oct 2014, Eisenman emailed Balwani a report that said Theranos was take blood samples to Palo Alto to process them. Balwani replied "doesn’t surprise us. Sounds like an uninformed consultant." After Eisenman replied, Balwani told him to "please stop" emailing everyday.

In April 2015, Eisenman wanted to liquidate his shares in Theranos b/c he was retiring and his daughter was buying a house. He wrote Holmes and Balwani an email with the subject titled "PLEASE RESPOND!!!”

Eisenman noted that he had been an investor for 9 years: "It’s really unfair for you to play this cat and mouse game with me...I can’t make a rational decision to settle or hold my stock with the lack of info you have provided."

Balwani replied: "Your emails are insulting, full of inaccurate statements and wasteful of our time. Our next response to this email and all your future emails will come from our counsel."

That was their last exchange and Eisenman never was able to sell his shares, he says.

The gov't wrapped direct and Kevin Downey is up for Holmes on cross. Downey notes that Eisenman's friend David Harris, who was Holmes' financial adviser, vouched for Holmes and recommended the startup to him in 2006.

Downey: Isn’t it true you only had one convo with Holmes before investing and it was a very brief convo?

Eisenman says no. Downey points to Eisenman's email the day before his investment. He wrote he "chatted with [Holmes] for about 5 minutes. She seems like a terrific person."

Eisenman keeps talking over Downey and is getting noticeably upset. Downey showed him a GlaxoSmithKline contract w/ Theranos and Eisenman interrupts, "Can you show me a Pfizer and Bristol Myers contract because that’s also what she told me at the time?"

Eisenman says he doesn't recall seeing the GlaxoSmithKline documents and asks if he was given it and the Pfizer and Bristol Myers documents before he invested. Downey tells the witness that's why we're here and they're trying to find that out. lol

Alan Eisenman: "Can I ask you what a service frame agreement is?"

Holmes' counsel Kevin Downey: "No you may not."

Alan Eisenman says in his convos with Holmes in 2006 "the details weren’t discussed, just the names were discussed," and that Theranos was doing business with four pharma companies, but he acknowledges he doesn't remember reviewing any contracts.

Downey points out that Alan Eisenman went to law school and is a trained lawyer, but Eisenman says he studied tax law. Downey says, "ok, I think tax law counts, but you had legal training?" "Yes," he says.

Eisenman continues to talk over Downey and Judge Ed Davila repeatedly tells Eisenman that Downey is supposed to ask the questions and Eisenman is only supposed to respond to the attorney's q's.

Downey is pointing to provisions in Eisenman's Theranos investment contract. The provisions say his investments are speculative and there's no IPO guarantee. Eisenman called the contract language "boilerplate" & "what’s more important is the conversations with principles."

Downey asks Eisenman if he ever got an attorney to review his Theranos investment contracts when he became frustrated with the lack of information he was receiving about the company. "No, it was irrelevant," he says.

Before trial is recessing for the week, Downey impeaches Eisenman pointing to his prior deposition in which he acknowledged his contracts didn't give him any rights to Theranos info. With that we're breaking. Judge Davila notes next week "will be a full week," w/ trial everyday.

Prosecutor Jeff Schenk says the government might rest its case-in-chief next week (!!!) and if so, the government wants to know who Holmes will call first in her defense case.

Holmes' counsel agrees to tell prosecutors who the defense plans to call next week if the government rests its case-in-chief. That's all for now.✌️

A Theranos investor testified in Elizabeth Holmes' trial today that his request to liquidate investments in emails titled "PLEASE RESPOND!!!" were met with litigation threats from Holmes' then-romantic partner Ramesh "Sunny" Balwani. My recap from today!
law360.com/articles/14395…