As the trial of Elizabeth Holmes, founder of the fraudulent biomedical company Theranos, enters its fourth week, two important witnesses testified in court that Holmes had intentionally misled investors on the track record of Theranos.
Holmes founded Theranos in 2003 at the age of 19, claiming that the company had a technology called “Edison” that would detect common illnesses like cancer and high cholesterol with just a few drops of blood. Compared to conventional testing, Theranos promised dramatically lower testing prices and need for blood. Theranos raised more than 700 million dollars from investors, reaching a net worth of $9 billion in 2014 and securing partnerships with various national clinics like Walgreens. With these investments, Holmes became the world’s youngest female self-made billionaire.
Soon, however, people began questioning Theranos’ technology. In October 2015, The Wall Street Journal reporter John Carreyrou published an investigation on the company, claiming that Theranos’ “Edison” couldn’t provide accurate results and that the company was simply using traditional blood-testing machines or fabricating its results altogether. By 2016, Theranos was forced to shut down its lab operations, and Holmes and Ramesh Balwani, the former president and chief operating officer of Theranos, were charged with fraud by the U.S. Securities and Exchange Commission (SEC). Holmes paid a $500 million fine and gave out 18.9 million shares of Theranos’ stocks. In June 2018, Holmes stepped down from the CEO position and faced twelve charges of fraud from a federal grand jury. She might face up to twenty years in prison if convicted. Due to COVID-19 and Holmes’ pregnancy, the official fraud trials were postponed until September 8, 2021, where it took place in the federal court in San Jose, California.
In the first three weeks of the trial, several high-profile witnesses testified against Holmes. Erika Cheung, a former Theranos employee, claimed that the company had put a priority on speed over accuracy in its blood tests. James Mattis, retired four-star Marine Corps general and former defense secretary, who also served on the board of directors of Theranos, testified that Holmes had kept the technological problems Theranos encountered as a secret from the board. “We were unable to help her on the fundamental issues that she was grappling with if we only saw them in the rearview mirror,” said Mattis.
In the last week, Adam Rosendorff, the lab director of Theranos from 2013 to 2014, began his testimony and provided more details about the failure of the technology. He claimed that Holmes ignored his concerns about the inaccuracies of the technology and instead pressed forward with Theranos’ commercial launch, saying that “The company was more about P.R. and fund-raising than patient care.”
To emphasize the routine failures of Theranos’ quality control tests and inaccurate results, the prosecutors brought forth Victoria Sung, a senior scientist at the pharmaceutical company Celgene while it was under contract with Theranos. Sung presented a slideshow showing that Theranos’ tests were more unstable and inaccurate than commercially available alternatives.
Lance Wade, Holmes’ attorney, focused on putting the blame for Theranos’ testing problems on Rosendorff this week, saying that Holmes never instructed him to report an inaccurate result and that Rosendorff should be the one legally responsible for the fall-out. However, according to testimony provided by the government, Rosendorff had emailed Holmes and other top executives at Theranos about test inaccuracy and quality control failures. Rosendorff further complained that he had not been notified of some patient complaints and testing decisions.
Carreyrou, the Pulitzer Prize-winning reporter who broke the Theranos story, is on the list of possible witnesses Holmes may call to testify by the fourth week. The motive remains unclear, but Carreyrou’s attorneys said that it might be a “ruse” to keep Carreyrou from talking about the case on his podcast. The trial is expected to last for another few months, as both sides are calling in multiple witnesses for testimony and the court still has more examinations to do.
By: Jenny Jin