The defense attorney for Elizabeth Holmes, founder and CEO of the blood-testing company Theranos, tried hard at Holmes' criminal fraud trial Tuesday to shake earlier testimony from a company investor, but it was tough going.
Lisa Peterson testified last week that the investment company she works for, RDV, put $100 million into Theranos in the fall of 2014 based on its understanding that the much-touted fingerstick blood-testing technology not only worked but had been validated by major pharmaceutical companies and was being used by the U.S. military.
Defense attorney Lance Wade tried to establish that Peterson and others didn't look hard enough into available information and that RDV — owned by the wealthy DeVos family, including former President Donald Trump's Secretary of Education Betsy DeVos — was sophisticated enough to know better.
Regarding Peterson's testimony that she did not know that the Theranos blood tests introduced at Walgreens stores were actually being run at the Theranos lab instead of on Theranos devices in the stores, Wade asked if she knew that fact could be found on the company's website. Peterson said "that's not what we thought we had invested in."
Putting up a laudatory Theranos internal report that an earlier witness testified has a forged Pfizer logo, Wade suggested that Peterson could have figured out that the report was in fact written by Theranos because the company's address and website were printed on the bottom of each page. Peterson testified she didn't recognize the address.
Pointing to generic language in the investment contract between RDV and Theranos, to the effect that information provided by the company was "not necessarily a thorough or exhaustive description" of Theranos' business and prospects, Peterson insisted that "we also relied on what we heard."
Asked by Wade if she understood that future projections of revenue were just estimates that could change, Peterson responded that, at an October 2014 meeting with Holmes at Theranos, "we were sitting in an office (being) told that there was $140M in revenue and a break-even cash flow. They should have told us if year-end was going to be different."
Wade successfully moved to strike many of Peterson's explanations, including the one about projections, finally drawing an intervention by U.S. District Judge Edward Davila: "Mr. Wade, some of your questions lend themselves to an explanation."
When it was prosecutor Robert Leach's turn, he returned to each of the points on which Peterson had tried to explain her answers. Regarding the Theranos projection of $990 million in revenue in 2015, a number that has come up repeatedly during the trial, Peterson testified that the projection was backed up by statements from Holmes that "900 Walgreens stores were going to open" in 2015, "along with 300 Safeway stores."
Peterson also reaffirmed her testimony from last week that she understood at the time of the investment that Theranos could run "comprehensive blood tests" from a fingerstick, that the tests were run on Theranos devices, and that the military and others "were using the technology in the field."
After the meeting with Holmes at Theranos, the DeVos family doubled the amount it had originally considered investing, from $50 million to $100 million.
Holmes is charged with making false and misleading statements to investors, doctors and patients about Theranos' blood-testing technology. If convicted, she faces up to 20 years in prison and $3 million in fines.
The jury also saw a second internal Theranos report altered to look as if it were issued by another pharmaceutical giant, Schering-Plough. Constance Cullen, a Schering-Plough scientist, testified that she worked with Theranos to validate Theranos' testing methods in 2009 but that no conclusion was reached, in part because Holmes was "cagey" with her answers at a due diligence meeting. Theranos sent Cullen a "validation report" in December 2009 concluding the Theranos testing method had been shown to give accurate and precise results. Cullen testified that no one at Schering-Plough reached that conclusion.
A few months later, Holmes sent the Theranos report, enhanced with both a Schering-Plough logo and the even rosier conclusion that the Theranos method was "more" accurate and precise than current "gold standard" methods, to Walgreens, as one of "three due diligence reports," including the forged Pfizer report, purporting to validate the Theranos technology.
Morning proceedings broke early when Davila learned that a spectator in the back of the courtroom has taken a photograph with his phone.
Admonishing the man to read the posted signs barring any photographs or recordings of the proceedings, the judge said if it happens again, he will call the U.S. Marshals Service.
The trial will continue on Wednesday and Thursday of this week and is expected to last well into December.