Theranos, The Trial of Elizabeth Holmes, ch. 11: Holmes’ widening gyre of diffusion of blame–and abuse

November 30, 2021 | by | 2 Comments

Turning and turning in the widening gyre
The falcon cannot hear the falconer;
Things fall apart; the centre cannot hold;
Mere anarchy is loosed upon the world,
The blood-dimmed tide is loosed, and everywhere
The ceremony of innocence is drowned;
The best lack all conviction, while the worst
Are full of passionate intensity.

The Second Coming, William Butler Yeats 

Elizabeth Holmes’ defense continues its strategy of deflection, diffusion of blame, and now psychological abuse. Ms. Holmes and her defense hit its stride today with Holmes recounting, in this lurid Mercury News headline, “Theranos president Balwani forced sex on Holmes, she testifies” (PDF attached if paywalled). This is far more interesting and clickbaitable than, say, her fan dance around regretting tacking on Pfizer and Schering-Plough logos on falsified reports, or denying that she ever said to investors, repeatedly, that the Theranos labs were being used by the US military in medevacs and in the field. The jury, ground down to numbness by the prosecution’s mile-high-pile of false documents and claims, surely woke up with Holmes’ upset and tears on the stand.

It started with her meeting Sunny Balwani on a trip to China when she was 18 (and he was 38), entering and then departing Stanford because she had been raped, compensating by dedicating herself to developing her high school idea on blood testing, and moving in with him. There was more than a bit of Svengali dynamic here, with her quoting Balwani’s rough talk of transforming her into ‘the new Elizabeth’ who’d be savvy about business and successful, versus “I didn’t know what I was doing in business, that my convictions were wrong, that he was astonished at my mediocrity and that if I followed my instincts I was going to fail, and I needed to kill the person who I was in order to be what he called the new Elizabeth”. She needed to work seven days a week, eat prescribed crunchy vegetables and grains (reading like a trendy SF restaurant menu), and see her family less. He would guide her and tell her what to do.

Holmes looked up to Balwani as a successful entrepreneur; he had joined a reverse auction startup called CommerceBid, eventually becoming president, and cashed out with $40 million as part of its $200 million sale to Commerce One in 2002. Between that and Theranos a few years later, however, Balwani left nary a shadow on Silicon Valley. At Theranos, Holmes became the public founder/face and Balwani the behind-the-scenes business planner–plus a bare knucks ‘enforcer’ on the daily life of the company, according to John Carreyrou. Business Insider

The rest of the story is about Balwani’s getting rough with her when she ‘displeased’ him, rough enough to be hurt, swollen, and not able to get up, in her account from a 2015 incident. She moved out the following year and he left the company in May 2016. Not all Pygmalion stories end well and all too often, they end like this.  

Yet the prosecution has provided another pile–of texts between Holmes and Balwani which, in between the mundane, are effusive in pronouncements of eternal love and support. These continued after his departure. Business Insider and full texts here

The defense has its own pile of deflection going, with the aim of creating doubt that Holmes was really at the center of the fraud, and more of a pawn, in Holmes’ own words:

  • Balwani was in charge of the financial projections and operations. Holmes testified that Balwani’s financial modeling produced discrepancies in revenue projections in 2014 and 2015. The Walgreens relationship also cratered at that time. This reinforces the defense opening back in September that relying on Balwani as president was one of her mistakes.
  • Validation? Adam Rosendorff, a former lab director, was less than competent [TTA 6 Oct]
  • Not disclosing about using third-party devices? A ‘trade secret’ recommended by legal counsel.
  • And the marketing/PR claim about Theranos using only ‘a single drop of blood’? (And all that ‘passionate intensity’ Holmes exhibited at investor conferences and interviews?) Blame TBWA/Chiat/Day, the ad agency! And Patrick O’Neill, who went from executive creative director there to creative director of Theranos and prepped her for the press including her 2014 TED speech. (Take a trip back and watch a few Theranos spots, courtesy of Refinery29. High on image, low on reality.)

Diffusion of responsibility is common in fraud cases. Wired quoted David Alan Sklansky, a professor of criminal law at Stanford. “It’s probably the most common kind of defense mounted in cases involving allegations of large-scale financial fraud,” he says. “Whether it works depends on how credible it seems to the jury.”

The hazard is that it makes Holmes appear incompetent, but incompetence beats 11 counts and 20 years in Club Fed.

What is the jury to believe about her competence? From the Mercury News again: “Asked by Downey whether Balwani ever forced her to make statements to investors or journalists that the prosecution has focused on, or whether he controlled her interactions with board members or executives from companies Theranos sought to work with, she said no. Asked what impact her relationship with Balwani had on her work, she responded, “I don’t know. He impacted everything about who I was, and I don’t fully understand that.” Holmes made statements on her own, frequently and over many years. She stated she wasn’t controlled by Balwani when it came to the board or business partnerships–and continued running the company after his departure and attempting to fix a myriad of problems. But what will the jury take away from this day? This, or Sunny getting blue on her?

Also Fortune 23 Nov and 25 Nov

To be continued…

TTA’s earlier coverage: Chapter 10, Chapter 9, Chapter 8, Chapter 7, Chapter 6, Chapter 5, Chapter 4 (w/comment from Malcolm Fisk), Chapter 3, Chapter 2, Chapter 1

Theranos, The Trial of Elizabeth Holmes, ch. 9: the cold $96 million (updated 19 Nov)

November 18, 2021 | by

On which may well hang how many years Elizabeth Holmes spends in prison. Yesterday’s testimony by Brian Grossman, chief investment officer at PFM Health Sciences, may be the prosecution coup de grace in drawing a picture in bold colors, no pale pastels, of deliberate deception and fraud.

Previous testimony spun tales of family offices and highly wealthy individuals such as Rupert Murdoch (and not so wealthy such as Alan Eisenman) being easily lulled by the Social Network spinning. They were gulled by the whiz-bang technology–Elizabeth Holmes’ and Sunny Balwani’s nanotainers, miniature Edison labs–as well as their fake claims of Theranos labs on Army medevacs and false letters from multiple international pharmaceutical manufacturers vetting their technology. Safeway and Walgreens executives had a more complicated tap dance, coming on board at not much past the idea stage, and staying in through a combination of Wanting To Believe, Competitive Embarrassment, and Heads Wanting To Stay In Place at having to write off hundreds of millions of dollars in public companies. 

Mr. Grossman in fact was and is the managing and founding partner, as well as CIO, of PFM. It’s located not on Sand Road but in (relatively) sober San Francisco. Founded in 2004, PFM specializes in early-stage and diversity health-focused investment, and currently manages over $2 billion in public and private funds. Lark Health is one of their recent investments [TTA 14 Oct]. Their Crunchbase profile demonstrates active investment in multiple operating companies. He and his firm are of some substance.

Something about Theranos got his attention–not the social networking, but the all-in-one miniature labs that condensed thousands of feet of lab into a small box. He was told that the entire Phoenix market could be served with labs fitting into about 200 square feet. Grossman knew a competitor, Quest Diagnostics, would need hundreds of thousands of square feet of space to match that. 

What caused him not to be skeptical? Of course, the mythical military involvement and pharma endorsements first, but then….

  • Projections of $30 million in 2014 income from pharma companies–alone. Needless to say, no income in 2012 or 2013 would raise a red flag for some, but not necessarily for PFM in early-stage companies.
  • Four-hour turnaround on lab results in retail, one hour in hospitals–carefully concealing the wildly uneven results from the Edison labs resulting in third-party labs being used for retail, and his own personal result of over a day on a full venous draw, not a finger stick.
  • Holmes was “very clear that this technology was not a point-of-care test, not a point-of-care testing platform, it was a miniaturized lab,” he said. That alone smelled like a 20-ounce porterhouse steak off the grill. 
  • While Balwani nixed Grossman speaking with Walgreens and UnitedHealth, Channing Robertson of Stanford, who helped Holmes start Theranos, vetted their labs as extremely advanced technology–one with which competitors would spend years catching up–for a serious investor, sauce, potato, vegetables, and trimmings on that sizzling steak

Unlike the picture the defense is painting of Balwani controlling Holmes, Grossman took care to note that Holmes, not Balwani, did most of the talking at the time. While he found the company highly secretive, he, unfortunately, discounted it. So in went PFM’s $96 million in February 2014, which included $2.2 million from a designated ‘friends and family fund’ which had investments from low-income people.

Three years later, PFM also won its own fraud case against Theranos, settling its lawsuit for about half–an estimated $40-50 million (WSJ; CNBC claims $46 million). The timing was good–it was while the company still had some money to claw back [TTA 26 June 2017].

What happened to PFM and other investors shook up Silicon Valley for years and, as much as some may deny it, health tech investment plus tarnished the image of women heading health tech companies. Some of the reasons why this case has received international attention. CNBC, The Verge, NBCBayArea

Updated. Where the prosecution would go in its final days of its case–they may be wrapping this week–would they have trouble topping this for the jury, after piling similar fraud high and wide? But, in this Editor’s estimation, they brought it all back home for the jury by putting Roger Parloff, author of the 2014 Fortune cover story, ‘This CEO Is Out For Blood”, on the stand. His articles, recordings, and notes put into sharp relief and in summary the full fraud–all the fraudulent statements the company presented, versus the reality presented by the witnesses and evidence in the courtroom. At the time, the Fortune article fueled the current investors and served to bring in more, such as the DeVos family. Parloff over a year later wrote a column stating that he had not only been misled, but also failed to get to the bottom of what he termed “certain exasperatingly opaque answers that I repeatedly received”. Parloff was also the “beating heart” of a 2019 HBO documentary, “The Inventor”. CNN Business

Updated 19 Nov: But now it will be the defense’s turn to surprise. 

The New York Times, in a well-padded piece, speculates on the obvious–whether Holmes will be put on the stand to directly testify about  “how Sunny made her do it”–Sunny Balwani’s private psychological manipulations, all of which seemed to be well-hidden at the time. Stand by, it may get lurid.

But first for hilarity. The prosecution rested. The defense’s first move was to request that the court acquit Holmes on the grounds of insufficient evidence. Then amazingly, Holmes took the stand. Judge Davila dismissed one fraud count against Holmes, leaving only 11. We’ll pick this up next week.

To be continued….

TTA’s earlier coverage: Chapter 8, Chapter 7, Chapter 6, Chapter 5, Chapter 4 (w/comment from Malcolm Fisk), Chapter 3, Chapter 2, Chapter 1

Theranos, The Trial of Elizabeth Holmes, ch. 8: choosing investors with more money than sense a winning strategy

November 16, 2021 | by

The prosecution continues to pile up defrauded investors–but this one may backfire on them. Alan Eisenman invested about $1.2 million in Theranos in 2006 on behalf of himself and his family–after a five-minute phone call with Elizabeth Holmes. As an early investor, he also believed he was entitled to special treatment, such as direct talks with Holmes, frequent enough to the point where she offered to buy out his shares for five times their value and cut off contact. 

Later, he had other opportunities to sell his shares up to nearly 20 times their purchase price, but held on stating he didn’t have enough information on what was apparently a ‘liquidity event’. Lack of information was a persistent red flag, with gaps in communication from 2010 to 2012 and a contentious relationship with Sunny Balwani. Despite this, when Theranos needed money in 2013, he then invested an additional $100,000 despite no audited statements since 2009. This last investment became one of the government’s counts of wire fraud.

In his testimony, Eisenman testified that like others, he was initially impressed that Oracle founder Larry Ellison was involved with the company and that Theranos had contracts with six international pharmaceutical companies including Pfizer and Novartis–which was blatantly false.

This incredible narrative becomes more understandable when you understand Holmes’ strategy of choosing only ‘high-quality investors’ of the family fund sort. She targeted funders who weren’t knowledgeable and meticulous in examining the company books and the technology. The funders were also oh-so-socially connected. According to The Verge, Eisenman was ‘wired’ into Theranos–“he was friends with the Holmes’ family’s financial advisor [David Harris], who had also invested. Plus, his wife’s father, who had also invested, was friendly with [Bill] Frist, who was on the board.” Eisenman contacted Frist as well when he was essentially cut off from Holmes about 2010. 

Surely Eisenman was entitled to be upset and more than a little embarrassed, as a former money manager and financial planner. But then his actions dealing with the prosecution left a Mack truck-sized opening for the defense on the cross-examination. He sent an email to the prosecution team perhaps 15 hours after he finished his direct examination last Wednesday, strictly against instructions. He did it again on Friday, ostensibly about travel plans. An assistant US attorney called him to remind him not to contact them again. The defense leveraged this into the compromising position of being biased against Holmes beyond his actual loss, for instance a purported statement he made “upon entering the courtroom” about wanting Holmes to go to prison.

Coming so late in the trial–the prosecution may rest this week–the abrasive impression that Alan Eisenman left may leave an opposite impression on the jury that favors the defense interpretation of naïve investors who didn’t do their due diligence homework, and by extension, deserved to lose their money. CNBC 15 Nov, 10 Nov

To be continued….

TTA’s earlier coverage: Chapter 7, Chapter 6, Chapter 5, Chapter 4 (w/comment from Malcolm Fisk), Chapter 3, Chapter 2, Chapter 1

Theranos, The Trial of Elizabeth Holmes, ch. 7: Edison labs consistent–in deficiency and strange results

November 11, 2021 | by

And Elizabeth Holmes knew. The last two years of Theranos’ existence, were, to put it mildly, fraught, for anyone honest. Job 1 for the very last in a parade of lab directors, Kingshuk Das, MD, was to respond to CMS on substantial deficiencies found in a November 2015 on-site inspection. The CMS deficiency report, sent to the prior lab director in January 2016, two months before Dr. Das’ start, had a subject line that would grab anyone’s immediate attention: “CONDITION LEVEL DEFICIENCIES – IMMEDIATE JEOPARDY.”

The report went on to say that it was determined that your facility is not in compliance with all of the Conditions required for certification in the CLIA program.” and concluded that “the deficient practices of the laboratory pose immediate jeopardy to patient health and safety.”

Dr. Das found some interesting things in his early days on the job, such as the Edison labs producing results detecting abnormal levels of prostate-specific antigen (PSA)–in female patients. When he brought this to Holmes’ attention, she quoted a few journal articles stating that certain rare breast cancers in women might present that result. This didn’t seem quite plausible to Dr. Das. Holmes then told him that it wasn’t an instrument failure, but rather a quality control and quality assurance issue. Nevertheless, Dr. Das went back and voided every Edison lab test made in 2014 and 2015, stating to Holmes that the Edison labs were not performing from the start. Most Theranos results sent to patients were produced on third-party machines made by Siemens and others, often on inadequately sized blood samples. 

As Dr. Das testified to the defense, many skilled people at Theranos earnestly tried to fix the problems with the Edison lab machines, but, as The Verge put it in part, if Holmes didn’t believe Dr. Das, other employees, or multiple preceding lab directors that the machines were really, truly broken, did it matter?

The defense is maintaining that Holmes didn’t really understand the lab details and was heavily influenced (ahem!) by president Sunny Balwani. However, the Babe in the Medical Startup Woods defense falls apart when there’s no Sunny to blame–he departed shortly after Dr. Das’ arrival. 

The actual theme–a long-term pattern of deception aimed at those who wanted to believe, and ponied up Big Bucks--was reinforced by a witness before Dr. Das. Lynette Sawyer was a temporary co-lab director for six months during 2014 and 2015, but never came to the Theranos site. It seems that her main duties were signing off remotely on documents using Docusign and backing up then-lab director Dr. Sunil Dhawan, Balwani’s dermatologist who came to the lab a handful of times. Even more amazingly, she was unaware of Theranos’ signature ‘nanotainers’ and the backup use of third-party devices. After her six-month contract was up, she departed, uncomfortable with Theranos’ procedures.

Kicking off the day was Judge Davila’s regular admonition to those in the public section of the courtroom to type vewy, vewy quietly. Then the video display for exhibits broke down. This led to a two-hour delay while the court found an antique projector to show the images to the jury and the public on a blank wall.

One wonders if the tapping plus the tech breakdown topping off the Parade of Fraud is leaving the jurors numb–or wanting to jump into the well above, even if there is no bottom. CNBC, Wall Street Journal (15 Oct), 5KPIX

TTA’s earlier coverage: Chapter 6, Chapter 5, Chapter 4 (w/comment from Malcolm Fisk), Chapter 3, Chapter 2, Chapter 1

To be continued….

 

 

Theranos, The Trial of Elizabeth Holmes, ch. 6: the decision maker was Holmes–and she was ‘cagey’

November 5, 2021 | by

Judge Davila is speeding up the trial, adding hours and days–perhaps because the damning testimony has become depressingly similar. Were the investors sloppy, or did Theranos–and Holmes–deliberately deceive?

Maybe…both.

Documents and slideshows from Theranos glowed.

  • The company faked memos and reports from both Pfizer and Schering-Plough, which was in the process of being acquired by Merck. Schering-Plough’s Constance Cullen said she found CEO Elizabeth Holmes’ answers to technical questions “cagey” and she was blocked by Holmes from asking questions of other Theranos employees.
  • Presentations describing the Theranos lab capabilities were written in present, not future, tense. Example from the prosecution reading from an investor deck: “Theranos proprietary technology runs comprehensive blood tests from a finger stick.” Another slide was 10-Pinocchio-worthy: “Theranos has been comprehensively validated over the course of the last seven years by 10 of the 15 largest pharmaceutical companies, with hundreds of thousands of assays processed.”

These were good enough for investors like Lisa Peterson of the DeVos family office, who testified last week about their decision to put in $100 million. In fact, investors were Social Networking right to Theranos’ door. The well-connected Daniel Mosley, who invested “a little under $6 million” in Theranos, after his client and friend Henry Kissinger, a Theranos board member and $3 million investor, asked him to evaluate the company, in 2014 recommended it to his other clients–the DeVos, Walton ($150 million), and Cox ($10 million)  families. Black Diamond Ventures founder Chris Lucas invested $7 million in Theranos. He believed that Theranos’ analyzers were being used by the military in the Middle East. Presumably, his uncle Don Lucas, who sat on the Theranos board, backed up the claim. They were additionally impressed by Holmes’ intensity and insistence that the company was on a mission to revolutionize blood testing. Risk can be fashionable for ‘high-quality families’ who aren’t hands-on with their money and won’t experience hardship if the investment doesn’t pan out.

The investors like Peterson and Mosley believed what they were shown was steak, not marshmallow, like projected revenue of $140 million in 2014 after zero revenue in the two prior years. They didn’t examine the books, other key corporate records, or make a technical evaluation of the labs. Why? “We were very careful not to circumvent things and upset Elizabeth,” Peterson of the DeVos office said. “If we did too much, we wouldn’t be invited back to invest.” Ooof. But on their side, in 2014-2015, the winds of hype were blowing fair, the skies were blue on CNBC, and Walgreens plus Safeway were lashed to the mizzenmast. The Verge, CNBC, KTVU Fox 2

The defense keeps pinning blame on the investors for being naïve, which is taken up by the NY Times. With 20/20 hindsight and infinite wisdom, the article blames the investors for not being scrupulous in their due diligence. A fair point made is that in ‘hot’ startup markets, no one looks too closely for the Fear Of Missing Out (FOMO)–something we see this very day.

Holmes’ chances of pinning the blame on president/boyfriend ‘Sunny’ Balwani and evading any lengthy time are low at best.

  • The defense sub-strategy of painting Holmes as controlled by Balwani appears to be augering in. CNBC uncovered a 27 June 2018 videotaped deposition in an investor lawsuit, eventually settled, where Holmes, in between taking the Fifth Amendment, also claimed she was the ultimate decision-maker at Theranos.
  • An analysis published in the Mercury News (PDF), through the paywall, is not sanguine about Holmes beating the odds and walking free, or with minimal time. However, juries do strange things in assessing fraud, even when piled high and wide by the prosecution, out of sheer boredom or cussedness. Holmes is also surrounded by family, friends, baby on breaks, and baby papa, all of which can sway some jurors.

So as the trial passes the halfway corner, we observers are waiting for a final bombshell–or two.

TTA’s earlier coverage: Chapter 5, Chapter 4 (see new comment from Malcolm Fisk), Chapter 3, Chapter 2, Chapter 1

To be continued….

Theranos, The Trial of Elizabeth Holmes, ch. 5: how to easily fool rich people and their investment offices

October 28, 2021 | by

It seems like smart people with big money like to jump into wells with no bottom, too. Yesterday’s testimony by Lisa Peterson in the Elizabeth Holmes trial indicated that Ms. Holmes knew her ‘marks’ as well as any grifter at the horse track. She concentrated on Very Rich People, whose Very Large Private Investment Funds are handled by ‘family offices’. Those offices handled investments for families such as DeVos (one of the top 100 richest families in the US), Walton (Walmart), and Cox (media). Holmes targeted five or six of these family offices, with the come-on line that she was seeking them because, after all, institutional investors wanted to recoup their investment via going public too soon for the Miracle Blood Lab.

Perhaps it was the prospect (and prestige) of backing a revolutionary healthcare technology, or large denominations falling from the sky, or just leaving it to their advisors, but they believed the sizzle, didn’t check that the steak was soy–and lost up to nine-figure sums. For these family offices, and for Rupert Murdoch, the losses were embarrassing, not life-affecting.

The former Secretary of Education Betsy DeVos did not testify either, leaving it to Lisa Peterson, who oversees private equity investments for RDV Corp., the DeVos family office. Ms. Peterson, who wouldn’t have the job if she weren’t decently savvy, drew a picture for the prosecution of being consistently lied to by Ms. Holmes and Theranos executives before committing to a $99 million investment through its legal entity Dynasty Financial II, LLC on 31 October 2014:

  • Holmes and Balwani showed financial projections of $140 million in revenue in 2014 and $990 million in 2015. Peterson testified she did not know that both 2012 and 2013 had zero revenue–a real lapse on her part, in this Editor’s view
  • Theranos claimed validation by ten major pharmaceutical companies, including Pfizer (in last week’s testimony, revealing that their validation was forged)
  • The RDV Corp. group was told multiple times that Theranos would offer hundreds of tests via finger stick with the analyzer at 50% of the cost
  • The DeVos investors supposedly never knew that third-party analyzers were doing all the testing. Both the pharma company validation and testing were critical in the underwriting agreement, Peterson said.
  • Holmes told Peterson the analyzers were being used in military helicopters (false) and that the company did not buy third-party analyzers (false, again).
  • Prior to the investment, three members of the DeVos family and Peterson’s boss Jerry Tubergen met with Holmes at Theranos’ Palo Alto headquarters on 14 October. Cheri DeVos had her blood drawn and tested using the Theranos lab. The family subsequently doubled their investment.

The binders were thick, the press articles at that stage were effusive, and both Safeway and Walgreens were going to roll it out in their stores. All the risk was on those companies for the execution, according to Petersen’s notes. 

So what we see is a classic ‘fake till you make it’ strategy, designed to play on two major retailers looking to buck up their pharmacy areas and select private investors with major funds. The articles in the WSJ and Fortune were fulsome to the point of parody. Holmes made an impact on supposedly cynical writers and Jim Cramer of CNBC’s ‘Mad Money’, who was highly influential on markets and investors at that time. It was to Cramer that Holmes made the famous statement, “This is what happens when you work to change things, and first they think you’re crazy, then they fight you, and then all of a sudden you change the world.” Whether she was scripted or really thought she was The Second Coming of Steve Jobs, it’s an audacious statement worthy of Napoleon or George S. Patton–which she had to walk back to Mr. Cramer and others in the press by early 2016 when the John Carreyrou/WSJ reporting made its own impact. The family offices questioned Holmes, of course, based on the email trail–and Theranos consistently downplayed the news to them as well as denying anything was wrong to the press.

What this Editor would like to know is once the signals went sideways, did any of these private offices’ investment managers get into Theranos to do some overdue due diligence and turn over some rocks, knowing that snakes might well fly out–or just let it ride?  CNBC, KTVU Fox 2 tweetstream 

What is somewhat risky may be the jury. The possibility of a mistrial has increased with halfway to go.  There have been three jurors removed, with their seats filled from the five alternates selected. Three more losses would lead to fewer than 12 jurors. Now the prosecution and defense could agree to go on–not a likely scenario. Judge Davila has increased the jury day by an hour daily to speed the trial up, but reports indicate the usual work and family problems. One juror was recently dismissed for playing a sudoku puzzle in the jury box due to “fidgetiness”. Choosing a jury was difficult in this tech area as few with the background and intelligence to understand financial fraud would be willing, for work and personal safety reasons, to appear on the jury. The defense is looking to unseal the juror questionnaires for their own strategic reasons. But CNN makes a mountain out of a speed bump, since Judge Davila is unlikely to pave any roads towards a mistrial.

Unfortunately, the Mercury News, Bloomberg, and WSJ, which would be primary sources, are paywalled.

TTA’s earlier coverage: Chapter 4 (see new comment from Malcolm Fisk), Chapter 3, Chapter 2, Chapter 1

To be continued….

Theranos, The Trial of Elizabeth Holmes, ch. 4: we deceive those who want to believe

October 21, 2021 | by | 1 Comment

The Theranos Cave apparently has no bottom. Reportedly at the halfway mark, Tuesday’s trial focused on the testimony of former Theranos product manager Daniel Edlin. Recommended by his college friend Christian Holmes in 2011, he soon stepped into frontline work, assembling presentations sent to investors such as Rupert Murdoch, conducting VIP tours with demonstrations of the Edison labs, coordinating with the press, and with Elizabeth Holmes, plumping for Department of Defense and pharmaceutical company business. 

According to Mr. Edlin’s testimony, Theranos executives and staff staged demos and blood tests for investors and VIPs. Sometimes the blood tests worked fine, sometimes they didn’t (as in Rupert Murdoch’s case). Investors and reporters often were more interested in seeing Edison and MiniLab machines “work” without seeing any test results. All routine for an early-stage technology company. What was not routine was that other test results others were “corrected” (for Walgreens executives), reference ranges changed, or tests removed on the direction of Dr. Daniel Young, a Theranos VP.  The MiniLab never was used for patient blood testing as it had trouble performing general chemistry or ELISA tests adequately.

Rupert Murdoch’s (listed as a witness) investor presentation binder was entered into evidence. According to CNBC, one section of the binder read: “Theranos offers tests with the highest level of accuracy.” Another section said the blood-testing technology “generates significantly higher integrity data than currently possible.” Mr. Edlin testified that Ms. Holmes vetted every investor deck and binder, including the ones shown to DOD. The website, overseen by Ms. Holmes, made statements such as “At Theranos we can perform all lab tests on a sample 1/1000 the size of a typical blood test.” However, even Theranos’ general counsel advised against using these superiority claims:

  • “Please remove reference to “all” tests and replace with statements such as “multiple” or “several.” It is highly unlikely that the laboratory can perform every conceivable test, both from a logistical standpoint and because the CLIA certification designates specific specialties of test the lab performs.
  • For a similar reason, replace “full range” with “broad range.”
  • Replace “highest quality” with “high quality”
  • What substantiation do you have for “have results to you and your doctor faster than previously possible?”
  • Remove “unrivaled accuracy.”

To be fair, some of this language did change over time. The defense, for instance, had a try at shifting blame to one of Theranos’ marketing agencies.

But overstatements were a way of ‘fake it till you make it’ life at Theranos. The infamous Fortune article (later retracted by the author), the glowing 8 September 2013 Wall Street Journal article by Joseph Rago made at the time of the Walgreens pilot were felt to be overstatements by Theranos insiders, but never corrected. Walgreens and Safeway executives previously testified that they were told that Theranos devices were in use in Army medical evacuation units. But the truth was, according to Mr. Edlin who managed the DOD relationship, that AFRICOM (US Army African Command) deployed the Edison device in Cameroon, Uganda, and South Sudan to run as an experiment to test the viability of the machine. It was never deployed in the Middle East (CENTCOM). The Edison 4.0 was deemed too heavy and put off until lighter-weight units were developed. Nonetheless, Theranos received a 12-month service contract. 

The prosecution strategy here is to show that Ms. Holmes was hands-on when it came to marketing and investor communications, approved the overstated claims, and was not “controlled” by Sunny Balwani as the defense maintains. If anything, he deferred to her. 

CNN Business, KTVU Fox 2 running commentary, Daily Mail, California News Times  Unfortunately, the Mercury News, Bloomberg, and WSJ are paywalled.

TTA’s earlier coverage: Chapter 3, Chapter 2, Chapter 1

To be continued….

Theranos, The Trial of Elizabeth Holmes: ch. 1

October 1, 2021 | by

“The company believed more about PR and fundraising than about patient care”, from Tuesday’s testimony by former lab director Adam Rosendorff, could be the prosecution’s strategy in the proverbial nutshell. Mr. Rosendorff, who quit in November 2014 after a long struggle to get Ms. Holmes and Theranos management to address persistent problems in patient lab results and to implement a legally required verification process, was a witness for the prosecution. The defense tried to paint his testimony in cross-examination as inconsistent and self-serving in accounts of Ms. Holmes’ state in hearing concerns about three particular blood tests, the launch date of public blood tests, proficiency tests versus ‘precision tests’, when the California Department of Public Health audited the lab, and exactly why he quit Theranos 18 months after hire. The questioning twice grew so heated that District Circuit Court Judge Edward Davila deemed it inappropriately argumentative. One example from Lance Wade to Mr. Rosendorff was that supervising quality control tests and making sure laws were followed was “why you get the big bucks, right?” “Not as big bucks as you get paid,” Mr. Rosendorff replied. Mr. Rosendorff did get caught up in an email trail and on narrowing the proficiency testing to FDA-approved devices versus the Edison labs. The cross and the bickering went on into Friday and probably will resume on Tuesday next week (@doratki).

Also on Tuesday was brief testimony from Celgene manager Victoria Sung, who drew a picture of more Theranos fabrications around how pharmaceutical companies (Celgene owned by Bristol Myers-Squibb) had not  “comprehensively validated” Theranos technology. 2012 results showed that Theranos labs performed “out of range” versus standard tests, and other tests were not run. Last week, Theranos employee Surekha Gangakhedkar in her testimony stated that she did not think GSK’s report validated Theranos’ tests. Mercury News, The Verge

Today, John Carreyrou, who broke la scandale Theranos in The Wall Street Journal and authored the book Bad Blood, filed a motion to stop being barred from court. Cleverly, La Holmes’ defense put him on the witness list but not subpoenaed him. Being on the witness list, however, means he cannot attend any part of the trial or publicly discuss his testimony, if given, without permission from Judge Davila. “Placing Carreyrou on the witness list was done in bad faith and was designed to harass him,” the motion claimed, calling his placement on the list “a cynical ruse” that violates the First Amendment. Also cited in the motion were the company chant about him and various text messages between Ms. Holmes and Sunny Balwani. Mercury News  Mr. Carreyrou and six years before the Theranos mast, interviewed in The Verge in an interview that diverges fascinatingly into the psychiatric drives of the players….

And earlier in September (Wednesday 22nd), General James Mattis, Ret. testified about how he initially wanted to pilot the Theranos labs on ships and remote locations, where space and swiftness are at a premium. The Verge article does take liberties in the psychology between the two (bachelor general, young female CEO), including his joining the board after retirement, sticking around despite his growing doubts until he was named secretary of defense in 2016. The defense drew out that he was confused about his compensation package ($150,000 per year plus a stock option purchase).

The Mercury News (which has a minimum of free articles before the paywall goes up, the WSJ (paywalled), local TV KRON4, The Verge, and CNBC have been covering the past weeks of the trial. Dorothy Atkins of @Law360 is also tweeting in real time on it (@doratki).

To be continued….

The Theranos Story, ch. 74: defense questionnaire trimmed; Holmes loses attorney-client privileges on 13 emails, doctor/patient testimony allowed

June 18, 2021 | by

This week’s update as Elizabeth Holmes’ Federal trial nears its 31 August start. 

The defense’s 112-page whopper of a jury selection questionnaire was, as most expected, nixed by Judge Edward Davila. He provided the defense with a slimmed-down version that apparently, from press reports, edited the media coverage issues. The prosecution had previously objected to the length, intrusiveness, and over-specificity around juror media usage. Judge Davila remarked in Tuesday’s hearing that jurors could be asked about their sources of news in an open-ended response. According to the Fox Business report, “He said both sides might be surprised to see how many potential jurors don’t know anything about the case.” Impartiality is also an issue in high-profile cases, but “impartiality does not require ignorance,” in the words of a previous Federal decision in the Enron CEO’s criminal case.

The jury will also hear testimony from patients and doctors who used Theranos tests and said they got inaccurate results. The testimony will be limited to facts about the inaccurate test and the money they lost by paying for it. Emotional and physical harm will be off-limits. Fox Business  What won’t be admissible, at least for now, is how Theranos “destroyed” its Laboratory Information System, or LIS, database. The defense argued that the prosecution took years to acquire it and then sat on the evidence. Judge Davila reserved the right to revisit that issue if appropriate. Fox Business

Elizabeth Holmes cannot keep her 13 emails with law firm Boies Schiller Flexner LLP out of the trial on attorney-client privilege grounds. US magistrate Judge Nathanael Cousins ruled that it did not apply to these emails since Boies Schiller was the corporation’s legal counsel and not hired by her personally. According to the Wall Street Journal (partial article as paywalled), the receiver who wound down Theranos after it closed in 2018 waived the company’s privilege to the documents, yet another factor. Boies Schiller represented Theranos up to 2016. Managing partner David Boies was a Theranos board director and a bulldog of an advocate from the company until then. Mr. Boies is now aged 80 and remains chairman of the law firm. (One wonders if the well-seasoned litigator, or his deposition, will be part of the trial.)

Judge Davila has also set the trial schedule–three days per week from late August into December, earlier disclosed as Tuesdays, Thursdays, and Fridays, with relatively short days to fight ‘juror fatigue’. Since Elizabeth Holmes will also have delivered her child by the time the trial starts, there will be a “quiet room” in the courthouse provided for her special needs during the trial.

TTA’s previous coverage of Theranos

The Theranos Story, ch. 73: the defense tries to stack the jury deck in Holmes’ favor, prosecutors say. And Theranos swag and memes are hot!

June 10, 2021 | by

Law and Order Proceeds. For those of us who follow US trials, or have served on a local or county jury, smart attorneys do a fair amount of ruling jurors in–and out. The voir dire process in high-profile trials is critical. Jury consultants make comfortable livings creating profiles of their ‘ideal juror’.

Thus it should not be a surprise that Elizabeth Holmes’ spare-no-expense-or-strategem defense would file in May with the court an over-the-top 41-page, 112 question jury document. Their rationale is to screen jurors for issues related to the extensive news coverage around la scandale Theranos, Holmes herself, and even the pandemic (!).

In the prosecution’s view, questions such as “Do you have investments?”, “Do you have health insurance?”, and inquiries about social media use, were “untethered” from pretrial publicity and the coronavirus pandemic.

By comparison, the prosecution presented to Judge Edward Davila a modestly sized nine-page questionnaire with a scant 51 questions. Typically, many of these questions are routine, such as reading about the case and if they had any pre-existing opinions which would prevent that person from a fair judgment of the facts presented in the case. On pandemic issues, the prosecution drew from previously used questionnaires that addressed them, though this Editor cannot see how the pandemic is pertinent to this case.

Holmes is facing 12 felony fraud charges. The trial will start 31 August and will be held on Tuesdays, Thursdays, and Fridays through 17 December, according to a filing last week by Holmes’ legal team. She faces maximum penalties of 20 years in prison and a $2.75 million fine, plus possible restitution. East Bay Times

Attention eBay Shoppers!  According to CNBC, original Theranos-labeled items are fetching real coin on auction sites like eBay and Poshmark. An original Theranos lab coat is supposedly listed for $17,000. Over at Etsy and Redbubble, which sell artist-created items, logo-printed t-shirts and masks, including those with Holmes’ face and the Silicon Valley meme, ‘Fake It Till You Make It’, “Girl Boss” signs, throws, posters (left), and greeting cards. (Good things? Yeesh!) are all over. The funniest is a sweatshirt with ‘Theranos Testing–A Guaranteed Result’. Over on Etsy, a merchant’s most popular Theranos item is a mug emblazoned ‘Theranos Early Investor’. (Is it cracked?) Perhaps Holmes could put her Theranos trinkets and trash online to defray a few costs. Or copyright her image like Bogart?

The Theranos Story, ch. 72: a little lifestyle and celebrity is admissible at trial–but not too much. And no profanity, please!

May 27, 2021 | by

The long-awaited update from the US District Court in San Jose. Judge Edward Davila ruled last Friday limiting the specifics on Elizabeth Holmes’ lifestyle that the prosecution wanted to present as evidence. Only general evidence of Elizabeth Holmes’ Silicon Valley CEO lifestyle would be admissible. The prosecution, in his words, “Each time Holmes made an extravagant purchase, it is reasonable to infer that she knew her fraudulent activity allowed her to pay for those items,” but that “Evidence of Holmes’s wealth can be construed as ‘appeals to class prejudice’ which are considered ‘highly improper’ because they ‘may so poison the minds of jurors even in a strong case that an accused may be deprived of a fair trial.” To the judge, evidence of Holmes’ wealth and fame are not even moderately related to the intent to defraud, the last of which is the heart of the charges.

The prosecution therefore has to walk a very fine line. It’s apparently fine to say that Holmes enjoyed a luxurious lifestyle equivalent to her Silicon Valley peers, with the usual perks. But details on brands of clothing, hotels, and other specifics “outside the general nature of her position as Theranos CEO,” is beyond the scope of the trial.

Judge Davila may be doing the prosecution a large favor by limiting this evidence. Too much reliance on lifestyle as the main motive to defraud is a crutch that could backfire with the jury, especially when they see in August a modestly dressed new mother Holmes. It could also open up an appeal on the basis of prejudicing the jury. To this Editor, there is abundant direct evidence of fraud of patients and investors in a technology that didn’t work, never could work, and the coverup. No need to overegg the pudding. Mercury News

And no profanity in the court! The jury will be spared the infamous employee meeting chants telling a rival testing company (Sonora Quest) and John Carreyrou of the Wall Street Journal to do something unprintable in a business article with themselves. The defense won the argument that these chants were the Silicon Valley Norm to motivate employees. Even the prosecution admitted that these might be “somewhat inflammatory”. Colorful, but inadmissible.  Mercury News

And lest we forget. Holmes is facing maximum penalties of 20 years in prison and a $2.75 million fine, plus possible restitution. The trial starts 31 August. Earlier chapters of this saga are here.

The Theranos Story, ch. 71: Holmes appears in court, lawyers argue celebrity, lavish lifestyle, Silicon Valley ethics

May 8, 2021 | by

After 15 months, Elizabeth Holmes puts in her Day in Court. Last Tuesday’s and Wednesday’s hearings in US District Court in San Jose were not virtual, but in court–and with Ms. Holmes present. The arguments between counsel were about what would be admissible; the relevance of her lifestyle (fine dining, houses, private jets), her wealth, spending, and celebrity to the charges of criminal fraud, first of hundreds of millions of dollars by investors plus patients and doctors with false claims that the Theranos labs actually gave accurate readings.

The defense argued that admitting information on the lifestyle and spending behavior would be inflammatory and prejudicial to the jury. The travel, the perks, the company-paid-for services were there because she was traveling on company business. Her stock was never sold and her salary at $200,000 to $390,000 (per SEC) was actually low for her peer group. To a certain degree, Judge Edward Davila agreed with the defense. Being in Silicon Valley, home of tech high flyers and Sand Road investors, Judge Davila said to the prosecution, “It seems like that’s designed to engage a class conversation amongst the jurors which I think you’d agree would be a little dangerous. What’s the value of, ‘Did she stay at a Four Seasons versus a Motel 6?” The prosecution countered that information regarding the increasing value of the stock and Holmes’ billionaire lifestyle largely funded by the company, more so than her salary, is relevant to the continuing fraud. “The perks that she is enjoying greatly reduce the pressure on her to cash in, sell stock and make more money.” And, one could say, to come clean and end the fraud around their technology.

According to the Mercury News, Judge Davila said he would rule on the dispute over lifestyle and compensation evidence later. The trial is scheduled to start 31 August. CNBC video, 5 May, 6 May  

The Theranos Story, ch. 70: the lab director turns Federal evidence

February 18, 2021 | by

A Tasty Appetizer of what awaits in July in Federal District Court, San Jose, showed up in the Wall Street Journal today (paywalled, link to full article below). Theranos‘ lab director Kingshuk Das, MD will testify in Elizabeth Holmes’ trial that the Theranos lab and technology did not work accurately enough to use–and that the company’s leaders ‘pushed back’ against his assessment.

Dr. Das’ comments, revealed in new court filings, represent his most extensive (and only revealed, in this Editor’s estimation) remarks on Theranos. His one-hour interview with Federal agents took place on 1 February. They indicate that Federal prosecutors continue to dig for damning evidence prior to the July trial.

Dr. Das held the lab director, later medical director, position at the Newark, California lab facility in Theranos’ final years (December 2015 in the article, the LinkedIn profile states March 2016, to June 2018). The Centers for Medicare and Medicaid Services (CMS) had already put Theranos on notice for“deficient practices” in November 2015. The WSJ, around that time, revealed Theranos’ dodgy practices.

Dr. Das’ fully credible and extensive pathology training is listed in his LinkedIn profile. It includes his MD at Case Western Reserve, internship at UCLA, residencies in clinical pathology at Washington University (St. Louis) and USC, and return to UCLA for a fellowship in molecular genetics, then rising to Associate Medical Director, UCLA Clinical Laboratories. As for many others, Theranos was challenging,  could not have been good for his career, but perhaps gave him a taste of how to do entrepreneurship right. He has worked in several positions and is currently listed with consumer genetics tester Invitae as a molecular pathologist and founder of AnimanDX from 2018.

This Editor would bet that Dr. Das had far more to say than what was cited in the WSJ article. At least this is more like Joe Friday’s ‘just the facts’ (Dragnet) and not mired in the swamp of ‘motivations’ represented by the filings around Silicon Valley’s Lifestyles of the Rich, Famous, and Busted.

Full article at StockXpo. Hat tip to reader William T. Oravecz. For those interested in the full sturm und drang by chapter, it is here.

The Theranos Story, ch. 69: Elizabeth Holmes ‘faked it till she made it’–like other Silicon Valley startups? (Updated)

January 12, 2021 | by

Lifestyles of the Rich, Famous, and Busted, Silicon Valley Style. As promised by the prosecution in the cases being brought against Elizabeth Holmes, the CEO/founder of Theranos, and separately with COO Ramesh ‘Sunny’ Balwani, they are proceeding with filings that connect Theranos’ continued defrauding of investors with Holmes’ extravagant lifestyle and desire for fame. “The causal connection between Defendant’s fraud and the benefits at issue is strong,” the filing stated, going on to detail how the fraud funded hotels, private jet travel, and “multiple assistants” paid by the company who also assisted with her personal needs.  “In addition to the tangible benefits that she received from her fraud, she also was the beneficiary of a great deal of favorable attention from the media, business leaders, and dignitaries”. Sustaining the illusion was necessary to continue the lifestyle and recognition.

Countering the prosecution filing on Friday was–of course–a defense filing that attributed Silicon Valley’s ‘fake it till you make it’ startup culture as a rationale for Holmes’ and Theranos’ actions. That filing states “founders in this area frequently use exaggeration and dramatic promises to generate needed attention for their companies and attract capital.” The “culture of secrecy” that concealed Theranos’ fraud?  “…if it is admitted Ms. Holmes surely could present evidence that other Silicon Valley start-ups used similar practices, and that persons at Theranos were aware of these practices.” In November, they also filed to block as ‘unfairly prejudicial’ any mention of Holmes’ lifestyle as irrelevant to her guilt or fraud. 

Another fake was pretending that problems didn’t exist and everything was just ducky. The prosecution also introduced emails that confirmed Holmes’ direct awareness of problems with the blood tests in 2014. One example was from her brother Christian, who worked in product management. It requested a meeting to discuss a customer complaint where it was “pretty obvious that we have issues with calcium, potassium and sodium specifically.” According to the filing, “Theranos emails contain many examples of customer complaints routinely being escalated” to Elizabeth Holmes and other senior company personnel. At trial, the evidence will show that defendant shaped Theranos’s response to those complaints, prioritizing the company’s reputation over patient safety.” This Editor would argue that it’s no different with car manufacturers (Ford and the now lower-case GM) than startups to spin a response, but the proper reaction to clinical product faults would be to pull back the offending tests and solve the problem before going any further. But the Edison lab and their technology didn’t work.

Updated with further analysis. In retrospect, it’s obvious that Theranos crossed the ethical line between massive hype (expected) and outright fraud (not), which is why the defense is fighting so hard to keep Silicon Valley Lifestyle and Startup Culture out of the case unless it can be spun their way. A key: Holmes’ emotional state and a psychiatric evaluation have also been introduced by the defense, countered by the prosecution. In this case, the fraud was based on dual ethical nightmares, the first worse than the second: faking of medical results, then defrauding small and large investors by faking company performance. Too many just wanted to believe, like the X Files. But we should not forget another high-profile hype and fraud that happened around the same time, Outcome Health [TTA’s articles here].  Outcome Health’s fraud was strictly financial–ad performance falsification leading to fraud and money laundering. They defrauded Big Pharma advertising and some of the largest global investors like Goldman Sachs. The Federal lawsuits on Outcome have gone very quiet after settlements, plea bargains, and COVID halting court actions.

Thanks in large part to Theranos and Outcome Health, that startup culture is mostly kaput. The lessons are learned–we believe. A modicum of modesty along with a large dose of telehealth/telemedicine/data analytics is The 2020-2021 Thing. A lasting effect? Perhaps. Small-batch blood testing is only now recovering from being radioactive.

Before the start of the company’s collapse in 2016, Theranos had raised a reported $900 million ($700 million in some accounts) and was privately valued at $9 bn. Few of the investors clawed back their money. Fraud doesn’t work. It never works.

The trial in Federal District Court, San Jose, is now scheduled for jury selection 13 July. It was moved just before Christmas from 9 March by Judge Edward J. Davila due to California’s COVID-19 surge (MassDevice). So here we are five years later It promises to be popcorn-worthy, with possible appearances by famous men such as Henry Kissinger, Rupert Murdoch, and former Defense Secretary James Mattis. CNBC, Bloomberg For those interested in the full sturm und drang by chapter, it is here.

The Theranos Story, ch. 68: the texts told the tech failure–and please omit Holmes’ ‘luxurious lifestyle’ and profane meeting language from trial

November 26, 2020 | by

The trials of Elizabeth Holmes and ‘Sunny’ Balwani churn on towards a March 2021 court date. Two major revelations have entered the record from last Friday 20 November’s flurry of filings on both sides. 

  • The prosecution introduced panicky Holmes/Balwani texts, iMessages, and Skype messages indicating that Theranos was having major trouble with validating its lab technology from 2014 on. One text from Balwani described a lab as a ‘disaster zone’. “The spreadsheets are replete with admissions by defendant and Balwani that demonstrate their knowledge that their statements to investors were false and misleading and that Theranos’s testing was beset with problems.”  CMS in 2015 concluded that their California lab posed an “immediate jeopardy to health and safety.” The messages were from previous civil cases and collected by securities regulators, with many still under seal from those cases.
  • The defense for Holmes moved to prohibit prosecutors as ‘unfairly prejudicial’ evidence of Holmes’ wealth, spending, and lifestyle,  citing Federal rules of evidence and that this information is not relevant to Holmes’ guilt or innocence on the fraud charges. In 2015, Holmes was worth an estimated (by Forbes) $4.5 bn despite what is claimed as a moderate salary and not selling equity. The government has detailed her company-paid perks such as a luxury SUV, a rented luxury house, and luxury-level travel, in addition to a ‘substantial salary’. 
  • The defense is also seeking to omit any references to Theranos employees making claims about the technology, including Theranos sales representatives falsely claiming that the FDA approved the company’s lab machines. The grounds to omit are that Holmes could not be responsible for their false statements.
  • The defense also seeks to omit transcripts of a company meeting that used profane language to refer to reporting in the Wall Street Journal investigating the company and a competitor at that time, on the grounds that such language is par for the course in High-Tech-Land. Mercury News (may be paywalled)

Fox Business 23 November, 24 November. BNNBloomberg.

In a separate case, a former Theranos lab scientist, Diana Dupuy, has claimed that she was wrongfully terminated from her job with medical testing company DiaSorin nine days after receiving a subpoena to testify at the Theranos trial. DiaSorin is claiming the reason is unrelated to Theranos. The suit has been filed in US District Court in San Francisco. Anecdotally, many former Theranos employees have reported that Theranos has been a glaring black mark in their resumes that make them close to unhireable. Mercury News

The Theranos Story, ch. 67: the Holmes/Balwani indictments stay, Holmes’ defense strategy fails

October 15, 2020 | by

What Elizabeth Holmes needs is Perry Mason and a good scriptwriter from the 1960s. On Tuesday, Judge Edward Davila hit the ‘REJECT’ button on Holmes and ‘Sunny’ Balwani’s six motions since August to have the July indictments by a grand jury–a second indictment of 14 July, then a third and operative charging document of 28 July, dismissed. In a single compact, well-reasoned order, all six motions were denied for both cases:

  1. Pre-indictment delay. The first indictment was made in June 2018. The findings were that the delays were due to defense motions which were agreed to by the government and the judge, then the pandemic which suspended all in-person court proceedings and then became remote. The separate trial dates were moved to October 2020 and then at defense requests due to preparation and witness travel, moved to March 2021. 
  2. Statute of limitations on the fraud counts from investors. Even the definition of investor was narrowly defined here as securities purchasers. However, the broader interpretation, for example business partners such as Safeway [TTA 8 Oct] and board members, are also included as investors. 
  3. The indictments did not provide fair notice of the charges. Fair notice was found. Again, investors include business partners and even their board members who had promissory or convertible notes.
  4. Duplicity of the multiple counts was not found.
  5. Failure to omit doctors as victims of the Theranos scheme; doctors were omitted after the first indictment. The judge did find some lapses in prosecution language.
  6. All the dismissal requests for the first indictment applied to the later two.

It seems as if the defense, particularly Holmes’, threw a lot at the wall to lessen charges against their clients, and none of it stuck. One wonders how Holmes (who did marry a wealthy man) but particularly Balwani, are affording all this legal churn.

Unless there are publicly released findings on Holmes’ mental defect defense, alleging her inability to discern right from wrong (a/k/a insanity defense lite, Twinkie Defense II, High Anxiety) [TTA 18 Sept], hold off on popcorn purchases till next spring. San Jose Mercury News (which incorrectly reverses the analogy, sorry), Wall Street Journal, and the Register (UK), which helpfully provides a PDF of the court order.