TTA’s Brrrrr Season 1: Rock Health’s ’22 funding roundup; CVS talks primary with Oak Street, invests in Carbon Health; Teladoc boosts $; Verily lays off; global M&A/fundings; Theranos updates, more!

 

 

Weekly Update

A mulligan stew of a week. CVS moving in on primary care with (possibly) Oak Street, funding Carbon Health in-store clinics while the latter downsizes. Walgreens’ VillageMD closed on Summit Health and Teladoc paints a brighter revenue picture with BetterHelp. Rock Health quantified a deflated 2022 year in funding, but M&A/VC investment still proceeds in its ‘boring’ way. Verily, Alphabet’s wandering ‘bet’, finally gets a needed trim. And Theranos is still in the news from appeals to post-prison requirements.

Weekend short takes: Theranos’ Holmes post-prison mental health + more on Shultz and Balwani; global M&A, funding roundup
Rock Health puts a kind-of-positive spin on digital health’s ‘annus horribilis’ 2022–a boring 2023
Mid-week roundup: Teladoc gets BetterHelp to boost Q4 ’22 revenue; fundings for Array, Paytient, Telesair, three others; layoffs hit at Alphabet’s Verily, Cue Health
CVS works their plan in Oak Street Health buy talks, Carbon Health $100M investment + clinic pilot; VillageMD-Summit finalizes (updated)
Theranos trial updates: Holmes’ freedom on appeal bid opposed; Balwani files appeal to conviction

Two surprises not under the Christmas tree or New Year’s hat. The ITC upheld AliveCor patents and damages versus Apple, pending their PTAB appeal, and Amazon got its first state approval for One Medical. As expected, telehealth’s national Medicare reimbursement was extended for two years, setting policy for health plans. And NHS advanced rapid stroke diagnosis with Brainomix trial in 22 hospital trust trial, tripling near-full recoveries to 48%.

Weekend news roundup: GE Healthcare spins off, adds CTO; Allscripts now Veradigm; NHS Brainomix AI stroke trial success; Withings home urine scanner; Careficient buys Net Health EMR; CommonSpirit’s class action suit on data breach
Amazon-One Medical gains conditional OK in Oregon–a preview of coming scrutiny?
(What happens at the big state and Fed level?)
Telehealth extensions signed into US law with Federal FY 2023 omnibus bill (Major breakthrough to widen nationally reimbursed telehealth)
Split decision! ITC rules that Apple violated AliveCor patents; enforcement held for PTAB appeal (David v Goliath continues!)

A potpourri of news wraps 2022, starting with confirming how telehealth can stand on its own even in specialty care visits and its continued strength in mental health. In the US, most telehealth expansion is confirmed for two years. But as predicted, DEA is going hard after ADHD misprescribing — a unicorn may lose its horn as a result. Oracle is erasing Cerner’s home town presence as Epic stomps a patent troll. And beware of DDoS–it may distract from more nefarious cybercrimes.

We wish our Readers all the happiness of the season, as we look forward to the start of the New Year. We’ll be back with new articles after 2 January. 

We wish our Readers a happy, healthy holiday season and New Year!
News roundup: DDoS attacks may be ‘smokescreen’, DEA slams Truepill with ‘show cause’, telehealth claims stabilize at 5.4%, Epic squashes patent troll, Cerner meeting exits KC, MedOrbis, Kahun partner on AI intake (From cybercrime to Cerner, c-c-c-changes roll)
Telehealth two-year extensions included in US Federal ‘omnibus’ budget bill (Tucked into a Moby Dick-sized whale of a bill)
Few specialty telehealth visits require in-person follow up within 90 days: Epic Research study 2020-2022 (Findings, though, may be pandemically skewed)

It’s a week of contrasts as the holiday season starts. There are ‘green shoots’ in startups and fundings, yet so many organizations have run into the red, with a high human cost. A literal bright spot–a lighting system that can detect and report falls. And the Holmes Defense Team files an appeal for a new trial that may delay her delivery to Club Fed for a long time. (Hoping the Feds will forget?)

Rounding up fundings and startups: Override(ing) pain; brainy Synchron and In-Med Prognostics; Click off migraine; Cardiosense and CHF detection (A touch of seasonal cheer)
Smart lighting that detects and reports falls in older adults–and more–debuts in UK and Ireland (Lighting up fall detection is a big step forward)
10 reasons for a new trial? Elizabeth Holmes’ legal team files appeal, delay in prison start (updated) (Foot dragging strategy continues as financial penalty to be decided)
Mid-week roundup: Wisconsin’s Marshfield Clinic zeros out telehealth staff; Komodo Health lays off 9%; epharmacy Medly’s Ch. 11, PharmEasy layoffs; OneStudyTeam releases 25% (Coal in too many stockings)

Windups as the holidays and year-end loom. AliveCor loses its David vs Goliath patent battle with Apple, with consequences to come. The Theranos drama nears its end with Balwani’s sentence. But in new developments, robotics for care support and care becomes part of…energy management? And can VIMPRO help NHS manage its patient population crush?

Theranos’ Balwani gets an unlucky 13 year sentence, restitution to come (No tears, no dramatic statements, little media scrum, and a lighter sentence than expected)
AliveCor loses Patent Office ruling with Apple; three patents invalidated (This one isn’t over–the stakes are high)
News (and robot) roundup: ElliQ companion robot upgrades, named to 2022 TIME list; Robin the Robot introduced for older adult care; Utilita acquires Canary Care (UK) (Robots advance, interesting integration of care with energy management)
Perspectives: Could the telehealth VIMPRO model save the NHS from drowning in demand? (A smarter approach advocated in managing patient populations )
Optum Labs creates and funds digital health research hub at Cornell Tech NYC (Reviving NYC in digital health, or gathering ideas for Optum to develop elsewhere?)

Something a bit different this week with two maximum roundups. athenahealth may IPO–again. Amwell may bolster telemental health with Talkspace. Cerebral and former CEO dueling in court. Taking bets on where Theranos’ Elizabeth Holmes will spend her sentence–and when. Plus…year-end buys and fundings. 

Who’s buying, selling, funding wrapup: athenahealth IPO deux?, NextGen EHR buys reseller TSI for $68M, Cloudwave buys Sensato; fundings for Lumen, UpStream, Aide Health
“Big Story” update: where Elizabeth Holmes will spend 11 years, Cerebral sues former CEO Robertson, Amwell buying Talkspace? 

As usual in the rollup to (US) Thanksgiving, it was a light news week. Our two roundups include Babylon Health’s encouraging Q3 results, DOJ’s appealing to block the UHG-Change buy–already closed (!)–an senior exec move from Walmart Health to JPM, and digital health/health tech funding yellow flagged to 2025 by Very Important Investors.

Mid-week news briefs: House members’ ‘grave concerns’ on two deaths tied to Oracle Cerner VA rollout; care.ai’s $27M funding; Clear Arch’s new mobile RPM platform; digital health investment in rough times
News roundup: Babylon Health Q3 revenue up 3.9x; surprise–DOJ to appeal UHG-Change buy approval; Walmart loses senior health exec Pegus to JPM

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Weekend short takes: Theranos’ Holmes post-prison mental health + more on Shultz and Balwani; global M&A, funding roundup

It’s been a bumpy road this second week of the New Year, with the passing away of genius guitarist Jeff Beck, Lisa Marie Presley, and historian Paul Johnson, the unrelenting Harry Hullabaloo, a rain-soaked downer of a JP Morgan healthcare conference, plus a certain 1967 Chevrolet Corvette convertible (Goodwood Green, 327 ci/350 hp) keeping garage company with…classified files.

Elizabeth Holmes’ post-prison future already being planned–and it’s all about her. But not as before. After her 11 years and three months (pending appeal) in (whatever) Federal prison she will be assigned to, her three years of supervised release are being planned for her. In an ‘exclusive’, celebrity website TMZ reports that Holmes will be required to complete a mental health program that she will pay for (details undisclosed). If her probation officer has any reasonable suspicion that she’s violating the terms of her release, her home, office, vehicle, and property will be subject to police search, including DNA collection. No details in the article beyond that. At this point, Holmes should be working with prison consultants (yes, there are such people, and they are not your legal team) in setting her expectations for Club Fed Life, planning her day-to-day in prison, and readying a reentry plan draft that can make her probation a bit easier on all.

In related Theranos news, a soon-to-be published biography of George Shultz, a government supremo during the Nixon and Reagan Administrations, claims that by then aged 90+ emeritus supported Holmes to the point of fixation. In a nearly 20-year tenure at Stanford’s Hoover Institution, respected and honored by all but with no medical expertise, he suddenly became a huge backer of Holmes, helped her get financing through his network of contacts, joined the board, and invited her to family gatherings. Grandson Tyler Shultz, who joined Theranos with his grandfather’s encouragement, became one of several whistleblowers, leading to a family rift never quite mended at the elder’s death at 100. More in the Guardian

Sunny Balwani also filed a motion this week to stay out of prison during his appeal process, arguing he presents no flight or public safety risk. The Law360 article on the 10 January 25-page filing is unfortunately paywalled.

London-based Huma is buying Frankfurt-based Alcedis, a data specialist for clinical trials. Huma will form an advanced clinical trials division with digital solutions across the entire development pipeline, from early stage through to Phase IV hybrid and fully decentralized trials. Terms were not disclosed. Formerly the mysterious Medopad [TTA 28 May 21], Huma seems to have settled into decentralized clinical trials and disease management using wearable tech and apps. Last March, AstraZeneca took a $33 million [£25 million] share in the company, with Huma acquiring their asthma and heart failure patient platform. Release, Crunchbase, Mobihealthnews

In Singapore, Amplify Health is acquiring AiDA Technologies. AiDA has developed machine learning tech to automate underwriting, claims processing, and detect fraud, waste, and abuse. Amplify has similar lines of business plus digital health programs for chronic disease management. Terms were not disclosed. Fintech Singapore. Also covered in the same Mobihealthnews article are:

  • India’s Dozee receiving funding from the UK government’s British International Investment (BII) for India’s MillionICU initiative. The BII investment will be used to convert 6,000 conventional hospital beds in about 140 public hospitals’ ICUs to stepdown beds. The MillionICU initiative’s goal is to convert one million ICU beds. Express Healthcare (India)
  • Taiwan’s largest hospital, Chang Gung Memorial, has adopted TPIsoftware’s SysTalk.Chat for AI-powered text and smart voice-enabled customer service. The Apo voice and text agent assists 80,000 ‘person-times’ per month in patient intake and setting appointments, admissions, and medical information. This saves 50% of time in appointment scheduling via texts or calls that happen within 2~3 minutes.  AsiaOne (PRNewswire release)

Theranos trial updates: Holmes’ freedom on appeal bid opposed; Balwani files appeal to conviction

Lost between the holiday and Happy New Year merriment were two year-end court filings by legal teams for Theranos’ Elizabeth Holmes and Ramesh ‘Sunny’ Balwani, who hope to stay free for at least part of 2023.

Elizabeth Holmes: In a joint filing on 30 December, Federal prosecutors and Holmes’ defense requested a hearing by Judge Edward Davila of the District Court on Holmes’ request to remain free on bail until her appeal in the Ninth Circuit Court of Appeals is resolved. In the filing, the prosecutors agreed to file their objections to her freedom by 19 January. Holmes’ defense had filed her three-page appeal on 3 December with 10 reasons why there should be a new trial. The full legal brief is due on 3 March. Both prosecution and defense had requested that the hearing by Judge Davila take place on 17 March.

Holmes was convicted on four counts of defrauding investors, with her sentence of 11 years and three months taking place on 18 November 2022. She remains free on bail until 27 April, her surrender date. The US Bureau of Prisons has not made public where she will spend her sentence. There is also a question of restitution of $121 million yet to be decided in court. SiliconValley.com

Sunny Balwani: His appeal was filed on 20 December, on the two-week deadline after sentencing, also in the Ninth Circuit Court of Appeals. Unlike Holmes, Balwani was convicted on 12 counts, including two counts of patient fraud. The appeal reportedly will be on the grounds of Judge Davila’s rulings and decisions adverse to Balwani during the case. Other possible factors: the weakest counts are the two on patient fraud where testimony and proof were indirect–Balwani had little to do with patients–and that he left in 2016 before the collapse. His sentence was 12.9 years (155 months). Like Holmes, his restitution is yet to be decided. Balwani is currently free on bail, with his surrender date 15 March. No motion to remain free on bail while the appeal is in progress has been disclosed, nor the Federal prison location decision. Yahoo!Finance

For those craving a recap of l’affaire Theranos and perhaps to reflect on it, Yahoo!Finance has produced an hour-long video documentary, ‘Culture of Hype’, on Theranos as a product of Silicon Valley culture. It was produced before their convictions and sentencings. It ends with discussion of how the multiple conflicts between an admittedly naïve founder vision, transparency, and the need to finance said vision in multiple iterations in any startup or early stage company can lead to borderline executive behavior and company collapse. (And yes, your Editor has seen it happen firsthand.) Was Elizabeth Holmes a victim, a sociopath, or something in between? She will have time to contemplate it, as this Editor continues to maintain that her chances of reversing her conviction and going free are as small as that nanotainer she is modeling above.

Theranos’ Balwani gets an unlucky 13 year sentence, restitution to come

Today, in the US District Court, Northern District of California, Ramesh ‘Sunny’ Balwani, the former president of Theranos, was sentenced to 155 months, or 12.9 years, in Federal prison. Balwani had been convicted on all 12 counts of fraud and conspiracy, including two for patient fraud, in July. The prosecution had asked for 15 years, as they had with Elizabeth Holmes, who was sentenced by Judge Edward Davila to 11.25 years on four counts. Balwani will be required to surrender on 15 March. None of the coverage indicates that he will appeal. 

The hearing today was about six hours and was far less of a media ‘event’ than Holmes’ hearing. 

Like Holmes, Balwani’s defense requested a sentence of home confinement of four to 10 months, citing that Balwani was an investor ($5 million), was not CEO but COO for six years to May 2016 before the company went out of business, wasn’t involved in key decision-making by Holmes, and gave money to charitable causes. The probation officers’ recommendation was, also like Holmes, nine years. Judge Davila again went with standard sentencing guidelines to produce a result that was far less than most observers, including your Editor, expected given the 12 counts and his direct management of the Theranos lab.

US Attorney Jeff Schenk, who spoke for the prosecution, said “Mr. Balwani knew that Theranos was not generating, and would not generate, any meaningful revenue by being honest with people. So he chose a different path.” The opposite view from his defense attorney, Jeffrey Coopersmith: “Mr. Balwani never wanted anyone to be harmed. He would never harm a fly. Instead, he wanted to give…He’s deserving of a lenient sentence. He’s not Ms. Holmes. He did not pursue fame and fortune.”

However, Balwani was key in making deals and withheld what was really happening in the lab. According to TechCrunch, “During the trial, a Walgreens executive testified that he worked closely with Balwani on the deal. The prosecution also displayed evidence of a text from Balwani to Holmes stating that he deliberately didn’t tell Walgreens that they were using different machines.” He did not testify in his own defense or speak at the hearing on his own behalf.

According to reporter Dorothy Atkins, covering for Law 360, Judge Davila “won’t give Balwani a tougher sentence for leading the conspiracy, but he found Balwani recklessly put patients at risk, since he led the lab.” By his own text to Holmes, “I am responsible for everything at Theranos.” and had, according to the judge, “significant autonomy” in the lab–where the machines did not work. In the judge’s words, as she reported, “Defendant chose to go forward with deception, I’ll call it, and continued to perpetuate the fraud….” After sentencing, his defense requested that he serve in a minimum security prison. At the end, “Balwani packed his things and whispered something to his family members. He didn’t get any hugs, and there were no visible tears in the courtroom.”

On restitution, the prosecution wants Balwani to pay $804 million to defrauded investors, which happened to be the same amount requested bu the prosecution as Holmes. Judge Davila calculated total investor loss as $120 million. A final determination will be made at a later date to be determined.

Balwani is 57, which means that if he serves the typical 85% of his Federal sentence, he will emerge from Club Fed aged 68.  Washington Examiner, NBC, NBC Bay Area, Scott Budman of NBC’s Twitter feed

“Big Story” update: where Elizabeth Holmes will spend 11 years, Cerebral sues former CEO Robertson, Amwell buying Talkspace?

Where will Elizabeth Holmes serve her sentence, whatever it is? A story that got lost in the Thanksgiving shuffle was Bloomberg News’ (paywalled) report that Judge Edward Davila recommended that she be remanded to a minimum security Federal women’s prison in Bryan, Texas, outside of Houston. What has previously been mentioned in the press and by legal commentators is that she would likely serve her time in a northern California minimum security prison about an hour from her present home, the Federal Correctional Institution in Dublin, California. According to commentators, the larger Bryan facility may be better than Dublin, which is a satellite camp. Bryan  “…compared to other places in the prison system, this place is heaven. If you have to go it’s a good place to go,” Alan Ellis, a criminal defense lawyer, told Bloomberg. The final say will be made by the Federal Bureau of Prisons. The selection is important because Federal inmates typically serve a minimum of 85% of their time, unlike time served in state prisons. Gizmodo reports on Bloomberg’s reveal

Holmes’ reporting to prison is scheduled for 27 April 2023. Her appeal to the Ninth Circuit Court of Appeals must be filed within two weeks of sentencing, which by this Editor’s calendar is 2 December but may be later due to the holiday. Holmes may be permitted to stay out of custody pending appeal if it extends beyond the surrender date if the judge permits. 

Editor’s commentary: One wonders whether Holmes’ appeal will be successful. One factor is what Judge Davila acknowledged: “What is the pathology of fraud? Is it the inability to accept responsibility?” Even in her personal statement during the sentencing, there is evasion. Holmes did admit some sorrow about patients and investors relating to her own failings (back to her again), but sorrow is not responsibility. Moreover, Holmes did not refer to making amends for that sorrow created by the Fraud That Was Theranos. Her defense continues to blame others, like Sunny Balwani, former president and live-in. Even the 130 character letters, many from others who knew her only briefly, blamed others including Balwani, almost tracking to the defense’s talking points. The case proved conspiracy with Balwani, who will likely be sentenced on 7 December for what is expected to be something close to the full 20 years as convicted on all 12 counts.

The tables are turned by Cerebral on co-founder/former CEO Kyle Robertson. Only a week or so ago, Robertson (through his attorneys) reportedly sent a letter to Cerebral management demanding access to documents detailing “possible breaches of fiduciary duty, mismanagement and other violations of law.” [TTA 18 Nov] Now Cerebral is suing Robertson for his default on a $49.8 million loan taken this past January to buy 1.06 million shares of common stock in the company. According to the filing in New York Supreme Court, he is personally liable for $25.4 million, plus interest and attorney’s fees. After his dismissal 18 May, he had six months to repay the loan or direct Cerebral to repurchase or cancel the shares. According to the lawsuit, “Robertson repeatedly asserted that he would not repay the loan.” The troubled company laid off 400 or more in October and is now valued at a fraction of last year’s $4.8 billion valuationStay tuned. HealthcareDive, Mobihealthnews

A cracked SPAC may get itself sold. Talkspace, which has had a year of challenges since its SPAC, apparently is in talks to be acquired by Amwell. According to Calcalist, an Israeli business publication, Amwell is in advanced talks to acquire it for $1.50 per share, or about $200 million. This is quite a comedown from when Talkspace was valued in January 2021 at $1.4 billion. It executed its SPAC in June [TTA 25 June 2021] and hit Nasdaq at $8.90 per share. Today it closed at $0.88, so Amwell’s offer would be close to double. It would also remove another problem. Nasdaq notified Talkspace on 18 November that they were on the verge of delisting their stock, as it was trading for over 30 consecutive business days at under $1.00 per share.

The ‘advanced’ term is interesting because this past June, reports indicated that Talkspace rejected overtures by Amwell and Mindpath. The amount bandied about at that time was $500 million and a sale was expected during the summer. (What a difference six months of economic uncertainty makes.) 

In November 2021, founders Roni and Oren Frank stepped down and their COO resigned shortly thereafter on a conduct-related allegation. Shareholders started to sue starting then. YTD results have also been dismal, with losses of $61 million on revenues of $89 million.

Talkspace would bolster Amwell’s mental health capabilities in telepsychiatry with a DTC and enterprise product. If the company hung on to most of their $184 million in cash reported in June (of the SPAC’s $250 million), for Amwell it also would be a deal that almost pays for itself. HealthcareDive, FierceHealthcare

Breaking–The Theranos denouement: Elizabeth Holmes sentenced to 11.25 years with an investor loss of ~$121 million

Elizabeth Holmes received her sentence today by Judge Edward Davila of the US District Court of Northern California, in an over four-hour court proceeding.

The sentencing was based on Federal guidelines for four counts of a Class C (non-violent) felony, as well as the recommendations of probation officers. Your Editor watched this in real time from the NBC Bay Area feed and reporter Scott Budman’s Twitter feed from the courtroom (cameras are excluded). This started at 10am PT with last arguments made by prosecution and defense and victim statements. The actual reading of the sentence in his summation by Judge Davila took a little more than 20 minutes, delivered in a silent courtroom, concluding after 2pm PT.

The decision:

  • Prison sentence: 11.25 years (11 years, three months), to be followed by three years of supervised release. Holmes will be required to self-surrender on 27 April 2023. This is likely after her delivery date. This was less than the 15 years requested by the prosecution (in turn less than the 20 years maximum), more than the nine years recommended to the judge by the probation officers (what is called a downward deviation), but entirely based on the sentencing manual. Judge Davila obviously did not believe that he could justify that downward deviation.
  • The investor loss. Judge Davila estimated the total loss by 10 investors at $384 million, not $804 million. A ‘reasonable total loss’ is only $121 million. This winnowing down is a big win for Holmes. While she will never be able to pay it, below $500 million it takes down her possible sentencing, according to NBC’s legal commentator, former prosecutor Dean Johnson. The total and final amount will be settled at a later date at a restitution hearing.

Scott Budman’s tweets included the jousting between both prosecution and defense on multiple points.

There were victim impact statements directed to Holmes, which include the father of whistleblower Tyler Shultz, Alex Shultz, whose grandfather was investor, board member, and enabler George Shultz. “There’s a lot of talk about Sunny and Elizabeth. From my family’s perspective, Elizabeth is their Sunny Balwani. She took advantage of my family.” Theranos lawyers burst into their home (average for the bare-knucks tactics of one David Boies) with no chance for Tyler to defend himself. It also pitted the senior generation (now departed) versus son and grandson, ripping apart the family.

A cancer patient testified; the judge gently said he read her letter.

Holmes presented her own statement as the last word. “I am devastated by my failings. I have felt deep pain for what people went through, because I failed them. To investors, patients, I am sorry.”

Judge Davila’s formal sentencing of Holmes was well under 30 minutes. A judge’s summation must primarily justify the sentencing. It is where he speaks at length. It must detail his logic, discretion, reasoning, and thought process based on the information presented at trial and by precedent. The quotes are from Scott Budman’s play-by-play tweets:

“This case is troubling on so many levels. What went wrong? This is sad because Ms. Holmes is brilliant.”
“Failure is normal. But failure by fraud is not OK.”
“We know by the texts with Mr. Balwani that there was conspiracy.”
“What is the pathology of fraud? Is it the inability to accept responsibility? Perhaps that [is] the cautionary tale to come from this case.”

This Editor will reflect on this, with more information, next week. Will there be a genuine Silicon Valley impact in the middle of a downturn or has this all been factored in? There is the implosion of bitcoin/crypto FTX in the headlines–2022’s equivalent of the early 1930s’ fall of Swedish Match/Ivar Krueger and Ivan Boesky’s stock fraud of the Big ’80s.

Certainly there will be appeals by the defense and by the Feds. A defense appeal, for instance, may lengthen the time before she will serve her sentence.

Sunny Balwani’s attorneys will not be having a Palm Springs Weekend, either, now knowing the thought process of Judge Davila. 

With deep appreciation to the NBC Bay Area team coverage, the analysis by Dean Johnson, and warmly to Scott Budman.

The Theranos denouement: ‘Humble, hardworking’ Elizabeth Holmes sentencing Friday; prosecution and defense paint different pictures (updated)

Elizabeth Holmes finally faces the music and perhaps the mercy of Judge Edward Davila on Friday, 10 am PT. Convicted on four felony counts of 11 and defrauding investors of over $144 million, the prosecution has called for Holmes to go to Federal prison for 15 years of the maximum 20, plus three years of supervised release. Restitution of $804 million would go to investors plus a fine of $250,000 for each charge. In US Attorney Stephanie Hinds’ 46-page pre-sentencing memo to Judge Davila, the prosecution states that she was blinded by ambition. “She repeatedly chose lies, hype and the prospect of billions of dollars over patient safety and fair dealing with investors. Elizabeth Holmes’ crimes were not failing, they were lying—lying in the most serious context, where everyone needed her to tell the truth.” They called her crimes “extraordinarily serious, among the most substantial white collar offenses Silicon Valley or any other district has seen.” and that her actions damaged the trust and integrity that is needed for Silicon Valley investors to trust companies to fund ideas before profits are seen. The cut: “She stands before the Court remorseless. She accepts no responsibility. Quite the opposite, she insists she is the victim.”

In all fairness, her defense has relentlessly painted Holmes as exactly that, from young, naive, battered, psychologically and sexually abused Trilby to Sunny Balwani’s Svengali. Their argument in their 82-page sentencing memo argues for mitigation to the point of no sentence at all, or a minimal sentence of no more than 18 months in home confinement plus her continuing service work. Supporting her character as a ‘humble, hardworking, and compassionate woman who deeply wants to give what she can to the world” and not motivated by greed or personal gain were character testimony letters from Billy Evans, her partner, as one would expect, but also from some unexpected places: the Senator from this Editor’s home state of New Jersey, Cory Booker, who knew her starting in 2012, and a former EPA head, William Reilly, who worked with Holmes’s father back in the George H.W. Bush administration. Their memo cited 130 letters.

Also revealed by the defense: Holmes is not only the mother of a year-old son but also pregnant. Evans’ letter contains another heartbreaking fact. Her beloved ‘wolf’ of a husky dog, Balto, was tragically killed by a mountain lion while she and Evans were living in seclusion in a rural area. While they lived in San Francisco, according to him, they were harassed by reporters, ordinary people, and threatening letters, so they hit the road for at least 6 months living in a camper.

Holmes’ ability to pay $804 million to the likes of Safeway and Walgreens seems to be a bit of a reach, as Holmes never cashed out of Theranos stock–at its peak valued at  $4.5 billion–is unemployed with no prospects, and is widely assumed to be, as they say, flat broke as are her parents. As to her sentence, what is widely expected is a multi-year sentence. If that happens, the defense will request that she remains free on bail (a motion for stay) while the filing to the Federal Appeals Court is made, a process that can take a year or more from filing to a decision. 

Judge Davila’s record has been to take in all the circumstances and to be measured in sentencing. After several years, he is intimately familiar with Theranos to the likely point of dreaming about it at night. Factors he may consider in sentencing, start of her term, where it will be served, restitution and fines: lack of flight risk, Holmes’ young child, and her current condition both physical and financial. Savvy court watchers have noted that if Federal law enforcement is in the courtroom, Holmes may initially be taken to prison and held, then freed on bail pending appeal. The jury convicted her on only four out of 11 counts (and threw out the 12th), but it remains that the prosecution proved and the jury decided that she was fully capable of engineering fraud, not once but several times, leaving Balwani’s Mesmerizing Influences aside.

Balwani’s own sentencing on 12 charges, with the same maximum of 20 years in Federal prison, is scheduled for 7 December, Pearl Harbor Day, at 10 am PT.

The Mercury News articles, while thorough, are paywalled: 11 November (defense memo), 11 November (Billy Evans letter), 14 November (prosecution filing). FierceBiotech, MedCityNews

The US Attorney, Northern District of California summary: U.S. v. Elizabeth Holmes, et al.  District Court documents here.

NBC Bay Area will cover the sentencing live here at 10 am PT, 1 pm ET, 6 pm GMT.

News updates: Theranos’ Holmes goes ‘mental’ in last ditch defense; troubled Cerebral telemental health fires another 400

Blood out of a rock? The Holmes’ defense goes ‘mental’ with Dr. Adam Rosendorff. Reduced to a limited hearing before Judge Edward Davila and the US District Court in San Jose, where Rosendorff not only reaffirmed his testimony but also explained the circumstances around his visit to the home, the Holmes defense filed a motion on Monday, citing an obscure interview published in September by the South African Jewish Report to cast doubt about the veracity and credibility of his testimony. Rosendorff, who was born in South Africa, recounted to the interviewer that the stress from blowing the whistle on Theranos led to a “breakdown, medication, hospitalization, and health problems.”

Rosendorff also stated in the interview that by the time the trials (Holmes and Balwani) were scheduled in early 2020, he was off medication. The trials finally took place in 2021 (Holmes) and this year. When questioned last week by defense lawyer Lance Wade about his mental state, his response was that “I’m finding this line of questioning to be invasive.” and that his “mental state was solid” when he drove to Holmes’ home wanting to speak with her. The prosecution objected to the questioning and Judge Davila upheld it.

The prosecution’s response to the defense filing is that the court record “contains no indication whatsoever that Dr. Rosendorff suffered from a mental health issue that affected his ability to serve as a reliable witness,” and that “newly raised and uncorroborated insinuations about Dr. Rosendorff’s mental health do not justify discounting his testimony or granting a new trial.”

The Mercury News’ money quote from New York defense lawyer Jennifer Kennedy Park: “I think the judge already made the decision that this is not relevant.” Another lawyer quoted, former Santa Clara County prosecutor Steven Clark, said that the stress can be difficult but that it apparently didn’t affect Rosendorff’s capacity to testify–and that he was consistent across two trials.

Unless Judge Davila decides to delay–not likely given the above and the pending sentencing for both Holmes and Balwani–or there are additional magic ‘rabbits out of hats’, Holmes’ sentencing remains scheduled for 18 November, Balwani’s later this year.

And speaking of mental health, beleaguered telemental health provider Cerebral let go of 400 more staff, or another 20% of their remaining workforce. This follows a layoff of ‘hundreds’ of contractors, including nurse practitioners who did counseling and support staff, at end of May. Cerebral is ‘restructuring’ under a new CEO, David Mou, who replaced CEO and co-founder Kyle Robertson  forced out by the Cerebral board after the first round of investigations by the Department of Justice (DOJ) on over-prescribing of controlled substances and the subsequent defection of CVS Health and Walmart, as well as Truepill on mail fulfillment. Their statement cites “operational efficiencies while prioritizing clinical quality and safety across the organization.” Cerebral had at its peak in the spring 4,500 employees.

In addition to the DOJ investigation, the FTC is investigating Cerebral for deceptive advertising [TTA 1 June] and a former VP of product and engineering, Matthew Truebe, is suing for wrongful dismissal, further exposing the inner workings of the company [TTA 16 June]. Employees have gone public with tales of pushing prescriptions to 95% of patients, disregarding state regulations, and generally Running Wild over any semblance of clinical probity [TTA 29 June]. Certainly Softbank cannot be delighted at the rolling crackup of their once-valued $4.8 billion baby for which they’ve led funding of over $426 million. TechCrunch, Healthcare Dive.

Theranos’ Holmes sentencing now 18 November, defense wants to expand hearing scope; Balwani can’t join in

Elizabeth Holmes will be receiving a limited hearing concerning The Mysterious Visit of Dr. Adam Rosendorff and her defense is attempting to expand the hearing. But Sunny Balwani won’t be joining in. The highlights of their recent District Court activities under Judge Edward Davila:

  • Holmes’ sentencing on her four counts has been reset to 18 November at 10am PT. This is despite the limited hearing on 17 October to determine whether Adam Rosendorff was really regretful about his testimony (as the Holmes defense maintains) and what he said and did. 
  • In a separate order, Judge Davila rejected Balwani’s defense move to join in the hearing. Rosendorff’s statements to Evans “related exclusively to his testimony during Ms. Holmes’ trial, not Mr. Balwani’s trial,” and provide “no basis for Mr. Balwani to examine” Rosendorff at the hearing.
  • In a filing, Rosendorff’s legal team asked Judge Davila to quash a subpoena sent by Holmes’ defense to obtain additional information from Rosendorff to use in next week’s hearing. “(Holmes) has sought to transform that limited inquiry into a free-for-all in which Dr. Rosendorff would be required to search through more than a year’s worth of sensitive emails, text messages, and other communications with family, friends, and others so that (Holmes) can try, yet again, to make him look like a liar.”
  • In that filing, the legal team also provided explanations of Dr. Rosendorff’s actions on that day. Driving around the area, he saw that the Theranos building had been torn down and a residential development complex built in its place, and the Palo Alto Walgreens where the first pilot took place had been replaced by a rug store. He wanted to “forgive her for the pain and suffering her actions have caused in his life” and to express his condolences on the child growing up without a mother. Unfortunately, he didn’t stop there on Memory Lane but took a drive up to the well-known location of her rental house, where recollections do differ and increased his tsuris as a result. 

Mercury News, Palo Alto Online

Thursday news roundup: RVO Health JV combines Optum-RV Health consumer health assets; Holmes sentencing for Theranos fraud delayed

Red Ventures, Optum combine consumer savings, digital health coaching, education assets into RVO Health. Quietly announced via Moody’s Investor Services (PDF) and appearing on LinkedIn, this offloads media holding company Red Ventures’ RV Health, consisting of Healthline health news/education media (Healthline, Medical News Today, Psych Central, Greatist, and Bezzy), plus the Healthgrades doctor rating, FindCare doctor locator and PlateJoy meal planner services. Optum contributes their Perks prescription savings card, Store shopping service, and coaching platforms Real Appeal, Wellness Coaching, and QuitForLife. For Red Ventures, this moves 20% of their company earnings into the JV, leaving media such as Bankrate.com and CNET. For Optum, this expands their coaching and consumer savings capabilities into an established digital audience–Red Ventures claims 100 million monthly users of its health media and other services. For Red Ventures, it opens up new solutions available through Optum’s parent, UnitedHealth Group.

According to Moody’s analysts, this is part of Red Ventures’ de-leveraging: “Under the terms of the JV arrangement, in exchange for the contributed assets, RV received cash proceeds, which were used to pay down the term loan. UHG will consolidate the financials of RVO Health in its future financial statements.” Based on LinkedIn, it will be located in Charlotte, North Carolina. Unannounced is who will be managing RVO Health.  FierceHealthcare, Becker’s 

Ironically, Healthline Media’ main competitor, WebMD, bought the former data analytics part of Healthgrades, Mercury Healthcare, on 29 June (release).

Elizabeth Holmes gets a three-week extension on her freedom. Her sentencing, originally scheduled for 26 September at the US District Court, Northern District of California, in San Jose has been moved to 17 October. No reason was given by the court for the extension. Judge Edward Davila will be presiding over the sentencing on four of the original 11 Theranos wire fraud charges [TTA 4 Jan]. Each one of these charges carries a penalty of up to 20 years, but generally in financial fraud, sentences are carried out concurrently. Judge Davila, known as a tough sentencer according to the Mercury News (mercifully not paywalled) may be considering factors such as that Holmes was, after all the founder and CEO but that Theranos did not start as a scam, proceeding to fraud when the technology was oversold and financially started to go under; and that she is a mother of a child not yet out of diapers. (This Editor will add the smoke around Sunny Balwani’s emotional abuse.) She will also be in a Federal facility for women likely located not far from San Jose. It is expected that she will appeal the verdicts and the sentences.

There is also the Balwani Factor. Sunny Balwani was convicted on 12 wire fraud charges and as Theranos’ president, was depicted as the ‘enforcer’. That book, when thrown after Holmes’ sentencing, will not be a paperback. Although he will want to stock up on reading for his expected long stay in Club Fed. Also CBS News.

Verdict Balwani: guilty on all 12 Theranos fraud charges

Breaking. A not-so-bright day for Sunny Balwani in the US District Court, Northern District of California, in San Jose. Today, after five days of deliberations, the jury returned verdicts on the ‘summer rerun’ of the two Theranos trials, that of former president Ramesh ‘Sunny’ Balwani. Unlike CEO Elizabeth Holmes, Balwani was found guilty of all 12 criminal fraud charges.

Each of the 10 wire fraud counts carries a maximum of 20 years imprisonment in Federal prison, plus a $250,000 fine and restitution on each count. The two additional conspiracy to commit wire fraud charges carry five years each. No date has been set yet for sentencing by Judge Edward Davila, who will be sentencing Holmes in September on her conviction on four of 11 counts and a possible 20 years as a member of Club Fed.

The trial called 24 witnesses, most of whom testified in the Holmes trial. The prosecution’s case centered on Balwani’s responsibilities in defrauding investors on the Theranos technology in order to get funding and placement in Safeway and Walgreens, as well as his knowledge that the labs didn’t work. The defense, calling only two witnesses, maintained that Balwani was a true believer in the technology, that the prosecution’s case was incomplete, he had no intent to defraud, and lost millions in direct investment and in shares. 

It is expected that Balwani will appeal the verdict. Undoubtedly, more details to come. Mercury News (mercifully, not paywalled), CNBC, KTVU2

Theranos Summer Rerun: Sunny Balwani trial verdict countdown analysis (updated)

Our last update on the Summer Rerun of the Theranos trial, a/k/a Rock and Hard Place or Blood Out Of A Stone, was that the defense rested.  It was definitely souffle-grade–Balwani’s late entry to the company, investment of his own millions, and never selling a share. There is no breathless coverage of the trial–no sensational new revelations of cheated investors or psychological violence claims, just near-identical charges (12) mostly of wire fraud with the prosecution methodically setting up Balwani with full knowledge of the cheating with the labs and defrauding of investors. [TTA 23 Mar, 16 June], 

Now it’s up to the jury. The betting is that there will be a verdict next week. It’s expected that the jury will 1) name a foreman and 2) methodically go through the pile of evidence, sending questions to the judge for clarifications on these complex legal issues when needed. The deliberations will be over the July 4th holiday giving a small delay. Will they heap guilt on Balwani’s head with multiple or nearly all counts, or keep them to low single digits as they did with Elizabeth Holmes? We will likely know sooner rather than later. If you want some informative analysis by an attorney, you’ll have to go to YouTube for this video by “Lawyer You Know” Pete Sargos. There’s also a light update on Yahoo Finance.

Update 29 June: The jury has sent two notes back to the court so far. On Day Three, Tuesday afternoon, the jury sent a note asking if the jury cannot agree on a specific count, is there an option other than guilty or not guilty. On Wednesday morning, another note was sent, contents unknown. There are ten wire fraud charges and two counts of conspiracy to commit wire fraud.  NBC Bay Area  This part of the article will be updated as it’s reported until a verdict is reached.

Thursday news roundup: FTC now investigating Cerebral, Balwani’s Theranos trial rests at last, Proscia pathology AI $37M Series C, health data breaches pile up

Telemental health Cerebral’s miseries pile on. The Federal Trade Commission (FTC) is now investigating Cerebral on deceptive advertising and marketing practices. The Wall Street Journal (may be paywalled) reviewed the 1 June letter sent to the company. The letter requests the usual preservation of documents and asks ‘dozens of questions’ related to their business. Of particular interest to the FTC is the ‘negative option’ practice that continues the subscription fee unless the subscriber takes positive action to cancel it. Subscribers have complained that Cerebral did not cancel their subscriptions after repeated attempts to do so and did not refund their money. Reuters, FierceHealthcare

Also of interest to the FTC will be the dodgy advertising claims about ADHD and obesity which ran on TikTok and Instagram [TTA 10 May]. The WSJ reported that their ad spend topped $65 million for this year–$13 million on TikTok alone from January to May this year, making Cerebral the third-largest advertiser behind HBO and Amazon, according to research firm Pathmatics.

The FTC action follows the Department of Justice (DOJ) investigation of their prescribing of controlled (Schedule 2, high potential for abuse) substances such as Adderall and Xanax, CVS and Walmart refusing their prescriptions, the unceremonious booting of the CEO and co-founder, and a wrongful dismissal lawsuit by a former VP of product and engineering, Matthew Truebe. Certainly, its investors led by SoftBank, which raised $300 million in December less than six months after a raise of $127 million, are unhappy at watching their $4.8 billion baby crash and burn.

The second “rerun” Theranos trial of Sunny Balwani rests. This much-muted trial is winding towards its close. Receiving much less breathless and near-sensational coverage than Elizabeth Holmes’, Theranos president Balwani was tried in the same San Jose Federal district court, with the same prosecutor (Robert Leach), just about the same charges (12 counts of wire fraud), and Judge Davila presiding. Holmes was convicted and her sentencing is scheduled for September.

The prosecution rested on 20 May and the defense on 9 June. The trial took some delays due to at least two jurors falling ill from Covid. The defense strategy rested on Holmes’ founding and operating the company without Balwani for a few years and that he never sold his shares, making him as victimized as any ordinary investor. The prosecution is relying on how close Holmes and Balwani were, that he had great power at Theranos–and used it, plus in his position was well aware of the problems with the lab machines and deliberately sought to defraud investors by covering it up. Unsurprisingly, Holmes did not testify at his trial, although she was a looming presence at his as he was somewhat at hers, especially in her testimony about their relationship. Closing arguments took place on Tuesday (14 June) and the jury will be charged after their conclusion. NBC Bay Area, New York Post, Wall Street Journal

Happier news comes from Proscia, a pathology software company, funding a $37 million Series C. Highline Capital Management, Triangle Peak Partners, and Alpha Intelligence Capital led the round along with participation from five earlier investors. Their total funding is up to $72 million. Their AI-enabled Concentriq platform combines “enterprise scalability with a broad portfolio of AI applications to accelerate breakthroughs and unlock clinical insights that advance precision medicine.” Clients include 10 of the top 20 pharmaceutical companies as well as the Joint Pathology Center, Proscia release, Becker’s 

Adding to the tally of healthcare data breaches are several this week. The year-to-date winner, of course, are the 2 million at Shields Health Care Group in Massachusetts [TTA 10 June], but this week, reports have been breaking out like late spring roses:

  •  A clinical guidance software vendor’s breach reported 10 June has exposed the protected health information (PHI) of patients at Omaha, Nebraska-based CHI Health and Sioux Falls, South Dakota based Avera Health. Avera has about 900 exposed patients, but the number at CHI is not yet known. MCG Health is the vendor. Becker’s
  • Yuma (Ariz.) Regional Medical Center reported an April ransomware attack that while short in duration, exposed PHI of 700,000 patients. An unauthorized user removed files from the hospital’s system that included patient health information such as names, social security numbers, health insurance information, and limited medical information relating to care. The hospital went offline until it was resolved, including reporting to law enforcement. Becker’s, Healthcare Dive
  • UChicago Medicine had its employee accounts hacked in March by an unauthorized user. It exposed about 2,500 patient records that included patient first and last names, social security numbers, health information, legacy Medicare beneficiary identification numbers, health insurance policy numbers, and driver’s license numbers. Becker’s
  • And Kaiser Foundation Health Plan of Washington had about 70,000 patient PHIs exposed on 5 April when an unauthorized user gained access to one employee’s emails with information on patient first and last names, dates of service, laboratory test information, and medical record numbers.

Short, but certainly not sweet, and expensive.

The Theranos Trials, ch. 3: Sunny and Elizabeth were in it together, all the way

“Partners in everything, including their crimes” was part of the prosecution’s opening statement in today’s start of Ramesh ‘Sunny’ Balwani’s trial. Delayed by a week by a Covid-19 exposure, the former chief operating officer of Theranos is on trial for the same charges as Elizabeth Holmes–10 counts of wire fraud and two counts of conspiracy to commit wire fraud. Their trials were severed when her defense charged him with emotional abuse. The trial is taking place in the same US District Court in San Jose, with Judge Edward Davila and with the same prosecution team, for the next 12 weeks.

Prosecutor Robert Leach brought Holmes into the picture repeatedly with their personal and professional partnership, adding that while Balwani “skewed the medical decisions patients were making and put them at risk”, he laid the financial and technical fakery at both their feet. “The defendant and Holmes knew the rosy falsehoods that they were telling investors were contrary to the reality within Theranos.”  Leach also contended that Balwani had absolutely no background in healthcare technology and was unqualified to lead the company.

His defense, which is led by Stephen Cazares of Orrick–a former Federal prosecutor and enforcement attorney at the SEC–contends that Balwani was not a founder, nor a controlling executive, or had final decision-making authority–Holmes was. If anything, Balwani was blinded by his belief in the technology, to the extent of putting up his own $10 million to guarantee a loan for Theranos before investing another $5 million for a stake in the company. And others, such as Safeway and Walgreens, had reviewed and invested in Theranos. Like Holmes, he never cashed in his stake.

A new piece of the defense is quoted from the very thorough article in tech website Protocol: “…the government was to blame for not doing its due diligence. Theranos handed over a hard drive to the Department of Justice with encrypted test data for more than 9 million Theranos patients back in 2018. The DOJ didn’t analyze that database, and therefore, Cazares argued, the government cannot definitively say how well or not well Theranos’ technology worked.” It’s an interesting limb but given the Holmes convictions, feels to this Editor like one that’s easily sawed off.

The first witness called was Erika Cheung, the Theranos lab associate who became a whistleblower. Court ended before she got to any statements, but in the Holmes trial she stated the Edison lab results were about as accurate as a coin toss, which was devastating. More to come through Thursday. The Guardian, NBC Bay Area, and Mercury News (annoyingly paywalled).

The Theranos Trials, ch. 2: bail tightened for Holmes, previewing the Balwani trial, and ‘The Dropout’

Ms. Holmes will have to pony up cash or property for her bail. Back in January, Judge Edward Davila of the US District Court ruled that Elizabeth Holmes would be free on a $500,000 bond secured by personal property. As is typical in federal cases of this type, this was based on her signature. The prosecution, perhaps being extra cautious on the possibility of flight during the time leading up to Holmes’ sentencing to 26 September, motioned Judge Davila to have it converted to cash or the equivalent in personal property. The defense agreed, perhaps mindful of the appeal deadline of 4 March with hearings in June.

Ms. Holmes does own property, though it is unknown what her remaining assets are since she never sold her Theranos holdings. Her partner and family can help her with the requirement. Mercury News (paywalled, but refresh)  The Trial, ch. 1

Meanwhile, Sunny Balwani’s trial in the same Federal District court and with Judge Davila starts next Wednesday 9 March with jury selection. Balwani was indicted in 2018 on the same charges as Holmes’ but his trial was severed from Holmes’ when her defense raised charges of abuse. Judge Davila is making moves to ensure the trial moves along and does not suffer from the juror problems experienced with the Holmes trial. Six alternate jurors will be seated versus five in the Holmes trial, where three jurors were lost at the start, raising the possibility of mistrial. Hours will be longer, 9am to 3pm Tuesdays, Wednesdays, and Fridays — including some Mondays and Thursdays. Concessions were made to Holmes with a young baby to attend to, which is not Balwani’s situation. Yahoo!News, KPIX5 San Francisco

And to those craving a true crime fiction take on l’affaire Theranos, Hulu is airing an eight-part series, entitled ‘The Dropout’, and starring Amanda Seyfried and a ‘wondrously vile’ Naveen Andrews. According to the WSJ review (free registration required) Seyfried gets the weird baritone and facial tics correctly (and correctly timed). But the reviewer notes that it’s hard to tell even from Seyfried’s excellent performance of a troubled girl/woman how she got so many older ‘sage’ men to believe in her Fraud Tech. Perhaps it was the fevered time in health tech, or as this Editor has said previously, fear of missing out or wanting to believe. We now have a generation of con artist millennials in the zeitgeist. The reviewer sums it well: “What the fraudsters also share is a counterfeit benevolence: Everyone is doing what they’re doing–and stealing what they’re stealing—for the benefit of mankind.” Yet there comes a time when the fever breaks, and the fraudsters get their comeuppance. For a lighter take, the NY Times article on clothing as reflective of character development on the show, Silicon Valley values, and Holmes’ ‘costuming’, is recommended.

The Theranos Trials, ch. 1: Holmes sentencing to be 26 September, three mistrial charges dropped, appeal dates set

Yesterday, Elizabeth Holmes’ next few months were outlined for her.

Her sentencing for the four charges on which she was convicted [TTA 4 Jan] will be 26 September by the trial judge, Judge Edward Davila. The delay in sentencing due to the ‘ongoing proceeding’ of the Sunny Balwani trial (scheduled to start 15 March) was revealed in a joint filing by the prosecution and Holmes’ defense. The filing confirmed that the prosecution would file a motion today (Friday) to dismiss the three deadlocked charges and that she will remain out of custody on a $500,000 bond secured by personal property, increased by request of the prosecution.

Judge Davila also set a deadline of 4 March for filing post-trial motions he will hear, such as an appeal by Holmes’ defense, with the hearing set for 16 June.  Fox News, Yahoo!News

Meanwhile, the Silicon Valley Home Town Newspaper, the Mercury News, waxed on how difficult life will be for Holmes’ baby after her incarceration, even in a minimum-security Federal prison (colloquially known as Club Fed). It is highly unlikely that she will face the extreme hardships of women facing hard time, imprisoned thousands of miles away from their families, or losing their children to foster care because there are no family caregivers. The Federal Bureau of Prisons tries to place low-risk prisoners like her within 500 miles of home. There is visitation time. Also cushioning this is Holmes’ own family and an affluent partner, Billy Evans, who has stayed by her side. Reportedly, they live with their son at a home rented on an estate in an affluent San Jose suburb, Woodside. But after the appeals (and money) are exhausted, the long sentence will likely be served, and then will come the tough part for the child growing up without a mother.