Catchup News Roundup: UHG-Change buy final; Theranos’ Holmes sentencing delayed, ‘limited hearing’ agreed to

Note: your Editor is on the mend after returning from vacation with a nasty bug that’s laid her low for the better part of a week.

UnitedHealth Group’s Optum unit completed its acquisition of Change Healthcare, after the 10-day agreed waiting period post-decision. As planned, Change will be folded into the OptumInsight unit. The all-cash deal was either $7.8 billion or $13 billion, depending on what source you go with [TTA 20 Sept].

The Department of Justice has a generous quantity of Grade A, Extra Large Egg on its metaphorical face. The District Court decision found that the DOJ did not conclusively prove its allegations of antitrust and loss of competition in services. Statements from UHG’s competitors such as Cigna, Aetna, and Elevance (Anthem) that the acquisition would not lead them to ‘stifle innovation’ also weakened the DOJ’s case. The major conflict, ClaimsXtend, was already in progress of divestiture to TPG.

Challenging acquisitions post-closing is difficult but has happened. Readers may recall the 2019 nine-month long District Court Tunney Act review drama over the final approval of the CVS buy of Aetna, dragging on long after the buy was final and reorganization was underway. If the Tunney Act applies, and this goes to a certain Judge Richard Leon, watch out!  Optum’s release did not disclose reorganization plans or management changes. Healthcare Dive, FierceHealthcare 

Elizabeth Holmes’ sentencing delayed to allow a ‘limited hearing’ on The Mysterious Visit of Adam Rosendorff.  The ‘crafty strategy’ [TTA 16 Sept] scored a win today (3 October). Judge Edward Davila accepted the defense’s request for a limited hearing on whether there was any prosecutorial misconduct in Dr. Rosendorff’s testimony and delayed Holmes’ sentencing originally scheduled for 17 October.

In August, according to Holmes’ partner Billy Evans, in a scene lifted out of TV’s Perry Mason, Dr. Rosendorff arrived at Holmes’ home doorstep disheveled and apologetic, allegedly telling Evans that the prosecution “made things sound worse than they were.” Yet Dr. Rosendorff swore a declaration to the prosecution after the Mysterious Visit that he testified “completely, accurately and truthfully” and stood by his testimony, while expressing “compassion” for her and her family. Rosendorff’s testimony was more about the Theranos labs and how they defrauded patients based on specious PR and inflated claims, not the investor fraud of which she was convicted. 

The limited hearing has been scheduled for 17 October (the original sentencing date). Judge Davila has already stated that the hearing will not last the full day. He also offered to both the prosecution and defense options for new sentencing dates: mid-November, early December, or mid-January. How this will affect Sunny Balwani’s upcoming sentencing on 12 counts is not known. Mercury News 

TTA’s Last Swing of Summer: CVS wins $8B Signify auction, Amazon-One Medical gets FTC look-see, UHG/Change decision now Oct, Holmes files motions before sentencing, keeping digital treatment tools safe by design, more!

 

Weekly Update

Back from Two Weeks in Another Town (except for a few extra days), the August-September ‘quiet time’ certainly was not. CVS’ big win in Signify’s auction was on Labor Day. Change may or may not be joining UHG/Optum after October. FTC doesn’t much like Amazon’s acquisitions, including One Medical. And Elizabeth Holmes’ legal team was busily filing–and delaying the (maybe) inevitable, including a declaration straight out of Perry Mason.

The passing of a Queen and crowning of a King.

Elizabeth Holmes’ three swings and a miss in overturning her trial verdict reveal a crafty strategy (She’ll be in court long after Sunny Balwani toddles off to prison)
News briefs, catchup edition: UnitedHealth/Change decision October?, CVS wins $8B Signify Health auction, Walgreens majority buy of CareCentrix, FTC requests more info on Amazon-One Medical (Home care wars and a long-awaited decision)
Perspectives: Creating consistent standards isn’t a once and done job (the safety of digital treatment tools)
On the passing of HM Queen Elizabeth II

$130M to Alma’s mental health platform, Cadence Care RPM with ScionHealth, NIH funding telehealth in cancer care, and more.

News roundup: RPM at 79 ScionHealth hospitals, 74% of employers like virtual care despite concerns, Alma Health garners $130M, NIH’s $25M for cancer care telehealth research, Parks’ virtual Connected Health Summit 30-31 Aug

Amazon threw in its beach towel on Care, put its bets on One (Medical), and paddle up in Signify’s auction closing after Labor Day. Babylon Health is eliminating distractions with the NHS to concentrate on the US. Oracle’s hit with charges of massive privacy violations, on top of massive Cerner VA dysfunctionality. But back to the future–Fitbit’s reviving with three new fitness watches.

Oracle in Federal court class-action lawsuit on global privacy violations; Cerner VA EHR had 498 major outage incidents, 7% of time since rollout (Misery upon misery)
Week-end news roundup: Fitbit revives with 3 new watches, Sena Health hospital-at-home, SteadyMD surveys telehealth clinicians, 9.4% fewer adult dental visits in England, save the date for ATA 2023
Perspectives: why digital apps need an in-house clinical safety lead (A Perspective from Wysa, more to come in September)
Breaking: Amazon Care shutting down after three years–what’s next? (updated) (Care an expensive course at the University of Healthcare Delivery)
Babylon Health exits last NHS hospital contract as a ‘distraction’, looks to US market for growth (Tighten your seatbelts)
Signify Health bidding war ensues, waged by Amazon, UnitedHealth Group, CVS, Option Care Health (A scrum with unknown outcome)

An action-packed mid-August. No one seems to be sitting on the beach unless you’ve been laid off. Meanwhile, companies are scrambling. No, Babylon Health is not being bought. But elsewhere, there is some good news around acquisitions and funding. 

Rounding up the week with good news: AliveCor’s Series F round, Scotland’s Smplicare gains £750K for fall research (A needed and refreshing drink!)
Friday short takes: was there a bidding war for One Medical? A concussion risk wearable tested. Get Well’s monkeypox digital care plan (One Medical’s gamble and a return to one of our old follow topics)
Week-end news roundup: +Oscar data tech platform pauses, BD buys MedKeeper pharmatech for $93M, Novant’s Meta misconfiguration reveals PHI, Mt Sinai’s Sema4 genomics spinoff releases 250 + founder (Reality bites in a lot of different areas)
Babylon Health: fending off bubbly rumors of acquisition this week (No, they’re not. Being. Bought.)

Big companies eager to snap up companies to fill out portfolios. Small (and not so small) companies drastically cutting staff and spending, looking for the Magic Survival Formula. Amwell finally closing a Big Deal with CVS Health. Babylon Health’s mixed picture as they grow. Cerner and VA’s miseries continue, but data and IoMT breaches thrive. And ISfTeH not only returns to live conferences, but also comes to the US.

Weekend short takes: May telehealth claims up to 5.4%; three health plan breaches, one at its law firm–affecting over 400,000 patients; layoffs hit Calm, Truepill (updated)
ISfTeH Global Connections for Sustainable Telehealth: 6-7 November, San Jose (International telehealth finally reaches the US)
Week-end news roundup: Allscripts on the acquisition hunt, Amwell’s CVS telehealth deal, Cerner’s $1.8M racial discrimination settlement, predicting Parkinson’s progression via smartwatch data
Mid-week news roundup: CVS eyeing Signify Health for in-home/VBC (updated); Babylon Health mixed pic of revenue and losses up; Geisinger doubles telemed specialties; connected IoT devices expand cyber-insecurity footprint; Owlet layoffs
More Oracle-Cerner VA/DOD EHR misery with 4 hour+ outage; 51% of VA iPads unused for video appointments (Not only VA’s
EHR, but also inventory management gone sideways)

This week’s big news centered on Oracle’s layoffs at Cerner–and Oracle–DOJ versus UnitedHealth Group, and telehealth nearing needed legislative change in the US. In UK news, NHS Digital trials wireless to compensate for looming staff shortages–and Cera raises £264 million. Advances in dementia diagnosis and therapy plus news from all over: multiple raises, VA, Cionic, Withings, Orion Health, Coviu, and more!

Week-end wrapup: CVS plans to expand primary care, home health; Cera Care raises £264M; Linus Health’s AI enabled dementia screener, Cognito’s cognitive therapy slows brain atrophy
Short takes for Thursday: Diagnostic Robotics $45M raise; Sage’s $9M seed; VA names EHR ‘functional champion’; Aussie telehealth startup Coviu arrives in US
NHS Digital trialling Wireless Center of Excellence–in face of ‘crisis’ level staffing shortages (Can one compensate for the other?)
Mid-week roundup: UnitedHealth-Change trial kicks off; Amazon’s One Medical buy questioned; Cionic’s neural sleeve designed by Yves Behar; Medable-Withings partner; Orion Health’s new CEO; IBM Watson Health’s Simon Hawken passes (Line up your bets on DOJ vs UHG)
Telehealth waivers take critical step in extending to 2024 in House bill now passed (About time, Congress)
Oracle’s Big Vision will be missing a lot of people; layoffs hit Cerner, customer experience, marketing staff (Didn’t take long for the guillotine to fall)

The news for this week is a mix of some good and some not-so. Oracle’s new sheriff moves to fix Cerner’s VA EHR problems, quickly. Investment is reviving, led by Amazon’s buying One Medical, Cleerly, and 3M’s 2023 healthcare spinoff. But Teladoc continues its losing streak. Health plans are shedding real estate and holdings. Also shedding are unicorns–Babylon Health, Included Health, and Noom.

Week-end roundup of not-good news: Teladoc’s Q2 $3B net loss, shares down 24%; Humana, Centene, Molina reorg and downscale; layoffs at Included Health, Capsule, Noom, Kry/Livi, Babylon Health, more (Hit by both telehealth and tech downturns)
Weekend investment/divestment roundup: 3M to spin off Health Care, Cleerly’s $223M Heartbeat, Elation’s $50M Series D, Health Note’s $17M Series A, Galen bought by RLDatix (A revival?)
Oracle’s ‘new sheriff’ moving to fix Cerner EHR implementation in the VA: the Senate hearing (High Noon at VA?)
Amazon moves to acquire One Medical provider network for $3.9B (revised) (Another worry for providers)

Having survived heat waves on both sides of the pond, the news is emerging from its lull. The most significant is around Oracle Health sunsetting the Cerner brand, which frankly has become a bit tarnished. Some of it is about staff cuts and hack attacks piling up, for different reasons in the US and UK. Other news is encouraging in that investment and business are moving forward, despite the parlous state of the markets.

Special congratulations to Herts Careline on its 40th birthday! 

Week-end news roundup: Fold Health launches OS ‘stack’; admin task automator Olive cuts 450 workers; 38% of UK data breaches from cyber, internal attacks; hacking 80% of US healthcare breaches; does AI threaten cybersecurity?
VA’s final, troubling OIG ‘unknown queue’ report on Cerner Millenium rollout; Oracle’s Sicilia to testify before Senate today (Oracle’s inherited mess)
Herts Careline marks 40th Anniversary (Congratulations!)
Midweek heat wave roundup: GE Healthcare’s new name, hospital-to-home health trending big, over 2 million patient records hacked (Hint: GEHC doesn’t have to change the brochures right away)
Cerner’s business now consolidated under Oracle Health (Excuse Cerner as it disappears–but save the swag for eBay!)

 


Have a job to fill? Seeking a position? See jobs listed with our new job search partner Jooble in the right sidebar!


Read Telehealth and Telecare Aware: https://telecareaware.com/  @telecareaware

Follow our pages on LinkedIn and on Facebook

We thank our present and past advertisers and supporters: Legrand/Tynetec, Eldercare, UK Telehealthcare, NYeC, PCHAlliance, ATA, The King’s Fund, DHACA, HIMSS, Health 2.0 NYC, MedStartr, Parks Associates, and HealthIMPACT.

Reach international leaders in health tech by advertising your company or event/conference in TTA–contact Donna for more information on how we help and who we reach. 


Telehealth & Telecare Aware: covering the news on latest developments in telecare, telehealth, telemedicine, and health tech, worldwide–thoughtfully and from the view of fellow professionals

Thanks for asking for update emails. Please tell your colleagues about this news service and, if you have relevant information to share with the rest of the world, please let me know.

Donna Cusano, Editor In Chief
donna.cusano@telecareaware.com

– – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – –

Elizabeth Holmes’ three swings and a miss in overturning her trial verdict reveal a crafty strategy

Putting off the inevitable? Elizabeth Holmes’ legal team in the past two weeks has filed a flurry of motions in US District Court to have her verdict thrown out prior to sentencing on Monday 17 October.

  • The filing on 1 September sought to have the verdict of guilty on four counts [TTA 4 Jan] tossed with no new trial. This was denied in a preliminary ruling by Judge Edward Davila, stating that the verdict by the jury was supported by the evidence. A final ruling is pending arguments by the defense and prosecution.
  • The three filings on Tuesday 6 and Wednesday 7 September seek to have Judge Davila rule, on the basis of new evidence, for a new trial.

According to the Mercury News, the first motion on Wednesday, which states that arguments presented in the Sunny Balwani trial could have acquitted her, has little chance of being successful and in fact may be counterproductive in annoying the judge in that case–also Judge Davila. The second motion filed has a better shot, including on appeal. It centers on the “Brady rule” that requires prosecutors to disclose and turn over information that could be helpful to the defense. This was the database of patient test results that the prosecution failed to preserve. It didn’t factor in the trial, but could in the expected appeal. 

The filing on Tuesday is straight out of an episode of Perry Mason. Holmes’ partner (and father of her one-year old son) Billy Evans declared that former Theranos lab director Dr. Adam Rosendorff showed up at the door of her home in a ‘desperate and disheveled’ state. In the declaration, Evans stated that “He said he wants to help her. He said he feels guilty. He said he felt like he had done something wrong. He tried to answer the questions honestly but that the prosecutors tried to make everybody (in the company) look bad” and that prosecutors “made things sound worse than they were.” Legal experts interviewed by the Mercury News believe it’s not the remorse, but the pressure prosecutors may have put on the witness. A hearing on this would be extensive and involve both prosecution and defense. Of course, this neglects that during the trial, the defense attempted to rip apart Dr. Rosendorff’s testimony as self-serving and essentially incompetent.

Net-net, Elizabeth Holmes has a best-money-can-buy legal strategy designed to delay her serving time, if not negate it, on the four of 12 counts on which she was convicted.  Mercury News 1 Sept, Mercury News 10 Sept  Adam Rosendorff’s testimony during trial summarized in Chapters 1 and 2

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. 

The Trial of Elizabeth Holmes, ch. 17: looking inside the juror decision process

How does a juror–and jury–process multiple counts, witnesses, a defendant, and an avalanche of information without drowning? ABC News interviewed Juror #6, Wayne Kaatz, an actor, voice talent, and scriptwriter. We rarely get a glimpse inside the jury box of a high-profile case. It’s well described, which isn’t surprising given that Mr. Kaatz is a writer, mostly for children’s programs. In short, “working class” show biz.

  • They grappled with the ultimately deadlocked three charges–and felt they had failed (Ch. 16)
  • Early on, they discarded the charges involving patients, considering Elizabeth Holmes ‘one step removed’ from them
  • They scored witnesses’ testimonies and Holmes on a 1-4 scale, from not credible to most credible. Adam Rosendorff, the lab director that the defense went after hard, scored a four. Holmes–a two.
  • They were sympathetic towards Holmes, finding her “likable”, with a “positive dream”. 
  • The decision to find her guilty on the four fraud counts centered on her “final approval” and that she “owned everything”.  

About the process, they selected a younger man as their foreman from the eight men and four women. They shared initial verdicts on paper scraps and laid out information on a timeline. The jurors got along well over the months-long trial culminating in 50+ hours of deliberation, working on puzzles and swapping sandwiches. 

Mr. Kaatz closed his thoughts: “It was an honor. It was a duty, I did it. I’m done.” Little drama, not ‘Law and Order’ or ‘Twelve Angry Men’. ABC News–and do read the interesting comments, but only halfway through before it devolves into hair-pulling on a wholly different event.

The Wall Street Journal’s follow-up (paywalled text, but audio is not) focuses on Juror #8 (Susanna Stefanek) finding the “smoking guns” as the altered pharmaceutical “endorsements”, singling out Pfizer’s, and the fictional financial projections.

Vox goes into Holmes as Hollywood will be seeing her, with Hulu and Apple treatments teeing up. The NY Times goes on about Holmes being a product of Silicon Valley culture–the puffery, the one-upmanship, and believing their own press releases. But for now, we can give it a rest…till Sunny Balwani’s trial starts.

Breaking–The Trial of Elizabeth Holmes, ch. 16: guilty on four charges of 11

Breaking. Elizabeth Holmes, founder and CEO of Theranos, was found guilty on four charges of wire fraud of the 11 charges brought by the prosecution. The guilty charges are, according to the reports in the New York Times and the Mercury News (paywalled, but keep refreshing), all related to wire fraud against investors. Counts six through eight are fraud against specific investors. The TTA articles relating to each are linked.

  1. Count one of conspiring to commit wire fraud against investors in Theranos between 2010 and 2015
  2. Count six of wire fraud in connection with a wire transfer of $38,336,632 on or about Feb. 6, 2014. This was part of the $96 million PFM Health Sciences investment detailed in Chapter 9.
  3. Count seven of wire fraud in connection with a wire transfer of $99,999,984 on or about Oct. 31, 2014. This was the DeVos family trust investment (RDV Corp.) in Chapter 5.
  4. Count eight of wire fraud in connection with a wire transfer of $5,999,997 on or about Oct. 31, 2014, made by Daniel Mosley, a financial advisor to Henry Kissinger. Mr. Kissinger was an early investor and sat on the Theranos board (Chapter 6).

Each one of these charges carries time up to 20 years, but in Federal financial fraud cases, time is usually served concurrently. Judge Edward Davila of the US District Court, Northern District of California, will sentence at a later date to be announced.

It’s expected that Holmes will appeal. The issues of emotional and physical abuse, with Svengali-like control on her judgment, at the hands of Sunny Balwani were not enough for this jury to dismiss the key financial fraud charges. They clearly decided that Holmes was fully capable of engineering fraud, not just once but several times. But with the defense having seeded a backdrop of abuse, it may prove mitigating on appeal. (No, this Editor does not believe that Judge Davila will even refer to that during sentencing, having strictly advised the jury to not consider that during deliberations.)

Holmes was found not guilty on three fraud charges against patients and a fourth relating to advertising and marketing services to patients:

  • Count two of conspiring to commit wire fraud against patients who paid for Theranos’s blood testing services between 2013 and 2016
  • Count 10 of wire fraud in connection with a patient’s laboratory blood test results on or about May 11, 2015
  • Count 11 of wire fraud in connection with a patient’s laboratory blood test results on or about May 16, 2015. These two counts pertained to false results on HIV and prostate cancer.
  • Count 12 of wire fraud in connection with a wire transfer of $1,126,661 on or about Aug. 3, 2015 to Horizon Media for advertising and marketing services for the Walgreens launch.

Given the above, was The Verge (Chapter 15) correct in stating that patient fraud, with the concomitant distress and potential for injury, is less important than financial fraud? Or was the case less well made? 

No verdict was reached on an additional three charges relating to wire transfers in December 2013 by other investors. These apparently were the charges that the jury deadlocked on earlier today: 

  • Count three of wire fraud in connection with a wire transfer of $99,990 on or about Dec. 30, 2013. This was part of the investments made from 2006 to 2013 by private investor Alan Eisenman detailed in Chapter 8. Eisenman was a contentious and offputting witness, and will not have any satisfaction.
  • Count four of wire fraud in connection with a wire transfer of $5,349,900 on or about Dec. 31, 2013. This was an investment by Black Diamond Ventures headed by Chris Lucas, nephew of Don Lucas who was on the Theranos board (Chapter 6).
  • Count five of wire fraud in connection with a wire transfer of $4,875,000 on or about Dec. 31, 2013. This was an investment by the Hall Group.

One additional charge (nine according to the Times, 10 according to the Mercury News) was dropped. The Times article also provides a preview on the next trial–Sunny Balwani. Man of Mystery, or just a lucky sod who made a bundle of money from a dot.com?

The trial started on 8 September and concluded just before Christmas. Deliberations took about 50 hours. 

Also CNBC and ABC News. Let the opinion slinging begin!

Theranos, The Trial of Elizabeth Holmes closes, ch. 15: she believed! in the technology!

The defense returned to their closing arguments on Friday. According to lead defense attorney Kevin Downey, not only did Holmes appoint a stellar board, but also the evidence showed that she believed intensely in the Theranos technology changing the world.

  • Holmes stayed till the end trying to save the company–because she believed in improving healthcare
  • She continued to improve the company and the technology, but after all that she didn’t realize…
  • …that the labs had problems until March 2016, when her very last lab director, Kingshuk Das, MD, invalidated 60,000 lab tests made on Theranos labs in 2014-2015.
    • This happened only after CMS sent a deficiency report notice to Dr. Das’ predecessor with the subject line  “CONDITION LEVEL DEFICIENCIES – IMMEDIATE JEOPARDY.” And that lab directors and techs had already told Holmes about problems with the Edison labs.
  • The proof of her sincerity? If she committed fraud, she would have sold her stock while it still had value, and jumped ship like a scared rat!

Interestingly, Downey made no mention of Sunny Balwani, except that Holmes fired him in 2016. No mention of all the time spent in her testimony depicting Balwani as a mentally and physically abusive Svengali, which led Holmes-as-Trilby to not be in control of herself as CEO, even after he departed.

The prosecution returned for rebuttals. John Bostic countered the defense claim of Holmes’ belief with “the disease that plagued Theranos wasn’t a lack of effort, it was a lack of honesty.” “We see a CEO of a company who was so desperate for the company to succeed, so afraid of failure, that she was willing to do anything.” Bostic also reminded the jury that they needed to put Holmes’ claims of emotional abuse by Balwani aside since there was “no evidence connecting the allegations of abuse with the actual charged conduct.” 

Judge Edward Davila, in winding up 14 weeks of trial, then charged the jury to avoid consideration of or speculation on the abuse, and to disregard both public opinion and Holmes’ place in society. They could consider whether Holmes had a “good faith belief” in the truth of her statements. The jury will return Monday morning to start deliberations. The fraud charges include conspiracy between Holmes and Balwani against patients and investors. Two more charges are related to patients receiving erroneous test results on HIV infection and prostate cancer. One is on fraudulent marketing and advertising. Six more charges are about investor fraud. 

AP, Mercury News (paywall–refresh to read)

Because it’s the weekend, your Editor will include two extra articles. The Verge article reads something like a screed against our legal system valuing money fraud over patient medical fraud. The NY Times article is on the latest Holmes makeover. During the trial, she changed from hard-edged, black turtleneck, red-lipsticked Lady Steve Jobs to suburban-junior-manager-working mom in off the rack wrinkled skirts, peachy pink lip color with curled but messy hair, carrying an inexpensive baby bag. All calculated by her defense to create an illusion of innocence and, this Editor would add, incapability of any dastardly acts, such as financial and medical fraud.

To be continued…

TTA’s earlier coverage: Chapter 14, Chapter 13Chapter 12Chapter 11Chapter 10, (10-13 recap the Holmes testimony); Chapter 9Chapter 8Chapter 7Chapter 6Chapter 5Chapter 4 (w/comment from Malcolm Fisk)Chapter 3Chapter 2Chapter 1

Theranos, The Trial of Elizabeth Holmes closes, ch. 14: was it fraud over business failure–or building a company, not a criminal enterprise?

The flat spin starts as the trial winds up. On Thursday, the prosecution presented its closing argument to the jury, and the defense began its summary which will finish on Friday.

The key prosecution points made by Assistant US Attorney Jeffrey Schenk were:

  • Elizabeth Holmes’ decisions were all hers. She first defrauded investors, then deceived patients.
  • “She chose fraud over business failure. She chose to be dishonest with investors and with patients.”
  • Elizabeth Holmes was not a young, naive CEO. She had headed Theranos for nearly a decade. But it was ‘a house of cards.’
  • A decision about Sunny Balwani’s abuse is not pertinent to the case and does not have to be made to reach a verdict. 
  • That has to be made on whether this was deliberate investor and patient fraud.“Ms. Holmes knew these honest statements would not have led to any revenue,” Schenk said. “She chose a different path.”

Mr. Schenk reviewed the testimony of all 29 witnesses and statements made by Holmes herself, with the specific aim of refuting every defense point made about her not being aware that the technology didn’t work, or that she was not in charge of the marketing, advertising, business development, partnerships, and finances. He put a very fine and obvious point on it with a chart for the jury entitled “Knowledge of falsity,” which listed her false statements alongside exhibits.

Enter the defense, represented by Kevin Downey. He started by telling the jurors that they had a high burden of proof in finding Holmes guilty “beyond a reasonable doubt”and that crucial information was left out of the government’s case. It was ‘incomplete’ and that their opinion would change with his review of the evidence. Holmes acted ‘in good faith’. In that review, Downey provided illustrations of 11 successful partnerships Theranos had with drug companies. As to the board, he pointed out that they were not cronies who one would expect in a fraudulent enterprise; “She appointed these people, an incredibly illustrious group of people.”

The defense continues on Friday. The jury will be given instructions after the defense concludes, and it’s expected they will have over the holidays to deliberate. MercuryNews (paywalled but refresh repeatedly to view), CNBC, The Guardian

To be continued….

TTA’s earlier coverage: Chapter 13, Chapter 12Chapter 11Chapter 10, (10-13 recap the Holmes testimony); Chapter 9Chapter 8Chapter 7Chapter 6Chapter 5Chapter 4 (w/comment from Malcolm Fisk)Chapter 3Chapter 2Chapter 1

Theranos, The Trial of Elizabeth Holmes, ch. 12: all bucks stop with the CEO (updated)

Tuesday was the last day this week of Elizabeth Holmes’ cross-examination by Federal prosecutors. Despite Monday’s excursion by the defense into how emotional and physical abuse by her live-in partner and corporate president could have warped her business judgment (a ‘me-too’ variation on the infamous Twinkie Defense relating to diminished capacity), and perhaps concealed from her the depth of Theranos’ problems, the cross-examination returned to the essentials. Who was the boss? Assistant US Attorney Robert Leach drew from her this: “Ultimately all roads led to the CEO?” “Yes,” she replied. “The buck stops with you.“ “I felt that.” 

The prosecution was highly effective in drawing out of her how Holmes controlled the company, and despite her claims of not knowing its finances, she knew what to say to round up funding. This countered the emotional drama of the prior day around ‘Svengali’ Balwani’s abuse and controlling actions. Holmes confirmed that she was the New Elizabeth in her hands-on role in altering pharma company reports, marketing materials, investor presentations, knowing their financials–and trying to kill unfavorable stories:

  • She added logos to Theranos’ pharma reports about partnerships with Pfizer and Schering-Plough to make it appear that the documents came from them. Add to these an altered analysis that came from GlaxoSmithKline (GSK), where Holmes admitted adding a logo but couldn’t recall deleting the conclusion “finger prick/blood draw procedure was difficult (needed larger lancet and better syringe system).”
  • She hired lawyers to review the Theranos website for claims at the time of the Walgreens launch in 2013. The language drew quite the critical eye for its language in their report to her. Our Readers will recognize these walk-backs on superiority claims: replacing “highest quality” with “high quality,” “highest levels of accuracy” with “high levels of accuracy,” and “more precise” to “precise.” Claims made needed to be substantiated. It’s not clear from the articles whether these were made.
  • Where walk-backs on these claims were most certainly not made were the investor presentations, including not disclosing that most testing was done on third-party machines, leaving the impression that Theranos labs were capable of running 1,000 tests.
  • Texts between Balwani and Holmes confirmed she knew that Theranos was in critical financial shape throughout 2013, burning through funding like tinder. 2014 was ‘fake till you make it’ time with sunny (sic) revenue projections–convincing to PFM Management and the DeVos family office, kicking in funds totaling close to $200 million, and then a cascade of funds following them. All of whom should have known better, admittedly.

In 2015, Holmes went directly to one of her investors, Rupert Murdoch, CEO of News Corporation and owner of the Wall Street Journal, to have John Carreyrou’s investigative reports killed. To Murdoch’s great credit, not only did the stories run, but also Carreyrou was legally defended against the mad-dog attorneys of Boies Schiller snapping at his heels. Boies Schiller also harassed and tracked former employees-turned-whistleblowers Erika Cheung and Tyler Shultz. Holmes also approved hiring the killer ‘oppo’ research of Fusion GPS. The latter became infamous a year later in sourcing and promoting now-debunked ‘evidence’ of Russian ties to then-candidate Donald Trump.

To counter the rising tide of negative news, Holmes went on CNBC’s ‘Mad Money’, hosted by, in this Editor’s opinion, the ever-credulous, often unhinged, and in recent years de trop Jim Cramer, and bald-face lied that “Every test we run on our laboratory can run on our proprietary devices.”–when only 12 did, not even the 15 Carreyrou documented.

It isn’t known yet whether Holmes will return to the stand next week for more cross-examination or a rebuttal by the defense. What is most likely is that the defense will continue with the themes of diffusion and deflection, creating cognitive dissonance in the jurors’ minds that while Holmes acted in control and committed fraudulent acts, Balwani had so thoroughly emotionally abused her that she was not in control of herself even after he departed. Look for expert testimony from Mindy Mechanic, an expert on intimate partner violence and abuse, to show that words of ‘love’ in 500-odd texts isn’t love at all. (Cue ‘What’s Love Got To Do With It’)

The Verge, CNBC, Yahoo Finance, Ars Technica

Updated: Theranos junkies (Judge Davila’s pronunciation of which is the subject of an entire Mercury News article) may want to follow John Carreyrou’s podcast, epically titled Bad Blood: The Final Chapter. He’s up to 11 episodes and close to 11 hours, so if you think your Editor is focused on this…it’s a deep dive indeed from the reporter who found that Theranos should have been spelled with an F for Fake. The link here is to the ThreeUncannyFour player, but Sony Media has made it available on other podcast platforms such as Spotify.

To be continued…

TTA’s earlier coverage: Chapter 11, Chapter 10Chapter 9Chapter 8Chapter 7Chapter 6Chapter 5Chapter 4 (w/comment from Malcolm Fisk)Chapter 3Chapter 2Chapter 1

 

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

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 9Chapter 8Chapter 7Chapter 6Chapter 5Chapter 4 (w/comment from Malcolm Fisk)Chapter 3Chapter 2Chapter 1