An interesting Tuesday at the Ninth Circuit Court of Appeals in San Jose, California. A three-judge Federal appeals court held hearings yesterday (11 June) on separate appeals on the convictions found and restitution imposed on both Elizabeth Holmes and Ramesh ‘Sunny’ Balwani, the former CEO and president of Theranos. The Holmes hearing was 50 minutes before Judges Jacqueline Nguyen, Ryan Nelson, and Mary Schroeder.

Holmes is seeking a complete overturn of the trial and jury verdict primarily on the basis of Judge Edward Davila including evidence favorable to the prosecution and not including defense-favorable evidence. She was not there as serving her time to mid-August 2032 in Bryan, Texas. Representing her for the defense was Amy Saharia of Williams & Connolly LLP, considered to be one of the US’ top appellant litigators.

• Favorable to the prosecution was Theranos’ chief scientist Kingshuk Das, MD’s testimony. Dr. Das was the final Theranos lab director who worked there March 2016 to June 2018–and voided two years of Edison Lab tests. Saharia is claiming that the prosecution was improper in putting him on the stand since he was not qualified by the court as an ‘expert witness’ and was allowed to express his opinion, specifically in statements allowed by Judge Davila including “I found these instruments to be unsuitable for clinical use.”

Going back to TTA’s original coverage of 11 Nov 2021 (which the coverage below largely has not), Dr. Das was hired to respond to CMS’ deficiency report that went to the prior lab director two months before. The subject line: “CONDITION LEVEL DEFICIENCIES – IMMEDIATE JEOPARDY.” The report went on to say that “it was determined that your facility is not in compliance with all of the Conditions required for certification in the CLIA program.” and concluded that “the deficient practices of the laboratory pose immediate jeopardy to patient health and safety.” After speaking with Holmes and dealing with her position that it wasn’t an instrument failure, but rather a quality control and quality assurance issue, he voided every Edison lab test made in 2014 and 2015–between 50,000 and 60,000. Holmes was told, but she didn’t believe Das or previous lab directors about the Edison problems. Also testifying was a contract offsite co-lab director in 2014-15 who expressed her reservations to one of Dr. Das’ predecessors –who also happened to be Sunny Balwani’s dermatologist. 

Judge Nelson said during the hearing that “There’s a pretty good story here for Ms. Holmes” and “They do have a pretty good basis for some unfairness here.” in how Judge Edward Davila allowed this testimony.  Judge Nguyen also seemed to agree with the defense position that Judge Davila went too far in allowing opinions from Dr. Das that under the rules would require his being vetted as an expert. Judge Nelson added that the conviction was supported by “pretty overwhelming evidence.” For Dr. Das, the conundrum was that he was called in as the former lab director to testify on Holmes’ knowledge of the problems the Edison lab had but he also had a level of expertise involving the labs. The Federal prosecutor on the appeal, Kelly Volkar, countered with how Judge Davila “carefully parsed” the Das testimony and sustained defense objections during the trial. While having concerns that Das strayed into opinions and Judge Davila allowed it, Judges Nguyen and Schroeder stated that much of Das’ testimony concerned what he observed at the company.

Reportedly, much of the hearing time focused on this one point. Saharia again insisted that “She [Holmes] in good faith believed in the accuracy of this technology” and did not knowingly misrepresent it.

• Not including defense-favorable testimony was another alleged Davila mistake. In the defense presentation, Judge Davila allowed testimony from former laboratory director Adam Rosendorff without including more evidence of government investigations of his work after quitting Theranos in 2014. These were direct attacks on his competence in running a lab facility. However, in our 6 October 2021 coverage, the defense grilled Rosendorff on his work at uBiome and PerkinElmer; both came under Federal investigation during his tenure.

A final Holmes defense point was made on how these ‘errors’ made by Judge Davila unfairly shaped the jury decision, where she was found guilty by a jury on only four counts of the prosecution’s 11.

The panel did not provide any timeline for issuing a ruling, other than in ‘due course’. This can be anywhere from a few weeks to over a year. The track record for Federal Court appeals tends to be dismal for the defense. 

Far less coverage was given to the separate Sunny Balwani hearing. This centered on the fact that the restitution of $450 million to investors ordered by Judge Davila’s order was incorrect and part of the “nature of investing in a private company.”  His defense counsel, Patrick Looby, also representing Holmes, made a most interesting spin on how fraud did not rob Theranos of ‘residual value’. “The fact that the investors may have had difficulty selling their shares is not owing to the fraud.” Volkar for the prosecution stated that the investors had no opportunity to do any recouping of their losses. Looby also contended that the prosecution presented distorted evidence against Balwani in a different narrative than against Holmes. Balwani was convicted on all 12 charges and is serving 12.9 years at the Federal Terminal Island facility. No timeline for a ruling was reported.

Mercury News, AP, Yahoo Finance  The Ninth Circuit also has an unusual web page on the Holmes appeal with case information plus notifications of public proceedings.