Theranos blood-testing machines, which US prosecutors claim failed over 51 per cent of the time, provided no indication if things went awry during demonstrations for visitors, a court has heard.
Seven weeks into the criminal fraud trial of Theranos founder and CEO Elizabeth Holmes, the feds are trying to show that Holmes, along with her former partner and COO Ramesh "Sunny" Balwani (to be tried next year after denying any wrongdoing), raised hundreds of millions of dollars from investors based on misrepresentations about technology that didn't work.
In court on Tuesday, Daniel Edlin, a former Theranos project manager who used to operate Theranos' Edison blood-testing machines, testified that device demonstrations, given mainly to VIP visitors, ran a demo app that hid failure messages.
Prosecutors pointed to an August 2013 email Edlin sent citing the need to set up a testing lab to show company technology to visiting executives. In reply, according to Law360 reporter Dorothy Atkins, former Theranos software engineer Michael Craig suggested using the demo app, which "shields protocol failures from the client."
Last week, former Safeway CEO Steven Burd testified that Holmes had brought a Theranos machine with her to a 2011 meeting and he agreed to a finger-prick blood test. The machine reportedly made lots of noise but never produced a result.
Nonetheless, Safeway struck a $85m deal with Theranos to test the machines and spent about $350m preparing its stores to offer rapid blood testing before it became clear Theranos couldn't fulfill its part of the partnership.
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The feds earlier this year claimed Theranos's Edison machine tests were about as accurate as flipping a coin. However, the company's database containing details on its test results was somehow destroyed in 2018 after it was subpoenaed.
On Wednesday, Holmes' attorney argued that Theranos tests were not attempts to deceive anyone. According to the Wall Street Journal, Kevin Downey pointed to a 2012 email from Balwani to Theranos staff after a demonstration for Walgreens Boots Alliance executives in Chicago.
The email said the results produced by a Theranos machine during a demo matched results from a lab. And Downey subsequently asked Edlin whether he was trying to deceive anyone, to which Edlin replied, "Of course not."
Theranos, founded in 2003, raised about $700m from investors and for a time in 2014 was valued at about $9bn, based on the notion that it could quickly test for multiple conditions with just a pinprick of blood. But after Wall Street Journal reporter John Carreyrou published a report in 2015 that challenged the company's claims, things began to unravel and by 2018, Theranos had shut down.
Holmes’ legal team filed a brief last week to defend its assertion that Carreyrou is a potential witness and should not be allowed to hear other evidence presented at trial [PDF]. The government filed its own brief [PDF] arguing that the gag order imposed on Carreyrou is unconstitutional and that his inclusion on Holmes’s potential witness list is being done in bad faith to exclude him from reporting on the trial.
Holmes' trial is expected to run another six weeks. ®