Elizabeth Holmes endures her worst day yet

(CN) — It was the most damning day for Elizabeth Holmes in her fraud trial as the journalist who launched her to fame testified and provided some of the most direct and incriminating evidence about Holmes’s willingness to wildly exaggerate the effectiveness of her miniature blood-testing machines. 

Roger Parloff, who wrote the 2013 cover story for Fortune magazine about Holmes and Theranos that catapulted her into the national spotlight, testified Thursday and provided some of the most revelatory evidence that Holmes was willing to completely misrepresent the number of blood tests her devices could perform reliably. 

“We can do all those tests,” Holmes said in a recorded interview with Parloff played for the jury on Thursday. She was referring to the approximately 1,000 blood tests that traditional blood analyzing laboratories like Quest could perform in traditional settings. 

Holmes claimed during an on-the-record interview with a major national journalist that her tests were essentially a miniaturized laboratory that could perform hundreds of tests, when prior testimony from lab directors and other Theranos employees demonstrate that the devices were capable of performing about a dozen different blood tests, with varying degrees of reliability. 

Parloff also directly asked Holmes why the website claimed the devices could do 200 tests, which was itself a gross exaggeration, and she responded that those were the only most commonly ordered tests. 

“I think we can say more than 1,000,” Holmes said to Parloff on the recording played for the jury. The ability of the jury to hear Holmes herself make these claims after months of testimony from various investors, former employees and others made for a dramatic day in a trial that has mostly been a slog through technical details.

The problem for the government up to this point has been that many of the former employees dealt mostly with Sunny Balwani, Holmes’s former business partner and romantic interest. Several of the investors have also testified that most of their dealings with Balwani, lending credence to the theory that Holmes’s defense team was poised to foist the blame on her former partner who was 20 years her senior and had considerably more business experience. 

But Thursday’s testimony showed that Holmes herself undeniably made dramatic embellishments about Theranos technology, some of which corroborated the testimony of prior witnesses. 

In another incriminating moment, Parloff told the jury that Holmes shared a document internally produced by Theranos with a Pfizer logo on it to mislead people into believing the major pharmaceutical company endorsed the company’s technology, when in fact, Pfizer had shown early interest but had ceased doing business with Theranos. 

“Did Ms. Holmes tell you that Theranos generated this report?” asked John Bostic, attorney for the U.S. Department of Justice. 

“No,” said Parloff. 

Earlier mentions of the Pfizer document failed to connect the scheme directly to Holmes, but in this instance, it was clear that Holmes herself sent the document as an attachment on an email sent to Parloff. 

“Did Ms. Holmes ever tell you these were not the conclusions of Pfizer?” Bostic asked. 

“No,” Parloff responded. 

Holmes also told the journalist that Theranos had active business with Big Pharma through 2014, which former employees have testified is not true. 

Parloff also asked Holmes several times in a different recording played later whether Holmes used third-party devices, which she denied. Theranos was using modified Siemens devices to run many of the blood tests it claimed were being performed by its proprietary devices, according to previous testimony. 

All of which amounted to some of the most difficult evidence for Holmes in the trial to date.

But John Cline, attorney for Holmes, used cross-examination to cast doubt on whether Parloff, like so many investors before him, wasn’t doing a proper amount of due diligence and that Holmes was perhaps trying to protect intellectual property rights in a highly competitive environment. 

Cline also induced Parloff to admit he talked to numerous sources before he went to press with his cover story, including Richard Kovacevich, former U.S. Secretaries of State Henry Kissinger and George Schultz, the CEO of Walgreens and former Defense Secretary James Mattis. 

Cline also asked numerous questions about Parloff’s notetaking ability, why certain of his notes related to the story have since been discarded and other such minutiae. 

The cross-examination was still ongoing when the trial broke for the day around 4 p.m., but on Thursday, after days of building circumstantial evidence, the prosecution appeared to score a major victory in its case, while the defense raised questions about whether Holmes could have been protecting trade secrets. 

The trial is slated to resume on Friday and the prosecution is expected to rest its case tomorrow. If so, it will have closed with a bang. 

Follow @@MatthewCRenda

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