Elizabeth Holmes takes the stand again in fraud trial

(CN) — Elizabeth Holmes continued testimony in her fraud trial Monday in federal court in San Jose, continuing what figures to be the most pivotal and dramatic phase of the trial that began in early September. 

Holmes, calm and poised on the stand, detailed how Theranos engaged in contracts with various pharmaceutical companies from 2006 to 2009 to test its technology that attempted to transform the blood testing industry and revolutionize an important quarter of health care. 

“We thought this was a really big idea,” Holmes said at one point during her testimony. “Robots in a traditional lab had not been miniaturized to run in a device that could be put at the point of care.”

Holmes wore a blue dress with a black blazer, removed her mask after an hour and a half delay and gave testimony that appears intended to lay a foundation that the ubiquitous Pfizer document referred to repeatedly throughout the trial may have not been fraud after all. 

“Did you think about doing work with Pfizer in 2010 and beyond?” Downey asked his client Holmes near the end of Monday’s testimony. 

“Yes,” she said. 

The timeline is important because Dr. Shane Weber, a former executive with Pfizer, testified earlier in the trial that he was the large pharmaceutical company’s liaison with Theranos in 2008, when the two companies contemplated partnering for a clinical trial. 

Holmes said that Pfizer wanted to test the efficacy of a drug using Theranos’ system of blood analysis, but did not discontinue a relationship with Theranos due to any concern over the inaccuracy of tests.

“Pfizer decided not to pursue the drug, because it acquired other drugs through companies it bought,” Holmes said. 

So Pfizer abandoned the relationship not because Theranos technology wasn’t up to snuff, according to Holmes, but because it intended to test different drugs by different means. 

Holmes said conversations with Pfizer continued even into 2015, when rumblings about Theranos’s accuracy issues first began to surface. 

“Did you continue to interact in 2015?” Downey asked. 

“We did,” Holmes responded politely. 

The issue is so important because the government has accused Holmes of creating an internally produced document and then interposing a Pfizer logo on it to make it appear as though it was third-party corroboration of Theranos’ efficacy. 

If instead, Theranos was simply placing the logos of pharmaceutical companies with whom it had conducted business, there are fewer grounds for outright fraud. However, if Holmes did indeed fake a document to swindle potential investors, as the government claims, Holmes could get convicted. 

Theranos conducted major trials with the Mayo Clinic, with Merck, Bristol Meyers Squibb and other major companies, as well. 

“Did the trials validate the Theranos system?” Downey asked. 

“It did,” Holmes said. 

The fact that Holmes is still willing to stand by the technology she developed from 2003 to 2009 is bad for the government’s case, particularly as Holmes and her lawyers are saying that Theranos was an example of business failure not fraud. 

But the timeline has yet to catch up to the period when Holmes and her business partner Sunny Balwani began painting a rosy picture for investors when the viability of their technology was in question. That period began in earnest in 2010 and accelerated through 2013. 

Even if Downey avoids questions about the tempestuous time, government prosecutors will ask Holmes about the Pfizer document, about her claims regarding financials that appear exaggerated, about whether or not she lied about obtaining defense contracts and other aspects of the trial that provide the foundation for government claims of fraud. 

How Holmes fares in answering those questions will likely go a long way in determining whether she is spending time in federal prison this time next year. 

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