(CN) — A water outage at the federal courthouse in downtown San Jose postponed the Elizabeth Holmes trial Wednesday and prolonged the testimony of Lisa Peterson, a wealth manager for the wealthy DeVos family, builders of the Amway empire and the people behind former President Donald Trump's controversial secretary of education Betsy DeVos.
When reporters first arrived at the courthouse Wednesday morning, they were told the court was in session but no one was allowed in due to a burst pipe nearby that made getting water impossible. However, it was later revealed that the jury was dismissed and Peterson’s testimony will have to wait until next week.
On Tuesday, Assistant U.S. Attorney Jeff Schenk questioned Peterson, who detailed how the DeVos Family Council, a governing board within the wealthy and powerful DeVos family that votes on various items of family business, decided to invest portions of the family’s enormous fortune gleaned from marketing programs involving beauty and health care products.
“Doug figured it might be better to put in a hundred,” Peterson said at one point during the testimony, referring to Doug DeVos, the former president of Amway and son of the co-founder Rich DeVos. The “hundred” refers to $100 million the DeVos Family Council, through its investment firm RDV Corp., agreed to provide Theranos with a substantial investment in about 2014.
Peterson was a member of the council tasked with performing due diligence on Theranos, researching the company, talking with CEO Elizabeth Holmes personally and even conducting a site visit to the company's headquarters in Palo Alto, California.
During her visit she wrote an email to the family council saying they should commit the sum immediately, she testified.
She later wrote to Holmes to tell her that her boss, Jerry Tubergen, former CEO of the RDV Corp., “committed on the spot $100 million.”
Like many of the witnesses before her, Peterson detailed her journey from excited investor to skeptical believer to scorned investor furious at feeling like they were the victims of fraud.
Peterson’s testimony was particularly valuable to the government because she repeatedly insisted the DeVos investment was largely predicated on a glowing report by Pfizer that spoke to the accuracy of the portable blood testing devices created by Theranos. The document, purportedly crafted by Pfizer, also attested to the innovative potential of the machines.
“It was very relevant to our decision because it came from a large company and it validated everything Holmes was telling us,” Peterson said.
In reality, Pfizer never produced the document and had actually decided to stop doing business with Theranos due to accuracy issues with their blood tests. Federal prosecutors claim the document was produced by Theranos, which slapped a Pfizer logo on it to make it seem like the blood testing devices performed better.
If true, the claim spells trouble for Holmes, who has consistently acknowledged her company failed but that failure was not criminal and does not amount to criminal fraud. However, the government may have to prove that Holmes was personally involved in the scheme to use Pfizer to manufacture independent verification of her device’s proficiency.
It has yet to do so.
Lance Wade, an attorney for Holmes, proceeded to punch holes in Peterson’s testimony, getting her to acknowledge she had contradicted herself about how and when the investment was approved by the DeVos Family Council and whether or not she took notes in important meetings.
While seemingly innocuous, such contradictions are important for the defense strategy which hinges on showing that investors such as Peterson were not unsophisticated dupes swindled out of their money but rather knowledgeable investors who knew they were getting into a speculative investment.
At one point Wade and Peterson had a terse exchange about the definition of a unicorn. In venture capital, the term unicorn describes a startup company that is privately held and worth more than $1 billion.
But it appeared during testimony on Tuesday that Peterson, despite being in the investment industry, was unfamiliar with the term.
“Unicorns are usually investments that can really pop, correct?" Wade asked.
“That’s your definition,” Peterson replied.
“What is your definition?,” rejoined Wade.
“I don’t deal in investing in unicorns,” Peterson said.
Later Wade asked Peterson if she knew what a unicorn was.
“Can you explain it?” she asked.
“You’re the investment professional,” Wade replied tartly.
Wade spent the day calling Peterson’s credibility into question and intimating that the DeVos family lost out on their investment due to a lack of due diligence and acumen, not because they were defrauded by Holmes.
Wade is slated to take up cross-examination of Peterson once again Nov. 2.
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