Week 7 of trial is tough on Elizabeth Holmes

(CN) — The Elizabeth Holmes trial completed week 7 on Friday and this past week contained some of the most damaging testimony for the former CEO of Theranos to date. 

On a rainy Friday in San Jose, a former Pfizer executive named Shane Weber, who was tasked to perform due diligence on Theranos on behalf of the pharmaceutical company in 2009, concluded the portable blood tests had no “diagnostic or clinical interest to Pfizer.”

Later, prosecutor Robert Leach showed Weber an email that Elizabeth Holmes sent to Walgreens with a glowing report about Theranos technology that had a Pfizer logo on the document. 

Weber then confirmed that the report was identical to one sent to Pfizer in 2008 to try and convince the company to invest money in Theranos and said that Pfizer did not approve of the use or its logo on the report that was clearly produced by Theranos. 

“Did anyone at Pfizer reach the conclusions shown in the document?” Leach asked at one point. 

“No,” Weber replied. 

It is one of the most damning pieces of evidence that Theranos sought to deceive investors by using fake documents with unauthorized logos purportedly generated by outside companies. The prosecution brought up the fake document during opening arguments but the question has become whether Holmes herself knew about it. The fact that the document was in an email sent personally by Holmes will be a tough fact for the defense to overcome. 

John Cline, attorney for Holmes, did get Weber to admit he only worked with Theranos for a brief three-month period and that Pfizer had formed a working relationship before he arrived at the company, but the email with the forged document loomed large in the testimony. 

Holmes's direct control of the company, something the defense team has worked to call into question as it has sought to shift the blame to her former partner and boyfriend, Sunny Balwani, was further cemented by the testimony of Daniel Edlin.

Edlin was college friends with Christian Holmes, the brother of Elizabeth Holmes, who became a product manager at Theranos and due to his connections had unique insight into the operations of the company. 

Edlin said Theranos routinely hid testing failures during testing demonstrations and at times didn’t attempt to use its device to perform blood tests, relying on old-school machines instead. 

As it related to Rupert Murdoch, who invested at least a million dollars into Theranos, Edlin testified he was instructed via email by a Theranos executive to remove some of the questionable results from the blood test performed on Murdoch during a demonstration. 

Holmes was copied on the email. 

Edlin also repeatedly testified that Holmes was in charge of the company and did not defer to Balwani when it came to large overarching decisions. 

“Generally, she was the C.E.O., so she had the final decision-making authority,” he said.

Kevin Downey’s cross-examination focused more on providing context for Edlin’s claims about demonstrations rather than Holmes’s role as CEO. He did induce Edlin to confirm that Theranos did not use demonstrations to “play tricks” on prospective investors. He further admitted he wasn’t privy to most of the follow-up conversations after demonstrations were carried out. 

But Edlin testified that Holmes was personally involved and “detail oriented” as it related to Theranos’s marketing materials, some of which contain misleading language about the portable analyzing tests, including that they could perform hundreds of tests, when, in fact, they could perform about a dozen with varying degrees of reliability. 

But attorneys for Holmes were also able to show instances when the former CEO argued for more transparency in the documents, including one instance where she demanded Theranos disclose they use a variety of ways to draw blood, not just a finger prick. 

Adam Rosendorff also revealed damaging testimony earlier in the trial about the ways in which Theranos would use other testing devices to deceive investors and business partners like Walgreens and Safeway, but defense attorneys were again able to show emails where Holmes was encouraging Rosendorff to be transparent and not engage in any duplicitous activity. 

Those facts are tough for the government’s case as they must show that Holmes directed a fraudulent scheme intent on separating credulous investors from their money for their own personal gain. The questions will come down to establishing the deception beyond a reasonable doubt while proving the level of Holmes’s personal involvement versus that of Balwani.

Another important point that will be discussed at length is whether investors were really duped by Holmes or whether they were getting into a speculative enterprise with eyes wide open about the speculative nature of the startup company. 

Follow @@MatthewCRenda

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