I was expecting more fireworks from the cross-examination of the former Theranos CEO. Today was a day of questions without a narrative throughline. I don't know why the government sent an assassin who didn't know when to use the knife.
The defense presented a strong narrative. The CEO of Theranos was a young woman who believed in the technology and had some very well-credentialed advisors who led her to believe it was real. Intellectual property was real. She never sold her shares. She was being abused by her boyfriend, the president of Theranos, and maybe that clouded her judgement. Balwani is being tried separately from the others.
To counter that, the prosecution needed to show that he was in control. She is facing 11 counts of wire fraud and conspiracy to commit wire fraud, which is central to proving that she lied. Robert Leach drove her control home on the first day of testimony. She could have fired everyone, including Balwani. Balwani didn't keep her from knowing what was going on in the lab.
Today was more scattered. He did score points, but he didn't talk about the narrative thread about the control of Holmes. Here is a brief overview of the cross-examination.
Several investors claimed thatHolmes told them that Theranos devices weren't on medevac helicopters.
It would be wrong to tell an investor that Theranos did not use third-party machines.
The people calculating the stock option values of Theranos were given different financial projections.
There were a lot of things wrong in the Fortune article, but Holmes promoted it.
Emails show that Theranos did special preparation for demo tests, but didn't report the results.
A slideshow from a Theranos scientist that was cited as part of her belief in the technology was forward looking and contained more ambitions than facts.
Working devices and patents are not the same thing.
The journal articles were published after the period in which the alleged fraud took place.
The inspection of the Centers for Medicare and Medicaid Services was going badly.
It was possible that there was a theme. The trial was delayed by the defense, but it seems like it could have been avoided if they'd delayed it more. It is easier to say I don't remember than it is to say it happened yesterday.
I was not happy that a promised discussion of trade secrets didn't happen. Last week, Leach said we would get to trade secrets. Some corporations abuse trade secrets to keep consumers in the dark. The use of trade secrets by Theranos could fall into this category. I guess we won't find out, because the argument wasn't made by Leach.
There are military toys.
The investors said that the Theranos devices were used by the military, either on medevacs or in theater in places such as Afghanistan. Steven Burd, CEO of Safeway, and Roger Parloff, the journalist who wrote a Fortune article that was heavily cited in the trial, echoed their testimony.
I don't think I said that.
Theranos devices were not being used by the military, according to the testimony ofHolmes. It would have been wrong to tell them otherwise. She said she never told anyone that Theranos used their devices on military aircraft. She said she didn't think she said that.
She testified that it would be wrong to tell a potential investor that Theranos didn't buy any devices from third parties. The prosecution didn't respond to the trade secrets argument, and we didn't inquire into why the company was using third-party devices. It might have been helpful to suggest that there was a sin of omission here, that by withholding information, he had functionally lied.
The prosecution did not do that.
Weird revenue projections.
The first witness in the trial was Danise Yam, who testified that she got revenue projections from the company. The numbers were much smaller than the ones shown to investors by Holmes. In documents investors received, revenue was projected to be over a billion dollars in 2015. These are not the same numbers.
The people pricing the options got lower estimates than potential investors.
There was no good explanation for why the numbers were so different. That was knocked down by Leach.
The people pricing the options got lower estimates than potential investors, so it doesn't look good. Why were the models different? Why were they chosen if it was because of different methodologies? Who chose them? Why did he allow this?
He moved on to his next topic.
Are you out for blood?
The article by Roger Parloff for Fortune put Theranos on the map for a lot of people. The article was not sent to shareholders before we saw an email from Theranos to its shareholders. She used it in investor presentations even though she knew there were things wrong in the article. No effort was made to correct those things.
We read the article. There was no mention of modified third-party devices in the article. That was not correct, he admitted. The article claimed that Theranos offered more than 200 tests. It wasn't true that Theranos' labs took up less space than conventional labs.
The way her defense team had lingered on how she didn't receive negative feedback from pharma companies could have been related to the lack of corrections to the article. He did not.
A demo derby.
The attempt was made to show that the investors had been deceived. Some test results were suppressed in order to do that. The employees of Theranos made plans to make sure would-be investors received finger sticks instead of traditional venous draws.
If it does, we can't tell them.
The employees of Theranos were getting ready for a visit from potential investors. People from BDT Capital Partners were going to have their blood drawn. The email was written by Christian Holmes, who said that they couldn't tell them their order would prompt a venous draw.
He laid out scenarios for what to do. The group could be told certain tests couldn't be done. Was this to hide from BDT Capital Partners? No, he said. BDT Capital Partners did not invest.
Theranos upper management interfered with a Walgreens demo. Daniel Young wrote in an email that several results were struck because they were all running low. Even though Walgreens was a business partner, Theranos didn't tell them why they struck the tests. He pointed out that the man could have talked about the struggles of the company. She didn't choose to.
The believer?
The defense team showed a slideshow of evidence that Theranos tech was real. The scientist author wrote in the future tense in the slides. It was about the tech. There was a discussion of candidate technologies in the slideshow. It meant to be determined.
The device it described is not real.
There was still work to be done.
The patents of Theranos were the subject of a lot of discussion. Working devices and patents are not the same thing. He pulled up the first patent of the man. The device it described does not exist. The man said, laughing, not yet.
The defense pointed out that Theranos had published peer-reviewed work. The dates on the papers were read by Leach. The government says that fraud was committed, but she couldn't have influenced her state of mind during that time.
An exit interview.
He pointed out that the regulators had kept him in the loop about how bad the inspection was. He showed an email that showed the schedule for the first day of the inspection, which was for Holmes, who was in Florida to receive an award. The schedule said that he had to be present at a lunch to get the award.
The man seemed amused on the stand.
Before they left, the inspectors did an exit interview with Theranos. There was someone there. The lab would be found to be putting patients' health in immediate jeopardy, which was denied by Holmes. She said the document didn't refresh her memory after she was shown it. She thought she was talking to inspectors about what Theranos had done. It wasn't clear what the point of the line of questioning was.
The cross-examination stopped after that. On the stand, he smiled or laughed at the other person. Maybe she knew she had the upper hand.
People remember stories. They make the facts more memorable by forming an organizing backbone. The narrative throughline of the defense was easy to remember. The jury didn't get another narrative to counter that, and it didn't pack the emotional punch of the testimony. I left the court with a sense that the prosecution had failed.
Tomorrow, the attorneys will have a chance to ask her more questions, which could be used to poke more holes in the government's case. After she leaves the stand, there is very little left to hear. They may not have to.
All 21 stories are available to view.
