CA - Elizabeth Holmes (Theranos) Wire Fraud

[UndiscoveredTruth]

Dorothy Atkins@doratki
34m

Cullen said she followed up a month later, in June 2009, asking Theranos personell for an update on assay development, b/c her company had paid Theranos $279k.

Dorothy Atkins@doratki
30m

Prosecutors pulled up Theranos' validation report w/ the three assays -- CRP, il-6 and TNF-a multiplex -- that Theranos sent to Cullen in December 2009. She said she never discussed the report w/ Theranos b/c she was "swamped" w/ Schering Plough's merger w/ Merck.

Dorothy Atkins@doratki
28m

Prosecutors pulled up another validation report that Elizabeth Holmes emailed Walgreens execs in April 2010. The report appears to be identical but has Schering Plough's logo at the top, next to Theranos. Cullen says Schering Plough never validated the assays.

Dorothy Atkins@doratki
25m

Prosecutors finished Cullen's direct. John Cline is up for Holmes on cross. He begins by getting Cullen to acknowledge that she was impressed by the testing "sensitivity" of Theranos' devices when she first received two devices for its beta testing.

Dorothy Atkins@doratki
18m

Cline points out that in a Dec 2008 email, Cullen wrote Theranos that "the reports that you provided showed correlations," but she wanted more info. Theranos then sent her four validation reports, and she says she "probably reviewed" two of the reports.

Dorothy Atkins@doratki
17m

Cline also points to Holmes' April 2009 email to Cullen and her boss in which Holmes wrote that "we of course work through the validation program with [Cullen] in great detail." Cullen says she's not sure if Holmes' statement is true.

Dorothy Atkins@doratki
8m

Cline gets Cullen to acknowledge that she never voiced her concerns about Theranos' responses to her technical q's in the May 2009 email and that aside from her June 2009 email, Schering Plough never asked Theranos for more info.

Dorothy Atkins@doratki
4m

Cline points out Holmes emailed Cullen in early 2010 and Cullen replied in March 2010 apologizing for her delay and telling Holmes she asked a scientist to reach out to Theranos to discuss "the specifics of validation." That was Cullen's last communication w/ Holmes, she says.

Dorothy Atkins@doratki
1m

The parties wrapped with Cullen's examination. The government calls former @Cravath partner Daniel L. Mosley as the next witness.

 

[UndiscoveredTruth]

Dorothy Atkins@doratki
14m

Mosley, who invested ~$6M into Theranos, says he first heard of Theranos in July 2013 through his Cravath client, Henry Kissinger, who was on the board of Theranos at the time. Mosley recalls that Kissinger asked Mosley to review Theranos and he put Mosley in touch w/ Holmes.

Dorothy Atkins@doratki
14m

In July 2014, Mosley wrote Holmes that “It was certainly a pleasure speaking with you yesterday. Once I receive the private placement memorandum, I will give you a call or send you and email to find a time to get a briefing from either you or someone from your staff.”

Dorothy Atkins@doratki
12m

Mosely's email went on stating that he reached out to Greg Penner, who is Rob Walton’s son-in-law and vice chair of Walmart. Penner "would very much like to have an opportunity to review the private place memo on behalf of the Walton family & have a chance to discuss Theranos."

Dorothy Atkins@doratki
8m

Mosley says in Aug 18 2014, Holmes sent Mosley a thick package of material about Theranos. Holmes letter said "historically" Theranos has worked with pharmaceutical and military clients, which Mosley says was important to him.

Dorothy Atkins@doratki
5m

Mosley said at some point in his conversation with Holmes, he started considering investing his personal money into the startup. "I was really doing what Dr. Kissinger had asked me," but he couldn't help but consider the company "in a broader scope," he says.
Dorothy Atkins@doratki
40s

Mosely said he invested in Theranos by purchasing "Series C-2 Preferred" stock, which he explains had priority over other stock classes - like series B - in the case of liquidation. He says he doesn't know who owned series B stock.

Dorothy Atkins@doratki
2m

Mosley*** (dumb typo) says the stock agreement also had an "unusual provision" that gave Theranos board members the option to buy back series C-2 shares based on what they thought was fair market value. He had concerns about that provision, he says. Taking a ~30 min break! Brb.

 

[UndiscoveredTruth]

Dorothy Atkins@doratki
25m

We're back! The judge observes that "it seems warm in here and I don't know what that has to do with our issue last week with the water," but they'll look into it.

Dorothy Atkins@doratki
21m

Prosecutor points to notes that Mosley took on Theranos. His notes mention there were 30 Walgreens stores offering Theranos services and that those numbers will grow to "11k stores in 10 countries. He also wrote Theranos collaborating w/ 3 hospital groups -“massive undertaking."

Dorothy Atkins@doratki
13m

Prosecutor flips through the info that Theranos gave to Mosley, including the statement that "Theranos has been comprehensively validated over the course of the last seven years by 10 of the 15 largest pharmaceutical companies, with hundreds of thousands of assays processed."

Dorothy Atkins@doratki
12m

It also says "Theranos runs any test available in central laboratories, and processes all sample types" and "Theranos provides the highest level of oversight automation and standardizations." Mosley adds he thought Johns Hopkins validated tests based on the logo in the binder.

Dorothy Atkins@doratki
4m

Mosley says Theranos included a validation report with the Pfizer logo on it, and he thought Pfizer had written it. He notes that the Pfizer logo is "on every page" and the report's conclusions "read as third-party conclusions" by somebody other than Theranos.

Dorothy Atkins@doratki
1m

Prosecutor points to Theranos' financial projections in Aug 2014 were $140M total revs by end of the year and $990M by end of 2015. Mosley said he thought the estimates were reliable and made in good faith, given they were 3/4ths of the way through 2014 at that point.

Dorothy Atkins@doratki
5m

Mosley says he also read the Fortune Mag cover story on Theranos before he invested. He emailed Holmes in Sept 2014 and thanked her for the chance to invest. He explains "this was a co that had enormous potential to do good things for people" and could be financially successful.

Dorothy Atkins@doratki
3m

Mosley says he arranged meetings with the DeVos family, the Walton family and the Cox family, who were all his clients, and Elizabeth Holmes, because he thought it was a good investment opportunity.

Dorothy Atkins@doratki
2m

Mosley sent Henry Kissinger a Theranos analysis memo on Sept 2014 that said "the materials on Theranos provided by Elizabeth Holmes are fairly extensive and provide substantial insight into the company and the investment opportunity."

Dorothy Atkins@doratki
1m

Mosley's memo says "There does not appear to be any sign of any q about the quality accuracy or reliability of the testing" and he cites the Johns Hopkins info, the purported Pfizer validation report and Theranos' statement that 10 of 15 largest pharma cos validated the tests.

 

[UndiscoveredTruth]

Dorothy Atkins@doratki
6m

Mosley's memo points out that Elizabeth Holmes owned Class B shares, which had 100 votes per share as opposed to the one vote per share in the other classes. That way, she had 100% control of the company, he says.

Dorothy Atkins@doratki
1m

Mosley's 2014 memo also states a risk is that Theranos expected to earn $990 million in revs in 2015 and it would be "helpful to know the basis for these estimates," as well as how many Walgreens stores would have Theranos services in 2015.

Dorothy Atkins@doratki
8m

Mosley wrote another "important q is why Theranos is now willing to sell additional shares and wishes to raise additional cash," b/c it could dilute the shareholder's value in the co. He still chose to invest tho, he says.

Dorothy Atkins@doratki
3m

In a Sept 2014 email, Mosley wrote Elizabeth Holmes that he sent Theranos' blank confidential disclosure agreement to Cox family and to DeVos family. He also thanks her for letting him be involved, adding "I can’t tell you how enamored I am in what you’re doing.”

Dorothy Atkins@doratki
3m

Holmes also told Mosley that "We have spent a lot of time on how we’re sizing this transaction and who we’re bringing in," but she confirms that there's "an allocation" for Mosley, the Cox family and the DeVos'.

Dorothy Atkins@doratki
1m

Mosley acknowledges that he knew he could risk losing all of his investment in the Theranos and the investment was highly speculative, but "it was a risk I was willing to take, based on what I knew."

Dorothy Atkins@doratki
30m

Lance Wade is up for Holmes on cross. He begins by getting Mosley to acknowledge that Cravath is one of the most "preeminent law firms in the world," and he counseled high-profile, high-net worth families in creating trusts and managing their estates.

Dorothy Atkins@doratki
20m

Wade notes Mosley's clients invested in Theranos. The DeVos fam invested $100M, Walton fam invested $150M, the Cox family invested $100M and Henry Kissinger's trust invested $3M. He also talked w/ Stavros' Andreas Dracopoulos, who invested $25M, & John Elkann, who invested $5M.

Dorothy Atkins@doratki
1m

Wade has turned to three binders of info that Mosley received from Theranos before investing in 2014, but trial is breaking for the day. Mosley will be back on the stand bright-and-early tomorrow morning (assuming no water pipes break).

 

[Niner]

Wednesday, November 3rd:
*Trial continues (Day 23) (@ 8:15am PT) - CA – for *Elizabeth A. Holmes (34/now 37) (CEO of Theranos) charged (March, 2018) & indicted (6/14/18) & arraigned (6/15/18) with 9 counts of wire fraud & 2 counts of conspiracy to commit wire fraud and charged & indicted (4/11/20) with fraud relating to a patient's blood test. Another count of wire fraud was added in 2020, bringing the total number of felony charges to 12. Plead not guilty. No bond. Faces a maximum sentence of 20 years in prison & up to $2.75 million in fines, plus restitution, & $250K for each individual count of wire fraud & conspiracy.
Defrauding investors out of $700 million in funding for their blood-testing startup Theranos.
Trial began on 8/31/21 with jury selection. 12 jurors of 7 men & 5 women (6 Caucasians, 4 Hispanics & 2 Asians) with five alternates (3 men & 2 women). Juror #7 excused & replaced with alternate #1. Now jurors are 8 men & 4 women. Alternates 2 men & 2 women. 10/6/21: Juror #4 excused & replace with alternate #2. Now jurors are 8 men & 4 women. Alternates 2 men & 1 woman. 10/22/21: The judge excused Juror #5, moving up the third alternate to replace the juror. Both are women. No word on why the juror was excused. Now jurors are 8 men & 4 women. Alternates 2 men.
Trial began on 9/8/21.
The Court trial days will be Tuesday, Wednesday & Friday, possibly other half days. The Court may modify the trial time & set either 8:30am-2pm or 9am-2pm & possibly 30-minute breaks in between. Judge Edward J. Davila presiding. Jury selection was on 8/31 & 9/1 completed. Judge Davila said the juror whose mother-in-law died suddenly last week wants to travel for a few days next week for the memorial service, so trial won't be in session next Friday, Oct. 29. 10/20/21: Judge Davila notes that a juror can't be in court Friday, 11/12 & 12/3 & the judge has a conflict in November at some point due to a meeting in the Ninth Circuit committee. Motions hearing on 11/2/21. Trial dates: 11/3, 11/4, 11/5, 11/9, 11/10, 11/12, 11/15, 11/16, 11/17, 11/18, 11/19, 11/22, 11/23, 11/24, 11/29 (starts @ 10am), 11/30, 12/3 so far.
Indictment & court info from 4/11/20 thru 8/26/21 & on 9/30/21 & on 11/2/21 & jury selection (Day 1-3) 8/31/21 to 9/2/21 & trial (Day 1-21) 9/8/21 to 11/2/21 reference post #737 here:
CA - Elizabeth Holmes (Theranos) Wire Fraud
11/2/21 Tuesday, Trial Day 22: Motions hearing. The judge notes that the jurors have told him they have some scheduling conflicts, so tpmorrow we're going until 3pm instead of 4pm & starting at 10am on Nov. 29 instead of 9am.
Government witnesses: Lisa Peterson, a private equity manager for the DeVos family's investment firm. On cross by defense attorney Lance Wade & Prosecutor Robert Leach on re-direct.
for more info see posts #738 to 740 here:
CA - Elizabeth Holmes (Theranos) Wire Fraud
Dr. Constance Cullen, who worked at Schering Plough - which later was acquired from Merck - from 1996 to 2016. She served as the director of its bioanalytical lab.
for more info see posts #740 here:
CA - Elizabeth Holmes (Theranos) Wire Fraud
Dr. Constance Cullen continued. On cross by defense attorney John Cline.
for more info see post #741 here:
CA - Elizabeth Holmes (Theranos) Wire Fraud
Former Cravath partner Daniel L. Mosley (invested ~$6M into Theranos). On direct & cross by Lance Wade.
for more info see posts #742, 743 here:
CA - Elizabeth Holmes (Theranos) Wire Fraud
Mosley will be back on stand tomorrow. Trial continues on 11/3/21 @ 8:15am.
*Ramesh “Sunny” Balwani (53/now 56) (CFO & President of Theranos) – Motion hearing on 9/30/21 which was cancelled & trial set to begin on 1/11/22 with jury selection & trial starts on 1/18/22. No update as of 11/3/21.

 

[UndiscoveredTruth]

Dorothy Atkins@doratki
14h

After writing Elizabeth Holmes that he was "enamored" w/ her business, ex-Cravath partner decided to invest $6M into Theranos and introduced his rich clients to Holmes, who secured a total of $385 million from them. Here's my recap of today's trial action!

Ex-Cravath Atty Introduced Rich Clients To Holmes, Jury Told - Law360

(*Please note: Above is referring to yesterdays trial. Thank you.)

 

[UndiscoveredTruth]

Dorothy Atkins@doratki
3h

Good morning from San Jose! It's day 2357209??!

in Elizabeth Holmes' criminal fraud trial. Judge Ed Davila is on the bench. We'll be going until 3 p.m. today. It's unclear who's on deck after ex-Cravath partner Daniel Mosley's exam wraps, so stay tuned...

Dorothy Atkins@doratki
3h

Holmes' counsel wants to exclude a patient - called B.B. - from testifying about a platelet complete blood count test, b/c the test wasn't mentioned in the initial indictment and the DOJ dropped a dr. witness from testifying about the test. "It's a notice issue," she says.

Dorothy Atkins@doratki
3h

Judge Davila doesn't seem convinced. He says the defense was given notice in the superseding indictment and bill of particulars, and prosecutors had identified B.B. as a potential witness. Prosecutor John Bostic agrees the defense had notice.

Dorothy Atkins@doratki
3h

After arguments, Judge Davila shifts gears and says he "may very well" grant the defense's motion on limiting B.B.'s testimony, b/c he's concerned it may be at odds with his pretrial order on patient testimony, but he says he'll issue an order. He's calling in the jury.

Dorothy Atkins@doratki
2h

The jury is in the courtroom. Judge Davila tells the jury that yesterday it was "oppressively hot" due to the court's HVAC system and he knows it's difficult to focus when it's warm, so they'll take standing breaks today. He adds "don't be shy" about requesting "fatigue breaks."

Dorothy Atkins@doratki
2h

Former Cravath partner Dan Mosley is back on the stand. Holmes' counsel Lance Wade is up on cross, asking him about representing Stavros Niarchos Foundation president and Greek shipping heir Andreas Dracopoulos.

Dorothy Atkins@doratki
2h

Mosley says he traveled to Theranos w/ the Niarchos Foundation and he "certainly did introduce them to Elizabeth" but didn't represent the foundation. Defense counsel asks why he asserted atty-client privilege over his Niarchos emails. He says he didn't, but his atty might have.

Dorothy Atkins@doratki
2h

Holmes' atty pulls up a chart w/ Mosley's clients & friends of Henry Kissinger who Mosley introduced to Holmes & who invested in Theranos. The chart includes the Oppenheimer family, which were friends of Kissinger - not a client - and invested $20M. In total, $403M was invested.

Dorothy Atkins@doratki
2h

Holmes' atty pulls up Mosley's Sept 2, 2014 email to Holmes that he wrote after reviewing Theranos' materials and preparing a memo on Theranos. "I could not be more impressed with what you have accomplished and what lies ahead for Theranos," he wrote.

Dorothy Atkins@doratki
2h

Holmes' attorney referred to Henry Kissinger as "Mr. Kissinger," and Mosley corrected him, saying he's "Dr. Kissinger."

 

[UndiscoveredTruth]

Dorothy Atkins@doratki
2h

Holmes' counsel points out that Mosley's Sept 2014 email acknowledges Holmes offered to meet for a briefing, but he held off so that he could first meet w/ the Stavros Niarchos Foundation. Mosley never updated his Theranos memo after he went to Theranos' HQ, the atty says.

Dorothy Atkins@doratki
2h

Holmes' atty Lance Wade is flipping through the binder of material that Theranos gave to Mosley to review. Wade points to a line about "epidemiological models," but he fumbles saying the word "epidemiological." Mosley tries to correct him, but also struggles to pronounce it.

Dorothy Atkins@doratki
2h

Wade presses Mosley on Walgreens. Mosley agrees that he assumed Walgreens did due diligence of Theranos b4 entering a contract. He adds he "obviously reviewed the Johns Hopkins report," which seemed to be commissioned by Walgreens, and it was important to his decision to invest.

Dorothy Atkins@doratki
2h

Wade gets Mosley to acknowledge that he didn't go back and clarify who drafted the validation report that Theranos provided him, which had a Pfizer logo on top of each page.

Dorothy Atkins@doratki
1h

Wade pulls up a Sept 2013 press release titled "Theranos selects Walgreens as a long-term partner through which to offer its new clinical laboratory service." Wade points out the PR release says blood samples are taken by fingerstick "or a micro-sample" via "traditional methods"

Dorothy Atkins@doratki
1h

Mosley says he doesn't remember reading the press release, but if he did, he didn't focus on that specific phrase and even if he did, he wouldn't have necessarily known what it meant. He adds that he prepared his Theranos memo over a weekend.

Dorothy Atkins@doratki
1h

Wade suggests Mosley's memo indicates that he knew that Theranos used blood drawn from samples taken not only from finger-stick, but also venously. Mosley disagrees. "I didn’t know that at the time and I’m not sure [my memo] says that," he says.

Dorothy Atkins@doratki
1h

Wade gets Mosley to acknowledge that he doesn't remember if he discussed Theranos' revenue projections with Sunny Balwani or Elizabeth Holmes. (Probably hinting here that Holmes claims Balwani was to blame for the overblown financial targets.)

Dorothy Atkins@doratki
1h

Wade says Theranos' July 2014 financial projections included ~$169M in deferred revenue. He also notes that Holmes' shares had more voting power, so she could put herself ahead of other investors in the event of liquidation. Mosley: "That’s not my understanding of the law."

Dorothy Atkins@doratki
1h

Trial is taking a 30 minute break. Brb!

 

[UndiscoveredTruth]

Dorothy Atkins@doratki
51m

We're back! The judge just had a sidebar with the attorneys and then disappeared into chambers. We're waiting for him and the jury. Wade is still at the podium so I'm guessing there won't be any surprise celebrity witnesses interrupting Mosley's cross.

Dorothy Atkins@doratki
34m

Mosley is back on the stand. Wade pulls up a letter Mosley wrote to Kissinger in Sept 2014 that was included w/ his Theranos memo. Mosley told Kissinger that if he shared his memo w/ anyone, they should sign an NDA.

Dorothy Atkins@doratki
32m

Wade asks Mosley about Theranos' FDA approval. Mosley admits he's not a regulatory expert "by any means," but he says "my understanding was that FDA approval was not needed," and Holmes said Theranos intended to get FDA approval "because that is a gold standard."

Dorothy Atkins@doratki
21m

Wade gets Mosley to acknowledge that he met Elizabeth Holmes for the first time at the BDT conference thrown by Byron Trott's firm, which Wade called "the Woodstock" for private business dealings for high-net worth families. "I wouldn’t describe it that way," Mosley replies.

Dorothy Atkins@doratki
17m

Wade wants to admit a document with a list of all the different speakers at the 2014 BDT conference and "breakout sessions," but the judge says it's not all relevant, but he'll allow the jury to see the hour-long panel that Holmes spoke on called "Game Changers."

Dorothy Atkins@doratki
1h

Mosley says he attended the panel and some of his clients were at the conference, but he doesn't know if they attended Holmes' session.

Dorothy Atkins@doratki
1h

Wade moves on to another topic - @rparloff's article in Fortune Magazine. Wade is reading excerpts from the article comparing Elizabeth Holmes to Steve Jobs.

This CEO is out for blood


Dorothy Atkins@doratki
1h

Wade hasn't yet mentioned that when you look at the article on Fortune Magazine's website now, it has an "author’s note" that on December 17, 2015, Parloff published a "protracted correction to this article."

How Theranos Misled Me


Dorothy Atkins@doratki
1h

The takeaway from Wade's q's about the Fortune Mag article appears to be that Henry Kissinger and Stanford prof Channing Rex Robertson were both quoted saying highly complementary things about Holmes' intelligence and leadership capabilities.

Dorothy Atkins@doratki
45m

Wade pulls up an Oct 2014 email to Holmes in which Mosley wrote "I am happy that each of the potential investors from the Walton, Cox, DeVos and Niarchos families are proceeding very well as I would expect." (Maybe it's just me, but this testimony seems to be pretty redundant.)

Dorothy Atkins@doratki
31m

Wade is going through a series of emails b/w Mosley and Holmes. Wade didn't mention this, but in one email from Oct 2014, Mosley wrote Holmes that Richard DeVos "is a terrific person" and tells Holmes she should meet him. Richard died in 2018 at 92.

Richard M. DeVos, Amway Co-Founder and G.O.P. Stalwart, Dies at 92 (Published 2018)


Dorothy Atkins@doratki
26m

Wade asks the judge when the break is. The judge seems super annoyed and says he thought they were going to finish with Mosley's exam today. Wade agrees they will. We're taking a 30 minute break.

 

[LinasK]

Elizabeth Holmes trial: New trouble for Holmes with second apparently pilfered logo
Ethan Baron - Yesterday 2:49 PM
SAN JOSE — Theranos founder Elizabeth Holmes was hit with more damaging testimony Tuesday, as jurors learned she distributed a report bearing an apparently unauthorized logo from a second pharmaceutical company, adding to claims that she had knowingly misled potential investors and corporate customers.
The email that jurors in Holmes’ criminal fraud trial saw Tuesday, sent from Holmes to Walgreens, had a Theranos company report attached bearing the logo of major pharmaceutical firm Schering-Plough. The drug giant has since merged with Merck. Walgreens at the time was considering partnering with Theranos to put the company’s blood-testing machines inside drugstores.

A Schering-Plough scientist testifying for the prosecution in U.S. District Court told the jury that before the dual-logo report was issued, she and a handful of colleagues had visited Theranos headquarters in Palo Alto while considering working with Holmes’ company.

Scientist Constance Cullen testified that Holmes “almost exclusively” answered their questions, at times interrupting when Cullen, frustrated with Holmes’ indirect responses, tried to ask questions of other Theranos representatives. “There were what I describe as cagey responses or attempts to redirect to other topics of discussion,” Cullen said of Holmes’ answers.
The jury had earlier heard that Holmes sent executives for the drugstore chain a Theranos report with the logo of pharmaceutical giant Pfizer. The report touted the “superior performance” and “excellent” accuracy of Theranos machines, but a former Pfizer scientist testified that he had dismissed Theranos’ technology and was not aware of anyone at Pfizer authorizing Theranos to use the logo.

On Tuesday, a long-time lawyer for former U.S. Secretary of State Henry Kissinger testified that he, too, had believed the Pfizer logo meant the laudatory Theranos report was written by Pfizer and showed the pharmaceutical firm had approved Theranos’ technology.

Daniel L. Mosley, who personally invested $6 million in Theranos after meeting with Holmes and receiving materials from her company, testified that the report had the Pfizer logo on every page, and was important to his decision to invest.
more at link: Elizabeth Holmes trial: New trouble for Holmes with second apparently pilfered logo

 

[UndiscoveredTruth]

Dorothy Atkins@doratki
16m

We're back with an hour left on the trial clock! Wade pulls up a Nov 2014 email pointing out that Mosley sent an Oppenheimer family rep an NDA and in another email introduced him to Holmes. The gov't objects to the 2nd email on relevance grounds.

Dorothy Atkins@doratki
8m

Judge Davila has Wade move on to something else, and he'll later take a break to review the doc. Wade turns to Theranos' mandatory redemption provision that gave board members the option to buy back shares based on what they thought was their fair market value.

Dorothy Atkins@doratki
5m

Wade notes Mosley objected to the provision and worked with Theranos' attorney David Boies to discuss terms exempting Mosley and his clients from it. Mosley says he's known Boies probably since before 1987.

Dorothy Atkins@doratki
4m

Mosley says he spoke to David Boies before investing in Theranos and Boies told him Theranos' technology was "absolutely sound and performing well," and it's "largest risk was with the rollout," and whether it would perform well when it was rolled out in many locations.

Dorothy Atkins@doratki
1m

Wade is walking through the Theranos website, which has footnotes stating that Theranos tests may use venous draws, which Wade says uses smaller needles. Mosley replies: "I don’t know when I learned that or if a learned that honestly."

Dorothy Atkins@doratki
1m

Wade has finished with cross, except for a few q's on a doc that prosecutors object to. They're having a sidebar in chambers to discuss the objection, and likely the timing. The judge seems annoyed we haven't gotten to another witness today.

Dorothy Atkins@doratki
2m

We're back. Judge Davila sustained the objection to admitting the documents, but lets Wade ask Mosley q's. Wade gets Mosley to acknowledge he introduced Alice Walton to Holmes and "said nice things" about Holmes. W/ that, Wade wrapped cross.

Dorothy Atkins@doratki
1m

Redirect was quick. Mosley says he may have written he "recommended" his clients invest in Theranos but that was "loose language" and he never encouraged his clients to invest. He adds that "these were highly sophisticated parties w/ sophisticated staff" to vet investments.

Dorothy Atkins@doratki
1m

Dan Mosley was excused and trial broke for the day. We'll be back here tomorrow at 9:30 a.m. for a full day of testimony. Peace out.

 

[mickey2942]

This trial is looking more and more like EH committed fraud, knowingly and deliberately. She probably should have taken a plea deal.

 

[Niner]

Thursday, November 4th:
*Trial continues (Day 24) (@ 9:30am PT) - CA – for *Elizabeth A. Holmes (34/now 37) (CEO of Theranos) charged (March, 2018) & indicted (6/14/18) & arraigned (6/15/18) with 9 counts of wire fraud & 2 counts of conspiracy to commit wire fraud and charged & indicted (4/11/20) with fraud relating to a patient's blood test. Another count of wire fraud was added in 2020, bringing the total number of felony charges to 12. Plead not guilty. No bond. Faces a maximum sentence of 20 years in prison & up to $2.75 million in fines, plus restitution, & $250K for each individual count of wire fraud & conspiracy.
Defrauding investors out of $700 million in funding for their blood-testing startup Theranos.
Trial began on 8/31/21 with jury selection. 12 jurors of 7 men & 5 women (6 Caucasians, 4 Hispanics & 2 Asians) with five alternates (3 men & 2 women). Juror #7 excused & replaced with alternate #1. Now jurors are 8 men & 4 women. Alternates 2 men & 2 women. 10/6/21: Juror #4 excused & replace with alternate #2. Now jurors are 8 men & 4 women. Alternates 2 men & 1 woman. 10/22/21: The judge excused Juror #5, moving up the third alternate to replace the juror. Both are women. No word on why the juror was excused. Now jurors are 8 men & 4 women. Alternates 2 men.
Trial began on 9/8/21.
The Court trial days will be Tuesday, Wednesday & Friday, possibly other half days. The Court may modify the trial time & set either 8:30am-2pm or 9am-2pm & possibly 30-minute breaks in between. Judge Edward J. Davila presiding. Jury selection was on 8/31 & 9/1 completed. Judge Davila said the juror whose mother-in-law died suddenly last week wants to travel for a few days next week for the memorial service, so trial won't be in session next Friday, Oct. 29. 10/20/21: Judge Davila notes that a juror can't be in court Friday, 11/12 & 12/3 & the judge has a conflict in November at some point due to a meeting in the Ninth Circuit committee. Motions hearing on 11/2/21. Trial dates: 11/4, 11/5, 11/9, 11/10, 11/12, 11/15, 11/16, 11/17, 11/18, 11/19, 11/22, 11/23, 11/24, 11/29 (starts @ 10am), 11/30, 12/3 so far.
Indictment & court info from 4/11/20 thru 8/26/21 & on 9/30/21 & on 11/2/21 & jury selection (Day 1-3) 8/31/21 to 9/2/21 & trial (Day 1-22) 9/8/21 to 11/2/21 reference post #745 here:
CA - Elizabeth Holmes (Theranos) Wire Fraud
11/3/21 Wednesday, Trial Day 23: Holmes' counsel wants to exclude a patient - called B.B. - from testifying about a platelet complete blood count test, b/c the test wasn't mentioned in the initial indictment and the DOJ dropped a Dr. witness from testifying about the test. "It's a notice issue," she says.
Government witness: Former Cravath partner Dan Mosley back on stand for cross by Holmes' counsel Lance Wade.
for more info see posts #747 to 749 here:
CA - Elizabeth Holmes (Theranos) Wire Fraud
Dan Mosley continued on cross & redirect.
for more info see post #751 here:
CA - Elizabeth Holmes (Theranos) Wire Fraud
Trial continues on 11/4/21 @ 9:30am.
*Ramesh “Sunny” Balwani (53/now 56) (CFO & President of Theranos) – Motion hearing on 9/30/21 which was cancelled & trial set to begin on 1/11/22 with jury selection & trial starts on 1/18/22. No update as of 11/4/21.

 

[UndiscoveredTruth]

Dorothy Atkins@doratki
6h

Ex-Cravath partner Dan Mosley testified today that David Boies - who was a Theranos board member at the time - told him Theranos' technology was sound before Mosley invested $6M into the startup. My recap!

Boies Said Theranos Tech Was Sound, Investors' Atty Testifies - Law360

 

[UndiscoveredTruth]

Dorothy Atkins@doratki
4h

Good morning from San Jose! Elizabeth Holmes' criminal fraud trial doesn't start for about an hour, but I'm in the overflow courtroom at the ready. It looks like we'll be watching at least one pre-recorded video deposition today. Perhaps Henry Kissinger? Just a guess. Stay tuned!

Dorothy Atkins@doratki
4h

As we wait, on the docket, Judge Ed Davila granted Holmes' request to bar patient B.B. from testifying on a blood test, finding that the gov't didn't give the defense proper notice. A small win for the defense & a rare instance in trial when the judge changed his mind after args.

Dorothy Atkins@doratki
3h

The jury is in the courtroom. There hasn't been any pre-trial motions arguments this morning. The government calls its next witness, Chris Lucas, the nephew of Donald Lucas, the former chairman of Theranos' board of directors and an early investor in the startup.

Dorothy Atkins@doratki
3h

Lucas says he founded the VC firm Black Diamond Ventures in 1998, and he's currently its managing director. Lucas says his uncle Don Lucas introduced him to Holmes in 2005 or 2006.

Dorothy Atkins@doratki
3h

Lucas said his uncle was introduced to Holmes, and "he started spending considerable time with her and he was very excited about the opportunity and he pretty much took it from there." Don Lucas also invested in Theranos and served as its board chairman, he says.

Dorothy Atkins@doratki
3h

Chris Lucas says BDV invested $400k in Jan 2006 after learning about Theranos from his uncle and meeting Holmes. "She was very passionate about the project. Very sincere about what she was trying to do. She worked all the time. It was all Theranos, all the time for Elizabeth."

Dorothy Atkins@doratki
3h

Chris Lucas says in early 2006 Theranos was a "very high risk," early stage startup and as an investor, "you took your chance and if it didn’t work out, you move on." Later that year, his firm invested $1.5M, and in December 2013 the firm invested an additional $5.4M.

Dorothy Atkins@doratki
3h

Chris Lucas said he met w/ Holmes 4-5 times a year and had lunch, and he never heard anything negative about Theranos. He adds that "there was not a lot of transparency," but he felt that Holmes was telling him the info he needed to make his decisions.

Dorothy Atkins@doratki
3h

Chris Lucas said he would typically review a startup's financial statements and "actually see everything working in the laboratory" but "we were not provided the opportunity." His uncle resigned from the board in 2012, but Chris says he still had a good relationship w/ Holmes.

Dorothy Atkins@doratki
3h

Prosecutor John Bostic points to various investor emails in 2013 announcing Theranos' commercial launch and the WSJ 2013 article on Theranos. The article mentions Theranos would provide cheaper, more accurate, more accessible blood tests. "That’s its mission clearly," Chris says.

 

[UndiscoveredTruth]

Dorothy Atkins@doratki
2h

Chris Lucas sent Theranos 5 q's on Dec 18, 2013 before investing $5.4M. He asked if it was necessary to invest before Dec. 31, 2013, b/c Theranos had announced the fundraising round 2 weeks earlier and "the timing was quite compressed." He was told he needed to invest by EOY.

Dorothy Atkins@doratki
2h

Lucas says the deal had to close by 2014, b/c Walgreens had lent Theranos money in the form of a note and it had the option to convert that note to stock by 2014. He asked if that was going to happen, b/c as an investor "You want more people in the wagon helping fund the co."

Dorothy Atkins@doratki
2h

Lucas says if Walgreens was confident in Theranos and the decision to scale up, the company would want to participate in Theranos' scale up "for sure" by converting its note to stock. Holmes wrote him that Walgreens was participating, and he thought "great, they’re ready to go."

Dorothy Atkins@doratki
2h

Lucas said it would have been helpful to have more info from Theranos, "but I had a relationship with Elizabeth and everything seemed to be going great." He adds that "the fact that she had been able to attract partners like Walgreens and others - that’s a huge factor."

Dorothy Atkins@doratki
2h

Lucas says Holmes was concerned "and perhaps rightly so" about competitors stealing Theranos' IP and crushing the co before it got to fruition. But there was still financial info that typically he would have access to as an investor, which was "irregular," he says.

Dorothy Atkins@doratki
2h

Lucas says he thought Theranos' devices could do dozens of blood tests and he would have been "very surprised" to learn that the devices could do only 12 tests. "If we’ve spent all this time and now we can only do 12, that would be a problem," he says.

Dorothy Atkins@doratki
2h

Lucas says he would've been surprised to learn the military wasn't using Theranos' devices. He adds that he thought the risk between investing in 2006 and 2013 was different, b/c he thought "the risk profile" would drop over time as Theranos grew.

Dorothy Atkins@doratki
2h

Prosecutors wrap direct pointing to @rparloff's Fortune Mag cover story on Elizabeth Holmes. Chris Lucas says "Great article. Great pictures. Everything.” He adds that he was proud when he read it. "Very proud of the situation. Very proud we were involved. Proud of Elizabeth."

Dorothy Atkins@doratki
2h

Kevin Downey is up for Holmes. He starts by asking Lucas about his impression of Holmes. "She was very articulate. Very passionate. She is very smart and she was on a mission. This was not just for her" or about making money. It was about bringing impt tech to the world, he says.

Dorothy Atkins@doratki
2h

Downey gets Lucas to acknowledge that his firm didn't hire outside counsel to conduct due diligence of Theranos before investing in the startup. Lucas also says his uncle's investing philosophy is that "it’s always about the people," not necessarily the financials.

Dorothy Atkins@doratki
2h

Lucas acknowledges that it's customary to look at a startup's IP portfolio, contracts and other corporate docs before investing, but his firm didn't do that. Lucas adds that "we were going on [my uncle Don Lucas'] experience as well.”

Dorothy Atkins@doratki
1h

Downey is flipping through a document explaining Theranos' technology and prospective growth. Lucas says "what I would have seen would have been quite rudimentary." We're taking a break. Back in 30!

 

[UndiscoveredTruth]

Dorothy Atkins@doratki
1h

There's something that the judge says the attorneys need to discuss with him, but they're going to do it after the break. The judge has cryptically described the issue as "the morning matter" and "the transaction."

Dorothy Atkins@doratki
1h

It appears that the attorneys discussed the mysterious "morning matter" with the judge in chambers. The jury is in the courtroom and Judge Davila is on the bench. Chris Lucas is back on the stand.

Dorothy Atkins@doratki
1h

Downey gets Lucas to concede that developing tech is "kind of like renovating your kitchen. It costs more and takes longer than you think."

Lucas laughs and says "that’s particularly relevant to me right now."

Dorothy Atkins@doratki
59m

Kevin Downey asks Lucas how old Elizabeth Holmes was when he met her in 2005, around the time his firm gave her ~$1.9 million. "I believe 19," he says.

Dorothy Atkins@doratki
40m

Kevin Downey points to a document detailing Lucas' Black Diamond Venture's 2006 investments into Theranos in addition to the $400k. There is a $1.98M entry and a $925k investment, which Downey is over $2 million. (DOJ said it was $1.5M + $400k on direct, so that seems to be off.)

Dorothy Atkins@doratki
38m

Downey notes that at the time investor Craig Hall also invested $1.92 million into Theranos through the entity Black Diamond 55 LLC. Downey adds that Hall was the largest American Airlines shareholder and a Black Diamond Ventures client. Lucas agrees.

Dorothy Atkins@doratki
26m

Downey pulls up a June 2007 email Lucas wrote to Holmes with a spreadsheet analyzing three of Theranos' "cash-flow scenarios." But he says he doesn't remember what documents he used to prepare the spreadsheets for Holmes.

Dorothy Atkins@doratki
22m

Lucas sent other spreadsheets in July 2011 to Holmes w/ "two current models" of revenues. He says he doesn't remember what the docs are, but adds "I don’t know that we Black Diamond developed the model. It's actually a pretty good model, it seems. I don’t think we prepared this."

Dorothy Atkins@doratki
19m

Downey pulls up an email with a Black Diamond Venture employee mentioned. Lucas initially doesn't seem to remember the person. "You’re certainly taking me down memory lane. I’m seeing this person and I’m seeing them and I’m like ‘Oh my gosh, I forgot about that person!'”

Dorothy Atkins@doratki
16m

In an Aug 2007 email, Lucas wrote Holmes that he agrees Theranos' docs "properly represent Theranos’ financial forecast based upon our discussions and assumptions." He adds, "let me know how I can further help you and the company. I’m very interested to do so, if you would like."

Dorothy Atkins@doratki
11m

Lucas says his uncle resigned as chairman of Theranos due to health reasons in 2012 and he acknowledges that George Schultz took over. He also agrees that when he first invested in Theranos its stock was under a $1 a share and later investments were just under $3 per share.

Dorothy Atkins@doratki
12m

Downey points out that in December 2013, Chris Lucas knew that Black Diamond Ventures' Theranos shares had grown in value from pennies to $75 per share and chose to purchase more at $75 per share.

Dorothy Atkins@doratki
4m

I believe Downey is pointing out that Walgreens paid $50 million to Theranos for $15 per share at the same time Black Diamond Ventures was paying $75 per share in December 2013.

Dorothy Atkins@doratki
29m

Chris Lucas wasn't aware of the price-per-share difference, and said it was the first time he saw Walgreens' terms with Theranos. "That was pretty exciting to see," he says.

Dorothy Atkins@doratki
28m

Trial is taking a 30 minute break. Brb.

 

[UndiscoveredTruth]

Dorothy Atkins@doratki
39m

We're back! Holmes' counsel Kevin Downey pulls up a transcript from an early 2013 Safeway investor call. A Merrill Lynch analyst asks about Theranos, and then-Safeway CEO Steven Burd says the rollout delay is b/c Theranos wants to ensure the "infrastructure" can handle the tech.

Dorothy Atkins@doratki
38m

(Burd testified earlier in this trial. ICYMI, here's one of two stories of mine on his testimony from a month ago.)

Ex-Safeway CEO Says Theranos Didn't Deliver On $55M Deal - Law360

Dorothy Atkins@doratki
30m

Downey shows a form from Jan. 2014 indicating Black Diamond Venture's $5.35 million investment in Theranos. Under the entry is a line item showing that Boies Schiller Flexner LLP gave Theranos $4.84 million.

Dorothy Atkins@doratki
19m

Downey points out that Black Diamond Ventures charges a 2.5% management fee and ~16% on profits of investments, and roughly 30 individual investors joined BDV's investment in Theranos. Lucas adds that the fees also went to helping cos grow if possible.

Dorothy Atkins@doratki
15m

Downey wrapped cross, and John Bostic is up for the DOJ on redirect, and points out that Chris Lucas invested his personal funds in Theranos. Bostic also notes that Holmes was 21 in 2005, and not 19, which he thought. She was also 29 when BDV invested in 2013, Bostic notes.

Dorothy Atkins@doratki
9s

Up next: The government calls Dr. Lynette Sawyer, who served as Theranos' co-lab director from 2014 to June 2015. She says she left Theranos, b/c she "grew increasingly uncomfortable with the way things were done as a director."

Dorothy Atkins@doratki
18m

Sawyer says she never set foot in Theranos' lab, was never invited there, never saw Theranos' blood-testing device, never reviewed data of Theranos' blood analyzers and wasn't told that Theranos was using blood-analyzers in the CLIA lab.

Dorothy Atkins@doratki
16m

Sawyer says she only reviewed SOPs on "ordinary, FDA-approved assays" virtually and wasn't asked to review any SOPs related to Theranos' devices. She said generally she only had contact w/ a Theranos employee who sent her the paperwork.

Dorothy Atkins@doratki
15m

Sawyer says Sunny Balwani hired her, but told her she was only needed for part-time work, and she was never introduced to the other co-lab director and never heard about the prior lab director, Adam Rosendorff. She's never met Holmes, she says.

Dorothy Atkins@doratki
8m

Sawyer says she quit b/c she was "uncomfortable about the lack of clarity about the lab" and "I didn't have a person I could talk to about some of the issues I had w/ the SOPs." "It was a little uncomfortable because [Balwani] was a little pushy about it." Direct wrapped.

Dorothy Atkins@doratki
19s

Lance Wade is up for Holmes on cross, getting Sawyer to acknowledge that she knew her job would be part time and "very temporary" and she never asked to visit Theranos or to go "on site."

Dorothy Atkins@doratki
1m

Trial is breaking for the week. The jury left and prosecutors note that the gov't's next witness is lab director, Dr. Kingshuk Das, who defense counsel has tried (unsuccessfully) to block from testifying. Here's my coverage on that pre-trial battle.

Holmes Can't Stop Ex-Theranos Lab Director From Testifying - Law360


Dorothy Atkins@doratki
1m

Prosecutor Robert Leach says there's likely going to be some debates about Das' testimony. Direct should last 1-2 hours, according to the gov't. Defense says Das' exam will be "one-long day." After Das, the gov't plans to call Theranos investor Alan Eisenman.

 

[UndiscoveredTruth]

Dorothy Atkins@doratki
45m

Judge Davila suggests that the parties meet Tuesday morning to discuss Das' testimony, but he notes that's going to take a couple of hours and he doesn't think Das' exam will be done by Wednesday for another witness. "I just don't see it realistically."


Dorothy Atkins@doratki
42m

And that's all for this week! No Kissinger. No Murdoch. Not yet anyway.

 

[Niner]

Holmes - added to schedule:

Monday, Nov 8 2021
10:00AM
5:18-cr-00258-EJD-1 - USA v. Elizabeth A. Holmes (NC)
AUSA:John Bostic/DEF:John Cline
Motion in Limine Re Testimony of Roger Parloff

link: CALENDAR


Balwani:

Thursday, Dec 16 2021

09:00AM
5:18-cr-00258-EJD-2 - USA v. Ramesh Sunny Balwani
AUSA: Jeffrey Schenk/DEF:Jeffrey Coopersmith
Pretrial Conference
Motions in Limine Hearing

5:18-cr-00258-EJD-2 - USA v. Ramesh Sunny Balwani (NC)
AUSA: Jeffrey Schenk/DEF:Jeffrey Coopersmith
Pretrial Conference
Motions in Limine Hearing

link: CALENDAR