Elizabeth Holmes trial: ex-employee says she was pushed back in an attempt to sound the alarm

A former lab worker at Theranos Inc. said on Wednesday she had sounded the alarm bells about the startup’s blood testing practices with colleagues, managers and even a senior executive and board member. , but had been pushed back at each turn.

Testimony from former employee Erika Cheung reinforced federal prosecutors’ case against Theranos founder Elizabeth Holmes, who is battling charges that she defrauded patients and investors by promising that her technology could test a range of health problems using just a few drops of blood from a finger prick.

During two days of testimony, Ms Cheung said that Theranos’ high-profile proprietary technology often did not work, and the company took shortcuts to make it look like its product was ready for large-scale use by the patients.

ELIZABETH HOLMES AND THERANOS TRIAL: WHAT YOU NEED TO KNOW

She said she tried to talk to as many people about the issues as possible, including talking to the company’s No. 2 manager, Ramesh “Sunny” Balwani. Rather than being receptive, she said, he asked why she was qualified to raise concerns and if she wanted to work in the company.

Ms Cheung said she was “really stressed and uncomfortable with what was going on” during her last few months at the company and didn’t feel confident enough in the technology to analyze samples. of patients. She resigned in April 2014.

Ms. Holmes pleaded not guilty to 10 counts of wire fraud and two counts of conspiracy to commit wire fraud. Her lawyer described her as guilty of little more than naivety and running a bankrupt business.

During cross-examination, a lawyer for Ms Holmes attempted to establish Ms Cheung’s role as a low-level employee at Theranos, asking her to detail the hierarchy of the company’s lab teams and whether she knew that under laboratory protocols, the laboratory director is responsible for ensuring that tests are accurate and reliable.

Ms Holmes’ attorneys tried to block jurors from seeing some of Ms Cheung’s emails from her time at Theranos, claiming it was hearsay that could not be linked to Ms Holmes. But U.S. District Judge Edward Davila cleared several other emails for use on Wednesday.

Ms Cheung’s testimony marked her most full and sworn account of her time at Theranos, an experience she told regulators about, in an HBO movie and publicly at a TED talk. Ms Cheung told jurors how she joined the company as a wide-eyed young graduate, enamored with Ms Holmes’s vision, and left about six months later.

M / s. Cheung is the second witness in what is expected to be a trial of more than three months.

Ms. Cheung joined Theranos after graduating from the University of California, Berkeley in 2013, a time when. she recalls, the startup was creating a buzz on campus. At a job fair in Berkeley, the Theranos booth had “a line outside the door of people waiting to speak to the recruiter,” she said. After handing over her resume, she held talks with executives, including Ms Holmes, whom she said she admired and felt ‘star struck’.

She was enthusiastic about the technology and was quickly told that corporate secrecy was paramount, Ms. Cheung recalls from the witness stand. By the time she became a partner at Theranos Lab, the company was already offering testing to the public at Alliance of Walgreens boots Inc. WBA 3.94% pharmacies.

Theranos told investors that its proprietary machines can perform more than 200 tests with tiny amounts of blood. But Ms Cheung explained to jurors that Theranos could never handle more than 12 types of blood tests on his proprietary Edison machine, and instead performed most of the tests on third-party machines, including some that he modified to work with smaller blood samples.

“The machine was not designed to be able to perform processing on such a small volume,” she said of the commercial analyzers.

Ms Cheung’s job was to validate the tests Theranos performed on the Edison device, she said. Such tests required numerous blood samples, which she said they sometimes obtained by paying employees, including herself, to donate.

ELIZABETH HOLMES TRIAL: THE FOUNDER OF THERANOS IN COURT FOR THE FIRST DAY OF PROCEEDINGS

During the process, she said she noticed that every time she performed a vitamin D test on her own blood, it showed that she had a deficiency, which was not reflected on traditional machines. “I started to notice there was a slight gap,” she said.

In November 2013, a month after joining the company, Ms Cheung said she tried to alert her colleagues to failures of the vitamin D quality control tests she was performing on an Edison machine, this which, according to laboratory protocols, prevented him from taking samples from patients.

In a chain of emails sent to jurors in response to Ms Cheung’s concerns, Mr Balwani said: “This is beyond unacceptable performance,” with Ms Holmes weighing in to ask if the sample could being analyzed on a traditional device and asking, “How fast can we solve this problem?” “

Ms Cheung said a patient sample was eventually analyzed on the Theranos device despite the issues, after an employee omitted some data to make it look like it passed quality control. “I didn’t agree with that,” Ms. Cheung said of the decision.

During her testimony on Wednesday, Ms. Cheung said the practice of removing so-called outliers to overcome quality control failures occurred frequently during her time at the company. Eliminating a “weird data point” is not uncommon in a lab, she said, but at Theranos there was no definition of an outlier and “no one from benchmark, really, to determine what an outlier was “.

Routine failures in quality control testing were troubling, Ms. Cheung said, because if you can’t get an accurate result when you know what the answer is supposed to be, “it doesn’t give you assurance that it is very reliable “when the blood of a real patient is tested.

Over the months, she became concerned that patient samples were being tested when “behind closed doors we have all these problems.”

She said she never tried to talk to Ms Holmes about the issues because a friend and colleague, Tyler Shultz, was already in contact with her. Ms Cheung said she and Mr Shultz also spoke to her grandfather, then a board member, George Shultz, a former secretary of state, but that he also allayed the concerns. The eldest Mr. Shultz passed away earlier this year.

In 2015, months after leaving Theranos, Ms Cheung spoke to a Wall Street Journal reporter about her experience with the company, she said, prompting a threatening letter from Theranos attorneys delivered by a man who she said seemed to follow her. .

Around the same time, she said, she started speaking up about her concerns to federal lab regulators.

After inspections and sanctions from the regulator, the Centers for Medicare and Medicaid Services, Theranos canceled all test results performed on its machines and struck a deal under which Theranos voluntarily shut down its labs.

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In 2019, Ms. Cheung co-founded Ethics in Entrepreneurship, an organization aimed at improving the ethics and culture of emerging businesses.