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Holmes, once hailed as the next Steve Jobs, faces a dozen federal fraud charges over allegations she knowingly misled investors, doctors and patients about her company’s blood testing capabilities in order to take their money. Holmes has pleaded not guilty and faces up to 20 years in prison.
Holmes catapulted Theranos to a $ 9 billion valuation on the promise that its technology could effectively test diseases like cancer and diabetes with just a few drops of blood taken per finger prick. Then a Wall Street Journal investigation found that Holmes’ technology and blood testing methods were not working as advertised. The dominoes started to fall from there.
The trial only took place two days this week, instead of the usual three. But there was no shortage of notable events in the San Jose federal courtroom where the trial is ongoing.
Steven Burd, the former CEO of Safeway, testified on Wednesday about how his company decided to close what would turn out to be a failed partnership with Theranos. He described being enthralled by the idea that Theranos could offer efficient, affordable and accurate blood tests to Safeway buyers – and enthralled by Holmes, whom he first met in 2010.
He compared her to the four US Presidents he met in terms of being able to order a piece. “There are very few people I’ve met in business that I would say are really charismatic,” Burd said. “She was clearly charismatic. She was very intelligent.”
Theranos’ retail partnerships with Safeway and Walgreens helped legitimize the business, but the partnership with Safeway never even got off the ground despite the grocery chain investing millions in the effort. Burd is the second major witness to appear in the trial after former Defense Secretary James Mattis last month. (Mattis was a member of Theranos’ board of directors.) Burd will continue to be questioned on Tuesday when the trial resumes.
Witnesses pointed out that Holmes was ultimately responsible
Burd testified that it was Holmes who was in charge, even when the chief operating officer and president of the company, Ramesh “Sunny” Balwani, was in a meeting. (Balwani faces a separate trial on the same charges as Holmes and has also pleaded not guilty.)
Burd said Holmes “never looked” to assess Balwani’s response to the questions. Burd also said he was unaware that Holmes and Balwani were involved in a romantic relationship – something the two kept a secret – which he said raised the question of what could have been hidden from other. He also said Holmes negotiated the Theranos deal with Safeway in the absence of a lawyer, which he said was unusual.
Adam Rosendorff, the former Theranos lab director turned whistleblower, who faced six days of questioning ending Wednesday afternoon, said it was Holmes – not him – who had more power in the company, despite regulations stating that the laboratory director is legally responsible for its laboratory operations. Prosecutor John Bostic asked him, “Who had more power: you or the CEO, Ms. Holmes?” Rosendorff testified: “Mrs. Holmes”, noting that her authority flowed from the “business priorities” of the company.
The question of who was responsible at Theranos is relevant to the defense. In court records, Holmes’ attorneys have indicated that she may have been claiming she had been the victim of domestic violence by Balwani, therefore not intending to cheat. Holmes’ attorneys have also singled out those who served as lab director, arguing Holmes was unqualified for the role and hired others who were.
A second juror is excused from the case
A 12-person jury member was excused on Wednesday after expressing anxiety and conflict with her religious beliefs as a Buddhist over the issue of forgiveness and any possible condemnation or punishment that could result from how she votes in the trial .
A deputy juror was chosen to replace her – but that juror also expressed some concern about the possible conviction of Holmes, who started Theranos at 19 and is now 37, as she is very young. She also said “English is not my mother tongue, I could make a mistake.”
The judge reminded the juror that it was not up to him to determine the sentence and the defense and the prosecution chose to have it served.
Last month, a juror was excused on the second day of trial for financial hardship after being unable to change her work schedule. With at least two months remaining in the trial, only three substitutes remain.
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