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The review of the corporate controller of blood testing company Theranos continued on Tuesday as part of the federal criminal lawsuit against the company’s founder and CEO, Elizabeth Holmes.
Prosecutors and the defense team used the testimony of So Han Spivey, also known as Danise Yam, to present opposing views on Theranos’ financial situation and whether the information the company provided regarding his finances depended on the public.
In response to questions from Senior Attorney Robert Leach, Yam said Theranos was increasingly cash-strapped during the 2013-2014 period, as seen in a weekly cash flow report sent to Holmes.
When shown the same report on cross-examination, Yam agreed with the defense that “the company has received hundreds of millions of dollars from customers” during the same period and that a “distinction technique ”imposed by accounting principles classified these funds as deferred income rather than cash.
Holmes is accused of spearheading an alleged multi-million dollar scheme to defraud investors, doctors and patients through false and misleading claims about the viability of Theranos blood testing technology .
The federal indictment charges Holmes with 12 counts of wire fraud and conspiracy to commit wire fraud. If convicted, Holmes faces up to 20 years in prison and a $ 3 million fine.
Yam was in charge of monitoring cash flow for Theranos and providing information to companies that provided audit, equity valuation and tax preparation services for the company.
She confirmed that Theranos had a growing “accumulated deficit” on her books, meaning the company’s total losses since its inception exceeded its profits. In 2015, the company’s tax return showed the deficit to have reached $ 575 million.
Asked about a document that nonetheless forecast a whopping $ 990 million in revenue for Theranos for 2015, Yam said she had “no explanation as to why this figure is different from that provided to” the Theranos’ investment advisory firm, and “can’t think of any reason.” for the different sets of numbers.
On cross-examination, defense attorney Lance Wade returned to the pink projection of $ 990 million. Yam testified that she did not know who prepared the document or for what purpose or if it had already been provided to investors.
Former Theranos laboratory associate Erika Cheung then came to testify at the San José trial. Describing herself as a “starstruck” by Holmes in college, Cheung said she quit after just six months after taking her first post-graduate job at Theranos. “I didn’t think the technology we were using was adequate.”
Cheung said Theranos’ much-vaunted testing device, known as Edison, “was supposed to perform all of the tests offered by Theranos” on the basis of a single finger prick, but lacked this ability. .
The Edison version used during Cheung’s tenure could only run about 12 tests and “could only run one type of test on one patient sample at a time.”
To get around the Edison’s shortcomings, Cheung said Theranos performed the dozens of tests on his menu using a combination of a Siemens machine modified to allow testing of finger samples, a clinical lab at the offices of Theranos who used larger samples obtained by standard venous tests. and sending patient samples to an independent laboratory.
Cheung identified an email chain in which she reported on quality control issues she encountered with the Theranos device. The emails eventually filtered through to Holmes, who asked if the sample to be tested was large enough to work “using traditional methods” ie not the Edison.
Tuesday’s proceedings began with U.S. District Judge Edward Davila and attorneys meeting out of the jury’s presence to address the multiple issues raised since the start of the trial on September 8 with opening statements.
One of the jurors had reported potential exposure to COVID-19 late last week. After receiving two negative tests over the weekend, he was allowed to remain on the jury.
A female juror was excused for financial hardship and replaced with a male deputy, bringing the number of genders on the jury to eight men and four women.
A third juror emailed the judge asking if jurors would be involved in a sentencing decision if Holmes was convicted. Davila questioned the juror to make sure she understood that any conviction would be dealt with in court. He later reminded jurors that they should not consider any potential penalties in their assessment of the case.
Responding to media reports of a bystander yelling at a juror outside the courthouse, Judge Davila reminded everyone present that “(a) anyone who interferes with a juror risks a court investigation.” .
The trial was scheduled to continue on Wednesday.
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