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Los Angeles Reaches $26 Million Settlement with Sameday Health and its Contract Doctor Over Alleged Phony COVID-19 Lab Test Results That Put Patients at Risk and Cost Insurers Millions

Company was accused of manipulating clinical laboratory reports from previous COVID-19 tests to forge new results, and sending “negative” test results to patients even though their tests had never been completed

National COVID-19 testing chain Sameday Health (a.k.a., Sameday Technologies) will pay $22.5 million—and its contracted doctor an additional $3.9 million—to settle a case with the City of Los Angeles and the Los Angeles County Attorney’s Office over alleged falsifying, faking, and failing to deliver more than 500 COVID-19 test results to consumers.

According to an announcement from the Los Angeles City Attorney’s Office, the settlements require Sameday Health and physician Jeffrey Toll, MD, to pay restitution and civil penalties, and to comply with permanent injunctions prohibiting them from participating in the alleged activities that led to the City Attorney’s investigation.

“If you get a negative test, you assume it’s safe to go to work, visit family and friends, or take a vacation. But the victims of this alleged scheme might unknowingly have spread COVID to others or failed to receive timely and appropriate care themselves,” Los Angeles City Attorney Mike Feuer, JD, said in the announcement.

“We’ve intervened to protect consumers in numerous major COVID-related matters, but this may be the most significant consumer protection case to emerge from the pandemic,” he added.

Los Angeles City Attorney Mike Feuer, JD
Los Angeles City Attorney Mike Feuer, JD, (above) teamed with Los Angeles County District Attorney George Gascón to reach a $26 million settlement with Sameday Health of Venice, Calif., and its contracted physician over phony COVID-19 test results. “It’s beyond outrageous that anyone would falsify COVID tests, as we allege happened here,” Feuer said in a statement. Clinical laboratories will want to note the fervor at which state officials are pursuing million-dollar settlements in COVID-19 fraud cases. (Photo copyright: California Globe.)

The LA City Attorney’s Complaint Against Sameday Technologies

Sameday Technologies, which operates under the name Sameday Health, has 55 COVID-19 testing sites throughout the country, with 16 locations in Los Angeles County, including five in the city.

The complaint released by the LA City Attorney’s Office states that consumers “paid a premium to get a rapid COVID-19 PCR test from Sameday Technologies, Inc. (Sameday), a Venice, Calif.-based start-up turned national chain that promised reliable COVID-19 test results in 24- hours or less.”

Sameday did not own its own clinical laboratory and its primary third-party vendor labs “were only required to aim to deliver results to Sameday’s consumers within 24-hours or 48-hours of the laboratory receiving the consumers’ testing samples from Sameday, along with all of the paperwork and information necessary to track, process, and report the result.

“But Sameday, unable to meet its 24-hour guarantee, sent hundreds of customers fake test results and laboratory reports stating that they had tested negative for COVID-19, when in reality Sameday’s laboratories had not run (and in many cases had not even received) the consumers’ tests,” the attorneys’ complaint states.

In addition to forging and falsifying hundreds of test results, the LA City Attorney’s Office alleges Sameday committed insurance fraud by partnering with a doctor to steer insured customers into three-minute-long medically unnecessary consultations. Using a virtual call center of physicians, the attorney’s office states, Sameday “submitted claims to insurance companies with codes that falsely represented the length of the consultations, misrepresented the purpose of the tests and consults, and sometimes sought reimbursement for calls that never even happened.” The state maintains Sameday in one year made “millions of dollars” from California-based insurance claims alone.

Additional Settlement with LA-based Medical Internist

In a statement provided to the Los Angeles Times, Sameday Health stated it was founded in September 2020 “to make fast, reliable, COVID testing available to everyone.

“In the early days, amidst the chaos of massive surges in demand for services, and shortages in supplies, we failed to meet the standards for excellence our customers deserve,” the company said. “We have corrected the problems that arose back in 2020 and have made significant investments in compliance and systems to ensure that we meet our customers’ expectations. We agreed to settle with the City Attorney and the LA District Attorney in order to move forward and to allow the 1,200 men and women of Sameday to place their focus on providing top-level service to the communities we serve.”

Sameday’s founder and CEO Felix Huettenbach also is named in the settlement, having agreed to join with Sameday in paying $9.5 million in restitution and $13 million in penalties and to no longer access any test result or medical records belonging to any Sameday Health customers.

The Los Angeles Times reported that a separate $3.9 million settlement was reached with Jeffrey Toll, MD, a Los Angeles-based internist who serves as Medical Director for concierge medical practice Good Life Medical Services.

Feuer and Los Angeles County District Attorney George Gascón maintain Toll was a partner in Sameday Health’s alleged insurance fraud. In their complaint, they state patient phone calls would last two to three minutes and cost insurers about $450. In exchange, Toll allegedly gave Sameday Health a large portion of the profits, the complaint alleges.

Toll’s attorney D. Shawn Burkley, JD, of Werksman Jackson and Quinn LLP denied any wrongdoing, telling the Los Angeles Times, “We settled the matter, but we do not believe that Dr. Toll did anything that was unethical.”

Settlements with Toll and Sameday Health must still be approved by a judge.

Patients to Receive Refunds for PCR Clinical Laboratory Tests

In late April, Feuer announced that Californians who paid out of pocket for PCR tests from Sameday Health between October 1 and December 31, 2020, are expected to be issued refunds from the company as part of the settlement, Patch reported.

More than 800 million COVID-19 tests have been performed in the United States since the pandemic began in 2020, according to Our World in Data statistics. Though incidents of fraud have been rare, clinical laboratory managers and pathologists who read Dark Daily will be aware of the growing number of state and federal fraud investigations being opened since the COVID-19 pandemic began to wane.

In “Department of Justice Recovers $1.8B from Medical Laboratory Owners and Others Accused of Alleged Healthcare Fraud During COVID-19 Pandemic,” we covered how unscrupulous clinical laboratory operators quickly sought to take advantage of the critical demand for SARS-CoV-2 testing and defraud the federal government. And how, the resulting federal prosecutions involved dozens of medical laboratory owners and operators who paid back “hundreds of millions in alleged federal healthcare program losses,” according to Goodwin Life Sciences Perspectives.

The settlement with Sameday Health may serve to put other pandemic startups—and their clinical laboratories—on notice that deceitful and fraudulent practices will likely not go unnoticed by federal or state agencies.

Andrea Downing Peck

Related Information:

‘Beyond Outrageous’: L.A. Company Faked COVID Test Results, Authorities Allege

The People of the State of California versus Sameday Technologies, Inc.

Announcing $26 Million Settlement over Allegedly Fake COVID Test Results with Sameday Health, Others

Fraudulent COVID Testing Company to Refund Victims: LA City Attorney

Prosecutors Allege Ex-Theranos President ‘Sunny’ Balwani and Elizabeth Holmes Were ‘Partners in Everything, including Their Crimes’

Like Holmes, Balwani faces 12 counts of fraud and conspiracy to commit wire fraud for allegedly misleading investors, patients, and others about blood-testing startup’s technology

Clinical laboratory managers and pathologists are buckling up as the next installment of the Theranos story gets underway, this time for the criminal fraud trial of ex-Theranos President and COO Ramesh “Sunny” Balwani.

This week, jurors saw text messages between Balwani and his former business partner girlfriend, Theranos founder and CEO Elizabeth Holmes. As Dark Daily previously reported in “Two Important Aspects for Clinical Laboratories to Consider Following Elizabeth Holmes’ Conviction,” Holmes was convicted on Jan. 3 on one count of conspiracy to defraud investors and three counts of wire fraud.

In one text to Holmes, Balwani wrote, “I am responsible for everything at Theranos,” NBC Bay Area reported.

Partners in Everything, including Crime, Prosecutors Allege

According to the Wall Street Journal (WSJ), prosecutors are following the Holmes trial playbook. They focused their opening arguments on the personal and working relationships between the pair, tying Balwani to Holmes’ crimes at the Silicon Valley blood-testing startup.

As second in command at Theranos, Balwani helped run the company from 2009 to 2016. He also invested $5 million in Theranos stock, while also underwriting a $13 million corporate loan.

“They were partners in everything, including their crimes,” Assistant US Attorney Robert Leach told jurors, the Mercury News reported. “The defendant and Holmes knew the rosy falsehoods that they were telling investors were contrary to the reality within Theranos.”

Leach maintained that Balwani was responsible for the phony financial projections Theranos gave investors in 2015 predicting $990 million in revenue when the company had less than $2 million in sales.

Former Theranos President and COO Ramesh “Sunny” Balwani
Former Theranos President and COO Ramesh “Sunny” Balwani (above) is seen arriving at the federal court in San Jose, California, for the start of his federal fraud trial. Clinical laboratory leaders and pathologists who followed the trial of ex-Theranos founder and CEO Elizabeth Holmes will no doubt be interested in what can be learned from this trail as well. (Photo copyright: Jim Wilson/The New York Times.)

“This is a case about fraud. About lying and cheating to obtain money and property,” Leach added. Balwani “did this to get money from investors, and he did this to get money and business from paying patients who were counting on Theranos to deliver accurate and reliable blood tests so that they could make important medical decisions,” the WSJ reported.

Defense attorneys downplayed Balwani’s decision-making role within Theranos, pointing out that he did not join the start-up until six years after Holmes founded the company with the goal of revolutionizing blood testing by developing a device capable of performing blood tests using a finger-prick of blood.

“Sunny Balwani did not start Theranos. He did not control Theranos. Elizabeth Holmes, not Sunny, founded Theranos and built Theranos,” defense attorney Stephen Cazares, JD of San Francisco-based Orrick, said in his opening argument, the WSJ reported.

The trial was expected to begin in January but was delayed by the unexpected length of the Holmes trial. It was then pushed out to March when COVID-19 Omicron cases spiked in California during the winter.

Balwani’s trial is being held in the same San Jose courthouse where Holmes was convicted. Balwani, 56, is facing identical charges as Holmes, which include two counts of conspiracy to commit wire fraud and 10 counts of wire fraud. He has pleaded not guilty.

Holmes, who is currently free on a $500,000 bond, will be sentenced on Sept. 26, Dark Daily reported in January.

Judge Excludes Jurors for Watching Hulu’s ‘The Dropout’

During jury selection in March, some jurors acknowledged they were familiar with the case, causing delays in impaneling the 12-member jury and six alternates. US District Court Judge Edward Davila excluded two potential jurors because they had watched “The Dropout,” Hulu’s miniseries about Holmes and Theranos. Multiple other jurors were dropped because they had followed the Holmes trial in the news, Law360 reported.

When testimony began, prosecutors had a familiar name take the stand—whistleblower and former Theranos lab tech Erika Cheung, who provided key testimony in the Holmes trial. During her testimony, Cheung said she revealed to authorities what she saw at Theranos because “Theranos had gone to extreme lengths to [cover up] what was happening in the lab,” KRON4 in San Francisco reported.

“It was important to report the truth,” she added. “I felt that despite the risk—and I knew there could be consequences—people really need to see the truth of what was happening behind closed doors.”

Nevada State Public Health Laboratory (NSPHL) Director Mark Pandori, PhD, who served as Theranos’ lab director from December 2013 to May 2014, was the prosecution’s second witness. Pandori testified that receiving accurate results for some tests run through Theranos’ Edison blood testing machine was like “flipping a coin.”

“When you are working in a place like Theranos, you’re developing something new. And you want it to work. Quality control remained a problem for the duration of my time at the company. There was never a solution to poor performance,” Pandori testified, according to KRON4.

While the defense team has downplayed Balwani’s decision-making role—calling him a “shareholder”—Aron Solomon, JD, a legal analyst with Esquire Digital, maintains they may have a hard time convincing the jury that Balwani wasn’t a key player.

“There’s no way the defense is going to be successful in painting Sunny Balwani in the light simply as a shareholder,” he told NBC Bay Area. “We know that, literally, Sunny Balwani was intimately involved with Theranos, because he was intimately involved with Elizabeth Holmes,” Solomon added.

Little Media Buzz for Balwani, Unlike Holmes Trial

While the Holmes trial hogged the media spotlight and drew daily onlookers outside the courthouse, reporters covering Balwani’s court appearances describe a much different atmosphere.

“The sparse crowd and quiet atmosphere at US District Court in San Jose, Calif., felt nothing like the circus frenzy that engulfed the same sidewalk months earlier when his alleged co-conspirator and former girlfriend, Elizabeth Holmes, stood trial on the same charges,” The New York Times noted in its coverage of the Balwani trial.

The Balwani trial may not reach the same headline-producing fervor as the Holmes legal battle. However, clinical laboratory directors and pathologists who follow these proceedings will no doubt come away with important insights into how Theranos went so terribly wrong and how lab directors must act under the Clinical Laboratory Improvement Amendments of 1988 (CLIA).

Andrea Downing Peck

Related Information:

Former Theranos President Ramesh ‘Sunny’ Balwani Begins his Defense

Jury Empaneled in Ex-Theranos Exec Balwani’s Fraud Trial

Elizabeth Holmes and Ex-Lover Balwani Were ‘Partners in Everything, including Their Crimes,’ Prosecution Alleges as His Trial Opens

Another Theranos Trial Begins, This Time Without the Fanfare

Former Theranos Employee Turned Whistleblower Testifies in Sunny Balwani Trial

Theranos Blood Machines Were Like Flipping a Coin

Leader or Follower? Defense Team Tries to Distance Former COO from Theranos

Two Important Aspects for Clinical Laboratories to Consider Following Elizabeth Holmes’ Conviction

Ex-Theranos CEO Elizabeth Holmes Will Be Free on Bail Until September 26 Sentencing Hearing for Criminal Fraud Conviction

Theranos Whistleblower Tyler Shultz Celebrates Former CEO Elizabeth Holmes’ Guilty Verdict by Popping Champagne with Family Members

As a Theranos insider and whistleblower, Tyler Schultz was able to provide information about the ongoing failures in medical laboratory testing at the once-high-flying Theranos to regulators and at least one journalist

What’s it like to be a whistleblower in a high-profile clinical laboratory? Few clinical laboratory workers will ever know. But former Theranos employee Tyler Shultz does know, after helping to expose the Silicon Valley blood-testing startup’s deceptions.

The 31-year-old Shultz reportedly celebrated the news of former Theranos CEO Elizabeth Holmes’ conviction on four charges of defrauding investors with champagne, joy, and a healthy dose of vindication, according to NPR.

Tyler Shultz


“This story has been unfolding for pretty much my entire adult life,” Tyler Shultz (above), whistleblower in the Elizabeth Holmes fraud trial, told NPR from his parents’ home in Silicon Valley. “All of a sudden, it was just a weight was lifted. It’s over. I can’t believe it’s over,” he added. A former employee of now defunct clinical laboratory company Theranos, Shultz is CEO at Flux Biosciences, a company he co-founded. (Photo copyright: Deanne Fitzmaurice/NPR.)

Shultz Interns Briefly at Theranos

In 2011, Shultz was a biology major at Stanford University—where Elizabeth Holmes herself briefly attended—when his grandfather, former US Secretary of State George Shultz, a Theranos board member, introduced him to Holmes.

According to NPR, the younger Shultz was so impressed by the charismatic Holmes that he asked her if he could intern with Theranos after his junior year. Following his internship, he accepted a full-time position as a research engineer with Theranos, a stint that lasted only eight months. Shultz quit Theranos the day after he emailed Holmes in 2014 to alert her to failed quality-control checks and other troubling practices within the company’s clinical laboratory.

According a 2016 profile of Shultz in The Wall Street Journal (WSJ), his email to Holmes resulted in a “blistering” reply from then-Theranos President and COO Ramesh “Sunny” Balwani, who “belittled Shultz’s grasp of basic mathematics and his knowledge of laboratory science.”

Yet, Shultz told NPR, “It was clear that there was an open secret within Theranos that this technology simply didn’t exist.”

After leaving Theranos, Shultz became a key source for the WSJ’s 2015 exposé of Theranos. Using an alias, he also contacted state regulators in New York about the Theranos Edison blood-testing device’s shortcomings. In response, Theranos responded with threats of lawsuits and intimidation, the WSJ reported.

In an interview with CBS News, Shultz said, “I am happy that she was found guilty of these crimes and I feel like I got my vindication from that, and I feel good about that.”

Whistleblowers Were Critical to WSJ’s Investigation

Former WSJ reporter John Carreyrou, who authored the newspaper’s investigative series into Theranos, credits the Theranos whistleblowers for blowing the cover on the clinical lab company’s deceptions.

“I would not have been able to break this story without Rosendorff, Tyler, and Erika,” Carreyrou told NPR, referring to Shultz and two additional Theranos whistleblowers: one-time Theranos Laboratory Director Adam Rosendorff and laboratory associate Erika Cheung. “Tyler and Erika were corroborating sources, and that was absolutely critical.”

Dark Daily reported on trial testimony given by four former Theranos clinical laboratory directors in “Another Former Theranos Clinical Laboratory Director Testifies in Holmes’ Fraud Trial about Irregularities with Proprietary Edison Blood-Testing Technology.”

In the interview with CBS News, Tyler described the damage his role as a Theranos whistleblower caused to his relationship with his grandfather, former Secretary of State and Theranos board member George Shultz. Tyler said the elder Shultz did not believe his claims about Theranos’ regulatory deficiencies and the Edison device’s shortcomings until he neared the end of his life.

“That was extremely tough. This whole saga has taken a financial, emotional, and social toll on my relationships. The toll it took on my grandfather’s relationship was probably the worst. It is tough to explain. I had a few very honest conversations with him,” Shultz told CBS News.

While the elder Shultz never apologized to his grandson, Tyler said his grandfather ultimately acknowledged he was right.

“In one of my last conversations with him he told me a story about how he got Elizabeth invited during fleet week in San Francisco to go give a speech to United States Navy sailors. He said with tears in her eyes, she told the room about how she was so honored and humbled that her life’s work would be saving the lives of United States servicemen and women,” Shultz recalled in the CBS News interview.

“He said he could not believe that anybody could get in front of these men and women who are willing to put their lives in front of our country and lie directly to their face as convincingly as she lied,” he added.

George Shultz died in February 2021.

Jury’s Ruling on Defrauding Patients

In an interview with CNBC, Shultz said his one disappointment with the verdict was that Holmes was not found guilty of defrauding patients. Calling the patients “the real victims,” Shultz said, “I did what I did. I stuck my neck out to protect those patients, not to protect Betsy DeVos’ $100 million investment.” (The jury voted Holmes guilty on three counts of wire fraud and one count of conspiracy to commit fraud against Theranos’ investors, but not guilty on conspiracy to defraud and commit wire fraud against Theranos patients.)

Tyler Shultz was listed as a potential witness in the Holmes trial but was not called to take the stand. He—along with many clinical laboratory directors and pathologists who have closely followed the Holmes trial—will now await news of Holmes’ sentencing. Holmes could face up to 20 years in prison for each guilty verdict, but she’s likely to receive a lighter sentence.

The trail of Ramesh Balwani is expected to begin sometime in March. That trial can be expected to produce additional revelations about the problems of Theranos and how and why management is alleged to have knowingly reported inaccurate clinical laboratory test results to thousands of patients.

—Andrea Downing Peck

Related Information:

Theranos Whistleblower Celebrated Elizabeth Holmes Verdict by ‘Popping Champagne’

Theranos Whistleblower Says He’s ‘Happy’ Elizabeth Holmes Was Found Guilty

I am Proud I Blew Whistle on Theranos, Says Tyler Shultz

‘I Feel Like I Got My Vindication’: Theranos Whistleblower Reacts to Elizabeth Holmes’ Conviction

Prosecutor in Theranos Case Closes by Telling Jury that Elizabeth Holmes ‘Chose Fraud Over Business Failure’

Another Former Theranos Clinical Laboratory Director Testifies in Holmes’ Fraud Trial about Irregularities with Proprietary Edison Blood-Testing Technology

Former Theranos Lab Director and Staff Testify in Ongoing Elizabeth Holmes Fraud Trial That They Voiced Concerns about Reliability and Accuracy of Edison Blood-Testing Device

Ex-Theranos CEO Elizabeth Holmes Testifies She Made Mistakes, Shifts Blame for Some of the Now Defunct Clinical Laboratory Testing Startup’s Failures

Jurors are expected to hear closing arguments beginning on December 16 and then will decide Holmes’ fate in criminal fraud trial

It was seven days of testimony from former Theranos CEO Elizabeth Holmes, reported in detail by most major news outlets. The jury in her criminal fraud trial heard the once-high-flying Silicon Valley executive attempt to explain away charges of deception. She acknowledged that she made mistakes while leading the clinical laboratory blood-testing company but claimed that others were ultimately responsible for the company’s failures.

In “Former Theranos Lab Director and Staff Testify in Ongoing Elizabeth Holmes Fraud Trial That They Voiced Concerns about Reliability and Accuracy of Edison Blood-Testing Device,” Dark Daily covered testimony by San Jose, Calif., pathologist Adam Rosendorff, MD, who told jurors that in the days leading up to the 2013 launch of the Edison blood-testing device he warned Holmes in emails and in person that the product wasn’t ready to be deployed commercially.

Rosendorff left Theranos in November 2014. He was followed by three more Theranos laboratory directors, all of whom have testified in the fraud case against Holmes.

Presumably, in her testimony, Holmes was laying the blame for key failures in the accuracy of the lab tests performed for patients, along with major deficiencies in how her medical lab company complied with CLIA regulations, on these former Theranos laboratory directors (as the clinical laboratory company’s CLIA lab directors of record during those years).

Former federal prosecutor Keri Curtis Axel, JD, an attorney with Waymaker LLP in Los Angeles, told Yahoo Finance Live that Holmes is mounting “a state of mind defense.”

“Whether you have an intent to defraud is really a state of mind,” she said.

Elizabeth Holmes trial illustration

The illustration above depicts ex-Theranos CEO and founder Elizabeth Holmes concluding seven days of testimony in her criminal fraud trial in San Jose, California. Closing arguments are scheduled to begin December 16. Clinical laboratory directors and pathologists following the fraud trail may soon learn whether the four clinical laboratory directors who worked for Theranos may in some way be held accountable for some of the company’s activities. (Graphic copyright: Vicki Behringer/The Wall Street Journal.)

‘We Wanted to Help People’

Holmes’ testimony may have both helped and hurt her case. According to The Wall Street Journal (WSJ), Holmes “hasn’t flinched during questioning by her lawyer or the government.

“The persona of the confident yet traumatized chief executive could create reasonable doubt in the minds of jurors, legal observers following the trial say, and muddy the evidence prosecutors put forward over 11 weeks to prove she intended to defraud investors and patients about the reach of Theranos’ technology,” the WSJ wrote.

During testimony, Holmes maintained that her goal in founding Theranos was to increase access to healthcare. “We wanted to help people who were scared of needles,” she told jurors, the WSJ reported.

In building its case, prosecutors presented witness testimony and other evidence strongly suggesting Holmes lied to investors about Theranos’ laboratory testing capabilities and deployment, concealed its use of commercial blood testing machines, and hid ongoing issues with its Edison device.

One of the most damaging moments of Holmes’ own testimony may have been when she admitted to affixing the logos of pharmaceutical giants Pfizer and Schering-Plough to reports sent to Walgreens and potential investors.

Holmes told jurors that her intent was to give credit to others, not to deceive and her defense attorneys attempted to show that many of Holmes’ more questionable decisions were aimed at protecting Theranos trade secrets.

Dark Daily covered this in “Corporate Executives and Mega-Rich Investors Testify in Elizabeth Holmes’ Federal Fraud Trial That They Were Misled by Theranos’ Claims about the Edison Blood-Testing Device.”

“We had a huge amount of invention that was happening in our laboratories,” Holmes testified, according to CNN’s trial coverage. “We had teams of scientists and engineers that were working really hard on coming up with new ideas for patents and trade secrets, and we needed to figure out how to protect them.”

Holmes Claims No Responsibility for Theranos’ Lab Operations and Product Development

On the witness stand, Holmes acknowledged she was the final decisionmaker at Theranos. However, she worked to distance herself from the company’s medical laboratory troubles. She pointed out that others within the company had control over laboratory operations and scientific decision-making.

The WSJ reported that defense lawyer Kevin Downey asked Holmes, “Who was responsible for operational management of the lab?”

Holmes replied, “Sunny Balwani.” She explained that her former No. 2 executive oversaw all the “business parts” of the lab. Meanwhile, the clinical/scientific decision-making, Holmes stated, was the job of the laboratory director and laboratory leadership.

When given the opportunity to cross-examine Holmes, prosecutors focused on Holmes’ response to the 2015 WSJ investigation into Theranos and her retaliatory actions against whistleblower Erika Cheung, a former lab employee who became a source for the WSJ’s expose and a prosecution witness.

According to WSJ live coverage, Holmes testified that Theranos hired a law firm and threatened Cheung with litigation after she left the company, but only did so to protect Theranos’ trade secrets. Holmes acknowledged that Cheung’s concerns about Theranos’ blood-testing technology ultimately were proven correct.

“I think I mishandled the entire process of the Wall Street Journal reporting,” Holmes said.

Closing Arguments

In her closing day of testimony, Holmes was asked if she ever intentionally misrepresented Theranos’ technology to patients and investors, the WSJ reported.

“Never,” Holmes responded.

Asked if investors lost money because of her attempting to mislead them, she answered, “Of course not.”

Clinical laboratory directors and pathologists who have taken a keen interest in the Holmes fraud trial will soon learn if the jury buys her arguments. Closing arguments are set for December 16, after which the jury must decide whether Holmes intended to defraud patients and investors or is guilty only of falling short in her goal of revolutionizing clinical laboratory medicine. 

—Andrea Downing Peck

Related Information:

Elizabeth Holmes Cross Examination: ‘The Devil Will Be in the Details’

Elizabeth Holmes’ Testimony: Moments That Might Influence Jurors

Elizabeth Holmes Trial: Former Theranos CEO Recounts Abuse by her Former Lover

Holmes Testifies Balwani Told Her What to Eat, How to Lead Theranos

Elizabeth Holmes Nears End of Her Time on the Stand in Her Criminal Trial

Others Led Laboratory Operations, Holmes Says

‘I Worship You’: Jury Sees Texts Between Holmes and the Ex She Accused of Abuse

Cross Examination of Holmes Begins with WSJ Investigation That Exposed Theranos Problems

Holmes Says She Never Tried to Mislead Investors, Patients

Former Theranos Lab Director and Staff Testify in Ongoing Elizabeth Holmes Fraud Trial That They Voiced Concerns about Reliability and Accuracy of Edison Blood-Testing Device

Corporate Executives and Mega-Rich Investors Testify in Elizabeth Holmes’ Federal Fraud Trial That They Were Misled by Theranos’ Claims about the Edison Blood-Testing Device

Ex-Theranos CEO Elizabeth Holmes Takes Witness Stand in Her Own Defense: Admits to Using Pharma Giants’ Logos on Reports to Investors, But Claims No Intent to Deceive

Former CEO also testified that she believed company’s proprietary blood-testing technology could perform ‘any’ clinical laboratory blood test

One relevant question in the federal fraud trial of ex-Theranos CEO Elizabeth Holmes was whether she would testify on her own behalf. That question was answered shortly after the government rested its criminal fraud case against the former Silicon Valley clinical laboratory testing company founder. Holmes took the stand in her own defense, a risk her defense team hopes will pay off in her favor.

During her first three days of testimony leading up to the Thanksgiving holiday break, Holmes—who faces 11 counts of fraud and conspiracy related to her tenure as founder and CEO of Theranos—made headlines by admitting she did personally put the logos of pharmaceutical giants Pfizer and Schering-Plough on reports she sent to Theranos investors and executives at Walgreens and Safeway. She expressed regret for doing so to the jury, but claimed her intent was not to deceive but to give credit to others.

“This work was done in partnership with these companies, and I was trying to convey that,” she testified, according to a trial coverage from Ars Technica.

When asked if she realized that others would assume the pharmaceutical companies—not Theranos—were the authors of the report, Holmes replied, “I’ve heard that testimony in this case, and I wish I’d done it differently.”

If found guilty, Holmes—who once claimed Theranos’ Edison proprietary blood-testing technology would to be able to complete as many as 200 clinical laboratory tests using a single finger-stick of blood—could face maximum penalties of 20 years in prison, a $2.75 million fine, and possible restitution.

Illustration depicting ex-Theranos CEO Elizabeth Holmes testifying in court

The illustration above depicts ex-Theranos CEO Elizabeth Holmes testifying on her own behalf. Former Santa Clara County prosecutor Steven Clark, JD, told The Mercury News, “(T)he best person to say what Elizabeth Holmes’ intent was is Elizabeth Holmes, and that’s why I think she’s taking the stand. … I think the jury will like her.” That remains to be seen. But there’s no doubt that Clinical Laboratory Directors should take a strong interest in the outcome of this trail. (Graphic copyright: Vicki Behringer/Reuters.)

Holmes Testifies She Believed the Edison Device Could Perform “Any” Blood Test

In its trail coverage, NPR described Holmes’ first three days of testimony “as having involved deflecting responsibility, pointing to the expertise of the Theranos board of directors, lab staff, and other company employees whom Holmes has suggested were close to how [Theranos’] blood analyzers worked.”

According to Reuters, Holmes’ defense team is arguing that Holmes’ always-rosy forecasts about her company’s technology and finances were based on her belief the proprietary Edison device worked as advertised, which, in turn, was based on feedback from pharmaceutical companies, her own employees, and the military.

During her testimony, Holmes compared a traditional blood-testing device to Theranos’ “3.0” device, which she said would reduce the human-error rate that can occur during blood sampling.

“If we had the ability to automate much of that process, we could reduce the error associated with traditional lab testing,” she told the court.

Reuters reported that Holmes told jurors her confidence in the Theranos device was in part due to how well the unit had performed in studies completed in 2008 and 2009, including those run by drug companies such as Novartis.

The Mercury News described Holmes as speaking with “confidence—and frequently a small smile”—during her opening day of testimony.

Asked by one of her lawyers, “Did you believe that Theranos had developed technology that was capable of performing any blood test?” Holmes responded, “I did.”

Holmes Testifies about Military’s Alleged Use of Edison Device

Prosecutors maintain that Holmes knew Theranos’ proprietary blood-testing technology had serious accuracy issues yet lied about its capabilities and use to lure investors. One of those false claims included allegedly stating the US military was using the Edison device on the battlefield. Earlier in the trial, CNBC reported, prosecution witness Brian Grossman, Chief Investment Officer at PFM Health Sciences, which invested $96 million into Theranos, testified he was told in a 2013 meeting with Holmes and Balwani that Theranos technology was being used in medical-evacuation helicopters.

Dark Daily covered court testimony on the military’s alleged use of the Theranos blood-testing device in “Prosecutors in Elizabeth Holmes’ Federal Fraud Trial Question Witnesses about Theranos’ Edison Technology and the Inaccurate Medical Laboratory Test Results It Produced.”

However, on the witness stand, Holmes described Theranos’ projects with the US military as much more limited in scope than the descriptions outlined by investors testifying for the prosecution.

According to The Wall Street Journal (WSJ), Holmes told jurors a 2010 partnership between Theranos and a US Army Institute of Surgical Research doctor in Texas looked into using the Theranos device to measure blood markers to detect kidney performance. A second project involved the military’s Africa Command, which was determining whether the device could withstand high temperatures. Holmes testified the devices used in Africa “held up well,” though some modifications were needed, and some issues were revealed with the touchscreen.

Should Holmes Have Testified on Her Own Behalf?

Trial experts maintain Holmes’ decision to testify in her own defense could backfire.

“It’s always a risk to put your client on because if they make a mistake they can sink the whole case,” former Santa Clara County prosecutor Steven Clark, JD, told The Mercury News. He added, “what’s at issue here is Elizabeth Holmes’ intent. And the best person to say what Elizabeth Holmes’ intent was is Elizabeth Holmes, and that’s why I think she’s taking the stand. She’s very charismatic. She’s really good on her feet. And I think the jury will like her.

“This is the pitch meeting of her life,” Clark added. “She’s going to be explaining herself to 12 people as to what was in her mind.”

Judge Drops One Count Due to Prosecution Error, Government Rests Its Case

Holmes is now charged with nine counts of wire fraud and two counts of conspiracy to commit wire fraud after the government dropped one count of fraud from the indictment. According to WSJ coverage of the trial, US District Judge Edward Davila blocked a patient named in the indictment as “B.B.” from testifying because of a filing error by the prosecution. The judge’s decision resulted in the government dropping one count.

The government rested its case against Holmes on November 19 following testimony from independent journalist Roger Parloff, who wrote a flattering 2014 Fortune magazine story on Holmes. He later redacted his earlier writing in another Fortune article, titled, “How Theranos Misled Me.”

The government alleged Holmes used media publicity as part of her scheme to defraud investors, patients, and physicians. All totaled, 29 witnesses appeared for the prosecution, the WSJ reported

Former Theranos Chief Operating Officer Ramesh “Sunny” Balwani—Holmes’ one-time boyfriend—faces similar charges of defrauding patients, investors, and physicians. His trial is expected to begin in January 2022.

Clinical laboratory managers and pathologists who have watched the federal court proceedings with keen interest should expect the trial to wrap up at the conclusion of Holmes’ testimony, just in time for the Balwani fraud trial to begin. 

—Andrea Downing Peck

Related Information:

Elizabeth Holmes Claims She Forged Pharma Reports—for All the Right Reasons

Elizabeth Holmes Describes Limited Military Research Partnerships

Government Rest Its Case Against Elizabeth Holmes

Elizabeth Holmes Takes Witness Stand in Theranos Trial after Prosecution Rests its Case

Holmes Defends Belief in Theranos Technology at Her Fraud Trial

Elizabeth Holmes Testifies That Theranos Had ‘Successes’ with Pharmaceutical Companies

Hedge Fund Investor Tells Jurors in Holmes Trial That Theranos Lied about Finger-Prick Tech and Military Use

This CEO Is Out for Blood

How Theranos Misled Me

Another Former Theranos Clinical Laboratory Director Testifies in Holmes’ Fraud Trial about Irregularities with Proprietary Edison Blood-Testing Technology

Corporate Executives and Mega-Rich Investors Testify in Elizabeth Holmes’ Federal Fraud Trial That They Were Misled by Theranos’ Claims about the Edison Blood-Testing Device

Prosecutors in Elizabeth Holmes’ Federal Fraud Trial Question Witnesses about Theranos’ Edison Technology and the Inaccurate Medical Laboratory Test Results It Produced

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