News, Analysis, Trends, Management Innovations for
Clinical Laboratories and Pathology Groups

Hosted by Robert Michel

News, Analysis, Trends, Management Innovations for
Clinical Laboratories and Pathology Groups

Hosted by Robert Michel
Sign 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

Four-star general Jim Mattis testified that he eventually “didn’t know what to believe about Theranos anymore,” The Wall Street Journal reported

Former-Theranos CEO Elizabeth Holmes was known for her obsession with Steve Jobs, imitating not only the late Apple CEO’s well-known management style, but also his wardrobe choices. However, clinical laboratory managers and pathologists will not be surprised to learn that—in testimony during Holmes’ federal fraud trial—Theranos’ former laboratory director told jurors Holmes’ “confident demeanor” disappeared when she was told her revolutionary blood-testing technology “didn’t work,” KPIX5 TV reported.

During two days of testimony in San Jose, Calif., pathologist Adam Rosendorff, MD, 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.

“I told her that the potassium was unreliable, the sodium was unreliable, the glucose was unreliable, [and] explained why,” testified the clinical pathologist. “She was very nervous. She was not her usual composed self. She was trembling a bit, her knee was tapping, her voice was breaking up. She was clearly upset,” he added.

KPIX5 TV reported that Holmes had told Rosendorff the laboratory could substitute conventional federal Food and Drug Administration (FDA)-approved devices as needed.

Rosendorff left his position with Theranos in November 2014. According to KPIX5, he told jurors, “I felt pressured to vouch for [medical laboratory] tests that I did not have confidence in. I came to believe that the company believed more about PR and fundraising than about patient care. The platform was not allowing me to function effectively as a lab director.”

Adam Rosendorff, MD

Former Theranos Laboratory Director Adam Rosendorff, MD (above), testified in the federal fraud trial of Theranos founder and ex-CEO Elizabeth Holmes that he considered filing a whistleblower lawsuit against his employer because of his concerns about the Edison blood-testing device’s lack of reliability and accuracy of test results. “I wanted to get the word out about what was happening at Theranos,” the clinical pathologist told jurors, the Wall Street Journal reported. (Photo copyright: LinkedIn.)

In continuing testimony, Rosendorff acknowledged that tension increased between himself and Holmes and Theranos’ Chief Operating Officer Ramesh “Sunny” Balwani over Rosendorff’s concerns about the reliability and accuracy of the lab’s test results. At one point, he asked Balwani in an email if his name could be removed from the Theranos CLIA lab license so he would not be legally responsible for the lab’s problems.

Balwani’s own fraud trial begins in January 2022.

Former Theranos Lab Director Considered Filing a Qui Tam Lawsuit

According to the Wall Street Journal (WSJ), Rosendorff testified he forwarded work emails to his personal email account to protect himself in case the federal government investigated Theranos. He also considered filing a whistleblower lawsuit against the company.

“I wanted to get the word out about what was happening at Theranos,” he testified, the Wall Street Journal reported.

The government’s first witnesses were former Theranos employees:

Gangakehedkar testified that Holmes knew about reliability issues with the Edison blood-testing device, yet pressured staff to move forward with the Walgreens roll out.

Theranos’ partnership with Walgreens ended in 2016, after Theranos voided years of test results performed on its machines.

In “Former Theranos Chemist Says Elizabeth Holmes Was Aware of Testing Failures,” the WSJ reported that Gangakhedkar resigned from Theranos in September 2013, taking with her Theranos documents and copies of emails in which she expressed her concerns to Holmes and others about continuing problems with Theranos’ lab tests.

“I was scared that things would not go well,” Gangakhedkar testified, her voice breaking at one point. “I was afraid I would be blamed.”

As foreshadowed during the trial’s opening statements, Holmes’ defense team plans to argue that their client did not intend to defraud investors but believed her blood-testing technology—portrayed as capable of running more than 200 tests using a finger-stick sample of blood—would revolutionize the healthcare industry.

In his opening remarks to the jury, Lance Wade, JD, a member of the Holmes defense team from Williams and Connolly LLP, told jurors that evidence will show Theranos investors were “incredibly sophisticated and knew the risks” and were actually pushing to invest in Theranos. The reality of the case, he said, is “far more human and real, and oftentimes, I hate to say it, technical and complicated and boring” than what the federal government has suggested, Forbes reported.

Four-star General Jim Mattis (ret.) Testifies

According to the Wall Street Journal, former Defense Secretary Jim Mattis testified he joined the Theranos board in the summer of 2013, at which time he invested $85,000 in the company. He said he had first met Holmes in San Francisco in 2011. At the time, Mattis, a Marine Corps four-star general, was leading the US military’s Central Command (CENTCOM) and that, according to testimony, he recognized the Edison device’s potential for use on the battlefield.

Mattis testified he and other Theranos board members were surprised to learn in 2015 that Theranos was using blooding testing equipment from competing companies.

“There came a time when I didn’t know what to believe about Theranos anymore,” he told jurors, according to the WSJ. Mattis resigned from the board in 2016, after learning he would be nominated as Secretary of Defense in the Trump administration.

Courtroom sketch

The courtroom sketch above shows former Defense Secretary four-star general Jim Mattis testifying Wednesday at the criminal trial of Theranos founder Elizabeth Holmes in San Jose, Calif. (Graphic copyright: Vicki Behringer.)

Theranos Investors

Theranos, which reached a peak valuation of $9 billion, received nearly $1 billion in funding from private investors, including from some well-known people. In “Theranos Trial Jurors to Weigh Whether Investors Were Dupes or Savvy Speculators,” according to the WSJ, the startup’s top investors included:

  • The Walton family—$150 million—heirs to the Walmart fortune;
  • Fox News Corp Executive Chairman Rupert Murdoch—$125 million—who sold his shares back to the company in 2017 for $1;
  • Former Education Secretary Betsy DeVos and her family—$100 million;
  • The Cox family, owner of Atlanta-based media and automotive company Cox Enterprises—$100 million;
  • Media investor Carlos Slim—$30 million;
  • Greek shipping magnate Andreas Dracopoulos—$25 million;
  • The Oppenheimer family—$20 million;
  • Riley Bechtel, former Chairman of Bechtel Corp.—$6 million;
  • Estate attorney Daniel L. Mosley—$6 million; and
  • New England Patriots owner Robert Kraft—$1 million.

As Holmes’ fraud trial heats up, Dark Daily will continue its coverage. In “Text Messages Between Theranos Founder Elizabeth Holmes and Ex-Boyfriend Ramesh “Sunny” Balwani Grab Headlines in Early Days of Fraud Trial,” we reported that Holmes’ defense team revealed plans to claim “intimate partner abuse” by Holmes’ then boyfriend, Theranos Chief Operating Officer Ramesh “Sunny” Balwani.

And in “On-demand Video Service Hulu Gets Underway on TV Miniseries Documenting Rise and Fall of Former Theranos CEO Elizabeth Holmes,” we covered Hulu’s plan to produce the “The Dropout,” a limited series chronicling Holmes’ rise and fall from Founder and CEO of $9 billion tech company Theranos to criminal defendant.

The trial is expected to last until mid-December, with jurors hearing testimony on Tuesdays, Wednesdays, and Fridays. For clinical laboratory scientists, each day of testimony should bring a new round of surprises so stay tuned.

Andrea Downing Peck

Related Information

Elizabeth Holmes Trial: Live Updates

Theranos Trial Jurors to Weigh If Investors Were Dupes or Savvy Speculators

Elizabeth Holmes’ Lawyer Says She Made ‘Mistakes,’ But ‘Failure Is Not a Crime’

Former Theranos Chemist Says Holmes Was Aware of Testing Failures

Elizabeth Holmes Confident Demeanor Vanished When Told Tests Didn’t Work, Former Lab Director Tells Jury

Elizabeth Holmes Trial: Jim Mattis Tells Jury He Came to Doubt Theranos Technology

Text Messages Between Theranos Founder Elizabeth Holmes and Ex-Boyfriend Ramesh “Sunny” Balwani Grab Headlines in Early Days of Fraud Trial

On-demand Video Service Hulu Gets Underway on TV Miniseries Documenting Rise and Fall of Former Theranos CEO Elizabeth Holmes

Theranos Founder and Former CEO Elizabeth Holmes’ Federal Criminal Fraud Trial Finally Is Under Way in California

Court documents show Holmes’ defense strategy includes accusing ex-boyfriend and former COO Balwani of ‘intimate partner abuse’ that impacted her ‘state of mind’

It has started! The long-awaited criminal trial of former Theranos CEO Elizabeth Holmes is underway in a federal courthouse in Silicon Valley. Across the profession of medical laboratory medicine, there is keen interest in the story of Holmes and her now-defunct clinical laboratory company Theranos.

This next chapter in the drama began on September 8 with opening arguments. Federal prosecutors came out strong, claiming Holmes was “a manipulative fraudster who duped investors and patients alike and knew the whole time that she was hoodwinking them,” according to NPR.

“This is a case about fraud, about lying, and cheating to get money,” said Assistant US Attorney Robert Leach, NPR reported. “It’s a crime on Main Street, and it’s a crime in Silicon Valley,” he added.

Not surprisingly, Holmes’ defense team had a different take, claiming Holmes was simply “a hardworking, young startup executive who believed in the mission of the company, only to see it buckle in the face of business obstacles,” NPR reported. “They argued that she placed blind faith in the No. 2 executive at the company [Balwani] and overly trusted lab directors, who the defense team says were legally responsible for how the labs were run.”

Holmes Claims Abuse at the Hands of Former Theranos COO Balwani

Many pathologists and clinical laboratory managers are ready to watch and learn what unfolds in the opening stages of Holmes’ long-delayed federal criminal fraud trial. During the jury selection process, recently unsealed court documents showed that Holmes’ defense planned to include claims she was abused by her then boyfriend, Theranos Chief Operating Officer Ramesh Balwani.

This surprising development adds yet another twist to the tale of the disgraced Silicon Valley executive and her defunct clinical laboratory testing company.

The hype surrounding the once-high flying startup, which in 2015 reached a peak valuation of $9 billion, began unraveling that same year when a Wall Street Journal (WSJ) investigation exposed the company’s alleged deceptions and questionable practices related to its finger-prick blood-testing technology.

Fast-forward six years—Theranos is now gone but its top executive continues to make headlines, not as a laboratory science wunderkind, but as a criminal defendant.

Holmes, 37, has pleaded not guilty to all charges. Her former consort and ex-Theranos COO Ramesh Balwani also pleaded not guilty to all charges. He will be tried separately from Holmes.

Elizabeth Holmes and her husband William Evans

Elizabeth Holmes, founder and former CEO of defunct clinical laboratory testing company Theranos, is seen leaving the Robert F. Peckham US Courthouse with husband William Evans following opening arguments in her federal trial on September 8. (Photo copyright: Reuters/Peter DaSilva.)

Dozens of Potential Jurors Removed for Alleged Bias

On August 31, in-person questioning of prospective jurors began in Holmes’ federal fraud trial in San Jose, California. The process did not go well. As CNBC reported, dozens of potential jurors were removed from the jury pool due to potential bias in the case.

“Thirty to forty of the remaining jurors have consumed substantial, and I mean lengthy extrajudicial material, about the case and about the defendant,” defense attorney Kevin Downey, JD of Washington, D.C.-based Williams and Connolly, LLP, told Judge Edward Davila, CNBC reported. “We’re very vulnerable to any of the jurors commenting in some ways as either the court or lawyers conduct voir dire about the content of the media they’ve seen.”

Voir dire is the legal term for preliminary examinations of jurors, which in this initial screening was done by reviewing potential juror questionnaires.

Holmes’ defense attorneys, according to CNBC, previously expressed concerns about “inflammatory” media coverage of the case. However, Assistant US Attorney Jeffrey Schenk maintained, “Less than half of the individuals that filled out the questionnaire had prior exposure to Holmes and Balwani. One juror saying something during the voir dire process that could be overheard is a risk in every court case,” CNBC reported.

Holmes Claims ‘Mental Condition Bearing on Guilt’

A report by the Independent notes that newly unsealed court documents which were first reported by NPR reveal that Holmes will mount a defense that includes claims of “intimate partner abuse” by Balwani, 56, during their past relationship.

 “The documents show that Ms. Holmes will describe how Mr. Balwani controlled what she ate and drank, how she dressed, and who she spoke to, while also alleging he threw ‘sharp’ objects at her,” the Independent reported.

NPR reported that court documents indicate Holmes is likely to take the stand and testify at her trial. She will not be presenting an insanity defense but will put forth a “defense of a mental condition bearing on guilt” that was the result of partner abuse and that impacted her “state of mind” at the time of the alleged crimes.

Court documents filed by Balwani’s defense attorneys label Holmes’ allegations as “salacious and inflammatory.”

“In truth, Ms. Holmes’ allegations are deeply offensive to Mr. Balwani, devastating personally to him and highly and unfairly prejudicial to his defense of this case,” defense attorney Jeffrey Coopersmith, JD, Principle and founder of Coopersmith Law and Strategy, wrote in the filing.

The Theranos Saga Continues …

In “Former Theranos CEO Elizabeth Holmes Is Pregnant, Causing a Further Delay in Her Trial Date,” Dark Daily reported that Holmes’ trial had been delayed multiple times since she was first was indicted on 11 counts of wire fraud and conspiracy to commit wire fraud in 2018. The COVID-19 pandemic, and more recently Holmes’ pregnancy, delayed the start of her trial until August.

CNBC reported that Holmes gave birth on July 10, 2021, in Redwood, California. The baby’s father is William Evans, heir to the Evans Hotels chain in California, The Sun reported.

Balwani’s criminal fraud trial is scheduled to begin with jury selection on January 11, 2022. Both Holmes and Balwani face maximum penalties of 20 years in jail and a nearly $3 million fine, plus possible restitution if found guilty on all counts.

It is a rare thing for owners of a clinical laboratory company accused of fraud to come to trial and receive so much media attention. In the weeks leading up to the trial, medical laboratory managers and pathologists could read a wide variety of news stories about the impending trial and the legal strategies expected by the attorneys for both the plaintiffs and the defendants.

Thus, everyone interested in this trial and its outcome will likely have the equivalent of a front row seat because so many journalists are covering this trial.

Andrea Downing Peck

Related Information

Hot Startup Theranos Has Struggled with Its Blood-Testing Technology

Dozens of Potential Jurors in Elizabeth Holmes Trial Cut for Potential Bias

Case 5:18-cr-00258-EJD Document 973

Case 5:18-cr-00258-EJD Document 976

Elizabeth Holmes Claims Abuse by Ex-Boyfriend Who Controlled What She Ate in Theranos Fraud Trial Defense

Elizabeth Holmes Plans to Accuse Ex-Boyfriend of Abuse at Theranos Fraud Trial

Elizabeth Holmes Gives Birth as Fraud Theranos Fraud Trial Nears

Former Theranos CEO Elizabeth Holmes Is Pregnant, Causing a Further Delay in Her Trial Date