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