Elizabeth Holmes admits to OK'ing shady practices at Theranos

Theranos
The former CEO and founder of Theranos’ testimony came more than two months into her trial, during which scientists, investors and former employees have alleged Elizabeth Holmes and other executives ran the blood-testing company with intent to mislead investors, partners and patients. (Shutterstock)

Nearly three months into her federal trial over a dozen counts of fraud, Elizabeth Holmes took the stand last week, undergoing questioning by her defense team that has so far stretched across three days.

Her third day of testimony, which took place Tuesday in San Jose, California, was the most revealing by far. In it, Holmes attempted to rebut as many of the claims made against her and her company throughout the previous 11 weeks as possible—but, in doing so, she admitted to many of the practices the prosecution has argued were done to mislead investors, partners and patients.

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For one, she admitted to being responsible for adding the logos of pharmaceutical companies to memos submitted to Walgreens and Theranos investors. Previously in the trial, according to The Wall Street Journal, many of those recipients said the presence of the logos led them to believe that Pfizer and Schering-Plough had validated Theranos’ blood-testing technology.

In fact, as scientists from both pharmas have testified, after conducting studies of Theranos’ devices, they were unable to authenticate the technology and proceeded to recommend that their companies discontinue all work with the startup—and did not give permission for their logos to be attached to the lab reports. The prosecution has labeled this a prime example of Holmes’ alleged pattern of misleading investors to convince them to pour nearly $1 billion into the company.

Tuesday, Holmes said she added the logos with nothing but good intent, since the work described in the memos had been done alongside the pharma companies. However, she added, “I’ve heard that testimony in this case, and I wish I had done it differently.”

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In another striking admission, Holmes discussed the decision to swap in commercial analyzers from Siemens in place of the Theranos Edison and MiniLab benchtop devices, which the company claimed could conduct hundreds of lab tests using only a few drops of blood.

Company documents and court testimony have since shown that the machines were only ever able to perform a maximum of 12 tests at once. Because of this, when Walgreens tapped Theranos to bring its seemingly miraculous blood-testing tech into clinics, the startup turned to the Siemens machines to perform the tests—even as Holmes maintained that Theranos’ technology was capable of doing what the company promised.

The decision to keep the device swap under wraps, she argued, was made not to mislead Walgreens about Theranos’ abilities, but rather to protect the “trade secret” of the alterations they’d made to the Siemens analyzers, per The New York Times.

She also blamed Walgreens for the fact that Theranos needed to bring in outside analyzers at all, alleging that the drugstore chain changed its mind about running one sample at a time on Theranos’ machines in its clinics, instead asking Theranos to test multiple samples at once in its own labs. Because the Edison and MiniLab machines weren’t able to do that, Theranos altered the Siemens devices so they could run tests on Theranos’ signature tiny amounts of blood.

Because Theranos determined that those alterations were a trade secret that should be protected from its larger competitors, Holmes said they told only the FDA about the switch—not Walgreens or any other partners or investors.

In response to Holmes’ claims, a former Walgreens employee involved in the partnership told WSJ that the chain didn’t change its mind about in-clinic versus lab-based testing on a whim. Instead, they said, Walgreens’ lawyers warned them against going along with Theranos’ claims that their devices could be installed in drugstores without requiring any regulatory oversight.

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Following a break for the Thanksgiving holiday, Holmes testimony is expected to continue Monday, Nov. 29. Once the defense has rested its case, the prosecution will have the opportunity to cross-examine Holmes. The trial is expected to wrap up soon after, since the defendant is typically one of the last to testify in a criminal case.

The court set aside a total of four months for Holmes’ trial, stretching into January. When a verdict has been reached, it’ll be former Theranos President Ramesh “Sunny” Balwani’s turn to face the same 12 counts of wire fraud and conspiracy to commit wire fraud.

Each of the defendants faces a maximum possible prison sentence of 20 years plus fines of at least $250,000 for each count of fraud.