What Elizabeth Holmes’ trial reveals about Theranos

Courtroom testimony that has unfolded thus far in Theranos Inc. criminal trial. Elizabeth Holmes gave even close company watchers new information.

While much of Theranos’ story has been closely documented by The Wall Street Journal and others, the trial has revealed details of the company’s losses, its fundraising, and the lengths that prosecutors say went to deceive its partners.

Ms Holmes, 37, is accused of defrauding patients and investors, and the maximum federal prison sentence is up to 20 years. She is not guilty.

Here are a few of the revelations we have heard so far in testimony or seen in court documents.

forged documents

During opening statements, Attorney General Robert Leach described how Ms Holmes told investors that Theranos technology had been validated by 10 of the 15 largest drug companies, a claim he says is completely false.

Mr. Leech showed the jury a document with


The logo, which he said Ms. Holmes portrayed to investors, as a sign of support for the pharmaceutical giant. He said it was actually a forged document.

“Pfizer did not write this. Pfizer did not put its logo on this. Pfizer did not give permission to place its logo on this. Pfizer did not reach the conclusions in this report,” Mr. Leitch said in court last week.

He said that Pfizer had a $900,000 contract prior to 2009, but after seeing initial reports from Theranos, it concluded it was not using Theranos technology and did not do business with the company again.

As the long-awaited trial of Theranos founder and former CEO Elizabeth Holmes begins, the Wall Street Journal looks back at the scandal’s biggest milestones and talks with legal reporter Sarah Randazzo about what we can expect to see in the fraud trial. Photo caption: Adele Morgan/WSJ

A Pfizer spokeswoman said it would not be appropriate to comment on an ongoing criminal trial, but the company “fully cooperated with the plaintiffs throughout this process.”

Accumulation of losses

Dennis Yam, a long-time controller of Theranos who was the chief financial officer for many years, testified that the company incurred losses of more than $585 million from 2003 to 2015. The company reported this figure to the IRS on its 2015 tax returns, The jury offered.

Ms. Yam spoke of years when the company didn’t bring in any money at all, and the periods when they burned between $1 million and $2 million a week. When questioned by one of Ms Holmes’ lawyers, Ms. Yam, who goes by the name So Han Spivey, said the biggest spend in many years was research and development costs.

Invest more than previously thought

Investors poured more money into the company than previously known: $944.56 million over six investment rounds, according to a March 15, 2015 report, from a company called Aranca that was repeatedly hired to value the company.

Ms. Yam testified that she provided internal financial information to Aranca to assist her in evaluating Theranos’ valuation. Later, prosecutors showed that much better revenue forecasts were given to potential investors than Ms Yam gave Aranca, something Ms Yam said she could not explain. In one case, Theranos told investors to expect $990 million in revenue in 2015, while the company told Aranca it would have $113 million or less in revenue.

Theranos headquarters in Palo Alto, California, in 2017.


Andre Sokolow / dpa / Zuma Press

Possible lines of action

In addition to its well-known partnership with

Walgreens Boots Alliance a company

Which placed Theranos testing centers at Walgreens drugstores, Theranos explored some partnerships that hadn’t been seen before.

Text messages from April 2015 included in court filings show that Theranos also had its sights set on a partnership with Highmark Inc. , a health care company in Pittsburgh. Ms Holmes texted fellow Theranos executive, Sunny Balwani, “deal 100% done with Highmark CEO,” and another Highmark executive apologized for not working with Theranos, admitting it was a “fatal mistake.”

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Theranos has never launched a blood-testing partnership with Highmark. Highmark spokesperson, Aaron Pilger, said, “A proposal has been made to us – like many of the offers we receive annually in new projects. After further review, the decision has been made not to invest.”

Ms. Yam’s testimony also revealed that Theranos had a $288,000 contract in its early years to provide cartridges and devices to the American Burn Association, a group that helps burn victims through research and services. In questioning witnesses, Ms. Yam said the work was done in relation to the Ministry of Defense. The American Burn Association did not immediately respond to a request for comment.

Prosecutors allege that Ms. Holmes and Mr. Balwani lied to investors about a lucrative business relationship with the Department of Defense and the deployment of Theranos technology to the battlefield.

Hiring private investigators

Court filings show the extent to which Theranos tried to prevent former employees from speaking out about the company after they left. Records details $150,000 paid to the investigation firm Interfor and Special Investigator David Fechheimer regarding what was listed in the records as “Project E. Cheung & T. Shultz” — a reference to Erika Cheung and Tyler Shultz, two junior employees of Theranos who resigned due to concerns about the company’s practices and later spoke out, including to the magazine, about their experience.

Interfor declined to comment. Mr. Wechsheimer passed away in 2019.

Erica Cheung is being questioned at Theranos Elizabeth Holmes criminal trial.


Vicki Bringer

write to Sarah Randazzo in sara.randazzo@wsj.com

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