Elizabeth Holmes trial: Theranos founder confronts accusations

After 10 hours behind her on the witness stand, it had become quite clear how Elizabeth Holmes, the disgraced founder of blood-testing start-up Theranos, once managed to talk a parade of investors into parting with hundreds of millions of dollars.

This week, as back then, the 37-year-old Stanford dropout seemed to have an answer for everything.

It helped that she already knew the questions, coming as they did from her lead attorney Kevin Downey; all part of a calm and collected display, delivered maskless and behind Plexiglas in the San Jose court.

As she defended herself on fraud charges, Holmes appeared so relaxed at times this week she even cracked a smile at the judge’s jokes. It will soon be much tougher. Government prosecutors will probably get their long-awaited turn to cross-examine her early next week.

Downey guided Holmes through a testimony carefully orchestrated to serve two purposes. First, to present Holmes as an ambitious young entrepreneur with deep knowledge of her work, with an intense belief that her vision was possible.

Second, Holmes had to address, and ideally dampen, some of the government’s strongest evidence.

Taking the stand on Tuesday, she quickly confessed to one of the most serious allegations: that she personally altered Theranos reports to include the logos of two major pharmaceutical companies — Pfizer and Schering-Plough.

Prosecutors said it implied that the pharma giants had endorsed Theranos’s technology, which was not the case. Nevertheless, the documents were sent by Holmes to Walgreens executives as part of what would be a successful pitch to open “wellness centers” within as many as 3,000 of the pharmacy chain’s locations. Walgreens became Theranos’s breakthrough client and the deal was the springboard to another huge round of investment that meant Theranos became a company worth $9bn.

“This work was done in partnership with those companies and I was trying to convey that,” Holmes said of her editing intervention, acknowledging that the drugs companies had been unaware of her actions. “I wish I’d done it differently,” she then added — a rare display of regret.

Then she took on another line of attack: that Theranos covered up the use of conventional testing machines because its own hardware was not up to the task, as prior witnesses had stated.

Holmes dug in, saying that she had made the choice to fall back on hardware made by the likes of Siemens due to the volume of tests from Walgreens customers that needed to be handled. The Theranos machines had only ever been designed to handle just one person’s sample at a time, she explained, but the third-party tech, such as machines made by Siemens, could handle far more.

When asked by her lawyer why she didn’t share details about the change of process with Walgreens, its customers or Theranos’s investors, Holmes claimed that far from orchestrating a cover up, she was in fact protecting a new invention: the ability to use existing testing machines for analysing smaller blood samples.

“This was an invention that we understood from our counsel we had to protect as a trade secret,” Holmes said. “The big medical device companies like Siemens could reproduce what we had done. They had a lot more engineers than we did.”

At times, the atmosphere in and around the court betrayed the severity of what might lie ahead for Holmes, who in July became a mother. She faces 11 charges of wire fraud and conspiracy to commit wire fraud, all related to the blanket accusation that her promise, to reduce the cost and discomfort of having a blood test, was a sham. If convicted, she faces up to 20 years in prison.

Whether fortunate timing or a well-executed plan, the calling of Holmes to the witness stand by the defence, late on Friday afternoon, set off a siren for domestic and international media outlets to get to San Jose by Monday morning to hear her speak for herself at length for the first time since Theranos came crashing down.

It also now means jurors are going home for their Thanksgiving break with Holmes’ defence at the front of their minds — and not the government’s accusations.

Those most desperate to secure one of about 30 public seats in the courtroom started to arrive at 3am each morning, with two reporters implementing a strictly logged queueing system to reward the early risers. The system drew praise from a local schoolteacher who, having decided to come along out of curiosity, said she organises her seven-year-olds in much the same way.

Nearby, an opportunistic — if perhaps not altogether serious — woman opened a suitcase to reveal a selection of “merchandise”, including a blonde wig for $40, or a Holmes-esque black turtleneck for the same price.

The scene proved that while it may not be quite how she intended, Holmes has unquestionably become an industry icon. As she walked into court on Tuesday, a male supporter yelled “Girl boss! God bless you girl boss!” — a condescending nickname but one that speaks to a sentiment held by some who point out that, for all the male-led failed start-ups, it is telling that it is a woman who finds herself in the dock in one of the most talked about cases in Silicon Valley’s history.

Others suggest it is not Holmes’ gender at play, but her choice of business. Compared to the “move fast and break things” wild west of software and social networking, the highly regulated healthcare sector provides ample opportunity for ruthless scrutiny, and the cost of getting it wrong — as evidenced by one witness here who was falsely told by Theranos that she was miscarrying — is severe.

Should Holmes be convicted, some argue it would strap a leash on future innovators, introducing a fear of failure. If Holmes walks, it is a signal to investors that even someone who they claimed lied continuously faces no criminal repercussions.