Ex-Theranos Manager Tells of Unrelenting Pressure From Holmes
(Bloomberg) -- On her way out the door when she quit working at Theranos Inc., Surekha Gangakhedkar says she printed and took company documents “to protect myself” -- because she suspected a pending launch of the company’s blood-testing machines in Walgreens stores would end badly.
“I was actually scared that things would not go well,” Gangakhedkar said in federal court in San Jose, California. She took the documents, she explained, in case “any issues came up.”
It was a prescient move. Eight years later, Gangakhedkar was testifying Friday at the criminal trial of her former boss, Elizabeth Holmes, the founder and former chief executive officer of Theranos.
It was by far the strongest testimony so far connecting Holmes’s actions to charges that she lied to patients and investors about the potential and accuracy of Theranos blood-testing machines. She has pleaded not guilty but faces as long as 20 years in prison if convicted.
Gangakhedkar was apparently worried about Theranos’s criminal liability as far back as 2013, said James Melendres, a former prosecutor turned criminal defense lawyer at Snell & Wilmer.
“Given her proximity and access to Holmes, she can provide a first-hand account tying Holmes to the alleged fraud,” he said. “The fact she was willing to resign and give up her livelihood because of her concerns about Holmes’s conduct will give the testimony added weight.”
As a manager of assay systems at Theranos, Gangakhedkar reported directly to Holmes, meeting with the CEO multiple times a week. Gangakhedkar, who worked at the company for eight years, testified that she made Holmes fully aware of serious failings of Theranos machines -- claims that were backed up Friday by emails displayed for jurors.
Gangakhedkar said she felt increasing pressure to approve Theranos blood tests leading up to the Walgreens launch.
“Where was the pressure coming from?” Assistant U.S. Attorney Bob Leach asked her. “From Ms. Holmes,” Gangakhedkar said.
Walgreens sued Theranos in 2016 after it closed about 40 of the company’s blood-testing sites in Arizona. The suit was settled.
Lance Wade, Holmes’s lawyer, raised repeated, increasingly urgent objections to the testimony and to jurors being shown Gangakhedkar’s resignation letter to Holmes, but the arguments only supercharged a courtroom already abuzz with the revelations. Wade had barely started his cross-examination of Gangakhedkar when trial was stopped as scheduled Friday afternoon. It resumes Tuesday.
Gangakhedkar doesn’t have a high profile like the previous witness, Erika Cheung, a junior lab worker at Theranos turned whistle-blower whose accounts of defective blood-testing technology had already been publicized in books and a documentary about the downfall of Theranos.
But Gangakhedkar’s testimony connected concerns about internal practices at the company to public safety when she talked about the Walgreens launch -- a move she said was so overly-ambitious and premature that it prompted her to leave Theranos after multiple one-on-one meetings with Holmes.
“I was not comfortable with the plans that they had in place so I made a decision to resign and not continue working there,” she said.
Gangakhedkar took particular exception to a decision she said was relayed by Holmes to use larger venous draws of blood from patients at Walgreens -- directly at odds with the company’s much-heralded mission to run tests on a pinprick of blood in a tiny glass capsule marketed as a “nanotainer.”
The retreat to venous draws came as a surprise and was possibly fraudulent, she said.
“The use of venous draws, that information was not released to everyone,” Gangakhedkar said. “I felt it was not the right thing to do.”
Gangakhedkar began Friday by acknowledging for the jury a deal she had struck with government lawyers guaranteeing her immunity from prosecution in exchange for her testimony. Her lawyer likely negotiated the agreement to shield her from any potential criminal liability, Melendres said. If she had criminal exposure she could have declined to be interviewed by prosecutors, he said.
“It’s a regular practice for prosecutors to immunize witnesses they believe are important to their case, and whose testimony they could not secure otherwise,” Melendres said.
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