Holmes Prosecutors Say Theranos Patient Complaints Reveal Fraud
(Bloomberg) -- As chief executive officer at Theranos Inc., Elizabeth Holmes received a 2014 email from her brother requesting a “candid conversation” concerning a customer complaint, one of many about problems with the company’s blood tests.
It is “pretty obvious that we have issues with calcium, potassium and sodium specifically,” Christian Holmes wrote, according to a court filing. The then-CEO, who now faces fraud charges over the collapse of the startup once valued at $9 billion, had hired her brother to work in product management.
The email is one example of several that government prosecutors want to show jurors to demonstrate Holmes’s hands-on involvement in collecting, tracking and responding to complaints about inaccurate tests. The complaints reveal not only that Holmes was aware of her company’s testing shortcomings, but continued marketing the technology to patients despite that understanding, prosecutors argue.
“Theranos emails contain many examples of customer complaints routinely being escalated” to Elizabeth Holmes and other senior company personnel, according to the filing. “At trial, the evidence will show that defendant shaped Theranos’s response to those complaints, prioritizing the company’s reputation over patient safety.”
Lawyers for Holmes claim the patient complaints amount to “inflammatory, unproven accusations.”
They argued to U.S. District Judge Edward J. Davila in a court filing that the complaints, cataloged in a spreadsheet, don’t “tend to show defects” in Theranos technology, and that prosecutors haven’t connected them to Holmes.
“All laboratory tests have inherent error rates, and the results covered by these spreadsheets reflect only a tiny fraction of the millions of results released by Theranos,” her lawyers said in the November filing.
In the September 2014 message, Christian Holmes told his sister that fielding customer service calls with doctors was difficult, and he suggested Theranos stop reporting problematic tests, according to the government’s filing. Three months earlier, Christian Holmes messaged his sister to say, “Just FYI -- HCG right now causing some serious issues and patient complaints,” a reference to hormone testing for pregnancy.
In November 2014, Theranos lab director Adam Rosendorff complained to Holmes that he was being pressured to vouch for blood test results he didn’t have confidence in, prosecutors say.
“Dr. Rosendorff is expected to testify that he observed increasing numbers of complaints about results from Theranos customers around this time,” according to the filing.
Prosecutors allege that Holmes and former Theranos President Ramesh “Sunny” Balwani falsely claimed Theranos machines could perform myriad tests with a single drop of blood. The government claims that over a period of years, they bilked investors of hundreds of millions of dollars and duped doctors and patients who trusted the results of the tests.
Holmes’s trial is scheduled to start in July. When it concludes, Balwani will face a separate jury. Both have pleaded not guilty.
In a flurry of court filings late Friday, prosecutors revealed new details of faulty test results that they say show how dangerously unreliable Theranos equipment was.
One woman’s results showed she was miscarrying -- but she wasn’t, according to the government. Another woman was led to believe she wasn’t pregnant, but in fact she was experiencing an “ectopic pregnancy” -- in which the fertilized egg grows outside the uterus -- that would have threatened her life if another lab result hadn’t revealed it.
“In each case, the patient’s experience of these effects -- and her subsequent blood tests -- revealed that she had been defrauded: she had purchased a test on which she could not rely,” prosecutors argue.
Back in November, lawyers for Holmes objected to the patient evidence, arguing prosecutors haven’t alleged any physical harm to any customer resulting from any allegedly inaccurate blood test.
“As far as we are aware, of the 7-10 million test results generated by Theranos, not one caused any physical harm,” the defense lawyers wrote. “Even if it had, such harm is not relevant to the offense charged, which concerns the loss of property.”
Kevin M. Downey and Lance A. Wade, lawyers representing Holmes, didn’t respond to emails and phone calls late Friday seeking a response to the government’s arguments.
The case is U.S. v. Holmes, 18-cr-00258, U.S. District Court, Northern District of California (San Jose).
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