Whistleblower Erika Cheung’s first inkling that Theranos’ technology fell short of company founder Elizabeth Holmes’ claims arose because the startup used workers’ blood to check how well its tests performed, jurors in Holmes’ criminal trial heard Tuesday.
“Employees would essentially donate their blood to Theranos for cash,” Cheung testified on the trial’s second day, without saying how much was paid. When Cheung’s blood was used to “validate” Vitamin D testing on Theranos machines, “it would always come up that I was deficient,” the former laboratory assistant testified. Her results didn’t show the same problem when they came from another company’s machines that Theranos kept upstairs for tests its own machines couldn’t run.
Cheung, who joined Theranos in 2013 straight out of college at UC Berkeley, said she’d been “star-struck” during her job interview with Holmes, who is charged with a dozen felony fraud counts. Cheung saw Holmes, a rare high-profile female technology entrepreneur, as a potential example for other young women in science and engineering, Cheung said.
“She had a charisma to her,” Cheung testified. “She had a strong sense of conviction about her mission.”
But scarcely a month after Cheung started her new job, she began finding problems with the technology that was supposed to revolutionize blood testing by enabling a full range of tests on a few drops of blood. Ultimately, Cheung resigned and blew the whistle to the government on what she saw at Theranos.
Cheung’s internal email about quality-control issues in the Theranos lab caught the attention of Holmes, who asked in an email thread shown to jurors how the issue was resolved. A lab leader responded that the problem had been taken care of by getting rid of the data that showed a problem.
Holmes is accused of bilking investors out of hundreds of millions of dollars, defrauding patients, and misleading doctors and patients with false claims about her company’s technology. The Stanford University dropout, who founded the Palo Alto blood-testing startup in 2003 at age 19, and her co-accused, former company president Sunny Balwani, have denied the allegations.
Earlier in the trial Tuesday, prosecutors and the defense presented a variety of Theranos financial data to jurors, much of it focused on revenue projections that prosecutor Robert Leach said had been approved by Holmes. Holmes lawyer Lance Wade was quick to get the day’s first witness, former company finance chief So Han Spivey, to note that Balwani — who Holmes claims coerced and abused her in a long-running romantic relationship — was involved in producing the projections. Balwani is to be tried separately.
During Cheung’s testimony, Judge Edward Davila excused the jury for a few minutes so lawyers for both sides could argue over whether certain emails could be shown to jurors. Wade, with the jury absent, claimed that Holmes was not aware of much that went on in Theranos’ labs, and that Balwani oversaw them. Prosecutor John Bostic countered that “substantial evidence” showed Holmes’ involvement in the company in general, and he suggested that the “pervasive nature” of her communications with Balwani was evidence of her awareness of lab matters. “These issues filter upward to Ms. Holmes,” Bostic said. The jury, he said, could infer that Holmes was aware of them.
Holmes, who has a newborn baby, faces up to 20 years in prison. Her trial continues Wednesday, with Cheung scheduled to return to the witness stand.