Elizabeth Holmes, founder of Theranos Inc., is leaving federal court in San Jose, California on Tuesday, August 31, 2021.
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SAN JOSE, CALIF. – A hedge fund manager who invested $ 96 million in Theranos said he had investigated the company thoroughly but was still misled by CEO Elizabeth Holmes about its blood testing technology.
Brian Grossman, chief investment officer at PFM Health Sciences, told juries in the Holmes criminal trial on Tuesday that as part of his 2014 due diligence, he had his own blood drawn from a Theranos machine at a Walgreens pharmacy.
“My blood was drawn through a venous draw, not a finger prick,” Grossman said, adding that the experience undermined what he was told about Theranos.
Grossman said he met Holmes and her top executive Ramesh “Sunny” Balwani in their Palo Alto, Calif. Office in December 2013, doing 1,000 blood tests using his proprietary technology.
“Ms. Holmes actually made it very clear that she could pass any test on a Labcorp and Quest menu of tests,” said Grossman. He told the judges this was “a really big statement about how much they had accomplished and where the technology was at that time”.
Previous witnesses, including lab worker Erika Cheung, have testified that Theranos devices could not run more than 12 different tests, contradicting the company’s public statements.
Grossman said that at the meeting he was told that Theranos is working with the military and that his technology will be used at Medivacs on the battlefield.
“What better application for such a technology than in a military environment under harsh conditions, as one would expect from a place like Afghanistan or Iraq?” said Grossmann. Theranos said it had “just over $ 200 million in revenue from the Department of Defense,” he said.
Daniel Edlin, a former Theranos staff member, told jurors last month that, to the best of his knowledge, the blood testing machines have never been used in the Middle East.
“No ambiguity and no confusion”
Grossman said that after his first meeting with Holmes and Balwani in January 2014, he sent them an email with the subject “Due Diligence Questions”.
His questions from PFM fell into seven categories. He wanted more detail on issues like the accuracy and speed of the tests compared to traditional vendors, the limitations of technology, and the exclusivity of the Walgreens relationship.
“We as a group asked questions that we wanted to understand better,” said Grossman. “We wanted to ask the same questions in as many ways as possible so there was no confusion or confusion about what the technology was doing.“
PFM then met with Holmes and Balwani a second time. Grossman testified that Holmes left about halfway through the meeting. Theranos executives told him at the time that test results could be returned in less than four hours in retail stores and in an hour in hospitals.
Grossman told the jury that Holmes never told him the company was using third-party equipment to do the blood tests. Speaking of his own experience at Walgreens, Grossman said he was surprised to find that the blood was drawn from his arm and said that his test results took more than four hours.
“I asked [Balwani] why I didn’t get a finger prick and why it was a venous collection, “said Grossman.” I also asked him why it took more than four hours to get my test results back. “
Balwani assured him that his doctor ordered an unusual test, Grossman said.
Still, PFM invested $ 96.1 million in Theranos in February 2014. That investment included $ 2.2 million from a friends and family fund that Grossman said contained money from low-income people.
PFM eventually settled its lawsuit against Theranos after accusing the company of securities fraud.
Holmes has pleaded not guilty to twelve wire fraud and wire fraud conspiracies. As a prosecution witness, Grossman supports one of the wire fraud counts.
Holmes has been sitting at the defense table for 11 weeks when government witnesses testified. A central question remains whether the defense will bring a case after the indictment has ceased.
“We don’t even know if there is a defense case or if there is one,” said Lance Wade, a Holmes attorney, before the jury entered the courtroom. “We’re still in the government’s case.”
Last week, Holmes’ defense team presented a list of potential witnesses to the government. However, Wade said, “We are not saying we present a defense case by making them feel about the witnesses.”
SEE: The deposition bands from the Elizabeth Holmes process