Ex-Worker Says Firm Has Misplaced Hundreds of thousands
SAN JOSE, CALIF. – In public, Elizabeth Holmes was dubbed the next Steve Jobs on the cover of Inc. magazine in 2015, but privately, the blood testing company Theranos, which she founded, has been bleeding hundreds of millions.
On Tuesday, the first government witness in Holmes ‘fraud trial, Theranos’ longtime financial controller San Ho Spivey, who also deals with Danise Yam, gave a detailed testimony about the company’s true financial position.
According to Yam, Theranos had net losses of $ 16.2 million in 2010, $ 27.2 million in 2011, $ 57 million in 2012, and $ 92 million a week in 2013, and “cash was getting a little tight. “
Yam testified that Theranos had amassed $ 585 million in losses by 2015, according to tax records. Despite this, the prosecution referred to a document to investors in which sales for 2014 were forecast at 140 million US dollars and for 2015 at 990 million US dollars. Yam said she did not prepare this document.
“Have you ever made financial forecasts to investors?” asked Robert Leach, a US assistant attorney. “No,” replied Yam.
During the cross-examination, defense attorneys pointed out a document that valued Theranos at either $ 9.5 billion or $ 1.69 billion, depending on the methodology used. Lance Wade, a Holmes attorney, asked Spivey about other companies that had suffered large losses during the 2009 financial crisis.
Yam testified that Holmes never sold any stock she owned, nor did he sell any stock.
Holmes has faced dozens of referral fraud and referral fraud conspiracies involving misleading investors and patients about Theranos’ technology – she has pleaded not guilty. Her long-awaited fraud trial began last week in San Jose. In the opening statements, Holmes’ defense team portrayed her as an ambitious young woman who really wanted to revolutionize healthcare.
Holmes had announced to several investors that Theranos’ technology was used by the US Department of Defense on the battlefield, in Afghanistan and in Medevac helicopters. During her four hours on the witness stand, Yam testified that Theranos actually had no income-generating contracts with the Department of Defense or the military.
The next government witness, Erika Cheung, quit her job as a laboratory worker after seven months and became a whistleblower, gave a TED talk and was interviewed for numerous newscasts.
Cheung testified that she “died” during her interview with Holmes.
“She had a charisma, she was very eloquent,” said Cheung. “She had a strong belief in her mission.”
Cheung told the court that she was excited to work at Theranos based on “very little information” given to her. “I asked a number of questions about the company and [Holmes] said you will find out when you start working here, “said Cheung.
Theranos was once valued at $ 9 billion.
“At the time, she was one of the few female entrepreneurs to receive unicorn status,” recalls Cheung, adding that Holmes “could possibly be an example for other women who are passionate about science and technology.”
Cheung testified that she looked to Holmes’ brother Christian Holmes, who advised her not to add Theranos to her LinkedIn profile. Cheung said the Edison used to process blood samples only performed 12 tests while she was in Theranos, and that all other tests were performed on third-party equipment.
“The Edison analyzer could only run one type of test on one patient at a time,” said Cheung.
Holmes came to federal court with her mother Noel Holmes holding hands. A bystander outside clapped in support and got emotional when Holmes walked into the courthouse and yelled, “To bet on one person is ridiculous.”
Earlier in the day, the judge excused a juror for financial hardship and referred another juror to the main bench. It changed the composition of the jury to eight men and four women.