Two of the prosecution’s witnesses took the stand yesterday on the second day of Elizabeth Holmes’ federal fraud trial.
Theranos’ former financial controller San Ho Spivey, who is referred to as Danise Yam, took the stand and testified the company’s financial condition during its heyday.
Yam told Assistant U.S. Attorney Robert Leach that Theranos had net losses of $16.2 million in 2010, $27.2 million in 2011, $57 million in 2012 and $92 million in 2013, CNBC reports. Yam also testified that Theranos made no revenue in 2012 and 2013 and that the company was spending nearly $2 million per week in 2013.
Theranos had losses of $585 million by 2015, Yam said. Prosecutors, in return, presented a document that was given to investors and showed a revenue forecast of $140 million in 2014 and $990 million in 2015. Yam testified that she did not prepare the document and never provided financial projections to investors.
Holmes’ defense attorneys presented a document during cross-examination that showed Theranos was valued at either $9.5 billion or $1.69 billion. Holmes’ attorney Lance Wade brought up other companies that took big hits following the 2008 recession, according to CNBC. Yam, in return, testified that Holmes never sold a share she owned and did not process any stock sale.
The prosecution’s second witness Erika Cheung, who worked on Theranos’ research & development and was one of the company’s whistleblowers, took the stand on day 2 of the trial as well, according to ABC7 Bay Area News. She testified that Theranos’ Edison device that was used for processing blood samples only ran 12 tests during her time there. All of the other blood tests were performed on third-party machines.
Cheung quit working for Theranos after six months following concerns about the system’s inaccurate test results. She told the jurors that there were problems passing daily quality control tests.
In a motion filed on Sept. 7, Holmes’ attorneys moved to exclude certain testimony of Cheung, Yam and Daniel Edlin. U.S. District Judge Edward Davila found that “it would be premature to make a ruling” on the challenges to certain testimony without hearing the questions the federal prosecutors planned to present during the trial. Since the court does not know what testimony the government would elicit during trial, Judge Davila deferred the ruling on Holmes’ evidentiary challenges until federal prosecutors elicited testimony from Cheung, Yam and Edlin.
Holmes and her defense attorneys are still planning to present claims that Sunny Balwani, former Theranos president and Holmes’ former romantic partner, abused her emotionally and psychologically. Balwani has denied the allegations. Holmes’ attorneys have said in court papers that she could take the witness stand to describe her romantic relationship with the former company president Balwani.
Holmes and Theranos were once believed to be the next shining stars of Silicon Valley. Holmes claimed her company would revolutionize blood testing with technology that could analyze tiny amounts of blood and inked retail partnerships with Walgreens and Safeway. Forbes in 2015 recognized Holmes as America’s richest self-made woman based on Theranos’ multibillion-dollar valuation at the time.
Investigative reporting soon dismantled Holmes’ technological claims, raising questions about whether she and others misled investors. The downward spiral culminated in the 2018 shutdown of the company, with the U.S. Securities and Exchange Commission accusing Holmes and Balwani of what it described as a “massive fraud.”
Holmes faces 10 counts of wire fraud and two counts of conspiracy to commit wire fraud over allegations that she knowingly misled investors by claiming Theranos technology could revolutionize blood testing. She has pleaded not guilty to all charges.
Balwani’s trial is expected to follow the Holmes trial.