One of Theranos’ whistleblowers testified on the inaccuracies in the blood analyzers that Theranos had touted to investors on the third day of Elizabeth Holmes’ federal fraud trial.
Erika Cheung, a former Theranos lab associate, testified yesterday that the machines the company was using to conduct patient blood tests had inaccuracies of quality control test results that would result in inaccurate patient tests, Silicon Valley News reports. She said that some 30% of prostate cancer tests were inaccurate and thyroid tests returned with a failure rate of more than 50%.
Cheung claimed that Theranos would throw out outlier data points to get the tests to pass quality control checks, The Washington Post reports. She said choosing those outliers was like “cherry-picking” and that the lab had no rules about which data points to choose. Cheung testified that Theranos was also running tests on third-party machines in an upstairs lab known as the “Dinosaur Lab” and was using commercially available Hepatitis C testing kits.
When she brought inaccuracy concerns to Theranos’ former president Sunny Balwani, who was in charge of lab operations, he brushed them off.
“The feedback and reception that I got from him was essentially, ‘What makes you think you’re qualified to make these calls?’” Cheung said, according to The Washington Post.
Balwani also allegedly told Cheung that she needed to process patients’ samples “without question” if she wanted to continue working for Theranos, which led her to believe the concerns wouldn’t be addressed, she testified.
Cheung shifted her concerns to Theranos board member and former Secretary of State George Shultz through his grandson Tyler Shultz, who was a junior lab associate at Theranos. The prosecution presented an email that Tyler sent to Holmes that outlined the lab’s testing practices and concerns. Tyler and Cheung later had dinner with the elder Shultz.
Tyler and Cheung, who formed the baseline for the Theranos HBO documentary “The Inventor: Out for Blood in Silicon Valley,” told the elder Shultz that the information he was receiving from Holmes and the company did not reflect what was actually going on behind the scene.
With their worries going unaddressed, Cheung forwarded the inaccuracies and lab conditions to federal regulators and resigned from Theranos after six months of employment. She later blew the whistle on the happenings at the young Silicon Valley company to former Wall Street Journal reporter John Carreyou in 2015.
Holmes’ defense attorneys cross-examined Cheung by bringing up her position as a lab associate was further down in the hierarchy of Theranos leadership of employees with science and medicine credentials, Bloomberg Law reports. Defense attorney Lance Wade said that Cheung was overseen by a medical doctor and managers who had PhDs and that she was only permitted by federal regulations to perform low complexity tasks.
Defense attorney Lance Wade also had Cheung acknowledge that the quality control analyses weren’t performed on human blood samples or patient samples, but on materials used for the testing equipment, The Washington Post reports.
In a motion filed on Sept. 7, Holmes’ attorneys moved to exclude certain testimony of Cheung and others. 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, Davila deferred the ruling on Holmes’ evidentiary challenges until federal prosecutors elicited testimony from Cheung.
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 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.
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