Steven Burd — Direct/Cross/Redirect/Recross (Continued)
1,711 linesDIRECT EXAMINATION (RESUMED) BY MR. LEACH:
MR. LEACH: GOOD MORNING, MR. BURD.
STEVEN BURD: GOOD MORNING.
MR. LEACH: WHEN WE BROKE LAST WEEK WE WERE ON EXHIBIT 718 FROM DECEMBER OF 2012, AND DO YOU RECALL TESTIFYING ABOUT STATEMENTS THAT MS. HOLMES MADE TO YOU ABOUT THERANOS'S RELATIONSHIP WITH THE MILITARY?
STEVEN BURD: YES, I HAVE IT.
MR. LEACH: OKAY. DO YOU RECALL TESTIFYING ABOUT STATEMENTS THAT MS. HOLMES MADE TO YOU ABOUT THERANOS'S RELATIONSHIP WITH THE MILITARY?
STEVEN BURD: YES, I DO.
MR. LEACH: AND THE DATE OF THIS EMAIL, EXHIBIT 718, IS IN OR AROUND DECEMBER OF 2012; IS THAT CORRECT?
STEVEN BURD: CORRECT.
MR. LEACH: I'D LIKE TO MOVE A LITTLE BACKWARD IN TIME TO AUGUST OF 2012, AND IF I COULD PLEASE DRAW YOUR ATTENTION TO WHAT WE HAVE MARKED AS EXHIBIT 375.
STEVEN BURD: I HAVE IT.
MR. LEACH: OKAY. DOES THIS APPEAR TO BE AN EMAIL FROM ELIZABETH HOLMES TO YOU ATTACHING A POWERPOINT IN ADVANCE OF A SAFEWAY BOARD MEETING?
STEVEN BURD: YES.
MR. LEACH: YOUR HONOR, I OFFER EXHIBIT 375.
MR. DOWNEY: NO OBJECTION, YOUR HONOR.
JUDGE DAVILA: IT'S ADMITTED. IT MAY BE PUBLISHED.
(GOVERNMENT'S EXHIBIT 375 WAS RECEIVED IN EVIDENCE.)
MR. LEACH: MS. HOLLIMAN, IF WE CAN PLEASE ZOOM IN ON THE TOP PORTION OF THE EMAIL. THANK YOU.
MR. LEACH: MR. BURD, DID MS. HOLMES PRESENT TO THE SAFEWAY BOARD ON OCCASION?
STEVEN BURD: YES, I CAN RECALL AT LEAST TWICE WHEN SHE DID THAT.
MR. LEACH: OKAY. AND LET ME DRAW YOUR -- ON OCCASION, DID SHE PRESENT POWERPOINTS TO THE SAFEWAY BOARD OF DIRECTORS?
STEVEN BURD: ON ONE OCCASION FOR SURE.
MR. LEACH: OKAY. LET ME DRAW YOUR ATTENTION TO PAGE 2 OF THIS EXHIBIT. DO YOU SEE THE DATE AUGUST OF 2012?
STEVEN BURD: I DO.
MR. LEACH: OKAY. AT A HIGH LEVEL, WHAT WAS YOUR LEVEL OF SATISFACTION WITH THE PACE OF THE ROLLOUT IN SAFEWAY STORES FOR THERANOS'S DEVICES AT THIS POINT IN TIME?
STEVEN BURD: I WOULD SAY I WAS DISAPPOINTED BECAUSE WE MET -- THE ORIGINAL DEADLINE FOR A PILOT WAS GOING TO BE IN THE FIRST QUARTER. THAT DIDN'T HAPPEN. AT THIS POINT WE'RE INTO THE THIRD QUARTER. SO, YOU KNOW, THE DATES JUST KEPT BEING PUSHED BACK.
MR. LEACH: AND WAS THIS A SENTIMENT SHARED BY THE SAFEWAY BOARD?
STEVEN BURD: I WOULD SAY ANY TIME YOU MISS A DEADLINE THEY'RE CONCERNED, RIGHT. BUT IT WASN'T THE BIGGEST ISSUE ON THE TABLE.
MR. LEACH: THE BIGGEST ISSUE IN TERMS OF SAFEWAY OVERALL?
STEVEN BURD: CORRECT.
MR. LEACH: LET ME DRAW YOUR ATTENTION TO PAGE 3. DO YOU SEE THE HEADINGS OR THE BULLET: SAFEWAY READINESS; THERANOS READINESS; PACE OF ROLLOUT; AND FINANCIAL IMPLICATIONS?
STEVEN BURD: YES.
MR. LEACH: AND WAS THIS A DOCUMENT THAT YOU AND MS. HOLMES WORKED ON TOGETHER?
STEVEN BURD: WHEN YOU SAY "WORKED TOGETHER" THIS IS, ON THE THERANOS PIECE, WHICH IS THIS LARGELY ABOUT. IF I HAD DONE SOME SLIDES, I WOULD HAVE SHOWN THEM TO HER, AND IF SHE HAD DONE SOME SLIDES, SHE WOULD HAVE SHOWN THEM TO ME.
MR. LEACH: OKAY. SO YOU WERE SPEAKING TO SAFEWAY'S READINESS AND SHE WAS SPEAKING TO THERANOS'S READINESS; IS THAT FAIR?
STEVEN BURD: I CAN'T TELL UNTIL I GET TO THE SLIDES, BUT THE INFORMATION ON THERANOS READINESS CAME FROM ELIZABETH.
MR. LEACH: OKAY. LET ME DRAW YOUR ATTENTION TO PAGE 4. DO YOU SEE WHERE IT SAYS PREPARING SAFEWAY FOR LAUNCH?
STEVEN BURD: YES.
MR. LEACH: AND THE BULLETS ARE: COMPLETE ALL CONSTRUCTION; HIRE AND TRAIN NEW EMPLOYEES; CREATE PR BUZZ TO FACILITATE ADOPTION; AND FINALIZE LOGISTICS. DO YOU SEE THAT?
STEVEN BURD: I DO.
MR. LEACH: AND LET ME FOCUS ON THE "COMPLETED ALL CONSTRUCTION," AND I DRAW YOUR ATTENTION TO PAGE 5.
STEVEN BURD: YES.
MR. LEACH: AND DO YOU SEE THE PHASE I CONSTRUCTION, 969 U.S. UNITS?
STEVEN BURD: I DO.
MR. LEACH: AND WHAT DOES THAT REFER TO?
STEVEN BURD: WE INTENDED TO PUT THE MINILAB IN 969 U.S. UNITS.
MR. LEACH: AND HAD SAFEWAY TAKEN EFFORTS TO MODIFY THOSE UNITS TO GET THEM READY FOR THE THERANOS ROLLOUT?
STEVEN BURD: YES. THE -- THIS IS JUST DEPICTING WHERE WE ARE IN THAT PROCESS.
MR. LEACH: AND WHAT IS MEANT BY THE TWO COLUMNS PLANS COMPLETE AND CONSTRUCTION COMPLETE?
STEVEN BURD: THE FIRST THING YOU HAVE TO DO IS DRAW PLANS, AND OFTEN LOCAL APPROVALS ON THOSE. ONCE THE PLANS ARE APPROVED AND A PERMIT IS GRANTED, THEN YOU CAN BE IN CONSTRUCTION.
MR. LEACH: OKAY. AND THAT WAS DONE FOR 100 PERCENT OF THE 969 U.S. UNITS IN PHASE I?
STEVEN BURD: THAT'S CORRECT.
MR. LEACH: AND CONSTRUCTION WAS ACTUALLY COMPLETE AT THIS POINT IN TIME FOR 98 PERCENT OF THE 969 U.S. UNITS?
STEVEN BURD: YES.
MR. LEACH: OKAY. THERE'S A REFERENCE TO PHASE II CONSTRUCTION. WHAT IS THAT?
STEVEN BURD: WE DECIDED THAT THE VOLUME WOULD BE SUCH THAT WE SHOULD REALLY HAVE TWO PLACES IN THE STORE, AND SO WE CREATED A SECOND ROOM. IT WAS 9 FEET DEEP, 5 FEET WIDE. WE ALSO NEEDED THAT BECAUSE SAFEWAY HAD A GROWING VACCINATION BUSINESS AND WE NEEDED TO COEXIST WITH THE LAB IN THAT SPACE.
MR. LEACH: LET ME NEXT DRAW YOUR ATTENTION, PLEASE, TO PAGE 11. DO YOU SEE THE HEADING LAUNCH WITH HEAVY PR EFFORT?
STEVEN BURD: I DO.
MR. LEACH: OKAY. IS PR AN ACRONYM FOR PUBLIC RELATIONS?
STEVEN BURD: YES.
MR. LEACH: AND THE FIRST BULLET SAYS, "ELIZABETH WILL MEET WITH EDITORIAL BOARDS OF ALL LOCAL NEWSPAPERS." DO YOU SEE THAT?
STEVEN BURD: I DO.
MR. LEACH: AND WHERE DID THAT IDEA COME FROM?
STEVEN BURD: YOU KNOW, THE -- CREATING THE LAUNCH EFFORT AND THE MARKETING, THAT WAS LARGELY IN THERANOS'S DOMAIN. YOU KNOW, WE PROVIDED SOME INPUT ON THAT, BUT THAT WAS LARGELY SOMETHING THAT THEY WOULD DO.
MR. LEACH: "A WSJ ARTICLE WILL BE RELEASED THE DAY OF OUR LAUNCH." DO YOU KNOW WHERE THAT IDEA CAME FROM?
STEVEN BURD: AGAIN, IT WOULD HAVE COME FROM THERANOS.
MR. LEACH: OKAY. LET ME DRAW YOUR ATTENTION, PLEASE, TO PAGE 12. DO YOU SEE THE HEADING OPERATIONAL LOGISTICS?
STEVEN BURD: YES.
MR. LEACH: AND THEN IN THE FIRST BULLET IT SAYS, "ONE CARTRIDGE WILL SATISFY 95 PERCENT OF ALL CPT CODES." WHERE DID THAT INFORMATION COME FROM?
STEVEN BURD: THAT CAME FROM THERANOS.
MR. LEACH: DID IT COME FROM MS. HOLMES?
STEVEN BURD: IT DID.
MR. LEACH: AND WHAT DOES THAT MEAN, THAT ONE CARTRIDGE WILL SATISFY 95 PERCENT OF ALL CPT CODES?
STEVEN BURD: IT MEANS THAT THE CARTRIDGES WHICH GO INTO THE MACHINES, THAT A SINGLE CARTRIDGE, A SINGLE CONFIGURATION WILL BE CAPABLE OF DOING ALL CPT CODES, AND A CPT CODE IS A BILLING CODE AND IT IDENTIFIES A SPECIFIC BLOOD TEST.
MR. LEACH: AND WAS THIS INFORMATION RELEVANT TO YOU?
STEVEN BURD: IT WAS GREAT NEWS.
MR. LEACH: AND WHY WAS IT GREAT NEWS?
STEVEN BURD: BECAUSE WE HAD TO INVENTORY THESE CARTRIDGES IN EACH OF THOSE STORES, AND IT MEANT THAT WE COULD HAVE MOSTLY THIS ONE CARTRIDGE THAT DID 95 PERCENT, AND THEN A FEW OTHER CARTRIDGES THAT WOULD, YOU KNOW, GET SOME LEVEL OF VOLUME, AND THEN THE MOST ESOTERIC OF BLOOD TESTS MIGHT GO OUTSIDE.
MR. LEACH: AND BASED ON STATEMENTS FROM MS. HOLMES, WAS IT YOUR UNDERSTANDING THAT THIS WAS SOMETHING THAT THERANOS COULD DO IN AUGUST OF 2012?
STEVEN BURD: YES.
MR. LEACH: LET ME DRAW YOUR ATTENTION TO THE NEXT PAGE, PAGE 13. DO YOU SEE WHERE IT SAID THERANOS READINESS ON KEY TASKS?
STEVEN BURD: YES.
MR. LEACH: AND THERE'S A REFERENCE TO: ON-CAMPUS FACILITY; STATUS OF ONLINE ADJUDICATION; PRODUCTION RATE OF PROCESSING PLATFORM; PRODUCTION RATE OF CARTRIDGES. DO YOU SEE THOSE BULLETS?
STEVEN BURD: I DO.
MR. LEACH: AND WHAT DID YOU UNDERSTAND PRODUCTION RATE OF PROCESSING PLATFORM AND PRODUCTION OF RATE OF CARTRIDGES TO MEAN?
STEVEN BURD: IN ORDER TO DO THE MINILAB, YOU NEEDED BOTH A MACHINE AND YOU NEEDED CARTRIDGES TO GO IN IT. AND SO AS YOU BUILD UP FOR A LAUNCH, YOU NEED TO HAVE AMPLE INVENTORY SO YOUR BUSINESS DOESN'T GET DISRUPTED.
MR. LEACH: AT ANY POINT IN TIME IN THIS BOARD MEETING OR THIS AUGUST 2012 TIME PERIOD, DID MS. HOLMES RAISE WITH YOU ANY TYPE OF TECHNOLOGICAL ISSUE WITH THE MINILAB DEVICE THAT WAS HOLDING UP THE ROLLOUT?
STEVEN BURD: I DON'T RECALL THE TIMEFRAME, BUT THE ONLY TECHNICAL ISSUE THAT I RECALL WAS THIS EXCESS HEAT GENERATED BY STACKING ONE UNIT ON TOP OF THE OTHER.
MR. LEACH: THANK YOU. YOU CAN PUT THAT -- I'D LIKE TO DRAW YOUR ATTENTION TO THE NEXT DOCUMENT, MR. BURD, WHICH IS EXHIBIT 670. I'M ONLY FOCUSSED ON PAGES 2 AND 3 OF 670, MR. BURD.
STEVEN BURD: YES.
MR. LEACH: AND DOES IT APPEAR TO BE AN EMAIL EXCHANGE BETWEEN YOU AND MS. HOLMES DATED SEPTEMBER 12TH, 2012?
STEVEN BURD: YES.
MR. LEACH: YOUR HONOR, I OFFER PAGES 2 AND 3 OF EXHIBIT 670.
MR. DOWNEY: NO OBJECTION, YOUR HONOR.
JUDGE DAVILA: THEY'RE ADMITTED, AND THEY MAY BE PUBLISHED.
(GOVERNMENT'S EXHIBIT 670, PAGES 2 AND 3 WAS RECEIVED IN EVIDENCE.)
MR. LEACH: MS. HOLLIMAN, IF WE CAN PLEASE FOCUS ON THE BOTTOM EMAIL IN THE CHAIN ON THE FIRST PAGE.
MR. LEACH: DO YOU SEE YOUR EMAIL ADDRESS IN THE FROM LINE, MR. BURD?
STEVEN BURD: I DO.
MR. LEACH: AND THE SUBJECT OF THIS IS ON CAMPUS FACILITY PERFORMANCE?
STEVEN BURD: CORRECT.
MR. LEACH: AND WHAT WAS THE ON CAMPUS FACILITY?
STEVEN BURD: WE HAD A HEALTH CENTER ON OUR CAMPUS, YOU KNOW, FOUR OR FIVE BUILDINGS, AND THAT SEEMED THE LOGICAL PLACE TO PUT THIS LAB, SO WE PUT IT OVER THERE IN THAT BUILDING. THAT ALSO CONTAINED AN EXERCISE FACILITY.
MR. LEACH: AND WHEN YOU SAY "PUT THIS LAB," WHAT DO YOU MEAN? WHAT WAS --
STEVEN BURD: WELL, THE ORIGINAL EXPECTATION IS THAT WE WOULD PUT A THERANOS UNIT IN THERE. THAT WAS THE REASON FOR WANTING AN ON CAMPUS LAB, AND SO WE WOULD GET SOME REAL EXPERIENCE BECAUSE I WAS REQUIRING THAT ALL SAFEWAY EMPLOYEES AND FAMILIES THAT LIVED IN A CERTAIN RADIUS, THAT'S THE LAB THAT THEY WERE TO USE. IF THEY USED THAT LAB, WE WOULD PAY FOR THEIR LAB COSTS. AS IT TURNED OUT, WE DIDN'T GET -- WE DIDN'T GET A LAB UNIT FROM THERANOS. WE ENDED UP DRAWING BLOOD. I BELIEVE IT WAS MOSTLY VEIN DRAW, BUT SOME OF THAT WAS ALSO FINGERSTICK IF THE PATIENT AGREED TO TWO DIFFERENT FORMS, AND THEN THEY LEFT THE FACILITY TO BE, TO BE ANALYZED.
MR. LEACH: THE BLOOD WAS TAKEN FROM THE SAFEWAY FACILITY SOMEWHERE ELSE; IS THAT RIGHT?
STEVEN BURD: CORRECT.
MR. LEACH: OKAY. AND DID MS. HOLMES GIVE YOU AN EXPLANATION FOR WHY THERE WERE VENOUS AND FINGERSTICK DRAWS?
STEVEN BURD: THE -- I THINK THE EXPLANATION WAS THAT THEY WANTED TO, YOU KNOW, CONTINUE TO TEST AND CALIBRATE, YOU KNOW, THEIR UNITS, AND YOU COULD GET BOTH THE FINGERSTICK AND YOU COULD GET A REGULAR DRAW AND IN THEORY THOSE ALL TO TURN OUT REMARKABLY THE SAME.
MR. LEACH: IN THIS EMAIL TO MS. HOLMES YOU WROTE, "I AM GENUINELY CONCERNED THAT SAFEWAY'S LAB REPUTATION GETS WORSE BY THE DAY. KEEP IN MIND, I HAVE NOW REQUIRED THAT OUR EMPLOYEES AND THEIR NEARBY DEPENDENTS USE THIS LAB." WHAT WERE YOU GETTING AT THERE?
STEVEN BURD: WELL, EVEN THOUGH IT WAS A LAB ON OUR FACILITY, I THINK OUR EMPLOYEES KNEW THAT WE WERE NOT REALLY THE ONES OPERATING IT, RIGHT, AND THAT THERE WAS A LAB INVOLVED. AND I THINK WHENEVER YOU START SOMETHING NEW, YOU'RE GOING TO HAVE SOME ROUGH SPOTS. BUT WE CONTINUED TO HAVE ROUGH SPOTS. WE HAD SAMPLES WHERE TEMPERATURE WAS NOT PROPERLY CONTROLLED, WE HAD SAMPLES THAT WERE LOST, WE HAD RESULTS THAT DIDN'T MAKE ANY SENSE. THOSE ARE THE KINDS OF THINGS THAT I WAS REFERRING TO.
MR. LEACH: OKAY. LATER ON IN THAT PARAGRAPH YOU WROTE, "THE SOONER WE GET TO 'FINGERSTICK,' THE BETTER WE WILL BE." WHAT DID YOU MEAN BY THAT?
STEVEN BURD: WELL, WHAT I MEANT WAS THAT I REALLY WANTED A FULL TEST, AND THE REASON WE DIDN'T END UP WITH A THERANOS UNIT IN THE BUILDING IS THAT AFTER THINKING ABOUT IT MORE, ELIZABETH THOUGHT THERE WAS A LOT MORE RISK THAT THE TECHNOLOGY GET OUT, YOU KNOW, PARTICULARLY TO OTHER COMPETITORS. THERE WAS ACTUALLY A QUEST LOCATED ABOUT 50 YARDS FROM THIS BUILDING, A QUEST LAB.
MR. LEACH: BENEATH YOU SUGGEST SOME CHANGES IN PROCEDURES, AND THEN IN THE PARAGRAPH AFTER 4, YOU WROTE, "WHILE MY STAFF TELLS ME THAT THERANOS PERFORMANCE IS MUCH BETTER THAN THE FIRST THREE MONTHS, IT IS NOWHERE CLOSE TO THAT OF QUEST. AS YOU KNOW, THE VAST MAJORITY OF THEIR RESULTS ARE DELIVERED THE NEXT DAY." WHAT WERE YOU GETTING AT THERE?
STEVEN BURD: WELL, THE TURN TIME WASN'T VERY PREDICTABLE, AND IT TYPICALLY WOULD RUN TWO TO FOUR DAYS, AND SOME EVEN LONGER THAN THAT. AND SO IT'S DIFFICULT TO COMPETE, YOU KNOW, WITH A LAB THAT GIVES YOU RESULTS SUBSTANTIALLY FASTER.
MR. LEACH: LET ME NEXT DRAW YOUR ATTENTION TO WHAT WE'VE MARKED AS EXHIBIT 684. DOES THIS APPEAR TO BE ANOTHER EMAIL EXCHANGE BETWEEN YOU AND MS. HOLMES DURING THIS SEPTEMBER 2012 TIME PERIOD?
STEVEN BURD: YES.
MR. LEACH: YOUR HONOR, I OFFER EXHIBIT 684.
MR. DOWNEY: NO OBJECTION, YOUR HONOR.
JUDGE DAVILA: IT'S ADMITTED. IT MAY BE PUBLISHED.
(GOVERNMENT'S EXHIBIT 684 WAS RECEIVED IN EVIDENCE.)
MR. LEACH: AND IF WE CAN PLEASE ZOOM IN ON THE MIDDLE EMAIL, MS. HOLLIMAN, THE ONE FROM MR. BURD. THAT'S IT. ALL OF THE WAY DOWN IF WE COULD. PERFECT.
MR. LEACH: DO YOU SEE YOUR NAME IN THE FROM LINE OF THIS EMAIL, MR. BURD?
STEVEN BURD: I DO.
MR. LEACH: AND THIS IS TO ELIZABETH HOLMES?
STEVEN BURD: YES.
MR. LEACH: IN THE FIRST PARAGRAPH YOU WROTE, "I THOUGHT I WOULD SHARE WITH YOU WHAT YOUR TEAM HAS COMMUNICATED TO BRIAN HILLE." WHO IS BRIAN HILLE?
STEVEN BURD: BRIAN HILLE WAS THE HEAD OF OUR PHARMACY OPERATIONS.
MR. LEACH: YOU THEN WRITE, "IF THE SOFT LAUNCH IS LIKELY TO BE AS LATE AS OCTOBER 29TH, I NEED TO KNOW THAT NOW SO I CAN SLOW DOWN THE HIRING EFFORT." WHAT WERE YOU GETTING AT THERE?
STEVEN BURD: THE EMPLOYEES IN THE STORE WHO WOULD BE RESPONSIBLE FOR THE LAB WORK WOULD ACTUALLY BE EMPLOYEES OF SAFEWAY, SO WE WERE IN THE PROCESS OF HIRING, YOU KNOW, A LOT OF FOLKS. AND SOMEWHERE ALONG THE LINE ELIZABETH THOUGHT IT BEST, I DIDN'T DISAGREE, THAT WE ACTUALLY HIRE A PHLEBOTOMIST, BECAUSE THAT'S WHAT PEOPLE WERE USED TO DEALING WITH WAS A PHLEBOTOMIST.
MR. LEACH: SO SAFEWAY WAS HIRING A NUMBER OF PHLEBOTOMISTS?
STEVEN BURD: WE HIRED AN OUTSIDE AGENCY TO DO THE HIRING, AND WE HIRED BOTH PEOPLE WITH EXPERIENCE AND WE HIRED PEOPLE WITHOUT EXPERIENCE, AND I RECALL AT ONE POINT WE HAD 26 PEOPLE HIRED AND ANOTHER 400 POSSIBILITIES IN THE WAITING.
MR. LEACH: ALL IN ANTICIPATION OF THE LAUNCH WITH THERANOS IN SAFEWAY STORES?
STEVEN BURD: CORRECT.
MR. LEACH: AND IN THE NEXT PARAGRAPH YOU WROTE, "IT ALSO LOOKS LIKE YOUR LAB WORK IS BEING SENT TO UTAH, NOT UCSF, AND NOT BEING DONE ON SITE. IT IS THE ONLY WAY IT COULD POSSIBLY TAKE 3 TO 5 DAYS." WHAT WERE YOU GETTING AT THERE?
STEVEN BURD: WELL, I THINK THE ORIGINAL INTENT WAS TO USE UCSF FOR SOME OF THE ANALYSIS, YOU KNOW, PARTICULARLY THE RARER TESTS. AND THIS IS INFORMATION THAT I GOT UNDOUBTEDLY FROM BRIAN HILLE, AND I DON'T KNOW HOW HE LEARNED THAT IT WAS BEING SENT TO UTAH, BUT THAT'S WHAT HE TOLD ME.
MR. LEACH: WAS THAT SURPRISING TO YOU?
STEVEN BURD: YEAH, IT'S A LONG WAYS AWAY.
MR. LEACH: AND DID MS. HOLMES GIVE YOU ANY EXPLANATION FOR WHY THERANOS WAS SENDING TESTS EITHER TO UTAH OR TO UCSF?
STEVEN BURD: I DON'T RECALL AN EXPLANATION. I KNEW THEY WERE DOING SOME WORK DOWN IN THEIR FACILITY.
MR. LEACH: DID YOU THINK IT WAS FOR THE MAJORITY OF TESTS? FOR A PORTION OF THE TESTS? WHAT WAS IN YOUR MIND?
STEVEN BURD: I REALLY DIDN'T KNOW.
MR. LEACH: IN THE THIRD PARAGRAPH YOU WROTE, "I FIRMLY BELIEVE THERE ARE THINGS THAT WE SHOULD BE DOING DIFFERENTLY EVEN IN THE SHORT RUN. I AM SURE I DON'T HAVE ALL OF THE INFORMATION YOU HAVE, BUT GIVEN THE SMALL NUMBER OF PATIENTS, WE COULD CREATE A MUCH BETTER SHORT TERM EXPERIENCE WITH LITTLE OR NO ADDITIONAL EFFORT. IT PAINS ME NOT TO DO SO." WHAT WERE YOU GETTING AT THERE?
STEVEN BURD: JUST THAT THE EXECUTION WASN'T GOOD. YOU KNOW, IN THE SUPERMARKET BUSINESS, WHICH IS SUCH LOW MARGIN, I MEAN, OPERATIONS REALLY HAVE TO CLICK OR YOU DON'T MAKE ANY MONEY AT ALL. SO WE WERE REALLY FOCUSSED ON THE OPERATING ASPECTS OF THIS FACILITY.
MR. LEACH: FURTHER DOWN BELOW YOU WROTE, "I JUST KNOW WE CAN DO BETTER. PROCESS IS SOMETHING THAT WE ARE VERY GOOD AT. SORRY TO BURDEN YOU WITH THIS." WHAT WERE YOU COMMUNICATING THERE?
STEVEN BURD: IF THERE WAS SOMETHING THAT WE COULD DO TO HELP IMPROVE THE PROCESS, WE WERE READY TO DO IT.
MR. LEACH: DID MS. HOLMES EVER TAKE YOU UP ON THAT?
STEVEN BURD: NO.
MR. LEACH: LET ME DRAW YOUR ATTENTION TO WHAT HAS BEEN MARKED AS EXHIBIT 693. IS THIS AN EMAIL EXCHANGE -- DOES THIS APPEAR TO BE AN EMAIL EXCHANGE BETWEEN YOU AND ELIZABETH HOLMES IN THE OCTOBER 2012 TIME PERIOD?
STEVEN BURD: YES.
MR. LEACH: YOUR HONOR, I OFFER EXHIBIT 693.
MR. DOWNEY: NO OBJECTION, YOUR HONOR.
JUDGE DAVILA: IT'S ADMITTED. IT MAY BE PUBLISHED.
(GOVERNMENT'S EXHIBIT 693 WAS RECEIVED IN EVIDENCE.)
MR. LEACH: AND IF WE CAN PLEASE ZOOM IN ON THE TOP HALF. THANK YOU, MS. HOLLIMAN.
MR. LEACH: MR. BURD, THE SUBJECT OF THIS IS SIX STORE LAUNCH SCHEDULE. DO YOU SEE THAT?
STEVEN BURD: YES.
MR. LEACH: AND WHAT DOES THAT REFER TO?
STEVEN BURD: THAT REFERS TO TRYING TO GO FROM THE ON CAMPUS FACILITY TO SIX STORES, AND IT'S A BIT OF A PILOT.
MR. LEACH: AND THIS WAS SOMETHING THAT YOU WERE ENDEAVORING TO DO IN THE FOURTH QUARTER OF 2012?
STEVEN BURD: THAT'S WHAT IT LOOKS LIKE FROM THIS MEMO.
MR. LEACH: OKAY. DID MS. HOLMES EVER SAY TO YOU THAT THERE WAS SOME TYPE OF TECHNOLOGICAL ISSUE GETTING IN THE WAY OF THAT?
STEVEN BURD: NO.
MR. LEACH: YOU WROTE, "WHERE ARE WE ON THE SCHEDULE? WE HAVE HIRED 26 PHLEBOTOMISTS AND HAVE SCREENED, INTERVIEWED, AND HAVE IDENTIFIED 181 OTHERS THAT WE ARE PREPARED TO HIRE." IS THAT A REFERENCE TO THE HIRING THAT SAFEWAY ENGAGED IN DURING THIS TIME PERIOD?
STEVEN BURD: YES.
MR. LEACH: LET ME NOW DRAW YOUR ATTENTION TO EXHIBIT 699. IS THIS AN EMAIL BETWEEN YOU AND MS. HOLMES IN NOVEMBER OF 2012?
STEVEN BURD: YES.
MR. LEACH: I OFFER EXHIBIT 699, YOUR HONOR.
MR. DOWNEY: NO OBJECTION.
JUDGE DAVILA: IT'S ADMITTED. IT MAY BE PUBLISHED.
(GOVERNMENT'S EXHIBIT 699 WAS RECEIVED IN EVIDENCE.)
BY MR. LEACH:
MR. LEACH: DO YOU SEE THE SUBJECT SIX STORE LAUNCH, MR. BURD?
STEVEN BURD: YES.
MR. LEACH: AND IS THAT A REFERENCE SIMILAR TO THE EMAIL THAT WE JUST LOOKED AT?
STEVEN BURD: CORRECT.
MR. LEACH: OKAY. YOU WROTE IN THE BOTTOM EMAIL, "IF WE DON'T PICK A LAUNCH DATE SOON, WE CAN FORGET ABOUT LAUNCHING EVEN SIX STORES IN 2012. IF YOU HAVE ALREADY DECIDED IT IS NOT GOING TO HAPPEN UNTIL NEXT YEAR, I WOULD LIKE TO KNOW. WHILE IT WOULD BE VERY UNFORTUNATE TO NOT LAUNCH IN Q4, BASED ON THE INFORMATION I HAVE, IT LOOKS PRETTY REMOTE. I FEEL LIKE A JOGGER RUNNING IN PLACE WAITING FOR THE STOPLIGHT TO TURN GREEN." WHAT DID YOU MEAN IN THAT LAST SENTENCE, THAT YOU FELT LIKE A JOGGER RUNNING IN PLACE?
STEVEN BURD: WELL, WE WERE READY. ON OUR END WE WERE COMPLETELY READY, AND WE WERE JUST WAITING ON THERANOS WITH NO REAL EXPLANATION AS TO WHY IT WAS BEING DELAYED. SO THE JOGGER MAKES NO PROGRESS AT A STOPLIGHT.
MR. LEACH: LET ME NEXT DRAW YOUR ATTENTION TO EXHIBIT 701. DOES THIS APPEAR TO BE ANOTHER EMAIL BETWEEN YOU AND MS. HOLMES IN OR AROUND NOVEMBER OF 2012?
STEVEN BURD: YES.
MR. LEACH: YOUR HONOR, I OFFER EXHIBIT 701 INTO EVIDENCE.
MR. DOWNEY: NO OBJECTION, YOUR HONOR.
JUDGE DAVILA: IT'S ADMITTED. IT MAY BE PUBLISHED.
(GOVERNMENT'S EXHIBIT 701 WAS RECEIVED IN EVIDENCE.)
BY MR. LEACH:
MR. LEACH: MR. BURD, THE SUBJECT OF THIS EMAIL IS BECOMING DISCOURAGED. DO YOU SEE THAT LANGUAGE?
STEVEN BURD: I DO.
MR. LEACH: OKAY. WERE YOU BECOMING DISCOURAGED AT THIS POINT IN TIME?
STEVEN BURD: I WAS GETTING CLOSE.
MR. LEACH: YOU WROTE, "I CAN RECALL HAVING BEEN DISCOURAGED ONCE IN THE LAST 62 YEARS. THAT SAID, I AM GETTING CLOSE TO MY SECOND EVENT." WAS THAT TRUE AT THE TIME?
STEVEN BURD: YES. I KNOW IT SOUNDS LIKE A BIT OF AN EXAGGERATION, BUT I'M ONE OF THE MOST POSITIVE PEOPLE YOU'LL EVER MEET. I DON'T GET DISCOURAGED.
MR. LEACH: AND WHAT WAS DISCOURAGING YOU?
STEVEN BURD: WELL, DEADLINES WEREN'T MET, NO REAL EXPLANATION PROVIDED. I FELT -- I FELT THAT THERE WERE OBSTACLES THAT WERE GETTING IN THE WAY. I DIDN'T THINK IT WAS THE BOX. I THOUGHT THERE WERE OTHER OBSTACLES. AND WHEN YOU HAVE 185,000 EMPLOYEES, YOU'RE WILLING TO DEVOTE SOME OF THOSE PEOPLE TO REMOVING THOSE OBSTACLES IF THAT WOULD BE HELPFUL.
MR. LEACH: AND DID MS. HOLMES EVER TAKE YOU UP ON THAT?
STEVEN BURD: WE DID A COUPLE OF THINGS TOGETHER TO TRY TO GET THE LOGISTICS RIGHT IN THE STORE, BUT THAT WAS A NATURAL THING. IT WAS GOING TO TAKE PLACE IN OUR STORES AND WE WORKED ON THAT TOGETHER. THERE WERE A NUMBER OF THINGS WE WORKED ON TOGETHER, BUT WE DIDN'T REMOVE OBSTACLES TOGETHER.
MR. LEACH: LET ME NEXT DRAW YOUR ATTENTION TO EXHIBIT 715. DOES THIS APPEAR TO BE AN EMAIL EXCHANGE BETWEEN YOU AND MS. HOLMES IN THE DECEMBER 2012 TIME PERIOD?
STEVEN BURD: YES.
MR. LEACH: YOUR HONOR, I OFFER EXHIBIT 715 INTO EVIDENCE.
MR. DOWNEY: NO OBJECTION.
JUDGE DAVILA: IT'S ADMITTED. IT MAY BE PUBLISHED.
(GOVERNMENT'S EXHIBIT 715 WAS RECEIVED IN EVIDENCE.)
MR. LEACH: AND, MS. HOLLIMAN, IF WE COULD PLEASE FOCUS ON THE BOTTOM EMAIL FROM MR. BURD.
MR. LEACH: LET ME DRAW YOUR ATTENTION TO THE FIRST PARAGRAPH, MR. BURD. DO YOU SEE WHERE YOU WROTE, "I HAVE LOTS OF DATA POINTS FROM YOUR TEAM THAT SUGGESTS THAT SAFEWAY AND THERANOS MAY NOT HAVE ALWAYS BEEN ON THE SAME PAGE"?
STEVEN BURD: YES.
MR. LEACH: AND THEN YOU PROVIDE A PARTIAL LIST OF THAT?
STEVEN BURD: I DO.
MR. LEACH: IN NUMBER 1 YOU WROTE, "THE ON CAMPUS LAB HAS OPERATED FOR ALMOST A YEAR WITH A POOR PATIENT EXPERIENCE. (THIS HAS NOTHING TO DO WITH THE FACT THAT WE ARE DOING VEIN DRAW.)" WAS THAT YOUR VIEW AT THE TIME?
STEVEN BURD: YES.
MR. LEACH: AND WAS THAT A TOPIC THAT YOU HAD DISCUSSED WITH MS. HOLMES ON MORE THAN ONE OCCASION?
STEVEN BURD: YES, IT WAS.
MR. LEACH: AND NUMBER 2 YOU WROTE, "THERANOS HAS BEEN SLOW TO REACT TO OUR CONCERNS ABOUT THE ON CAMPUS LAB AND UNWILLING TO ALLOW US TO FIX THE PROCESS OURSELVES." WAS THAT YOUR VIEW AT THE TIME?
STEVEN BURD: YES.
MR. LEACH: AND WAS THAT SOMETHING THAT YOU HAD DISCUSSED WITH MS. HOLMES ON MORE THAN ONE OCCASION?
STEVEN BURD: YES.
MR. LEACH: IF WE CAN GO TO THE NEXT PAGE, MS. HOLLIMAN. I DRAW YOUR ATTENTION TO NUMBER 4, MR. BURD.
STEVEN BURD: YES.
MR. LEACH: YOU WROTE, "MY REPEATED SUGGESTIONS THAT WE ENGAGE IN A COLLABORATIVE REVIEW OF THE PATIENT EXPERIENCE HAVE YET TO GENERATE A POSITIVE RESPONSE. THE PATIENT EXPERIENCE HAS BEEN DESIGNED ENTIRELY BY THERANOS. THIS IS NOT MY ONLY EXPERIENCE, THIS IS MY TEAM'S EXPERIENCE." WHAT DID YOU MEAN BY THAT?
STEVEN BURD: THAT WE WERE NOT PART OF THAT DETAILED PROCESS. THINK OF IT AS THE LOGISTICS OF A PATIENT COMES IN, HOW THEY GET CHECKED IN, WHERE THEY SIT, YOU KNOW, ALL OF THE INFORMATION BEHIND IT SO THAT IT'S HIGHLY AUTOMATED. YOU KNOW, OF THE TWO COMPANIES, WE WERE THE COMPANY THAT HAD PROBABLY GIVEN MILLIONS OF VACCINATIONS, SO WE HAD PATIENT EXPERIENCE, AND WE WANTED TO LEND THAT EXPERIENCE TO THE PROCESS.
MR. LEACH: AND THEN DOWN AT THE BOTTOM YOU WROTE, "I AM SORRY IF THIS SOUNDS A BIT BLUNT. CHALK IT UP TO THE LIMITATIONS OF EMAIL." DID YOU THINK YOU WERE BEING BLUNT HERE?
STEVEN BURD: I THOUGHT I WAS BEING BLUNT.
MR. LEACH: WHY WERE YOU BEING BLUNT?
STEVEN BURD: NOTHING ELSE HAD WORKED.
MR. LEACH: LET ME MOVE FORWARD IN TIME, MR. BURD, TO JANUARY OF 2013. I DRAW YOUR ATTENTION TO EXHIBIT 770. MAY I HAVE ONE MOMENT, YOUR HONOR?
JUDGE DAVILA: YES.
(PAUSE IN PROCEEDINGS.)
BY MR. LEACH:
MR. LEACH: DOES THIS APPEAR TO BE AN EMAIL EXCHANGE BETWEEN YOU AND MS. HOLMES ON OR ABOUT JANUARY 20TH OF 2013?
STEVEN BURD: YES.
MR. LEACH: YOUR HONOR, I OFFER EXHIBIT 770 INTO EVIDENCE.
MR. DOWNEY: SUBJECT TO THE REDACTIONS THAT COUNSEL REPRESENTS WERE MADE, WE HAVE NO OBJECTION.
JUDGE DAVILA: ALL RIGHT. YOU'VE MADE THOSE REDACTIONS?
MR. LEACH: WE HAVE, YOUR HONOR.
JUDGE DAVILA: THANK YOU. IT IS ADMITTED AND IT MAY BE PUBLISHED WITH THE REDACTIONS.
(GOVERNMENT'S EXHIBIT 770 WAS RECEIVED IN EVIDENCE.)
BY MR. LEACH:
MR. LEACH: LET ME DRAW YOUR ATTENTION, MR. BURD, TO THE BOTTOM PORTION OF PAGE 1, THE EMAIL FROM YOU TO MS. HOLMES. DO YOU SEE THE DATE OF JANUARY 19TH, 2013?
STEVEN BURD: I DO.
MR. LEACH: AND THE FIRST SENTENCE READS, "I CANNOT BEGIN TO TELL YOU HOW DISAPPOINTED I AM THAT YOU REDESIGNED THE WORDMARK WITHOUT EVER TELLING US YOU WERE DOING IT." WHAT WERE YOU TALKING ABOUT THERE?
STEVEN BURD: WE HAD PREVIOUSLY DONE, IN COOPERATION WITH ELIZABETH, SOME WORK ON THE LOGO, HOW THE WORDS WOULD APPEAR BOTH INSIDE AND OUTSIDE OF THE STORE, HOW THEY MIGHT APPEAR ON A LETTERHEAD AT A TIME WHEN SHE DID NOT HAVE A TEAM IN PLACE TO DO THIS, OR OFTEN YOU WOULD DO SOMETHING LIKE THIS WITH OUTSIDE EXPERTS, AND SO WE HAD DONE ALL OF THIS WORK. WE ALL SEEMED TO LIKE IT. AND REGARDLESS, IF I'M GOING TO PUT A BRAND INSIDE OF MY STORES, I HAVE TO APPROVE THE LOOK OF THAT BRAND. I HAVE TO BE -- I HAVE TO APPROVE THE COLORS, I HAVE TO APPROVE EVERYTHING ABOUT IT BECAUSE IT COULD AFFECT OUR BRAND.
MR. LEACH: AND IF WE COULD GO TO PAGE 2, AND I WANT TO FOCUS YOU ON THE FIRST PARAGRAPH, MR. BURD, ROUGHLY IN THE MIDDLE OF THE -- IF WE CAN ZOOM IN ON THE TOP HALF THERE, MS. HOLLIMAN. THANK YOU. AND, MR. BURD, I WANT TO DRAW YOUR ATTENTION TO THE LANGUAGE IN THE FIRST PARAGRAPH AT THE TOP WHERE YOU SAY, "I DON'T MIND PASSING THE BATON TO EITHER THERANOS OR ANYONE ELSE."
STEVEN BURD: CAN YOU TELL ME AGAIN WHAT YOU'RE CITING?
MR. LEACH: SURE. WE'RE ON PAGE 2 OF EXHIBIT 770.
STEVEN BURD: YES.
MR. LEACH: AND I DRAW YOUR ATTENTION TO THE FIRST PARAGRAPH AT THE TOP.
STEVEN BURD: YES.
MR. LEACH: AND ROUGHLY THE THIRD SENTENCE SAYS, "I DON'T MIND PASSING THE BATON."
STEVEN BURD: CORRECT.
MR. LEACH: "AND WHAT I MIND IS HAVING IT RIPPED FROM MY HANDS. I DO NOT LIKE WASTING TIME. THIS DOES NOT FEEL LIKE A PARTNERSHIP." WHAT WERE YOU HAVE GETTING AT THERE?
STEVEN BURD: JUST AS MUCH AS THERE WERE A LOT OF EMAILS AND PHONE CALLS, ON SOME OF THE BUSINESS ISSUES IT WASN'T AS COLLABORATIVE AS I THOUGHT IT SHOULD BE.
MR. LEACH: AND HOW DOES THAT RELATE TO THE REDOING OF THE WORDMARK?
STEVEN BURD: I MEAN, IT'S THEIR BRAND AND THEY CAN DO WHAT THEY CHOOSE AND I THOUGHT A COURTESY CALL AT A MINIMUM WOULD BE USEFUL.
MR. LEACH: AND LET ME DRAW YOUR ATTENTION TO THE THIRD PARAGRAPH WHERE YOU SAY "I BELIEVE IN YOU. I BELIEVE IN YOUR COMPANY. AND I SHARE YOUR VISION. I WANT SO MUCH TO HELP YOU CHANGE THE WORLD. WE ARE SO GOOD TOGETHER WHEN WE COLLABORATE. BUT I HAVE NEVER BEEN MORE FRUSTRATED." WAS IT TRUE YOU HAD NEVER BEEN MORE FRUSTRATED?
STEVEN BURD: IT'S TRUE.
MR. LEACH: AND WHY WAS THAT?
STEVEN BURD: WELL, ALL OF THE MISSED DEADLINES, THE LACK OF COLLABORATION ON KEY ISSUES. REMEMBER, IT'S NOW BEEN ALMOST TWO YEARS SINCE WE HAD A LAUNCH DATE SCHEDULED.
MR. LEACH: AND BESIDES THE STACKING OF THE DEVICES AND THE HEAT THAT YOU'VE TALKED ABOUT, DID MS. HOLMES EVER ATTRIBUTE THIS TO SOME FORM OF TECHNOLOGICAL ISSUE?
STEVEN BURD: NO.
MR. LEACH: LET ME MOVE FORWARD IN TIME, MR. BURD, TO MARCH OF 2013 AND DRAW YOUR ATTENTION TO WHAT WE HAVE MARKED AS EXHIBIT 813. DOES THIS APPEAR TO BE AN EMAIL FROM BOB GORDON TO MS. HOLMES, WITH A COPY TO YOU, ON OR ABOUT MARCH 19TH, 2013?
STEVEN BURD: YES.
MR. LEACH: YOUR HONOR, I OFFER EXHIBIT 813.
MR. DOWNEY: NO OBJECTION.
JUDGE DAVILA: IT'S ADMITTED. IT MAY BE PUBLISHED.
(GOVERNMENT'S EXHIBIT 813 WAS RECEIVED IN EVIDENCE.)
BY MR. LEACH:
MR. LEACH: MR. BURD, REMIND US, WHO IS BOB GORDON?
STEVEN BURD: BOB GORDON WAS THE GENERAL COUNSEL OF SAFEWAY.
MR. LEACH: SOMEONE YOU WORKED WITH CLOSELY?
STEVEN BURD: VERY CLOSELY.
MR. LEACH: AND THE SUBJECT IS THERANOS - INVOICE FOR INVENTORY PRE-PURCHASE. DO YOU SEE THAT?
STEVEN BURD: YES.
MR. LEACH: AND WHAT DOES THAT REFER TO?
STEVEN BURD: THERE WERE POINTS IN THE CONTRACT, POINTS OF PROGRESS, AND WHEN THAT MILESTONE WAS REACHED, THERE WAS ADDITIONAL MONEY DUE FROM US AND IT CAME IN THE FORM OF A PRE-PURCHASE OF INVENTORY.
MR. LEACH: SO SAFEWAY, UNDER THE CONTRACT, WAS OBLIGATED TO PAY $25 MILLION TO PRE-PURCHASE SOME INVENTORY?
STEVEN BURD: YOU KNOW, IF CERTAIN CONDITIONS WERE MET.
MR. LEACH: AND WHAT WERE SOME OF THE CONDITIONS?
STEVEN BURD: THE CONDITIONS WOULD BE A PILOT THAT WE REGARDED AS A SUCCESS, AND THE WAY -- WE SAID THAT WE ALONE WOULD DECIDE WHETHER IT WAS SUCCESSFUL, AND THAT CONDITION HAD NOT BEEN MET.
MR. LEACH: AND HAD A PILOT TAKEN PLACE AT ALL AT THIS POINT?
STEVEN BURD: NO.
MR. LEACH: OKAY. LET ME NEXT DRAW YOUR ATTENTION TO EXHIBIT 820. DOES THIS APPEAR TO BE ANOTHER EMAIL RELATING TO THE INVOICE THAT THERANOS SENT FOR THE $25 MILLION?
STEVEN BURD: YES.
MR. LEACH: YOUR HONOR, I OFFER EXHIBIT 820.
MR. DOWNEY: NO OBJECTION.
JUDGE DAVILA: IT'S ADMITTED. IT MAY BE PUBLISHED.
(GOVERNMENT'S EXHIBIT 820 WAS RECEIVED IN EVIDENCE.)
MR. LEACH: IF WE CAN ZOOM IN ON THE SUBSTANCE. THANK YOU, MS. HOLLIMAN.
MR. LEACH: THE SUBJECT IS TRIGGER POINT FOR THE 25 MILLION. WHAT IS MEANT BY TRIGGER POINT?
STEVEN BURD: IT'S THE CONDITION IN THE CONTRACT THAT SAYS WHEN IT IS MET WE WOULD PAY $25 MILLION.
MR. LEACH: AND YOUR VIEW AT THE TIME WAS THAT IT HAD NOT BEEN MET?
STEVEN BURD: CORRECT.
MR. LEACH: YOU WROTE, "I HAD A LONG CHAT WITH BOB GORDON EARLIER TODAY ABOUT THE TRIGGERING EVENT. AS WE DISCUSSED, WE WOULD LIKE TO SEE THE SPU IN ACTION." DO YOU SEE THAT?
STEVEN BURD: YES.
MR. LEACH: AND WHAT DID YOU MEAN BY THE SPU?
STEVEN BURD: THAT'S THE UNIT ITSELF, THE ANALYZER.
MR. LEACH: AND DID THAT EVER HAPPEN?
STEVEN BURD: NO.
MR. LEACH: YOU LEAVE SAFEWAY IN MAY OF 2013. IS THAT YOUR TESTIMONY?
STEVEN BURD: CORRECT.
MR. LEACH: TO YOUR KNOWLEDGE, DID THERANOS EVER PUT A MINILAB DEVICE IN A SAFEWAY STORE?
STEVEN BURD: TO MY KNOWLEDGE, NO.
MR. LEACH: TO YOUR KNOWLEDGE, DID SAFEWAY EVER SUCCESSFULLY OFFER THERANOS BLOOD TESTING SERVICES TO THE PUBLIC?
STEVEN BURD: NO.
MR. LEACH: OTHER THAN THE STACKING OF THE DEVICES AND THE HEAT ISSUES THAT YOU'VE DESCRIBED, DID MS. HOLMES EVER ATTRIBUTE DELAYS OR FAILURES TO DO THAT TO SOME TYPE OF TECHNOLOGICAL ISSUE?
STEVEN BURD: NO. LET ME GO BACK TO THE PUBLIC. I WANT TO MAKE SURE, WHEN I SAY THE PUBLIC, I'M THINKING OF NONEMPLOYEES OF SAFEWAY AND THEIR FAMILIES.
MR. LEACH: OTHER THAN THE ON CAMPUS FACILITY THAT WE'VE TALKED ABOUT?
STEVEN BURD: RIGHT.
MR. LEACH: DID MS. HOLMES EVER SUGGEST USING MODIFIED THIRD PARTY MACHINES TO DO FINGERSTICK TESTING?
STEVEN BURD: NO.
MR. LEACH: WOULD THAT HAVE BEEN OF INTEREST TO YOU?
STEVEN BURD: NO.
MR. LEACH: MAY I HAVE A MOMENT, YOUR HONOR?
JUDGE DAVILA: YES.
(DISCUSSION AMONGST GOVERNMENT COUNSEL OFF THE RECORD.)
MR. LEACH: THANK YOU, MR. BURD. I HAVE NO FURTHER QUESTIONS. THANK YOU, YOUR HONOR.
JUDGE DAVILA: CROSS-EXAMINATION?
MR. DOWNEY: YES, YOUR HONOR. YOUR HONOR, MAY I HAVE A MOMENT?
JUDGE DAVILA: YES.
(PAUSE IN PROCEEDINGS.)
MR. DOWNEY: YOUR HONOR, I HAVE A NOTEBOOK FOR THE COURT AND THE WITNESS. MAY I PASS A COPY UP AND APPROACH THE WITNESS?
JUDGE DAVILA: PLEASE.
MR. DOWNEY: (HANDING.)
CROSS-EXAMINATION BY MR. DOWNEY:
MR. DOWNEY: GOOD MORNING, MR. BURD.
STEVEN BURD: GOOD MORNING.
MR. DOWNEY: MY NAME IS KEVIN DOWNEY AND I REPRESENT MS. HOLMES. I'M GOING TO REMOVE MY MASK, TOO, SO WE CAN HAVE THIS CONVERSATION A LITTLE MORE COMPREHENSIBLY --
STEVEN BURD: GREAT.
MR. DOWNEY: -- FOR THE JURY. AS I UNDERSTAND IT, YOU WERE THE CHIEF EXECUTIVE AT SAFEWAY FOR ABOUT 20 YEARS.
STEVEN BURD: EXACTLY 20 YEARS.
MR. DOWNEY: AND I THINK YOU TESTIFIED ON DIRECT THAT SAFEWAY IS A VERY LARGE, SUCCESSFUL ORGANIZATION; IS THAT RIGHT?
STEVEN BURD: CORRECT.
MR. DOWNEY: YOU MENTIONED $45 BILLION OR SO IN REVENUES AS OF 2010. HOW MUCH OF THAT WOULD CONSTITUTE THE PROFIT OF SAFEWAY AT THAT TIME?
STEVEN BURD: YOU KNOW, I DIDN'T COMMIT THOSE TO MEMORY, BUT WE USUALLY HAD FREE CASH FLOW AFTER MEETING ALL EXPENSES AND AROUND A BILLION THREE OR SOMETHING LIKE THAT.
MR. DOWNEY: AND PEOPLE THINK THAT BECAUSE YOU'RE THE CEO, YOU'RE THE TOP GUY. BUT, IN FACT, YOU HAD A BOARD OF DIRECTORS YOU HAD TO REPORT TO; IS THAT CORRECT?
STEVEN BURD: THAT'S CORRECT.
MR. DOWNEY: AND IT WAS A VERY SOPHISTICATED BOARD?
STEVEN BURD: WE HAD PEOPLE WITH STRONG BUSINESS EXPERIENCE. WE THINK IT WAS A GOOD BOARD.
MR. DOWNEY: AND YOU HAD THE FORMER CHIEF EXECUTIVE OF WELLS FARGO; CORRECT?
STEVEN BURD: CORRECT?
MR. DOWNEY: AND YOU HAD THE FORMER VICE CHAIR OF MACY'S; CORRECT?
STEVEN BURD: RIGHT.
MR. DOWNEY: AND YOU HAD THE FORMER CEO OF AT&T WIRELESS; CORRECT?
STEVEN BURD: CORRECT.
MR. DOWNEY: AND SO YOU HAD A LOT OF PEOPLE WHO HAD A LOT OF EXPERIENCE IN BUSINESS?
STEVEN BURD: THAT'S CORRECT.
MR. DOWNEY: AND THEY WERE PEOPLE WHO WOULD ASK YOU QUESTIONS AND COMMENT ON DECISIONS MANAGEMENT MADE IF THEY HAD AN ISSUE WITH IT; CORRECT?
STEVEN BURD: CORRECT.
MR. DOWNEY: AND WITHIN THE COMPANY, OF COURSE YOU MENTIONED -- I THINK YOU MENTIONED YOU HAD MORE THAN 175,000 EMPLOYEES AT THAT TIME; CORRECT?
STEVEN BURD: CORRECT.
MR. DOWNEY: AND MANY OF THOSE ARE THE PEOPLE WE KNOW WHO WORK IN THE STORES; CORRECT?
STEVEN BURD: MOST OF THEM WORK IN THE STORES.
MR. DOWNEY: OKAY. BUT YOU ALSO HAVE A FUNCTION THAT YOU MIGHT CALL THE CORPORATE FUNCTION, WHICH IS THE LAWYERS AND THE ACCOUNTANTS AND SO FORTH?
STEVEN BURD: WE WOULD CALL THAT THE SUPPORT FUNCTION.
MR. DOWNEY: THE SUPPORT FUNCTION. HOW MANY PEOPLE WORKED IN THE SUPPORT FUNCTION IN 2010?
STEVEN BURD: YOU KNOW, 2010 TO 2013 ARE KIND OF BLURRING, SO I'LL JUST GIVE YOU ROUGH NUMBERS.
MR. DOWNEY: THAT'S FINE.
STEVEN BURD: ON CAMPUS WE HAD AROUND 3500 EMPLOYEES; AND THEN WE WERE ORGANIZED DIVISIONALLY IN NINE DIVISIONS IN THE U.S. AND CANADA, AND SO THEY HAD THEIR OWN SUPPORT FUNCTION. IT MIGHT BE ANYWHERE FROM 300 TO 700 PEOPLE.
MR. DOWNEY: AND YOU HAD, WORKING WITHIN THAT, A NUMBER OF PEOPLE WHO REPORTED DIRECTLY TO YOU; CORRECT?
STEVEN BURD: CORRECT.
MR. DOWNEY: AND THAT WAS A STRONG EXECUTIVE TEAM IN YOUR VIEW?
STEVEN BURD: IT WAS.
MR. DOWNEY: OKAY. YOU HAD A -- I THINK YOU MENTIONED YOU HAD A GENERAL COUNSEL, MR. GORDON; CORRECT?
STEVEN BURD: CORRECT.
MR. DOWNEY: AND YOU HAD A CHIEF FINANCIAL OFFICER, ROBERT EDWARDS; CORRECT?
STEVEN BURD: CORRECT.
MR. DOWNEY: AND YOU HAD A NUMBER OF OTHER SENIOR EXECUTIVE VICE PRESIDENT TYPES; CORRECT?
STEVEN BURD: YES.
MR. DOWNEY: AND YOU HAD AN ENTIRE DIVISION THAT WAS DEVOTED TO HEALTH ISSUES AT SAFEWAY; CORRECT?
STEVEN BURD: WE HAD A SMALL COMPANY, A STARTUP, PROBABLY NOT MORE THAN FIVE EMPLOYEES.
MR. DOWNEY: AND THAT WAS CALLED SAFEWAY HEALTH?
STEVEN BURD: SAFEWAY HEALTH.
MR. DOWNEY: OKAY. AND WHEN THE COMPANY HAD ISSUES ON WHICH IT DIDN'T HAVE INTERNAL CAPACITY TO UNDERTAKE DECISIONS OR CONDUCT ITS OPERATIONS, YOU WOULD GET OUTSIDE ADVISORS; CORRECT?
STEVEN BURD: WE WOULD.
MR. DOWNEY: AND SO IF YOU NEEDED LAWYERS, YOU MIGHT HIRE A LAW FIRM; CORRECT?
STEVEN BURD: YES.
MR. DOWNEY: AND IF YOU NEEDED TO UNDERTAKE A TRANSACTION, YOU MIGHT HIRE PEOPLE TO HELP YOU WITH THAT TRANSACTION; CORRECT?
STEVEN BURD: YES.
MR. DOWNEY: AND YOU MIGHT HIRE INVESTMENT BANKERS; CORRECT?
STEVEN BURD: YEAH, FOR LARGE TRANSACTIONS. SMALL ONES WE DO OURSELVES.
MR. DOWNEY: AND ACQUISITION ADVISORS AND SO FORTH; CORRECT?
STEVEN BURD: CORRECT.
MR. DOWNEY: OKAY. AND AT THIS POINT IN YOUR 17TH OR 18TH YEAR, WHATEVER IT WAS, AS THE CHIEF EXECUTIVE, YOU HAD BECOME A PRETTY SOPHISTICATED NEGOTIATOR; IS THAT RIGHT?
STEVEN BURD: I THINK I'M PRETTY GOOD AT IT. ON THE OTHER HAND, WE HAD -- THIS WAS LARGELY A UNIONIZED COMPANY, SO I HAD PEOPLE NEGOTIATE FOR ME. BUT I SET THE STRATEGY, THEY EXECUTED THE STRATEGY, AND I APPROVED THE OUTCOME.
MR. DOWNEY: WELL, YOU MENTIONED EVEN BEFORE YOU CAME TO SAFEWAY YOU HAD A BACKGROUND IN PRIVATE EQUITY; CORRECT?
STEVEN BURD: I WORKED FOR KOHLBERG, KRAVIS, ROBERTS & COMPANY NOT AS AN EMPLOYEE BUT AS AN ADVISOR FOR ALMOST TEN YEARS.
MR. DOWNEY: AND THAT'S A LARGE PRIVATE EQUITY FIRM THAT MAKES INVESTMENTS IN COMPANIES; CORRECT?
STEVEN BURD: IT IS.
MR. DOWNEY: AND YOUR AFFILIATION YOU SAY LASTED TEN YEARS?
STEVEN BURD: CLOSE TO TEN YEARS.
MR. DOWNEY: AND YOU WERE AROUND TRANSACTIONS IN CONNECTION WITH THEIR WORK; CORRECT?
STEVEN BURD: I WAS.
MR. DOWNEY: AND AT SAFEWAY STORES, YOU'VE ALSO ENGAGED IN NEGOTIATIONS RELATED TO A NUMBER OF ACQUISITIONS OF A NUMBER OF BUSINESSES; CORRECT?
STEVEN BURD: YES.
MR. DOWNEY: AND YOU STARTED SOME BUSINESSES. I THINK YOU MENTIONED THAT.
STEVEN BURD: I STARTED SOME BUSINESSES.
MR. DOWNEY: AND THEN THOSE ARE THE GAS STATIONS AND SO FORTH?
STEVEN BURD: ACTUALLY, I HADN'T THOUGHT ABOUT THAT. THAT WOULD BE NUMBER SEVEN. I STARTED SEVEN BUSINESSES.
MR. DOWNEY: SEVEN BUSINESSES?
STEVEN BURD: YES.
MR. DOWNEY: OKAY. NOW, YOU FIRST LEARNED ABOUT THERANOS IN 2010 OR LATE 2009?
STEVEN BURD: I REMEMBER THE MONTH. THE YEAR IS SOMEWHERE IN THESE BINDERS. THE MONTH WAS MARCH.
MR. DOWNEY: OKAY. AND BEFORE YOU MET WITH MS. HOLMES, I THINK YOU MENTIONED THAT SOME OTHER EXECUTIVES OF THE COMPANY HAD MET WITH MS. HOLMES; CORRECT?
STEVEN BURD: CORRECT.
MR. DOWNEY: AND DO YOU KNOW ON HOW MANY OCCASIONS THEY HAD MET WITH MS. HOLMES?
STEVEN BURD: I BELIEVE IT WAS JUST ONE.
MR. DOWNEY: OKAY. AND DO YOU RECALL WHETHER A BOARD MEMBER OF THERANOS HAD HAD A DISCUSSION WITH A BOARD MEMBER OF SAFEWAY, OR RATHER, WITH THE CHIEF FINANCIAL OFFICER OF SAFEWAY ABOUT THERANOS?
STEVEN BURD: YES.
MR. DOWNEY: AND THE CHIEF FINANCIAL OFFICER, AS YOU SAID, WAS MR. EDWARDS; CORRECT?
STEVEN BURD: CORRECT.
MR. DOWNEY: AND THE BOARD MEMBER FROM THERANOS WAS MR. DON LUCAS; CORRECT?
STEVEN BURD: THAT IS CORRECT. I BELIEVE THEY SERVED ON A BOARD TOGETHER AND THAT'S HOW THEY KNEW ONE ANOTHER.
MR. DOWNEY: SO THEY HAD A PRIOR RELATIONSHIP?
STEVEN BURD: CORRECT.
MR. DOWNEY: AND DID YOU LEARN ABOUT THAT CONVERSATION BEFORE YOU ENTERED INTO DISCUSSIONS WITH MS. HOLMES?
STEVEN BURD: I DID NOT KNOW ABOUT THAT CONVERSATION. I THINK IT TOOK PLACE AFTER I MET ELIZABETH AND HEARD THE THERANOS STORY.
MR. DOWNEY: AND WHEN YOU HEARD THAT MR. LUCAS WAS A BOARD MEMBER, DID YOU RECOGNIZE WHO HE WAS?
STEVEN BURD: I DID.
MR. DOWNEY: YOU UNDERSTOOD THAT HE HAD BEEN A SUBSTANTIAL INVESTOR IN TECHNOLOGY COMPANIES; IS THAT RIGHT?
STEVEN BURD: CORRECT.
MR. DOWNEY: AND YOU UNDERSTOOD THAT HE HAD BEEN AFFILIATED WITH SOME OF THE SUCCESS STORIES IN TECHNOLOGY; IS THAT CORRECT?
STEVEN BURD: CORRECT.
MR. DOWNEY: ORACLE AND SO FORTH?
STEVEN BURD: CORRECT.
MR. DOWNEY: AND DID YOU LEARN DETAILS ABOUT THE BUSINESS FROM YOUR -- THE PEOPLE WHO WORKED FOR YOU PRIOR TO THE TIME THAT YOU MET MS. HOLMES?
STEVEN BURD: NO.
MR. DOWNEY: THEY SIMPLY TOLD YOU THAT WE HAD A MEETING AND THEY WOULD LIKE YOU TO HAVE A MEETING?
STEVEN BURD: WELL, THEY TOLD ME ABOUT THE MEETING. I WOULDN'T SAY IT WAS DETAILS. I JUST HAD TO HEAR THAT IT WAS A MINILAB, RESULTS IN 20, 30 MINUTES, AND I WAS IMMEDIATELY INTERESTED.
MR. DOWNEY: AND THEN YOU HAD THE MEETING I THINK YOU DESCRIBED ON DIRECT; CORRECT?
STEVEN BURD: I'M SORRY. SAY THAT AGAIN.
MR. DOWNEY: I'M SORRY. YOU HAD THE MEETING WITH MS. HOLMES THAT YOU DESCRIBED ON FRIDAY, WHICH I WON'T MAKE YOU REPEAT.
STEVEN BURD: YES.
MR. DOWNEY: BUT THIS WAS IN GENERAL TERMS. THIS WAS THE MEETING WHERE YOU WANTED TO GAIN AN IMPRESSION OF HER, LEARN ABOUT HER VISION AND SO FORTH?
STEVEN BURD: CORRECT.
MR. DOWNEY: AND I THINK YOU TESTIFIED THAT YOU WERE IMPRESSED WITH HER AS A RESULT OF THAT MEETING; CORRECT?
STEVEN BURD: YES.
MR. DOWNEY: YOU KNEW AT THE TIME THAT SHE WAS A VERY YOUNG ENTREPRENEUR; CORRECT?
STEVEN BURD: YES.
MR. DOWNEY: YOU KNEW SHE WAS IN HER 20S OR SO?
STEVEN BURD: RIGHT.
MR. DOWNEY: AND OF COURSE YOU KNEW THE COMPANY WAS A STARTUP; CORRECT?
STEVEN BURD: I KNEW THAT. I MEAN, IT WAS A, IT WAS -- IT HAD STILL BEEN IN BUSINESS FOR A WHILE, BUT I WOULD CLASSIFY IT AS A STARTUP.
MR. DOWNEY: IT WAS ABOUT FIVE AND A HALF YEARS OLD OR SO?
STEVEN BURD: YES, YES.
MR. DOWNEY: AND DID YOU KNOW HOW MANY EMPLOYEES THE COMPANY HAD?
STEVEN BURD: I DID NOT.
MR. DOWNEY: AND DID YOU KNOW WHETHER THE COMPANY HAD EVER BEEN PART OF A RETAIL PARTNERSHIP BEFORE MS. HOLMES'S DISCUSSIONS WITH YOU AND OTHERS AT SAFEWAY?
STEVEN BURD: YOU KNOW, SOMEWHERE ALONG THE LINE, NOT IN THAT FIRST MEETING, I LEARNED THAT THEY HAD DISCUSSIONS WITH WALGREENS.
MR. DOWNEY: THAT AT THE SAME TIME THEY WERE JUST HAVING DISCUSSIONS WITH SAFEWAY, THERANOS WAS ALSO DISCUSSING POTENTIAL RETAIL PARTNERSHIPS WITH OTHER RETAIL COMPANIES; IS THAT WHAT YOU MEAN?
STEVEN BURD: THAT'S WHAT I MEAN.
MR. DOWNEY: OKAY. BUT AS OF THAT TIME, THEY HAD NOT YET RUN ANY RETAIL OPERATIONS; CORRECT?
STEVEN BURD: CORRECT.
MR. DOWNEY: AND THEIR WORK, AS YOU UNDERSTOOD IT, HAD LARGELY BEEN IN CONNECTION WITH WORK WITH THE PHARMACEUTICAL INDUSTRY; CORRECT?
STEVEN BURD: THAT'S INITIALLY WHO THEY SAID THEY HAD TESTED OUT THEIR DEVICE WITH.
MR. DOWNEY: SO YOU UNDERSTOOD THAT SAFEWAY OR WALGREENS OR ONE OF THE OTHER COMPANIES THAT THEY WERE TALKING TO, THIS WOULD BE THEIR FIRST CONSUMER-BASED DEPLOYMENT OF TECHNOLOGY; CORRECT?
STEVEN BURD: CORRECT.
MR. DOWNEY: AND YOU UNDERSTOOD, OF COURSE, AS A RESULT THAT THEY NEVER SCALED THIS TECHNOLOGY OR BUILT TECHNOLOGY ON A BROAD BASIS; CORRECT?
STEVEN BURD: I KNEW THEY DIDN'T HAVE A LOT OF CUSTOMERS, OKAY, SO THEY HADN'T GEARED UP FOR A LOT OF PRODUCTION.
MR. DOWNEY: OKAY. BUT NEVERTHELESS, FOR THE REASONS THAT I THINK YOU SAID ON FRIDAY, YOU WERE IMPRESSED WITH MS. HOLMES AND WITH THE COMPANY BASED ON WHAT YOU HAD LEARNED; CORRECT?
STEVEN BURD: CORRECT.
MR. DOWNEY: AND I THINK YOU TESTIFIED THAT YOU ALMOST IMMEDIATELY WERE INTERESTED IN PURSUING A POTENTIAL PARTNERSHIP WITH THERANOS; CORRECT?
STEVEN BURD: CORRECT.
MR. DOWNEY: AND YOU MENTIONED THAT YOU, SHORTLY AFTER THE MEETING, THAT YOU THOUGHT YOU SENT AN EMAIL TO MS. HOLMES. DO YOU RECALL THAT?
STEVEN BURD: I BELIEVE I DID.
MR. DOWNEY: OKAY. LET ME SHOW YOU IN THE BINDER THAT I'VE PLACED IN FRONT OF YOU EXHIBIT 281.
STEVEN BURD: YES.
MR. DOWNEY: IS THAT A LETTER THAT YOU SENT TO MS. HOLMES IN 2010 AFTER THE MEETING THAT YOU DESCRIBED ON DIRECT?
STEVEN BURD: CORRECT.
MR. DOWNEY: YOUR HONOR, I MOVE THE ADMISSION OF 281.
MR. LEACH: NO OBJECTION.
JUDGE DAVILA: IT'S ADMITTED. IT MAY BE PUBLISHED.
(GOVERNMENT'S EXHIBIT 281 WAS RECEIVED IN EVIDENCE.)
BY MR. DOWNEY:
MR. DOWNEY: NOW, AM I RIGHT THAT AFTER YOU HEARD ABOUT THERANOS, THAT YOU UNDERSTOOD THAT THIS OPPORTUNITY MIGHT BE ONE THAT HAD A LOT OF POTENTIAL FOR SAFEWAY?
STEVEN BURD: CORRECT.
MR. DOWNEY: AND I THINK YOU SAID ON DIRECT THAT ONE OF THE POTENTIALS WAS THAT JUST BY HAVING A NEW BUSINESS, YOU WOULD DRAW MORE PEOPLE INTO SAFEWAY STORES; CORRECT?
STEVEN BURD: YES.
MR. DOWNEY: AND ANOTHER POSSIBILITY WAS THAT WITH RESPECT TO TESTS THAT WERE PERFORMED IN SAFEWAY STORES, YOU MIGHT REALIZE A LITTLE BIT OF A PROFIT ON EACH TEST THAT WAS PERFORMED; CORRECT?
STEVEN BURD: CORRECT.
MR. DOWNEY: AND SO THAT THERANOS MIGHT BE OFFERING A TEST IN YOUR STORE AT, SAY, $12 AND YOU MIGHT BE ABLE TO RETAIN TWO OF THOSE DOLLARS; CORRECT?
STEVEN BURD: YES. YOUR EXAMPLE, THOUGH, IS A PRETTY LOW NUMBER. A TYPICAL TEST WOULD BE, YOU KNOW, OVER $30.
MR. DOWNEY: OKAY. AND OUT OF THAT, HOW MUCH WOULD SAFEWAY PROJECT IT MIGHT BE ABLE TO CAPTURE?
STEVEN BURD: WE HAD SOMETHING IN THE CONTRACT THAT SUGGESTED THAT -- WELL, IT DIDN'T SUGGEST, IT SAID THAT WE WANTED TO MAKE $10 PER TEST.
MR. DOWNEY: OKAY. AND YOU ALSO TALKED ABOUT -- HOW MANY TESTS --
STEVEN BURD: CAN I CLARIFY THAT AND MAKE SURE EVERYBODY UNDERSTANDS?
MR. DOWNEY: YEAH.
STEVEN BURD: WE WANTED $10 IN REVENUE FOR DOING A TEST. WHEN SOMEONE COMES IN FOR A BLOOD TEST, THEY TYPICALLY HAVE THREE AND A HALF TESTS, SO THAT WOULD BE $35. AND THE FACILITY'S ON OUR PROPERTY WITH OUR LABOR, THAT'S NOT THE PROFIT YOU MAKE, IT'S THE REVENUE THAT YOU MAKE.
MR. DOWNEY: SO IT WOULD BE YOUR GROSS REVENUE, AND THEN OUT OF THAT YOU WOULD REALIZE A SMALLER NUMBER AS PROFIT; CORRECT?
STEVEN BURD: CORRECT.
MR. DOWNEY: BUT IN TERMS OF THE LARGER STORE AND SO FORTH, THAT WAS ALREADY BUILT, CORRECT, SO THIS WAS POTENTIALLY A PROFITABLE BUSINESS?
STEVEN BURD: AT THE NUMBERS THAT WE WERE LOOKING AT, YES.
MR. DOWNEY: AND YOU ALSO MENTIONED THAT YOU MIGHT FEATURE TO OTHER STORES A NETWORK IN WHICH THERANOS SERVICES MIGHT BE OFFERED. COULD YOU EXPLAIN THAT?
STEVEN BURD: SURE. WE HAD BUILT A NETWORK OF RETAILERS TO SELL GIFT CARDS THAT YOU'LL SEE IN MOST SUPERMARKETS IN THE UNITED STATES CALLED AN END CAP. SO WE HAD THESE PARTNERSHIPS THAT EXISTED, AND WE FELT WE COULD DO THE SAME THING FOR THERANOS BECAUSE WE WERE ONLY 1500, 1800 STORES IN THAT TIMEFRAME AND WE THOUGHT WE COULD PUT TOGETHER A NATIONWIDE NETWORK OF OTHER RETAILERS AND WE WOULD GET A REALLY SMALL SLIVER OF INCOME FROM THAT.
MR. DOWNEY: AND WOULD THAT BE DONE BY A LICENSING AGREEMENT BETWEEN YOU AND THE OTHER STORES, OR HOW WOULD IT WORK?
STEVEN BURD: IT WOULD BE -- YOU KNOW, I DON'T THINK WE GOT FAR IN THAT BUT WE ENVISIONED THAT WE WOULD PUT THAT NETWORK TOGETHER, THERANOS WOULD APPROVE THOSE RETAILERS, AND THEN I CAN'T RECALL, I THINK IT WAS OUR REVENUE WOULD COME FROM THE RETAILER ITSELF, THAT SMALL BIT OF PROFIT.
MR. DOWNEY: AND YOU MENTIONED ON, ON -- A MOMENT AGO THAT YOU LEARNED AT SOME POINT DURING THE COURSE OF YOUR DISCUSSIONS WITH THERANOS THAT THEY WERE ALSO TALKING TO OTHER RETAILERS; CORRECT?
STEVEN BURD: THE ONLY RETAILER I KNEW THAT THEY WERE TALKING TO WAS WALGREENS. AT LEAST THAT'S MY MEMORY. I HAD INTRODUCED ELIZABETH TO PEOPLE AT PUBLIX, HY-VEE, AND I THINK OTHER RETAILERS AT AN ANNUAL FMI CONFERENCE.
MR. DOWNEY: OKAY. BUT WHATEVER -- AT THIS EARLY STAGE WHERE YOU WERE MEETING MS. HOLMES FOR THE FIRST TIME, YOU RECOGNIZED THAT WHATEVER RETAILER MIGHT GET AN EXCLUSIVE CONTRACT WITH THERANOS, THAT THAT COULD BE A UNIQUELY PROFITABLE OPPORTUNITY FOR THAT RETAILER; CORRECT?
STEVEN BURD: SURE. AND THAT WAS NOT DISCUSSED AT THAT MEETING. THAT WAS LAID OUT IN THIS LETTER.
MR. DOWNEY: OKAY. WELL, LET'S LOOK AT EXHIBIT 281 AND LET'S LOOK AT THE FIRST PARAGRAPH. IN THIS PARAGRAPH, YOU LAY OUT A POTENTIAL ARRANGEMENT WHERE SAFEWAY WOULD HELP TO LAUNCH THE THERANOS BLOOD ANALYZER; CORRECT?
STEVEN BURD: CORRECT.
MR. DOWNEY: AND IN RETURN, SAFEWAY WOULD GET THE EXCLUSIVE RIGHTS IN ALL RETAIL FOR SOME PERIOD OF TIME; CORRECT?
STEVEN BURD: IT WAS CONFINED TO THE RETAIL SUPERMARKETS.
MR. DOWNEY: WELL, AT THIS POINT IN TIME, WERE YOU SEEKING ACTUALLY EXCLUSIVE RIGHTS ACROSS ALL FORMS OF RETAIL?
STEVEN BURD: I DON'T BELIEVE SO. I CAN READ THIS THING AGAIN.
MR. DOWNEY: SURE.
(PAUSE IN PROCEEDINGS.)
STEVEN BURD: WE WERE THINKING, YOU KNOW, WHETHER IT SAYS IT HERE OR NOT, WE WERE THINKING EXCLUSIVELY ABOUT A SUPERMARKET NETWORK.
BY MR. DOWNEY:
MR. DOWNEY: OKAY, SO THAT WOULD PRECLUDE RETAILERS LIKE KROGER AND OTHERS FROM OFFERING IT IF YOU WERE ABLE TO ACHIEVE THAT TYPE OF EXCLUSIVITY?
STEVEN BURD: WE WOULD TRY TO BUILD IT INITIALLY SO IT WAS RETAILERS THAT WE DIDN'T COMPETE WITH, BUT WE LEARNED FROM THE BLACK HAWK NETWORK THAT WE PUT TOGETHER FOR GIFT CARDS THAT WE ULTIMATELY SOLD THEM TO EVERYBODY, EVEN THOSE WE COMPETED WITH, AND IT WAS PROFITABLE TO DO SO. BUT WE WOULD START WITH NONCOMPETING RETAILERS.
MR. DOWNEY: OKAY. AND SO WOULD YOU BE ABLE TO PRECLUDE, IN YOUR VIEW, FOOD RETAILERS LIKE WAL-MART?
STEVEN BURD: WE WOULDN'T HAVE PICKED THEM BECAUSE WE COMPETE WITH THEM SO BROADLY.
MR. DOWNEY: OKAY. SO THEY WOULD NOT HAVE BEEN PART OF THE NETWORK?
STEVEN BURD: CORRECT.
MR. DOWNEY: SO IF YOU GOT AN EXCLUSIVE DEAL, YOU COULD PRECLUDE WAL-MART FOR A PERIOD OF TIME FROM HOSTING THERANOS DEVICES?
STEVEN BURD: CORRECT.
MR. DOWNEY: OKAY. AND THAT WOULD BE TRUE ALSO OF ANY OTHER RETAILER THAT IS PART OF THE FOOD RETAIL CHAIN?
STEVEN BURD: YES.
MR. DOWNEY: OKAY. IF YOU LOOK AT THE FIRST PARAGRAPH AFTER YOUR INTRODUCTORY PARAGRAPH, YOU INDICATE THAT YOU WILL ARRANGE A MEETING BETWEEN MS. HOLMES AND UCSF SO THAT IT COULD VERIFY THAT THE BLOOD ANALYZER COULD PERFORM 85 PERCENT OF BLOOD WORK DONE BY A STANDARD RETAIL LAB; CORRECT?
STEVEN BURD: CORRECT.
MR. DOWNEY: DID YOU ARRANGE THAT MEETING?
STEVEN BURD: WE DID ARRANGE A MEETING WITH UCSF WHICH INCLUDED THE CEO, THE CHIEF MEDICAL OFFICER, AND THE HEAD OF LABS, BUT THAT WASN'T UNTIL 2011.
MR. DOWNEY: WELL, DO YOU RECALL AT THE TIME OF THIS DISCUSSION WITH MS. HOLMES THAT YOU DID ARRANGE A MEETING BETWEEN MS. HOLMES AND PHYSICIANS AT UCSF?
STEVEN BURD: I DON'T QUITE UNDERSTAND THE QUESTION.
MR. DOWNEY: WELL, I THINK YOU JUST DESCRIBED A MEETING --
STEVEN BURD: ARE YOU ASKING, DID I DO THAT BEFORE 2011?
MR. DOWNEY: YES.
STEVEN BURD: I'D HAVE TO GO LOOK AT A BUNCH OF EMAILS. I CAN'T COMMIT ONE WAY OR THE OTHER ON THAT.
MR. DOWNEY: WELL, LET ME SHOW YOU ONE EMAIL TO SEE IF IT REFRESHES YOUR RECOLLECTION.
STEVEN BURD: SURE.
MR. DOWNEY: AND THIS IS NOT FOR DISPLAY, BUT EXHIBIT 7101. AND YOU CAN REVIEW AS MUCH OF THIS AS YOU WOULD LIKE TO REVIEW, BUT I'M JUST REALLY INTERESTED IN THE FIRST PARAGRAPH. FIRST OF ALL, LET ME JUST ASK, IS KEVIN SHACHMUT ONE OF THE EXECUTIVES WHO YOU MENTIONED WHO WORKED WITHIN SAFEWAY HEALTH AT THIS TIME?
STEVEN BURD: THAT'S CORRECT.
MR. DOWNEY: IS IT ACCURATE THAT YOU, AS OF 2010, HAD CONTACTS AT UCSF?
STEVEN BURD: I HAD A LONGSTANDING RELATIONSHIP AT UCSF. I HAVE TO READ THE COMPLETE LETTER. CAN I DO THAT?
MR. DOWNEY: SURE. OF COURSE.
STEVEN BURD: OKAY.
(PAUSE IN PROCEEDINGS.)
STEVEN BURD: OKAY.
BY MR. DOWNEY:
MR. DOWNEY: ALL RIGHT. I ASKED YOU ABOUT MR. SHACHMUT. IS BRAD WOLFSEN ALSO ANOTHER SAFEWAY HEALTH EXECUTIVE?
STEVEN BURD: HE WAS AT THE TIME.
MR. DOWNEY: AND YOU -- AS YOU SAID, YOU HAVE A LONGSTANDING RELATIONSHIP WITH UCSF; IS THAT CORRECT?
STEVEN BURD: CORRECT.
MR. DOWNEY: AND IS THAT IN PART BECAUSE SAFEWAY HAS BEEN A GENEROUS DONOR TO UCSF?
STEVEN BURD: SAFEWAY HAS, YES.
MR. DOWNEY: AND YOU PERSONALLY HAVE?
STEVEN BURD: I PERSONALLY HAVE.
MR. DOWNEY: AND SO YOU HAVE HAD GOOD RELATIONSHIPS WITHIN UCSF; IS THAT CORRECT?
STEVEN BURD: CORRECT.
MR. DOWNEY: AND DOES THIS REFRESH YOUR RECOLLECTION THAT YOU REACHED OUT AROUND THE TIME OF YOUR INITIAL MEETING WITH MS. HOLMES TO ASK UCSF TO EVALUATE THERANOS'S TECHNOLOGY AND WHAT CAPACITIES IT HAD AT THAT TIME?
STEVEN BURD: IT DOESN'T. THIS LETTER STATES THAT STEVE WILL BE REACHING OUT TO HIS CONTACTS --
MR. DOWNEY: YOU DON'T HAVE TO READ IT. I'M JUST --
JUDGE DAVILA: EXCUSE ME, COUNSEL. THE LAST PORTION IS STRICKEN, LADIES AND GENTLEMEN. THE PORTION ABOUT READING THE LETTER IS JUST TO REFRESH THE WITNESS'S RECOLLECTION.
STEVEN BURD: RIGHT.
BY MR. DOWNEY:
MR. DOWNEY: I'M JUST ASKING YOU IF, HAVING READ IT, YOU RECALL IT OR NOT.
STEVEN BURD: I DON'T BELIEVE THAT -- BY THE 24TH I HAD NOT YET REACHED OUT TO UCSF.
MR. DOWNEY: DO YOU KNOW DR. SUE DESMOND-HELLMANN?
STEVEN BURD: SHE'S MY ALAMO NEIGHBOR. I LIVE IN ALAMO AND SHE LIVES NEXT DOOR.
MR. DOWNEY: AND DO YOU KNOW SHE'S DONE MANY THINGS, BUT AMONGST THEM SHE'S A VERY PROMINENT EPIDEMIOLOGIST?
STEVEN BURD: SHE'S ACTUALLY A CANCER DOCTOR.
MR. DOWNEY: RIGHT. AND SHE FOCUSES ON BIOSTATISTICS AND CANCER RESEARCH AND SO FORTH?
STEVEN BURD: SHE DID THAT AT GENENTECH, AND THEN SHE SERVED AS THE CHANCELLOR AT UCSF.
MR. DOWNEY: AND THEN SHE HELPED TO DEVELOP SEVERAL WELL-KNOWN AND CRITICALLY IMPORTANT CANCER DRUGS; CORRECT?
STEVEN BURD: CORRECT.
MR. DOWNEY: AND DO YOU RECALL REACHING OUT TO DR. DESMOND-HELLMANN IN 2010 TO ASK HER TO LOOK AT THERANOS'S TECHNOLOGY AND DATA?
STEVEN BURD: IT WOULDN'T BE UNUSUAL FOR ME TO CALL HER OR CONTACT HER VIA EMAIL.
MR. DOWNEY: AND WOULD IT ALSO BE LOGICAL FOR YOU AT THAT TIME TO HAVE ASKED UCSF TO BE THE INSTITUTION THAT EVALUATED THE TECHNOLOGY?
STEVEN BURD: I WAS INTERESTED IN WHAT THEY THOUGHT OF THE TECHNOLOGY, YES.
MR. DOWNEY: DO YOU KNOW THAT AT THAT TIME MS. HOLMES BROUGHT THE THERANOS BLOOD ANALYZER AND OTHER COMPONENTS OF THERANOS TECHNOLOGY TO UCSF?
STEVEN BURD: I'M NOT AWARE THAT -- I HAVE A VIVID RECOLLECTION OF A MEETING I HAD WITH THE INDIVIDUALS I MENTIONED EARLIER.
MR. DOWNEY: THAT WAS IN 2011?
STEVEN BURD: THAT WAS IN 2011. I DON'T RECALL. MAYBE YOU CAN SHOW ME AN EMAIL. I DON'T RECALL A 2010 MEETING.
MR. DOWNEY: SO IF SUCH A MEETING HAPPENED, IT IS NOT SOMETHING THAT YOU WERE PRESENT IN; CORRECT?
STEVEN BURD: IF IT HAPPENED, I WASN'T PRESENT OR I DON'T RECALL IT.
MR. DOWNEY: AND NOT SOMETHING THAT YOU WERE AWARE OF? YOU WERE NOT AWARE OF IT?
STEVEN BURD: IF IT HAPPENED, I WASN'T AWARE OF IT.
MR. DOWNEY: OKAY. NOW, DID YOU, AFTER THIS ORIGINAL MEETING, THIS MEETING THAT YOU DESCRIBED ON DIRECT, DID YOU START TO WORK ON THE POTENTIAL STRUCTURE OF A DEAL WITH THERANOS?
STEVEN BURD: WE DID. WE ALSO WORKED ON OUR DUE DILIGENCE PATH AS WELL.
MR. DOWNEY: WELL, I THINK -- DO YOU RECALL THAT MR. LEACH SHOWED YOU ON DIRECT EXAMINATION A PRESENTATION THAT YOU HAD MADE TO THE BOARD OF DIRECTORS OF SAFEWAY; CORRECT?
STEVEN BURD: CORRECT.
MR. DOWNEY: AND THAT WAS 45 DAYS LATER OR SO FORTH OR SOMETHING LIKE THAT?
STEVEN BURD: I THINK IT WAS IN MAY.
MR. DOWNEY: IN MAY. AND YOU TOLD THE BOARD AT THAT TIME THAT YOU WERE EVALUATING A POTENTIAL DEAL WITH THERANOS; CORRECT?
STEVEN BURD: CORRECT.
MR. DOWNEY: AND YOU TOLD THE BOARD THAT YOU WOULD PERFORM DUE DILIGENCE IN CONNECTION WITH THAT DEAL?
STEVEN BURD: CORRECT.
MR. DOWNEY: AND WERE YOU ASKED IN THAT MEETING ABOUT YOUR EVALUATION OF THE REPRESENTATIONS THAT MS. HOLMES HAD MADE TO YOU CONCERNING THE TECHNOLOGY?
STEVEN BURD: CAN YOU REPEAT THE QUESTION?
MR. DOWNEY: SURE. DID BOARD MEMBERS ASK YOU WHAT THE CAPACITY OF THE TECHNOLOGY WAS DURING THAT MEETING?
STEVEN BURD: YOU KNOW, I MADE A PRESENTATION, I REPRESENTED WHAT THERANOS HAD REPRESENTED TO ME. THEY ASKED QUESTIONS. I CERTAINLY DON'T REMEMBER WHAT THE QUESTIONS WERE.
MR. DOWNEY: BUT THEY ASKED YOU TO UNDERTAKE DUE DILIGENCE IN CONNECTION WITH THOSE REPRESENTATIONS; CORRECT?
STEVEN BURD: WE TOLD THEM THAT WE WERE GOING TO DO DUE DILIGENCE.
MR. DOWNEY: IN FACT, IF YOU'D LET ME SHOW YOU THE EXHIBIT THAT YOU WERE LOOKING AT ON DIRECT, IF YOU GO BACK TO THE WHITE BINDER THAT MR. LEACH WAS SHOWING YOU AND GO TO EXHIBIT 336, WHICH IS ALREADY IN EVIDENCE, AND I'M GOING TO DIRECT YOU TO PAGE 7.
STEVEN BURD: PAGE 7?
MR. DOWNEY: YES, SIR. ON PAGE 7 AT A VERY HIGH LEVEL YOU OUTLINE A POSSIBLE DEAL WITH THERANOS, AND THE FIRST THING YOU SAY, OF COURSE, IS THAT IT WILL BE SUBJECT TO DUE DILIGENCE; CORRECT?
STEVEN BURD: I SAID THAT IN AN EARLIER CHART, I BELIEVE.
MR. DOWNEY: OKAY. AND THE DEAL POINTS THAT YOU COMMUNICATED ON PAGE 7, THIS WAS NOT THE DEAL THAT WAS ACTUALLY ULTIMATELY NEGOTIATED, IS IT?
STEVEN BURD: NO. IT WAS DIFFERENT.
MR. DOWNEY: OKAY. SO, FOR EXAMPLE, YOU DID NOT MAKE -- SAFEWAY DID NOT MAKE AN EQUITY INVESTMENT IN THERANOS, DID IT?
STEVEN BURD: NO, IT DID NOT.
MR. DOWNEY: AND SAFEWAY DID NOT TAKE A BOARD SEAT AT THERANOS, DID IT?
STEVEN BURD: IT WAS IN THE CONTRACT THAT THEY WOULD MAKE EVERY EFFORT TO GIVE SAFEWAY A BOARD SEAT.
MR. DOWNEY: BUT YOU DID NOT ULTIMATELY TAKE A BOARD SEAT?
STEVEN BURD: WE DID NOT. WE DID NOT.
MR. DOWNEY: OKAY. LET ME ASK YOU -- AND, OF COURSE, AT ANY TIME IF YOU WANT TO LOOK AT OTHER PARTS OF THE DOCUMENT, DO.
STEVEN BURD: SURE.
MR. DOWNEY: BUT I WANT TO DIRECT YOUR ATTENTION TO PAGE 18 OF THE SAME EXHIBIT, 331. PAGE 18 IS LABELED BUSINESS RISKS. IS THIS PART OF A PRESENTATION THAT YOU GAVE TO THE SAFEWAY BOARD ABOUT RISKS THAT HAD TO BE EVALUATED IN CONNECTION WITH THE POTENTIAL DEAL WITH THERANOS?
STEVEN BURD: YES.
MR. DOWNEY: AND THE FIRST RISK THAT YOU IDENTIFIED IS REGULATORY APPROVAL; CORRECT?
STEVEN BURD: CORRECT.
MR. DOWNEY: AND YOU UNDERSTOOD THAT THERE WERE POTENTIAL REGULATORY RISKS INVOLVING VARIOUS FEDERAL REGULATORS; CORRECT?
STEVEN BURD: YES.
MR. DOWNEY: ANOTHER RISK WAS THAT THERANOS WOULD HAVE TO OBTAIN CERTAIN APPROVALS OR WAIVERS UNDER CLIA; CORRECT?
STEVEN BURD: CORRECT.
MR. DOWNEY: AND CLIA IS ADMINISTERED BY CMS; CORRECT?
STEVEN BURD: CMS, WHICH IS MEDICARE.
MR. DOWNEY: OKAY. AND I THINK YOU ALSO IDENTIFIED POTENTIAL RISKS AROUND WHETHER THIRD PARTIES WHO WERE NECESSARY TO THE DEAL WOULD AGREE TO THE DEAL. SO, FOR EXAMPLE, YOU RECOGNIZED INSURANCE COMPANIES WOULD HAVE TO SUPPORT THERANOS; CORRECT?
STEVEN BURD: CORRECT.
MR. DOWNEY: AND SO A RISK WAS THAT THAT WOULD NOT HAPPEN, THERANOS WOULD NOT BE ABLE TO PERSUADE INSURANCE COMPANIES TO REIMBURSE PATIENTS FOR THEIR SERVICES; CORRECT?
STEVEN BURD: CORRECT.
MR. DOWNEY: AND THAT'S -- THESE RISKS EXISTED BECAUSE IT WAS ALL VERY EARLY IN TERMS OF THE DEAL; CORRECT?
STEVEN BURD: THAT'S RIGHT.
MR. DOWNEY: AND YOU WENT ON -- IF YOU WOULD JUST FLIP TO THE NEXT PAGE -- YOU TELL THE BOARD AT THE END OF THIS PRESENTATION THAT YOU WILL COMPLETE DUE DILIGENCE; CORRECT?
STEVEN BURD: CORRECT.
MR. DOWNEY: AND SOME OF THE ITEMS THAT YOU IDENTIFIED ON THE PRIOR SLIDE, OR ADDRESSED, THAT YOU WOULD REVIEW THE REGULATORY STRATEGY AND CONFIRM THE EQUITY VALUE AND THINGS LIKE THAT; CORRECT?
STEVEN BURD: CORRECT.
MR. DOWNEY: AND YOU ALSO INDICATED THAT YOU WOULD VALIDATE THE TECHNOLOGY WITH A SCIENTIFIC PANEL, INCLUDING JOHNS HOPKINS AND UCSF; CORRECT?
STEVEN BURD: CORRECT.
MR. DOWNEY: NOW, IN TERMS OF CARRYING OUT THE DUE DILIGENCE OF THE COMPANY, IT WAS ULTIMATELY YOUR RESPONSIBILITY, BUT OBVIOUSLY YOU DIDN'T DO EVERY ASPECT OF IT; CORRECT?
STEVEN BURD: THAT'S CORRECT.
MR. DOWNEY: YOU HAD THE ABILITY TO DECIDE WHAT GOT DONE AND WHAT DIDN'T GET DONE, BUT YOU DIDN'T NECESSARILY CARRY ALL OF IT OUT; CORRECT?
STEVEN BURD: NOT ALL OF IT PERSONALLY, NO.
MR. DOWNEY: AND SO, FOR EXAMPLE, WITH RESPECT TO REGULATORY ISSUES, YOU WOULD HAVE ASSIGNED -- YOU DID ASSIGN THAT RESPONSIBILITY TO MR. GORDON, THE GENERAL COUNSEL; CORRECT?
STEVEN BURD: CORRECT.
MR. DOWNEY: AND WITH REGARD TO ANY FINANCIAL ISSUES, YOU WOULD HAVE ASSIGNED THAT DUE DILIGENCE TO MR. EDWARDS; CORRECT?
STEVEN BURD: IN ALL LIKELIHOOD.
MR. DOWNEY: BY THE WAY, WITH RESPECT TO FINANCIAL ISSUES, DID YOU ASK MS. HOLMES AT ANY TIME WHEN YOU WERE DEALING WITH HER, HOW MUCH MONEY HAVE YOU SPENT DEVELOPING THIS TECHNOLOGY?
STEVEN BURD: I DON'T RECALL.
MR. DOWNEY: DO YOU KNOW IF MR. EDWARDS MADE THAT EVALUATION AS PART OF HIS DUE DILIGENCE?
STEVEN BURD: I DON'T, I DON'T KNOW.
MR. DOWNEY: OKAY. BUT IN TERMS OF THE BUSINESS MODEL, YOU WOULD HAVE HAD SOME INPUT; CORRECT?
STEVEN BURD: THE BUSINESS MODEL, ABSOLUTELY.
MR. DOWNEY: AND MAYBE EXECUTIVES. DID EXECUTIVES FROM SAFEWAY HEALTH ALSO WORK ON DESIGNING THAT?
STEVEN BURD: THEY WOULD HAVE HAD A PERIPHERAL INVOLVEMENT.
MR. DOWNEY: OKAY. SO BY THE END OF THE DAY, THERE WOULD BE A FAIRLY BIG TEAM WORKING ON EVALUATING THERANOS; CORRECT?
STEVEN BURD: A NUMBER OF DISCIPLINES.
MR. DOWNEY: AND AS WELL BECAUSE THE ISSUES WERE COMPLICATED WITH REGULATORS, DID SAFEWAY ALSO ENGAGE OUTSIDE LAWYERS?
STEVEN BURD: ON THE REGULATORY ISSUE, YES.
MR. DOWNEY: OKAY. SO IS IT FAIR TO SAY THAT IN THE PROCESS OF CONSIDERING WHETHER TO DO A DEAL, SAFEWAY DID HUNDREDS OF HOURS OF DUE DILIGENCE?
STEVEN BURD: AT LEAST 100.
MR. DOWNEY: AND YOU WOULD HAVE COMMUNICATED, LET'S SAY, WITH THERANOS DURING THAT PERIOD ALMOST DAILY ABOUT ONE ASPECT OR ANOTHER OF THE DEAL; CORRECT?
STEVEN BURD: WE WERE ON A PARALLEL PATH TO DO THE DEAL AND DO THE DUE DILIGENCE.
MR. DOWNEY: OKAY. LOOK AT, IF YOU WOULD, EXHIBIT 7190.
JUDGE DAVILA: I JUST WANT TO CORRECT YOU. I THINK YOU INDICATED THE EXHIBIT YOU WERE JUST DISCUSSING WAS 331, AND I THINK IT WAS 336.
MR. DOWNEY: I BEG YOUR PARDON, YOUR HONOR. I DID MISIDENTIFY IT.
STEVEN BURD: WHICH BINDER ARE WE IN?
MR. DOWNEY: YOU CAN RETURN TO THE BLACK BINDER.
STEVEN BURD: AND GIVE ME THE EXHIBIT AGAIN.
BY MR. DOWNEY:
MR. DOWNEY: THE EXHIBIT IS 7190.
STEVEN BURD: I HAVE IT.
MR. DOWNEY: I'LL GIVE YOU A MINUTE TO LOOK AT IT, BUT MY QUESTION AT THIS POINT IS, IS THIS AN EMAIL FROM YOU TO RICK JURGENS OF HY-VEE COPYING MS. HOLMES?
STEVEN BURD: CORRECT.
MR. DOWNEY: AND YOU SENT THIS IN OR AROUND JULY OF 2011; CORRECT?
STEVEN BURD: CORRECT.
MR. DOWNEY: YOUR HONOR, I MOVE THE ADMISSION OF EXHIBIT 7190.
MR. LEACH: NO OBJECTION.
JUDGE DAVILA: IT'S ADMITTED. IT MAY BE PUBLISHED.
(DEFENDANT'S EXHIBIT 7190 WAS RECEIVED IN EVIDENCE.)
BY MR. DOWNEY:
MR. DOWNEY: I JUST WANT TO ASK YOU IF THE STATEMENT IN HERE IS AN ACCURATE CHARACTERIZATION OF THE DUE DILIGENCE THAT SAFEWAY PERFORMED WITH RESPECT TO THERANOS. FIRST OF ALL, LET ME ASK YOU, RICK JURGENS IS THE CEO OF ANOTHER FOOD RETAILER; CORRECT?
STEVEN BURD: HE WAS AT THE TIME.
MR. DOWNEY: AND HE WAS THE CEO OF HY-VEE?
STEVEN BURD: CORRECT.
MR. DOWNEY: AND HY-VEE WAS ONE OF THE COMPANIES THAT YOU CONSIDERED BRINGING INTO THE NETWORK; CORRECT?
STEVEN BURD: THAT'S CORRECT.
MR. DOWNEY: AND SO YOU WERE HAVING DISCUSSIONS WITH HIM ABOUT WHETHER HY-VEE WOULD BE INTERESTED IN SUCH A DEAL; CORRECT?
STEVEN BURD: I ACTUALLY INTRODUCED ELIZABETH TO THEM.
MR. DOWNEY: OKAY. AND YOU WERE DISCUSSING IN THIS EMAIL WHAT DUE DILIGENCE HY-VEE SHOULD DO IN TERMS OF EVALUATING A POTENTIAL DEAL; CORRECT?
STEVEN BURD: WE TALKED ABOUT SOME ELEMENTS OF THAT, SURE.
MR. DOWNEY: SO IN THE FIRST NUMBERED PARAGRAPH, YOU INDICATE THAT YOU TALKED TO -- YOU INDICATE TO MR. JURGENS, "YOU SHOULD FOCUS YOUR QUESTIONS WITH ME (SAFEWAY HAS SPENT HUNDREDS OF HOURS ON ITS OWN DUE DILIGENCE AND HAS COMMUNICATED ALMOST DAILY WITH ELIZABETH AND THERANOS FOR MORE THAN ONE YEAR). THIS GIVES ELIZABETH MORE TIME TO CONCENTRATE ON ALL THAT SHE MUST GET DONE BEFORE SAFEWAY'S LAUNCH." AT THE TIME THAT WAS AN ACCURATE STATEMENT?
STEVEN BURD: IT WAS AN ACCURATE STATEMENT, BUT IT DESERVES A LITTLE EXPLANATION. BECAUSE I WAS SENSITIVE TO ELIZABETH'S TIME AND WE HAD BEEN THROUGH A GOOD DEAL OF OUR OWN DUE DILIGENCE, THEY COULD ASK ME THE QUESTIONS THAT I PROBABLY ASKED ALREADY AND I COULD PROVIDE THE ANSWERS SO THEY DIDN'T HAVE TO GO TO ELIZABETH.
MR. DOWNEY: I UNDERSTAND. SO YOU WERE INDICATING THAT YOU THOUGHT THE GREATEST EFFICIENCY WOULD BE FOR SAFEWAY TO PROVIDE ANY -- BE CONTACTED FIRST ABOUT ANY DILIGENCE QUESTIONS; CORRECT?
STEVEN BURD: CONTACTED FIRST, YES.
MR. DOWNEY: BUT IT'S AN ACCURATE STATEMENT THAT SAFEWAY HAD SPENT HUNDREDS OF HOURS ON DUE DILIGENCE ON THERANOS?
STEVEN BURD: IF I SAID IT IN THIS LETTER, IT'S TRUE.
MR. DOWNEY: AND DO YOU RECALL THAT SAFEWAY ASKED THERANOS FOR A NUMBER OF DOCUMENTS DURING AND IN CONNECTION WITH PERFORMING DUE DILIGENCE?
STEVEN BURD: WE DO -- I DO RECALL THAT, BUT I DON'T RECALL ALL OF THE DOCUMENTS.
MR. DOWNEY: LET ME SHOW YOU A DOCUMENT WHICH IS IN THE BLACK NOTEBOOK, WHICH IS EXHIBIT 10536. NOW, THIS IS AN EMAIL THAT YOU ARE NOT A SENDER OR A RECIPIENT. I WANT TO ASK YOU IF THE DOCUMENTS LISTED ON HERE ARE DOCUMENTS THAT YOU RECALL WERE PART OF THE DILIGENCE PROCESS BETWEEN THERANOS AND SAFEWAY.
STEVEN BURD: IT LOOKS LIKE A NUMBER OF THEM WOULD HAVE BEEN PART OF THAT PROCESS.
MR. DOWNEY: AND, FOR EXAMPLE, IT'S STANDARD AS PART OF DUE DILIGENCE, ISN'T IT, FOR ONE COMPANY TO PROVIDE ITS CAPITALIZATION TABLE TO THE OTHER COMPANY; CORRECT?
STEVEN BURD: TO ANY COMPANY LOOKING TO BUY OR INVEST IN THE COMPANY, YES.
MR. DOWNEY: OKAY. LET ME ASK YOU ABOUT A FEW ITEMS ON HERE. DO YOU RECALL WHETHER ANY ASSAY DEVELOPMENT REPORTS WERE SENT FROM THERANOS TO SAFEWAY AS PART OF THE DILIGENCE PROCESS?
STEVEN BURD: I DON'T KNOW IF THIS IS A CORRECT DESCRIPTION, BUT WE WERE PROVIDED WITH SOME INFORMATION REGARDING SOME WORK THAT THERANOS HAD SAID THEY HAD DONE WITH SOME PHARMACEUTICAL COMPANIES.
MR. DOWNEY: WELL, DO YOU REMEMBER RECEIVING A DEVELOPMENT REPORT ABOUT HOW THEY HAD ACTUALLY GONE ABOUT DEVELOPING ASSAYS INTERNALLY AT THERANOS?
STEVEN BURD: I DON'T RECALL.
MR. DOWNEY: OKAY. BUT DO YOU RECALL RECEIVING PATENTS FROM THERANOS THAT DETAILED THE INTELLECTUAL PROPERTY IT HAD OBTAINED?
STEVEN BURD: IT WOULD HAVE BEEN COMMON TO ASK FOR THEM, BUT THAT'S NOT SOMETHING THAT I WOULD HAVE PERSONALLY REVIEWED.
MR. DOWNEY: WOULD THOSE ISSUES HAVE BEEN HANDLED BY MR. GORDON?
STEVEN BURD: THEY WOULD.
MR. DOWNEY: AND WITH REGARD TO ANY OF THE REPORTS THAT RELATED TO SCIENTIFIC ISSUES, THE TECHNOLOGY OR THE DEVELOPMENT OF ASSAYS, WHO WITHIN SAFEWAY WOULD HAVE EVALUATED THAT INFORMATION?
STEVEN BURD: I THINK THE FIRST LEVEL OF EVALUATION PROBABLY WOULD HAVE BEEN KEN SHACHMUT AT SAFEWAY HEALTH; WE WOULD HAVE HAD OUR HEAD OF PHARMACY LOOK AT THESE IN TERMS OF INTERNAL; I PERSONALLY HAD CONVERSATIONS WITH THE LAB DIRECTORS AT JOHNS HOPKINS AND THE LAB DIRECTOR AT UCSF.
MR. DOWNEY: OKAY. LET'S TALK ABOUT -- WHO IS THE LAB DIRECTOR AT JOHNS HOPKINS THAT YOU RECALL SPEAKING TO?
STEVEN BURD: YOU KNOW, WE'RE GOING BACK 11 YEARS, SO I DON'T RECALL. I'M SURE WE CAN DO AN INTERNET SEARCH.
MR. DOWNEY: WELL, LET ME ASK YOU A FEW NAMES BECAUSE I DON'T KNOW EXACTLY WHO YOU ARE REFERRING TO.
STEVEN BURD: YEAH.
MR. DOWNEY: LET ME ASK YOU, DO YOU RECALL CONTACTING A PHYSICIAN NAMED DR. JONATHAN SIMONS?
STEVEN BURD: I RECALL TALKING TO JONATHAN.
MR. DOWNEY: OKAY. AND DR. SIMONS WAS THE CEO OF THE PROSTATE CANCER?
STEVEN BURD: HE WAS AT THE TIME.
MR. DOWNEY: AND HE'S AN ONCOLOGIST?
STEVEN BURD: HE'S AN ONCOLOGIST.
MR. DOWNEY: AND HE'S SOMEONE FOR WHOM YOU HAVE HIGH REGARD?
STEVEN BURD: IN THE SCIENTIFIC COMMUNITY, YES.
MR. DOWNEY: AND YOU SPOKE TO HIM ABOUT THE COMPANY?
STEVEN BURD: I DID.
MR. DOWNEY: AND YOU WANTED TO GET HIS IMPRESSIONS AND HIS EVALUATION OF THERANOS AND ITS TECHNOLOGY?
STEVEN BURD: I ACTUALLY HAD HIM MEET ELIZABETH AS WELL.
MR. DOWNEY: YOU HAD DR. SIMONS MEET WITH MS. HOLMES?
STEVEN BURD: AND I WAS IN THE ROOM.
MR. DOWNEY: AND DID THAT MEETING GIVE YOU ANY SENSE OF THE CAPACITIES OF THERANOS'S TECHNOLOGY?
STEVEN BURD: YOU KNOW, OBVIOUSLY JONATHAN WAS IN NO POSITION AT A DINNER MEETING TO EVALUATE THE TECHNOLOGY. HE THOUGHT IF THERANOS COULD DO THIS, THAT WOULD BE A BIT OF A GAME CHANGER.
MR. DOWNEY: LET ME ASK YOU TO LOOK AT EXHIBIT 7164.
STEVEN BURD: I HAVE IT.
MR. DOWNEY: THIS WAS AN EMAIL THAT WAS SENT, APPEARS TO HAVE BEEN SENT FROM DR. SIMONS TO MS. HOLMES AND YOURSELF; CORRECT?
STEVEN BURD: CORRECT.
MR. DOWNEY: I MOVE THE ADMISSION, YOUR HONOR, OF 7164.
MR. LEACH: HEARSAY, YOUR HONOR.
JUDGE DAVILA: THERE ARE TWO DOCUMENTS HERE, MR. DOWNEY.
MR. DOWNEY: YOUR HONOR, I THINK IF YOU SEE --
JUDGE DAVILA: IS IT BOTH OF THEM YOU'RE SEEKING ADMISSION OF? THE SECOND ITEM SEEMS TO BE A TWO-PAGE LETTER.
MR. DOWNEY: YES, YOUR HONOR. I THINK THE WAY THE DOCUMENT WORKS IS THAT THE FIRST PAGE IS AN EMAIL AND THE EMAIL HAS AS AN ATTACHMENT A MEMO WHICH IS REFERENCED IF YOU SEE THAT UNDER THE SUBJECT, AND THEN THERE'S AN ATTACHMENT OF A PDF AND WITHIN THE PDF THERE'S A COVER LETTER TO ANOTHER LETTER WHICH, IN TURN, FORWARDS THAT LETTER. AND THIS WAS BEING SHARED, I THINK, WITH THE RECIPIENTS OF THIS EMAIL.
JUDGE DAVILA: AND THE SECOND LETTER, ARE YOU ASKING THAT THIS BE ADMITTED FOR THE TRUTH OF THE MATTER ASSERTED? I THINK I WOULD SUSTAIN A HEARSAY OBJECTION TO THAT SECOND PAGE.
MR. DOWNEY: WELL, AT THE VERY LEAST, YOUR HONOR, I'M ASKING THAT IT BE ADMITTED TO THE DEFENDANT'S STATE OF MIND. BUT I ALSO THINK IT GOES TO THE MATERIALITY ISSUES OF -- THIS WITNESS HAS TESTIFIED ON DIRECT ABOUT THOSE ISSUES WHICH WERE IMPORTANT TO HIM IN EVALUATING AND CONTINUING UNDER THE DEAL. I THINK HE'S JUST TESTIFIED ABOUT CONVERSATIONS WITH THIS WITNESS AND HIS REQUEST. I THINK THIS RETAINS -- CONTAINS A CONTEMPORANEOUS REFLECTION OF WHAT THOSE REFLECTIONS WERE.
JUDGE DAVILA: I'M GOING TO SUSTAIN THE OBJECTION.
MR. DOWNEY: MAY I ASK, YOUR HONOR, IF ANY OF THE COMPONENTS REFRESH THE RECOLLECTION OF THE WITNESS?
JUDGE DAVILA: YOU MAY, OF COURSE. SURE.
BY MR. DOWNEY:
MR. DOWNEY: LET ME ASK YOU, MR. BURD, TO LOOK AT THE THIRD PAGE OF THE EXHIBIT. LET ME KNOW WHEN YOU HAVE THAT IN FRONT OF YOU.
STEVEN BURD: I DO.
MR. DOWNEY: AND LET ME ASK YOU TO LOOK AT THE -- THERE'S A SHORT PARAGRAPH AND THEN THERE'S A QUESTION, AND UNDER THAT THERE'S AN ANSWER. IF YOU GO TO THE SECOND SENTENCE FROM THE BOTTOM, I WANT TO ASK --
STEVEN BURD: ON THE FIRST PAGE OR THE SECOND PAGE?
MR. DOWNEY: ON THE FIRST PAGE.
STEVEN BURD: OKAY.
MR. DOWNEY: SO DO YOU SEE THAT THERE'S A QUESTION THAT BEGINS "WHAT DO YOU KNOW"?
STEVEN BURD: I'M ON THE BOTTOM OF THE FIRST PAGE.
MR. DOWNEY: I'M ASKING YOU TO LOOK AT THE TOP OF THE THIRD PAGE OF THE EXHIBIT, WHICH IS A LETTER, AND I THINK I CAN --
STEVEN BURD: OKAY. ALL RIGHT. SO I'M ON THAT PAGE.
MR. DOWNEY: ALL RIGHT. SO I'M ASKING YOU TO LOOK AT THE FIRST PARAGRAPH, THE PARAGRAPH UNDER THE FIRST QUESTION THAT IS POSED THERE.
STEVEN BURD: YES.
MR. DOWNEY: AND THE SECOND TO THE LAST SENTENCE OF THAT ANSWER THAT BEGINS "THERE ARE."
STEVEN BURD: CORRECT.
MR. DOWNEY: IS THAT -- IS THE STATEMENT CONTAINED THEREIN CONSISTENT WITH WHAT DR. SIMONS CONVEYED TO YOU ABOUT THE STATE OF THERANOS'S TECHNOLOGY?
STEVEN BURD: IT'S NOT SOMETHING THAT I RECALL.
MR. DOWNEY: OKAY. DO YOU RECALL DR. SIMONS EVER SAYING TO YOU THERE WERE OTHER EFFORTS THAT WERE BEING MADE WHICH WERE SIMILAR EFFORTS TO THE EFFORT THAT THERANOS WAS UNDERTAKING TO GIVE POINT OF CARE BLOOD TESTING?
STEVEN BURD: I DON'T RECALL THAT.
MR. DOWNEY: DO YOU RECALL HIM SAYING THAT THERANOS WAS IN A SUPERIOR POSITION TO OTHER COMPANIES BASED ON ITS PATENTS?
STEVEN BURD: I DON'T RECALL THAT.
MR. DOWNEY: OKAY. AND DO YOU RECALL LEARNING FROM HIM THAT RELATIVE TO OTHER BIOTECH COMPANIES IN THE SAME SPACE, HE THOUGHT THAT THERANOS WAS IN THE LEADING POSITION?
STEVEN BURD: I DON'T RECALL THAT. HE DIDN'T EVALUATE THE TECHNOLOGY. HE WAS ASKING OTHERS ABOUT WHAT THEY KNOW OF HER.
MR. DOWNEY: OKAY. I JUST WANT TO ASK YOU A QUESTION THAT IS A LITTLE BIT OFF TOPIC, BUT I'LL JUST ASK YOU TO GO BACK TO THE EMAIL --
STEVEN BURD: SURE.
MR. DOWNEY: -- FOR A MOMENT.
STEVEN BURD: YES.
MR. DOWNEY: AND I WANT TO JUST ASK YOU TO LOOK AT THE LAST PARAGRAPH OF THE EMAIL THAT BEGINS "ELIZABETH."
STEVEN BURD: YES.
MR. DOWNEY: AND JUST TAKE A LOOK TO LOOK AT THAT. MY QUESTION IS, DO YOU RECALL REFERENCES TO A 3.0 OR A 4.0 IN DISCUSSING THERANOS TECHNOLOGY?
STEVEN BURD: I DON'T. WHAT I RECALL FROM THE DINNER MEETING IS THAT THERE WAS A LOT OF DISCUSSION ABOUT CANCER BECAUSE HE WAS AN ONCOLOGIST, AND THOSE WERE SOME VISIONS THAT ELIZABETH HAD THAT SHE MIGHT BE ABLE TO DO WITH THE ANALYZER, AND JONATHAN WAS JUST DESCRIBING A JAR OF JELLY BEANS AND THE DIFFERENT COLORS AND HE WAS -- THAT'S WHEN HE STARTED TALKING ABOUT CYTOKINES, BUT THEY WERE TALKING AT A LEVEL OF DETAIL THAT WAS A LITTLE ABOVE ME.
MR. DOWNEY: OKAY. SO YOU DON'T REMEMBER HEARING AT THAT DINNER REFERENCES TO DIFFERENT VERSIONS OF THERANOS TECHNOLOGY?
STEVEN BURD: I DON'T.
MR. DOWNEY: DO YOU RECALL LEARNING THAT AT ANY TIME?
STEVEN BURD: I WASN'T AWARE OF ANYBODY ELSE DOING IT.
MR. DOWNEY: WELL, DO YOU RECALL HEARING ABOUT DIFFERENT VERSIONS LIKE A 2.0, A 3.0, A 4.0 OF THERANOS'S TECHNOLOGY?
STEVEN BURD: YES. I THINK THAT, AS I SAID DURING MY DIRECT TESTIMONY, THERE WERE -- THE BIO SENSOR, WHATEVER THE TERM IS, THE UNIT, IT WENT THROUGH CONSTANT CHANGE, BOTH PHYSICAL AND I SUPPOSE IT HAD NEW CAPABILITIES AND THEREFORE YOU'D HAVE A 1, 2, 3, JUST AS MICROSOFT DOES.
MR. DOWNEY: AND AT THE TIME, NOT TODAY, BUT AT THE TIME --
STEVEN BURD: YES.
MR. DOWNEY: -- DID YOU HAVE AN UNDERSTANDING OF THE DIFFERENCES BETWEEN THOSE VERSIONS?
STEVEN BURD: NO.
MR. DOWNEY: LET ME ASK YOU TO LOOK NOW AT EXHIBIT 332.
STEVEN BURD: ALL RIGHT.
MR. DOWNEY: IS THIS AN EMAIL THAT MS. HOLMES SENT TO DR. SIMONS COPYING YOU IN 2010?
STEVEN BURD: IT IS.
MR. DOWNEY: AND IS THIS PART OF YOUR DISCUSSIONS WITH THERANOS ABOUT ENTERING, POTENTIALLY ENTERING A DEAL?
STEVEN BURD: WAS IT PART OF THE THOUGHT PROCESS? YES.
MR. DOWNEY: YOUR HONOR, I WOULD MOVE THE ADMISSION OF 332.
MR. LEACH: NO OBJECTION, YOUR HONOR.
JUDGE DAVILA: IT'S ADMITTED. IT MAY BE PUBLISHED.
(GOVERNMENT'S EXHIBIT 332 WAS RECEIVED IN EVIDENCE.)
BY MR. DOWNEY:
MR. DOWNEY: I'LL ASK YOU TO FOCUS ON THE SECOND FULL PARAGRAPH. THE PARAGRAPH ABOVE, I'M SORRY, THE PARAGRAPH THAT BEGINS "THERANOS STARTED OUT."
STEVEN BURD: YES.
MR. DOWNEY: IN THAT PARAGRAPH, MS. HOLMES TOLD DR. SIMONS AND YOU THAT THERANOS HAD BUILT A MINILAB SYSTEM THAT AUTOMATES THE PROCESS OF RUNNING A BROAD RANGE OF ASSAYS ON ACCELERATED TIMELINES WITH MUCH SMALLER VOLUMES OF SAMPLE; CORRECT?
STEVEN BURD: CORRECT.
MR. DOWNEY: AND IS THAT CONSISTENT WITH WHAT SHE TOLD YOU IN YOUR MEETING IN MARCH OF 2010?
STEVEN BURD: CORRECT.
MR. DOWNEY: IN THE NEXT PARAGRAPH SHE GOES ON TO SAY, "WE HAVE HAD THE OPPORTUNITY TO PRESENT THE VALIDATION DATA ON THE TECHNOLOGY PLATFORM AND ON THE BROAD RANGE OF ASSAYS AT HOPKINS." CORRECT?
STEVEN BURD: THAT'S WHAT IT SAYS.
MR. DOWNEY: AND HOPKINS YOU UNDERSTOOD TO BE A REFERENCE TO JOHNS HOPKINS?
STEVEN BURD: CORRECT.
MR. DOWNEY: AND SHE THEN GOES ON TO IDENTIFY A VARIETY OF DOCTORS AT HOPKINS WHO HAVE PARTICIPATED IN THAT EVALUATION; CORRECT?
STEVEN BURD: CORRECT.
MR. DOWNEY: IS THIS WHEN YOU LEARNED THAT HOPKINS HAD UNDERTAKEN AN EVALUATION OF THERANOS'S TECHNOLOGY?
STEVEN BURD: I CAN'T BE CERTAIN BECAUSE I KNOW PEOPLE AT HOPKINS AND BECAUSE ELIZABETH SAID ONE OF THEIR ANALYZERS WAS PHYSICALLY ON THEIR PROPERTY FOR A WHILE. SHE INVITED ME TO TALK TO SOMEONE AT HOPKINS, AND THAT'S THE PERSON THAT I CALLED.
MR. DOWNEY: AND IS THAT THE LABORATORY DIRECTOR THAT YOU ARE RECALLING?
STEVEN BURD: I RECALL THEM AS A LABORATORY DIRECTOR. IT ALMOST HAD TO BE THE LABORATORY DIRECTOR BECAUSE THAT'S WHOSE OPINION I WANTED TO HEAR.
MR. DOWNEY: DID YOU TALK TO ANY OF THE INDIVIDUALS WHO ARE IDENTIFIED IN THE EMAIL THAT IS EXHIBIT 332?
STEVEN BURD: I DON'T RECALL TALKING. THE NAME KICKLER SOUNDS A LITTLE BIT FAMILIAR BUT, YOU KNOW, I TALKED TO THE PERSON THAT SHE DIRECTED ME TO AND ASKED HIM WHETHER THIS BOX COULD DO WHAT SHE SAID.
MR. DOWNEY: AND WAS THAT THE CONVERSATION THAT YOU HAD IN 2010?
STEVEN BURD: THAT WOULD HAVE BEEN IN 2010, YES.
MR. DOWNEY: OKAY. AND WHAT DID THAT INDIVIDUAL TELL YOU?
STEVEN BURD: WHAT THEY SAID WAS THAT WE DIDN'T HAVE THE BOX HERE LONG ENOUGH TO VALIDATE IT THE WAY WE WOULD LIKE. IN OTHER WORDS, THE BOX WAS TAKEN BACK BY THERANOS. AND THE LAB DIRECTOR SAID, LOOK, IF THEY CAN DO THIS, IT'S A GAME CHANGER, BUT I CAN'T VALIDATE FOR YOU THAT THEY'VE DONE IT. I DIDN'T HAVE ENOUGH TIME WITH THE BOX.
MR. DOWNEY: SO YOU UNDERSTOOD THAT IN 2010?
STEVEN BURD: CORRECT.
MR. DOWNEY: DID YOU LEARN FROM THAT DIRECTOR WHETHER OR NOT ANY DATA HAD BEEN SHARED BY THERANOS WITH HOPKINS?
STEVEN BURD: I DID NOT.
MR. DOWNEY: NOW, IF I MIGHT ASK YOU, HOW FAMILIAR WERE YOU WITH THE BLOOD TESTING BUSINESS BEFORE YOU BEGAN TALKING TO THERANOS IN 2010?
STEVEN BURD: YOU KNOW, I WAS FAMILIAR WITH WHO THE MAJOR LAB PLAYERS WERE OUT THERE, QUEST AND LAB CORP., AND I WAS FAMILIAR WITH THE TESTS, CPT CODES. I KNEW THAT THOSE TWO LABS WERE MUCH CHEAPER THAN OUTPATIENT HOSPITAL AND OTHERS, AND I ALSO KNEW -- AND THIS SURPRISED ME -- THAT MEDICARE, WHO OFTEN HAS THE LOWEST RATES, HAD THE HIGHEST LAB RATES.
MR. DOWNEY: SO YOU KNEW A LOT ABOUT THE BUSINESS?
STEVEN BURD: I KNOW MORE TODAY THAN I KNEW THEN.
MR. DOWNEY: BUT DID YOU ACTUALLY KNOW HOW THE MEDICAL PROCESS OF BLOOD TESTING WORKED?
STEVEN BURD: IF YOU MEAN HOW ONE GETS A BLOOD TEST? YOU GET A PRESCRIPTION FROM A DOCTOR, THEY IDENTIFY THE TEST, THE SCRIPT IS TAKEN TO A LAB AND THEY FULFILL THE REQUEST.
MR. DOWNEY: I MEANT SOMETHING SLIGHTLY DIFFERENT.
STEVEN BURD: OKAY.
MR. DOWNEY: I MEANT, DID YOU UNDERSTAND THAT WHEN A LAB IS ANALYZING A BLOOD SAMPLE WHAT THE DIFFERENT ELEMENTS OF THAT ARE?
STEVEN BURD: I'M NOT SURE WHAT YOU MEAN BY "ELEMENTS."
MR. DOWNEY: WELL, DID YOU KNOW, FOR EXAMPLE, THAT THERE ARE DIFFERENT FORMS OF BLOOD TESTING MACHINES THAT PERFORM DIFFERENT KINDS OF BLOOD TESTS?
STEVEN BURD: I WAS FAMILIAR WITH THE FACT THAT, THAT MOST FULL SCALE LABS CAN DO MOST ANYTHING, AND THEN THERE WERE REFERENCE LABS THAT COULD DO A BIT MORE.
MR. DOWNEY: OKAY. AND YOU UNDERSTOOD THAT THOSE WERE LABS THAT CONTAINED A SUBSTANTIAL AMOUNT OF HEAVY EQUIPMENT TO PERFORM THAT TESTING?
STEVEN BURD: CORRECT.
MR. DOWNEY: DID YOU -- WERE YOU FAMILIAR WITH THE TERM "ASSAY" BEFORE DISCUSSION OF THERANOS?
STEVEN BURD: I HADN'T HEARD THE TERM USED IN THIS WAY, BUT I UNDERSTOOD THE TERM WHEN USED.
MR. DOWNEY: OKAY. AND DID YOU COME TO LEARN THAT THERE WERE DIFFERENT FORMS OF ASSAYS, DIFFERENT METHODS BY WHICH ASSAYS WORKED?
STEVEN BURD: I'M NOT SURE. NOW, ARE YOU EQUATING AN ASSAY TO A SPECIFIC CPT CODE?
MR. DOWNEY: WELL, IT IS -- EFFECTIVELY I AM.
STEVEN BURD: OKAY.
MR. DOWNEY: WHAT I AM REFERRING TO AS AN ASSAY IS THE METHOD BY WHICH A PARTICULAR LAB ANALYZES AN ANALYTE IN THE BLOOD, SO A GLUCOSE TEST OR A SODIUM TEST, THAT THERE ARE DIFFERENT ASSAYS FOR EACH.
STEVEN BURD: SURE.
MR. DOWNEY: AND DID YOU UNDERSTAND THAT THE METHODS BY WHICH THEY WERE ANALYZED FELL INTO DIFFERENT CATEGORIES? WAS THAT SOMETHING THAT YOU --
STEVEN BURD: NO, IT'S NOT THE LEVEL OF DETAIL THAT I HAD.
MR. DOWNEY: YOU KNEW THAT SOME BLOOD TESTS WERE PRETTY COMMONLY ORDERED; CORRECT?
STEVEN BURD: CORRECT.
MR. DOWNEY: AND ONE OF YOUR GOALS, I THINK, IN DESIGNING THIS PARTNERSHIP WAS TO MAKE SURE THAT THERANOS COULD TEST THOSE, PLUS OTHER TESTS?
STEVEN BURD: CORRECT.
MR. DOWNEY: IN FACT, IN STARTING THE PARTNERSHIP, IS IT TRUE THAT SAFEWAY PROVIDED TO THERANOS ITS DATA ABOUT WHICH TESTS WERE ORDERED WITHIN SAFEWAY AND HOW FREQUENTLY THEY WERE ORDERED?
STEVEN BURD: WELL, WE HAD CLAIMS DATA. I DON'T RECALL GIVING THEM CLAIMS DATA. BUT WE HAD INFORMATION THAT COULD TELL US THE TOP 25 ASSAYS, AS YOU REFER TO THEM, THE TOP 50, THE TOP 100, WHAT THOSE PRICE POINTS WERE, YOU KNOW, FOR DIFFERENT LABS. WE MAY HAVE PROVIDED THAT.
MR. DOWNEY: SO WHEN YOU SAY CLAIMS DATA -- YOU, OF COURSE, PROVIDE INSURANCE TO A NUMBER OF SAFEWAY EMPLOYEES; CORRECT?
STEVEN BURD: FOR THE BENEFIT OF THE JURY, ALL LARGE COMPANIES ARE SELF-INSURED AND SO THEY PAY ALL OF THE MEDICAL BILLS, AND AN INSURANCE COMPANY LIKE AN AETNA OR A BLUE SHIELD JUST DOES THE MECHANICS OF PROCESSING THE CLAIM.
MR. DOWNEY: OKAY. AND SO YOU, YOU RECALL GENERALLY IN SOME FORM THAT YOU WERE ABLE TO AGGREGATE INFORMATION FROM THAT DATA AND PROVIDE IT TO THERANOS?
STEVEN BURD: WE DID THAT OFTEN FOR OUR OWN ANALYSIS TO LOWER COSTS.
MR. DOWNEY: DO YOU RECALL PROVIDING IT TO THERANOS?
STEVEN BURD: I DON'T. BUT IF THEY HAD ASKED FOR IT, I WOULD HAVE PROVIDED IT ON AN AGGREGATED BASIS.
MR. DOWNEY: OKAY. DO YOU RECALL DISCUSSIONS BETWEEN THERANOS AND SAFEWAY AS TO WHICH TESTS WERE THE MOST COMMONLY ORDERED TESTS?
STEVEN BURD: I DON'T RECALL. BUT WE KNEW WHAT THEY WERE, AND IF WE WERE ASKED, WE PROVIDED IT.
MR. DOWNEY: OKAY. NOW, DID YOU UNDERSTAND AT THE TIME THAT YOU WERE HAVING CONVERSATIONS WITH THERANOS THAT THERANOS HAD NOT YET DEVELOPED AN ASSAY FOR EACH BLOOD TEST THAT CAN POTENTIALLY BE OFFERED?
STEVEN BURD: WE THOUGHT THAT THERANOS HAD DEVELOPED ASSAYS FOR ALMOST ALL. AND IF YOU GET TO PROBABLY 200 ASSAYS, YOU WOULD BE 95 PERCENT OF ALL ASSAYS, AND MAYBE AT 100 YOU WOULD BE AT LEAST AT 75 PERCENT.
MR. DOWNEY: SO AT SOME POINT SAFEWAY HAD THAT UNDERSTANDING OF WHAT THERANOS HAD DONE?
STEVEN BURD: WELL, WE WERE RELYING ON THE FACT THAT THEY SAID THAT THEY COULD DO VIRTUALLY ALL ASSAY TYPES.
MR. DOWNEY: AND DID YOU AUTHORIZE MR. WOLFSEN AND MR. SHACHMUT TO HAVE CONVERSATIONS WITH MS. HOLMES ABOUT THAT?
STEVEN BURD: THEY MADE A TRIP DOWN TO THERANOS AND SPENT A FEW HOURS.
MR. DOWNEY: AND I THINK YOU INDICATED IN YOUR EMAIL TO MR. JURGENS THAT SAFEWAY WAS COMMUNICATING ALMOST DAILY WITH THERANOS.
STEVEN BURD: IN ONE FORM OR ANOTHER.
MR. DOWNEY: AND DID MR. SHACHMUT AND MR. WOLFSEN COMMUNICATE WITH REPRESENTATIVES OF THERANOS BY EMAIL ABOUT THE POTENTIAL DEAL?
STEVEN BURD: THEY WERE PART OF A DUE DILIGENCE TEAM, SO I DON'T THINK THEY WOULD HAVE BEEN TALKING ABOUT A POTENTIAL DEAL. BUT THEY WOULD HAVE BEEN PURSUING DIFFERENT AVENUES OF DUE DILIGENCE.
MR. DOWNEY: AND THEY WOULD HAVE BEEN TRYING TO UNDERSTAND WHAT THERANOS'S CAPACITIES WERE; CORRECT?
STEVEN BURD: CORRECT.
MR. DOWNEY: AND OTHER ASPECTS OF THERANOS?
STEVEN BURD: RIGHT.
MR. DOWNEY: AND THAT WAS TRUE BOTH BEFORE THE DEAL WAS AGREED TO AND THEN AS TIME WENT ON AND PAYMENTS WERE REQUESTED BY THERANOS; CORRECT?
STEVEN BURD: CORRECT.
MR. DOWNEY: AND IN DOING THAT, DID YOU UNDERSTAND THAT THEY AND OTHER SAFEWAY EMPLOYEES COMMUNICATED WITH THERANOS EMPLOYEES AND EXECUTIVES BY EMAIL?
STEVEN BURD: THERE WOULD BE SOME EMAILS EXCHANGED I THINK DURING THE DUE DILIGENCE PROCESS, AND THEN ONCE WE GOT DOWN TO THE LOGISTICS AT THE STORE LEVEL, THERE WAS A SMALL TEAM AT THERANOS AND A SMALL TEAM AT SAFEWAY. BUT THE VAST MAJORITY OF COMMUNICATION WAS BETWEEN EITHER MYSELF AND BOB GORDON, ELIZABETH, AND SUNNY.
MR. DOWNEY: AND TO THE EXTENT THAT EMPLOYEES COMMUNICATED BY EMAIL, WAS THERE A SYSTEM AT SAFEWAY BY WHICH THAT EMAIL WAS PRESERVED?
STEVEN BURD: I CAN'T TELL YOU.
MR. DOWNEY: DID YOU EVER SEE A LIBRARY OF ASSAYS THAT THERANOS -- THAT YOU UNDERSTOOD THAT THERANOS COULD PERFORM?
STEVEN BURD: IN ONE OF THE EXHIBITS THEY OFFERED UP ABOUT JUST AS AN EXAMPLE OF THEIR PRICING, AND THOSE WERE SOME OF THE TOP ASSAYS IN TERMS OF VOLUME.
MR. DOWNEY: AND DO YOU KNOW THAT MS. HOLMES TOLD MR. WOLFSEN BY EMAIL THAT THERANOS WAS NOT PRESENTLY CAPABLE OF PERFORMING ALL OF THOSE TESTS?
STEVEN BURD: I DON'T KNOW THAT. I'D LIKE TO SEE THE EMAIL.
MR. DOWNEY: WELL, LET ME ASK YOU TO LOOK AT EXHIBIT 7104. YOUR HONOR, 7104 IS NOT AN EMAIL ON WHICH THIS WITNESS IS COPIED. I DO THINK THAT THIS IS AN IMPORTANT COMMUNICATION FOR PURPOSES OF REFLECTING THE INTENT OF MS. HOLMES BOTH IN TERMS OF SENDING AND RECEIVING THE EMAIL. SO I THINK IT COULD BE ADMITTED ON THAT BASIS. BUT ALTERNATIVELY I'LL HAVE TO CALL EITHER MR. WOLFSEN OR MR. SHACHMUT. SO I MOVE TO ADMIT IT.
MR. LEACH: NO OBJECTION, YOUR HONOR.
JUDGE DAVILA: TO THE ADMISSION OF THIS EMAIL?
MR. LEACH: CORRECT.
JUDGE DAVILA: IT'S ADMITTED, AND IT MAY BE PUBLISHED.
(DEFENDANT'S EXHIBIT 7104 WAS RECEIVED IN EVIDENCE.)
BY MR. DOWNEY:
MR. DOWNEY: IF YOU LOOK AT THE BOTTOM OF THE EMAIL THAT STARTS ON PAGE 1, MR. WOLFSEN WRITES TO MS. HOLMES AND SAYS HE'S RECEIVED A REQUEST FROM PRESUMABLY SAFEWAY'S LAWYERS TO SEND THE SELECTED ASSAYS FROM THE THERANOS ASSAY LIBRARY TO OUR OUTSIDE COUNSEL WHO IS ASSISTING IN VARIOUS REGULATORY RESEARCH. AND THEN HE GOES ON TO DISCUSS SOME REGULATORY ISSUES. DO YOU SEE THAT AT THE BOTTOM OF THE FIRST PAGE?
STEVEN BURD: YES.
MR. DOWNEY: AND HE SENDS THAT EMAIL TO MS. HOLMES AND MR. SHACHMUT; CORRECT?
STEVEN BURD: YES.
MR. DOWNEY: AND MS. HOLMES RESPONDS TO THAT AND SAYS THIS IS FINE, BUT THAT LIST IS NOT AN ACCURATE REFLECTION OF THE TESTS WE WILL ACTUALLY MAKE AVAILABLE IN THE STORES, THAT LIST IS THE LIBRARY WE PROVIDE FOR OUR PHARMACEUTICAL CLIENTS' CLINICAL TRIALS. DO YOU SEE THAT?
STEVEN BURD: I SEE THAT.
MR. DOWNEY: AND I THINK YOU MENTIONED YOU UNDERSTOOD THAT THERANOS, PRIOR TO THE TIME THAT THEY ENTERED NEGOTIATIONS WITH SAFEWAY, HAD BEEN PURSUING PARTNERSHIPS WITH PHARMACEUTICAL COMPANIES; CORRECT?
STEVEN BURD: THAT'S WHAT WE WERE TOLD, RIGHT.
MR. DOWNEY: AND MS. HOLMES IS SAYING TO MR. WOLFSEN, THIS IS A LIBRARY OF ASSAYS WE FEATURE AND CAN DEVELOP AND VALIDATE AS PART OF OUR TRIAL WITH YOU; CORRECT?
MR. LEACH: OBJECTION. THAT MISSTATES WHAT THIS SAYS, AND IT CALLS FOR SPECULATION.
MR. DOWNEY: I'LL WITHDRAW IT, YOUR HONOR.
JUDGE DAVILA: THE QUESTION IS WITHDRAWN.
BY MR. DOWNEY:
MR. DOWNEY: IN ANY EVENT, MR. WOLFSEN RESPONDS TO MS. HOLMES AND SAYS, THANK YOU FOR THE CLARIFICATION, I HAD FORGOTTEN THAT THE LIST WAS A COMPOSITE OF CURRENT AND FUTURE TESTS. DO YOU SEE THAT?
STEVEN BURD: I SEE THAT.
MR. DOWNEY: IS THIS AN EMAIL AND THE COMMUNICATIONS CONTAINED HEREIN, DO YOU RECALL ANY CONVERSATION WITH MR. WOLFSEN OR MR. SHACHMUT ABOUT THAT IN OR AROUND APRIL OF 2010?
STEVEN BURD: I DO NOT. THEY WERE SENT DOWN TO DISCUSS THE WORK THAT HAD BEEN DONE WITH PHARMACEUTICAL COMPANIES, AND THOSE PRESUMABLY WERE UNITS IN PATIENT'S HOMES THAT WERE VALIDATING SOME VERY SPECIFIC ASPECTS OF SOME DRUG THAT THEY WERE DEVELOPING.
MR. DOWNEY: AND APPARENTLY THEY WERE ALSO IN TOUCH WITH SAFEWAY'S OUTSIDE LAWYERS; CORRECT?
STEVEN BURD: I THINK THAT BOB GORDON WOULD HAVE BEEN FOR SURE. BUT, AGAIN, I THINK WE'RE TALKING ABOUT APPLES AND ORANGES HERE. THE KIND OF TESTS THAT WERE RUN FOR PHARMACEUTICAL TO MY KNOWLEDGE WOULDN'T BE THE SAME KIND OF TESTS YOU WOULD RUN FOR INDIVIDUALS, AND WE WERE REPEATEDLY TOLD THAT THEY COULD DO VIRTUALLY ALL.
MR. DOWNEY: WELL, THAT REMAINS -- THAT DEPENDS ON THE EMAIL, I SUPPOSE. BUT I WANT TO ASK YOU WHAT YOUR UNDERSTANDING OF THE PHARMACEUTICAL BUSINESS WAS. DID YOU UNDERSTAND THAT THEY WOULD PARTNER WITH PHARMACEUTICAL COMPANIES IN CONNECTION WITH PARTICULAR ASSAYS? DID YOU UNDERSTAND THAT?
STEVEN BURD: I UNDERSTOOD THAT THEY WERE WORKING WITH PHARMACEUTICAL COMPANIES AND, JUST AS I SAID, THEY WERE TRYING TO EVALUATE REALTIME HOW THOSE DRUGS WERE AFFECTING MAYBE, YOU KNOW, PARTS OF TRADITIONAL ASSAYS I DON'T KNOW.
MR. DOWNEY: BUT YOU UNDERSTOOD --
STEVEN BURD: IT'S A DIFFERENT APPLICATION.
MR. DOWNEY: BUT YOU UNDERSTOOD THAT THEY WERE WORKING WITH DIFFERENT PHARMACEUTICAL COMPANIES; CORRECT?
STEVEN BURD: I UNDERSTOOD THAT THAT'S WHAT THEY SAID THEY WERE DOING. I NEVER PERSONALLY VALIDATED THAT.
MR. DOWNEY: OKAY. BUT DID YOU UNDERSTAND THAT THE NATURE OF THOSE PARTNERSHIPS WAS THAT THEY WOULD INVOLVE ONE OR TWO ASSAYS?
STEVEN BURD: I KNEW THAT.
MR. DOWNEY: LET ME ASK YOU ABOUT SOME REGULATORY ISSUES THAT WE TOUCHED ON BEFORE. YOUR HONOR, I THOUGHT, BECAUSE WE WILL GO UNTIL 3:00, I THOUGHT WE MIGHT GO UNTIL 11:15 TODAY IF THAT'S -- GO UNTIL 11:15 AND HAVE A LITTLE BIT OF A LONGER BREAK. SO LET ME JUST COVER THIS MATTER.
JUDGE DAVILA: YOU PREVIEWED ME ASKING THE JURY IF THEY CAN GO UNTIL 3:00.
MR. DOWNEY: I BEG YOUR PARDON.
JUDGE DAVILA: SO THANKS FOR THAT.
MR. DOWNEY: I'M BREAKING IT TO THEM SOFTLY.
MR. DOWNEY: LET ME ASK YOU ABOUT SAFEWAY'S EVALUATION OF THE LEGAL AND REGULATORY ISSUES. WE MENTIONED BEFORE CMS, AND THAT WAS ONE REGULATOR YOU KNEW WOULD BE RELEVANT HERE; CORRECT?
STEVEN BURD: CORRECT.
MR. DOWNEY: AND THE FDA WAS ANOTHER; CORRECT?
STEVEN BURD: MAYBE THE FDA, MAYBE NOT.
MR. DOWNEY: THAT WAS AN OPEN QUESTION; CORRECT?
STEVEN BURD: CORRECT.
MR. DOWNEY: BUT YOU -- AND WHEN YOU ULTIMATELY ENTERED INTO AN AGREEMENT, YOU ULTIMATELY INCLUDED A PROVISION WHICH SAID IF THE FDA OBJECTS, WE HAVE THE RIGHT TO TERMINATE THE AGREEMENT; CORRECT?
STEVEN BURD: I DON'T RECALL THAT, BUT THE DOCUMENT'S IN THESE BINDERS.
MR. DOWNEY: OKAY. YOU UNDERSTOOD OVER TIME THAT THERANOS WAS WORKING WITH BOTH OF THOSE REGULATORS; CORRECT?
STEVEN BURD: THEY SAID THEY WERE WORKING WITH BOTH, AND I KNEW THEY WERE WORKING WITH CLIA, CLIA WAIVERS, BECAUSE I RECALLED THE TIME WHEN ELIZABETH CALLED ME AND SAID THAT THEY HAD JUST BEEN CLIA APPROVED.
MR. DOWNEY: RIGHT. AT SOME POINT DURING THE RELATIONSHIP, THEIR LAB HAD GOTTEN A CERTIFICATION FROM CLIA TO OPERATE AS A LAB?
STEVEN BURD: CORRECT, CORRECT.
MR. DOWNEY: BUT DURING THE TIME THAT YOU WERE NEGOTIATING THE AGREEMENT IN 2010, MS. HOLMES NEVER SAID WE HAVE A CLIA CERTIFICATION; CORRECT?
STEVEN BURD: NO, SHE DID NOT. BUT SHE WAS EXPECTING TO GET ONE, AND I BELIEVE THEY ULTIMATELY DID.
MR. DOWNEY: AND, IN FACT, FOR THE AGREEMENT TO GO FORWARD, THEY HAD TO GET THAT; CORRECT?
STEVEN BURD: CORRECT.
MR. DOWNEY: AND SIMILARLY, DID YOU KNOW THAT THERANOS WAS TALKING TO THE FDA ABOUT VARIOUS APPROVALS?
STEVEN BURD: I DO RECALL ELIZABETH SAYING THAT THEY WOULD PREFER TO GET I GUESS A BIGGER GOLD STAMP OF APPROVAL WHICH THEY REGARDED AS THE FDA.
MR. DOWNEY: AND DID YOU TALK TO MS. HOLMES ABOUT FDA APPROVAL IN 2010?
STEVEN BURD: WE MAY HAVE HAD SOME DISCUSSION. BUT, YOU KNOW, TO OPERATE A LAB, ALL YOU NEED IS CLIA WAIVED.
MR. DOWNEY: BUT YOU DIDN'T UNDERSTAND IN 2010 -- SHE NEVER TOLD YOU IN 2010 THAT THEY HAD ANY APPROVALS FROM THE FDA, DID SHE?
STEVEN BURD: I DON'T RECALL HER SAYING THAT.
MR. DOWNEY: OKAY. AND AT THE TIME, DID YOU PERSONALLY LOOK AT THOSE ISSUES VERY CLOSELY?
STEVEN BURD: IN TERMS OF CLIA AND FDA, WE WOULD HAVE RELIED ON OUTSIDE COUNSEL.
MR. DOWNEY: AND THAT WOULD BE LATHAM & WATKINS?
STEVEN BURD: CORRECT.
MR. DOWNEY: AND THOSE, IN FACT, ARE THE LAWYERS WHO ARE REPRESENTING YOU IN CONNECTION WITH YOUR APPEARANCE HERE TODAY; CORRECT?
STEVEN BURD: CORRECT.
MR. DOWNEY: AND THAT'S A VERY REPUTABLE, WELL-KNOWN LAW FIRM; CORRECT?
STEVEN BURD: YES.
MR. DOWNEY: NOW, IS THERE ANY ASPECT OF REGULATORY APPROVAL THAT YOU RECALL RECEIVING A REPRESENTATION FROM THERANOS ABOUT THAT YOU LATER CAME TO BELIEVE WAS UNTRUE? DID THEY TELL YOU SOMETHING ABOUT HAVING A REGULATORY APPROVAL THAT YOU THINK WAS FALSE?
STEVEN BURD: THE ONLY ONE I RECALL ELIZABETH SAYING WAS THAT THEY HAD BEEN CLIA APPROVED.
MR. DOWNEY: OKAY. BUT THAT WAS TRUE; CORRECT?
STEVEN BURD: AND THAT WAS TRUE.
MR. DOWNEY: OKAY. AND LET ME -- THIS NEXT SUBJECT IS A LITTLE LONG, YOUR HONOR, SO IT MIGHT BE A LOGICAL TIME FOR A BREAK.
JUDGE DAVILA: TIME FOR A BREAK? ALL RIGHT. WE'LL TAKE A BREAK NOW. SIR, YOU CAN STAND DOWN NOW IF YOU WANT TO TAKE YOUR BREAK.
STEVEN BURD: SURE.
JUDGE DAVILA: I NEED TO TALK TO THE JURY FOR A FEW MINUTES. WE'LL COME BACK IN ABOUT 30 MINUTES, I THINK, ABOUT 30 MINUTES WOULD BE GOOD. MR. DOWNEY, YOU CAN HAVE A SEAT. LADIES AND GENTLEMEN, AS YOU'VE HEARD, I'D LIKE TO GO UNTIL 3:00 THIS AFTERNOON, IF WE MAY, AND TOMORROW I'D LIKE TO SEE IF WE CAN GO UNTIL 4:00 P.M. FRIDAY WE WILL NEED TO BREAK AT 1:00 P.M., 1:00 P.M. IN THE AFTERNOON. ALSO, LADIES AND GENTLEMEN, BEFORE WE TAKE OUR BREAK, I DO WANT TO INFORM YOU OF AN ACTION THAT HAS OCCURRED THAT AFFECTS THE JURY QUESTIONNAIRES THAT YOU COMPLETED IN THE JURY SELECTION PROCESS OF THIS CASE. AS YOU RECALL, EACH OF YOU COMPLETED A JURY QUESTIONNAIRE PRIOR TO YOUR COMING TO COURT TO BE QUESTIONED AS POTENTIAL JURORS FOR THIS CASE. THE QUESTIONNAIRE HAD TWO PAGES OF INSTRUCTIONS, AND ON THE SECOND PAGE ABOVE MY SIGNATURE WAS THE STATEMENT THAT YOUR ANSWERS WOULD BE CONFIDENTIAL. YOU WERE INFORMED THAT THE COURT WAS SENSITIVE TO YOUR PRIVACY.
YOU WERE INFORMED THAT THE QUESTIONNAIRES WOULD BE REVIEWED BY THE LAWYERS AND THE COURT AND THAT THEY WOULD BE KEPT WITH THE CLERK OF THE COURT UNDER SEAL AND WOULD BE DISCLOSED, IF AT ALL, WITH NAMES AND OTHER IDENTIFYING INFORMATION REMOVED. NOW, I NEED TO INFORM YOU THAT ABOUT TEN DAYS AGO THE COURT RECEIVED A MOTION FROM AN ENTITY CALLED "MEDIA COALITION" ASKING THAT THE COURT UNSEAL THE QUESTIONNAIRES SUCH THAT THEY MIGHT HAVE ACCESS TO THEM. THE MEDIATION COALITION IDENTIFIES THEMSELVES AS THE FOLLOWING: AMERICAN BROADCASTING COMPANY, INCORPORATED DOING BUSINESS AS ABC NEWS; THE ASSOCIATED PRESS; BLOOMBERG LP; THE DAILY MAIL; DOW JONES & COMPANY INCORPORATED; NBC UNIVERSAL MEDIA LLC; THE NEW YORK TIMES COMPANY; PORTFOLIO MEDIA INCORPORATED, PUBLISHER OF LAW 360; 3 UNCANNY 4 LLC; AND THE WASHINGTON POST COMPANY. NOW, LAST WEEK, A FEW DAYS AGO, I HAD A HEARING ON THIS MOTION WITH THE MEDIA COALITION ATTORNEY WHO BROUGHT THE MOTION.
ALSO PRESENT WERE ATTORNEYS INVOLVED IN THIS CASE, AN ATTORNEY FOR MS. HOLMES, AND THE UNITED STATES ATTORNEY'S OFFICE PROSECUTING THIS CASE. WE DISCUSSED THE QUESTION OF CONFIDENTIALITY OF THE QUESTIONNAIRES AND I TOLD THE PARTIES THAT PRIOR TO ME DECIDING WHAT, IF ANYTHING, IS TO BE RELEASED, I WOULD SPEAK TO EACH ONE OF YOU PRIVATELY TO HEAR YOUR COMMENTS, IF ANY, ON THIS ISSUE. NOW, WHAT I'D LIKE TO DO TODAY, LADIES AND GENTLEMEN, IS AT THE BREAK, MS. KRATZMANN IS GOING TO PROVIDE YOU WITH COPIES OF YOUR QUESTIONNAIRES, THE QUESTIONNAIRES THAT YOU FILLED OUT, COPIES OF THEM. MY THOUGHT IS THAT YOU MIGHT LIKE TO REVIEW THESE QUESTIONNAIRES AT OUR BREAK. AFTER WE FINISH EVIDENCE TODAY, WHICH I SUGGESTED WOULD BE ABOUT 3:00 P.M., I WILL ASK IF ANY OF YOU WISH TO SPEAK TO ME TODAY ABOUT YOUR QUESTIONNAIRES AND THESE ISSUES. IF YOU DO, WE WILL SPEAK IN MY CHAMBERS.
IF YOU WISH TO THINK ABOUT IT OVERNIGHT, YOU MAY DO THAT AND I'LL ASK TOMORROW IF YOU WISH TO SPEAK WITH ME, WHICH IS TO SAY THAT I WILL PERMIT YOU TO TAKE YOUR QUESTIONNAIRE HOME WITH YOU, A COPY OF YOUR QUESTIONNAIRE. WE'LL PROVIDE AN ENVELOPE FOR YOU SUCH THAT IT CAN REMAIN CONVENIENT TO YOU KEEPING IT PRIVATE, AND THEN TOMORROW I'LL ASK YOU IF YOU WISH TO SPEAK WITH ME ABOUT THIS. OUR CONVERSATION WILL BE BRIEF. NOW, I'VE TALKED TO THE LAWYERS HERE. WE'LL MEET IN MY CHAMBERS, IN MY OFFICE. I'LL DO THAT ONE AT A TIME WITH EACH OF YOU. IT WILL BE RECORDED, SO THERE WILL BE A COURT REPORTER PRESENT. THE LAWYERS WILL HAVE ONE LAWYER PRESENT. THEY WILL NOT PARTICIPATE IN THE CONVERSATION. THEY WILL BE THERE TO OBSERVE ONLY. I MAY HAVE SOME OF MY STAFF PRESENT AS WELL. I TELL YOU THIS IN ADVANCE TO TRY TO LET YOU KNOW WHAT THE CIRCUMSTANCES WILL BE SUCH THAT YOU WON'T BE INTIMIDATED WHEN YOU WALK IN A ROOM AND SEE PEOPLE THERE.
MY GOAL IS NOT TO MAKE THIS INTIMIDATING AT ALL, BECAUSE IT SHOULDN'T BE. IT'S GOING TO BE A CONVERSATION WITH YOU AND WITH ME, AND I HAVE SOME PREPARED QUESTIONS THAT I'M GOING TO ASK EACH OF YOU REGARDING THIS ISSUE AND REGARDING YOUR QUESTIONNAIRES. SO THAT'S THE SCHEDULE FOR TODAY. AT THE BREAK MS. KRATZMANN WILL PROVIDE YOU, AS I SAID, WITH COPIES OF YOUR QUESTIONNAIRES IF YOU WOULD LIKE TO REVIEW THOSE. AGAIN, IF YOU WOULD LIKE TO SPEAK WITH ME TODAY AFTER 3:00 O'CLOCK, I'M HAPPY TO DO THAT. IF YOU WANT TO WAIT UNTIL TOMORROW, OF COURSE WE CAN DO THAT AS WELL. I WILL ASK YOU, IF YOU DO LEAVE WITH YOUR QUESTIONNAIRES, PLEASE DO NOT SHARE THEM WITH ANYONE ELSE, AND PLEASE BRING THEM, BRING THEM WITH YOU TOMORROW BACK TO COURT AND WE'LL COLLECT THOSE AGAIN.
JUDGE DAVILA: ALL RIGHT. THANK YOU. COUNSEL, ANYTHING FURTHER?
MR. SCHENK: NO. THANK YOU, YOUR HONOR.
MR. DOWNEY: NO, YOUR HONOR.
JUDGE DAVILA: ALL RIGHT. WE'LL TAKE ABOUT A 30 MINUTE BREAK. THANK YOU.
(LUNCH RECESS TAKEN AT 11:08 A.M.) AFTERNOON SESSION
(JURY IN AT 11:46 A.M.)
JUDGE DAVILA: WE'RE BACK ON THE RECORD. ALL PARTIES PREVIOUSLY PRESENT ARE PRESENT ONCE AGAIN. MR. DOWNEY, YOU WANTED TO CONTINUE?
MR. DOWNEY: YES, SIR.
JUDGE DAVILA: YES?
MR. DOWNEY: YES.
MR. DOWNEY: MR. BURD, WE WERE TALKING A LITTLE BIT THIS MORNING ABOUT THE PROCESS OF DUE DILIGENCE BEFORE YOU ENTERED INTO AN AGREEMENT WITH THERANOS. I WANT TO TALK NOW ABOUT THE AGREEMENT THAT YOU ULTIMATELY ENTERED INTO, AND YOU MIGHT FIND IT HELPFUL TO HAVE IT IN FRONT OF YOU. IT'S EXHIBIT 387 IN THE WHITE BINDER.
COURT CLERK: THAT WAS PREVIOUSLY ADMITTED.
MR. DOWNEY: IT WAS.
MR. DOWNEY: BEFORE WE GET INTO THIS DOCUMENT, YOU HAD MENTIONED THAT WITH RESPECT TO THIS AGREEMENT, MS. HOLMES NEGOTIATED A LOT OF THE TERMS OF THE AGREEMENT ON HER OWN; CORRECT?
STEVEN BURD: YES, MEANING SHE -- MEANING WE NEVER SAT WITH A LAWYER FROM THERANOS, WHICH IS CUSTOMARY.
MR. DOWNEY: AND YOU UNDERSTOOD FROM THERANOS THAT THIS WAS A BIG DEAL?
STEVEN BURD: I THOUGHT IT WAS, SURE.
MR. DOWNEY: OKAY. LET ME DIRECT YOUR ATTENTION IN THE EXHIBIT THAT IS IN FRONT OF YOU TO PAGE 8, AND I'M GOING TO BE LOOKING AT THE PART OF IT THAT IS THE CARRY-OVER SECTION IN 3B WHICH CARRIES OVER BETWEEN PAGES 8 AND 9. DO YOU SEE THAT?
STEVEN BURD: YES.
MR. DOWNEY: NOW, YOU HAD TALKED DURING YOUR DIRECT EXAMINATION ABOUT A PILOT PROGRAM. DO YOU RECALL THAT?
STEVEN BURD: I DO.
MR. DOWNEY: BUT, IN FACT, THE AGREEMENT SET UP A SYSTEM UNDER WHICH THERE WOULD BE THREE PHASES IN THE AGREEMENT; CORRECT? THERE WOULD BE A PRE-PILOT, A PILOT, AND THEN THERE WOULD BE A LAUNCH. DO YOU RECALL THAT?
STEVEN BURD: YES.
MR. DOWNEY: AND IN PARAGRAPH 3B OF THE AGREEMENT, THE OBLIGATIONS OF THE PARTIES WERE SET FORWARD; CORRECT?
STEVEN BURD: CORRECT.
MR. DOWNEY: AND THERANOS WAS OBLIGATED UNDER THIS SECTION OF THE AGREEMENT TO OBTAIN APPROVALS BY CLIA; CORRECT?
STEVEN BURD: YES.
MR. DOWNEY: AND THEY WERE ALSO REQUIRED TO OBTAIN APPROVALS REQUIRED BY ANY OTHER REGULATOR OR LEGAL AUTHORITY; CORRECT?
STEVEN BURD: YES.
MR. DOWNEY: AND BEFORE THEY LAUNCHED AT SAFEWAY, THEY WERE REQUIRED TO TAKE THEIR TECHNOLOGY AND CUSTOMIZE IT TO SAFEWAY. DO YOU RECALL THAT?
STEVEN BURD: THERE IS SOME LANGUAGE IN HERE TO THAT FACT.
MR. DOWNEY: WELL, IT WAS A REQUIREMENT OF THE AGREEMENT, WASN'T IT?
STEVEN BURD: I'M LOOKING AT SECTION 3B II. LET ME JUST READ IT FOR A SECOND.
MR. DOWNEY: CERTAINLY.
(PAUSE IN PROCEEDINGS.)
STEVEN BURD: YEAH, I THINK CUSTOMIZATION REFERRED TO SORT OF INTEGRATING IT WITH THE BALANCE OF SAFEWAY SYSTEMS.
BY MR. DOWNEY:
MR. DOWNEY: OKAY. AND SO SOFTWARE WOULD HAVE TO BE CREATED THAT DID THAT?
STEVEN BURD: CORRECT.
MR. DOWNEY: AND DO YOU RECALL SUBSEQUENTLY THAT YOU ALSO WANTED TO CUSTOMIZE THE DEVICE IN TERMS OF HOW IT APPEARED IN SAFEWAY STORES. DO YOU REMEMBER THAT?
STEVEN BURD: YES. THERANOS WAS, YOU KNOW, GOING THROUGH SOME CHANGES ON THEIR OWN AND SO I OFFERED UP, YOU KNOW, WHAT WOULD LOOK GOOD FOR US.
MR. DOWNEY: OKAY. AND JUST FROM A RETAIL PERSPECTIVE YOU OFFERED THOUGHTS.
STEVEN BURD: RIGHT.
MR. DOWNEY: SO, FOR EXAMPLE, DO YOU RECALL THAT YOU SUGGESTED THAT THE SCREEN OF THE DEVICE BE SEPARATED OUT FROM THE DEVICE? DO YOU REMEMBER THAT?
STEVEN BURD: IF IT'S IN -- IF IT'S IN ONE OF THE EMAILS, I'M SURE I DID.
MR. DOWNEY: WELL, LET'S GO BACK TO THE AGREEMENT. SO IN ADDITION TO WHAT WE'VE ALREADY DISCUSSED, THE OBLIGATION WAS IMPOSED ON THERANOS BY THIS AGREEMENT TO NEGOTIATE WITH PAYORS WHO PAY FOR THE MEDICAL COSTS OF PATIENTS; CORRECT?
STEVEN BURD: CORRECT.
MR. DOWNEY: AND THEY HAD TO GAIN ACCEPTANCE THAT WAS SATISFACTORY TO SAFEWAY BEFORE THERE WAS A LAUNCH; CORRECT?
STEVEN BURD: CORRECT.
MR. DOWNEY: AND THAT'S TRUE SPECIFICALLY WITH REGARD TO INSURERS; CORRECT?
STEVEN BURD: YES.
MR. DOWNEY: AND THOSE OBLIGATIONS ARE COVERED IN B III AND IV; CORRECT?
STEVEN BURD: YES.
MR. DOWNEY: AND THEN THERE WAS ALSO AN OBLIGATION THAT THERANOS HAD TO MEET SERVICE STANDARDS SET BY SAFEWAY, INCLUDING THAT THE RESULTS OF TESTS BE AVAILABLE IN 30 MINUTES OR LESS; CORRECT?
STEVEN BURD: YES.
MR. DOWNEY: AND THEN THERE WERE SOME OTHER PROVISION ABOUT THERANOS REPLACING DEVICES THAT MALFUNCTIONED. AND THEN SAFEWAY OBTAINED -- STRIKE THAT. SAFEWAY WAS OBLIGATED TO HELP THERANOS IN GAINING GOVERNMENT APPROVAL; CORRECT?
STEVEN BURD: CORRECT.
MR. DOWNEY: AND IT WAS OBLIGATED TO ASSIST THERANOS IN CONNECTION WITH A MARKETING STRATEGY; CORRECT?
STEVEN BURD: YES.
MR. DOWNEY: AND THEN REMODELING OF THE STORE WOULD BE SAFEWAY'S OBLIGATION, NOT THERANOS'S; CORRECT?
STEVEN BURD: THAT'S CORRECT.
MR. DOWNEY: AND ALL OF THIS WAS BEFORE THE PILOT PROGRAM LAUNCHED; CORRECT?
STEVEN BURD: CORRECT.
MR. DOWNEY: OKAY. SO ALL OF THESE TASKS HAD TO BE COMPLETED TO EACH PARTY'S SATISFACTION IF IT WAS AN OBLIGATION OF THE OTHER PARTY BEFORE THERE COULD EVER BE A PILOT LAUNCH AT SAFEWAY; CORRECT?
STEVEN BURD: CORRECT.
MR. DOWNEY: AND IF IT WERE TO PASS THAT THERANOS DID NOT MEET ONE OF THOSE OBLIGATIONS OR MORE THAN ONE OF THOSE OBLIGATIONS, SAFEWAY HAD THE RIGHT TO TERMINATE THE AGREEMENT; CORRECT?
STEVEN BURD: IT'S NOT SOMETHING THAT I RECALL, BUT I WOULD, I WOULD HAVE BEEN DISAPPOINTED IF GENERAL COUNSEL DIDN'T HAVE IT IN HERE.
MR. DOWNEY: OKAY. AND AFTER THE PRE-PILOT PERIOD WAS COMPLETED TO THE SATISFACTION OF SAFEWAY, A PILOT PROGRAM COULD ACTUALLY LAUNCH; CORRECT?
STEVEN BURD: CORRECT.
MR. DOWNEY: AND THAT'S DETAILED IN PARAGRAPH C ON PAGE 9; CORRECT?
STEVEN BURD: YES.
MR. DOWNEY: AND THE EXPECTATION OF THE PARTIES WAS THAT THE PILOT PROGRAM WOULD LAST ABOUT 90 DAYS; CORRECT?
STEVEN BURD: YES.
MR. DOWNEY: AND ALSO THAT THE PILOT PROGRAM WOULD RUN CONCURRENTLY WITH THE PILOT PROGRAM THAT WALGREENS WOULD RUN; CORRECT?
STEVEN BURD: YES.
MR. DOWNEY: AND AGAIN, AS WITH THE PRE-PILOT PERIOD, THE PILOT PERIOD HAD TO BE COMPLETED TO SAFEWAY'S SATISFACTION; CORRECT?
STEVEN BURD: CORRECT.
MR. DOWNEY: AND AGAIN, IF SAFEWAY DID NOT -- IF SAFEWAY WERE UNSATISFIED WITH THERANOS'S PERFORMANCE, IT COULD TERMINATE THE AGREEMENT; CORRECT?
STEVEN BURD: CORRECT.
MR. DOWNEY: AND IF THE AGREEMENT WAS TERMINATED, THERANOS WAS OBLIGATED TO RETURN ANY MONIES PAID BY SAFEWAY TO DATE; CORRECT?
STEVEN BURD: I'D HAVE TO -- I'D HAVE TO READ THIS AND GIVE YOU AN ANSWER ON THAT.
MR. DOWNEY: OKAY. BUT DO YOU RECALL GENERALLY TRYING TO NEGOTIATE AN AGREEMENT --
STEVEN BURD: CORRECT.
MR. DOWNEY: -- THAT PROVIDED FINANCIAL PROTECTION FOR SAFEWAY?
STEVEN BURD: RIGHT.
MR. DOWNEY: AND YOU HAD MENTIONED THIS MORNING THAT YOU WERE CONCERNED TO ACHIEVE EXCLUSIVITY IN CONNECTION WITH THE FOOD RETAIL MARKET; CORRECT?
STEVEN BURD: YES.
MR. DOWNEY: AND DO YOU RECALL THAT YOU WERE SUCCESSFUL IN THAT REGARD AND THAT YOU DID OBTAIN A COMMITMENT FROM THERANOS THAT YOU COULD BE THE -- THAT SAFEWAY COULD BE THE EXCLUSIVE FOOD RETAILER TO LAUNCH FOR A PERIOD?
STEVEN BURD: YES.
MR. DOWNEY: AND IF YOU LOOK AT PARAGRAPH 5 ON PAGE 11, DOES THAT REFLECT THAT PROVISION?
STEVEN BURD: I THINK THAT 5 JUST REFERS TO HOW MUCH OF THE INSURANCE MARKET SHE HAS TO HAVE PRICING ARRANGEMENT WITH BEFORE THE PROGRAM WOULD LAUNCH.
MR. DOWNEY: I'M SORRY. I MAY HAVE DIRECTED YOU TO THE WRONG PLACE. I'M LOOKING AT PAGE 11, B 5. I THINK THAT'S EXCERPTED ON YOUR SCREEN IF THAT'S HELPFUL AS WELL. MY QUESTION WAS, THIS PROVISION PROVIDED THAT SAFEWAY WOULD HAVE THE EXCLUSIVE RIGHT TO DEPLOY THERANOS IN THE FOOD RETAIL CHANNEL; CORRECT?
STEVEN BURD: LET ME JUST FINISH THIS.
(PAUSE IN PROCEEDINGS.)
STEVEN BURD: CORRECT.
BY MR. DOWNEY:
MR. DOWNEY: NOW, THERE WERE OTHER FOOD RETAILERS AT THAT TIME WHO WERE LARGER FOOD RETAILERS; CORRECT?
STEVEN BURD: WAL-MART WAS LARGER, KROGER WAS LARGER.
MR. DOWNEY: SAFEWAY ABOUT A THIRD?
STEVEN BURD: A THIRD.
MR. DOWNEY: AND ALSO UNDER THE AGREEMENT, DID -- SO THEY WOULD BE PRECLUDED UNDER THE AGREEMENT FROM LAUNCHING THERANOS SYSTEMS?
STEVEN BURD: WE GAVE THE LIST OF ONES WE CONSIDERED TO BE THE PLAYERS, AND IT'S IN THE DOCUMENT SOMEWHERE, BUT WE WOULD NOT HAVE PUT WAL-MART ON THE LIST AND WE WOULD PROBABLY EXCLUDE KROGER. BUT, AGAIN, IT'S IN THE DOCUMENT.
MR. DOWNEY: OKAY. AND WE'VE BEEN TALKING ALSO ABOUT YOUR RIGHT TO TERMINATE, AND I JUST WANT TO GIVE YOU AN ABILITY TO LOOK AT THAT PROVISION AS WELL. THAT'S ON PAGE 19.
STEVEN BURD: YES.
MR. DOWNEY: SECTION 26B.
STEVEN BURD: I HAVE IT.
MR. DOWNEY: OKAY. AND PARAGRAPH 26B PROVIDES "IN THE EVENT THAT SAFEWAY DETERMINES IN ITS SOLE DISCRETION THAT THE PILOT OF THE PROGRAM HAS BEEN UNSUCCESSFUL, SAFEWAY HAS THE RIGHT TO TERMINATE THIS AGREEMENT WITHOUT CAUSE ON THIRTY (30) CALENDAR DAYS' PRIOR WRITTEN NOTICE TO THERANOS. UPON ANY SUCH TERMINATION, THERANOS SHALL PROMPTLY RETURN ALL PREPAYMENT AMOUNTS ATTRIBUTABLE TO UNDELIVERED INVENTORY UNDER SECTION 10 ABOVE." DO YOU SEE THAT?
STEVEN BURD: YES.
MR. DOWNEY: AND THE REFERENCE TO INVENTORY REFERS TO THE FACT THAT PAYMENTS UNDER THE CONTRACT WERE BEING MADE AS PAYMENTS TO PREPAY FOR CARTRIDGES THAT WERE PART OF THE THERANOS SYSTEMS?
STEVEN BURD: CORRECT.
MR. DOWNEY: OKAY. SO ANY PAYMENTS MADE FOR THAT, THERANOS WOULD HAVE AN OBLIGATION TO PREPAY; CORRECT?
STEVEN BURD: CORRECT.
MR. DOWNEY: AND IT WAS ALSO THE CASE UNDER PARAGRAPH 2 THAT IF THE FDA TOOK ADVERSE ACTION AGAINST THERANOS, THAT SAFEWAY WOULD HAVE THE RIGHT TO TERMINATE THE AGREEMENT; CORRECT?
STEVEN BURD: CORRECT.
MR. DOWNEY: WAS THAT A RISK THAT YOU BECAME AWARE OF DURING YOUR EVALUATION OF THE DEAL?
STEVEN BURD: MY UNDERSTANDING AT THE TIME WAS THAT CLIA APPROVAL WAS SUFFICIENT AND THEY DIDN'T NECESSARILY NEED FDA APPROVAL. ELIZABETH POSITIONED THAT AS MORE OF A BULLETPROOF TYPE OF APPROVAL.
MR. DOWNEY: BUT THE AGREEMENT CONTEMPLATED THE POSSIBILITY THAT THE FDA MIGHT TAKE THE OPPOSITE POSITION; CORRECT?
STEVEN BURD: SURE.
MR. DOWNEY: AND THE RIGHTS AS TO WHO WOULD HAVE THE ABILITY TO TERMINATE THE AGREEMENT DID NOT LIE WITH THERANOS, DID THEY? THEY LAID WITH SAFEWAY; CORRECT?
STEVEN BURD: YES.
MR. DOWNEY: AND INDEED, AS WE TALKED ABOUT THIS MORNING, THERANOS WAS A RELATIVELY YOUNG COMPANY; CORRECT?
STEVEN BURD: CORRECT.
MR. DOWNEY: AND I ASSUME YOU HAD SOME UNCERTAINTY AS TO WHETHER THEY WOULD HAVE THE ABILITY TO REPAY IF SAFEWAY UNDERTOOK TO TERMINATE THE CONTRACT; CORRECT?
STEVEN BURD: WE INITIALLY GOT A LETTER OF CREDIT SUPPORTING THE MONEY WE PUT UP AND THAT GAVE US SOME COMFORT.
MR. DOWNEY: SO IF THERE WAS A TERMINATION OF THE AGREEMENT THAT THERANOS ITSELF WAS UNABLE TO PAY, SAFEWAY WOULD STILL BE REPAID UNDER THAT LETTER OF CREDIT; CORRECT?
STEVEN BURD: RIGHT.
MR. DOWNEY: AND IN CONNECTION WITH THE EXECUTION OF THE SAFEWAY AGREEMENT, SAFEWAY MADE A COMMITMENT TO BUY ABOUT $10 MILLION WORTH OF CARTRIDGES; IS THAT RIGHT?
STEVEN BURD: I DON'T SEE 10 MILLION CARTRIDGES. I SEE $10 MILLION. BUT MAYBE YOU CAN REFER ME TO A SECTION.
MR. DOWNEY: YES. IT'S PARAGRAPH 10.
STEVEN BURD: PARAGRAPH 10.
MR. DOWNEY: AND IT'S LABELLED AS INVENTORY PRE-PURCHASES. PAGE 12.
STEVEN BURD: PAGE 12.
MR. DOWNEY: AND IT'S REFERRING TO INITIAL PRE-PURCHASE?
STEVEN BURD: AND THIS WAS SIGNED 11 YEARS AGO.
MR. DOWNEY: I UNDERSTAND.
STEVEN BURD: A. OKAY. SO IT WAS $10 MILLION FOR APPROXIMATELY 715,000 UNITS.
MR. DOWNEY: OKAY. AND THAT WAS THE PAYMENT THAT WAS MADE IN CONNECTION WITH THE AGREEMENT WHEN YOU SIGNED IT; CORRECT?
STEVEN BURD: CORRECT.
MR. DOWNEY: AND THE PROTECTIONS THAT SAFEWAY HAD WERE IF THE AGREEMENT DIDN'T WORK OUT, IT COULD TERMINATE IT; CORRECT?
STEVEN BURD: CORRECT.
MR. DOWNEY: AND THERE WAS SOME SECURITY, THERANOS AGREED TO REPAY THAT; CORRECT?
STEVEN BURD: RIGHT.
MR. DOWNEY: AND IF THERANOS DID NOT REPAY IT, THERE WAS FINANCING THAT ENSURED THE PAYMENT WOULD BE MADE TO SAFEWAY?
STEVEN BURD: CORRECT.
MR. DOWNEY: AND IN EXCHANGE FOR THAT DEAL, SAFEWAY GOT THE EXCLUSIVITY THAT YOU TALKED ABOUT AT THE OUTSET; CORRECT?
STEVEN BURD: YES.
MR. DOWNEY: AND IF THE DEAL WERE TO WORK OUT, THE VARIOUS PROFIT ADVANTAGES THAT SAFEWAY MIGHT ACHIEVE WOULD FLOW TO IT DURING THAT EXCLUSIVITY PERIOD; CORRECT?
STEVEN BURD: CORRECT.
MR. DOWNEY: AND THIS BEING DRAFTED BY LAWYERS, IT CONTAINED A CLAUSE REFERRED TO AS AN INTEGRATION CLAUSE. IS THAT A TERM THAT YOU'RE FAMILIAR WITH?
STEVEN BURD: NOT REFERRING TO IT AS A CLAUSE. INTEGRATION CLAUSE IS AT THE INTEGRATION OF THE SOFTWARE.
MR. DOWNEY: WELL, LET ME ASK YOU TO LOOK AT PARAGRAPH 22 OF THE AGREEMENT. I'M SORRY, PAGE 22 OF THE AGREEMENT.
STEVEN BURD: OKAY.
MR. DOWNEY: IT'S JUST PARAGRAPH I. IT'S THE ONLY PARAGRAPH ON THAT PAGE. AND IT SPECIFIES THAT EACH PARTY AGREES THAT THIS AGREEMENT, INCLUDING ITS SCHEDULES, EMBODIES THE ENTIRE UNDERSTANDING BETWEEN THE PARTIES AND SUPERSEDES AND REPLACES ANY AND ALL PRIOR UNDERSTANDINGS, ARRANGEMENTS, AND AGREEMENTS, WHETHER ORAL OR IN WRITING RELATING TO IT. YOU'VE SEEN PARAGRAPHS LIKE THAT BEFORE?
STEVEN BURD: I DON'T RECALL SEEING IT, AND SO I'M REALLY NOT FAMILIAR WITH THE INTEGRATION CLAUSE. I LIKE THE LANGUAGE OF THIS AGREEMENT, YOU KNOW, BUT IT'S NOT A TERM THAT I HAVE USED BEFORE.
MR. DOWNEY: OKAY. BUT FOR WHATEVER REASON, IT'S INCLUDED IN THE AGREEMENT?
STEVEN BURD: SURE.
MR. DOWNEY: OKAY. NOW, LET ME RETURN FOR JUST ONE MOMENT TO THE SUBJECT OF THE REGULATORY RISKS AND THE PATH THAT WENT FORWARD FROM THE SIGNING OF THE AGREEMENT UNTIL THE TIME PERIOD THAT YOU TALKED ABOUT IN EARLY 2013. FIRST OF ALL, LET ME SAY, YOU REPEATEDLY REFERRED TO TALKING ABOUT A LAUNCH AT A SPECIFIED TIME, BUT THERE WERE NO PARTICULAR DEADLINES IN THIS AGREEMENT, WERE THERE?
STEVEN BURD: NO. THERE WAS -- I THINK WE MAY HAVE LISTED AN EXPECTATION. BUT, YOU KNOW, WE KNEW WE WERE DEALING WITH TECHNOLOGY AND IT'S SOMETIMES DIFFICULT TO NAIL THAT DOWN. IF WE WERE GOING TO OPEN A GROCERY STORE, WE WOULD GIVE YOU A SPECIFIC DAY.
MR. DOWNEY: BECAUSE THAT'S SOMETHING THAT YOU'VE BEEN DOING FOR A LONG TIME?
STEVEN BURD: CORRECT.
MR. DOWNEY: OKAY. AND YOU UNDERSTOOD THAT THE DELAYS THAT OCCURRED IN THE PARTIES' ABILITY TO LAUNCH WERE DELAYS IN THE DEVELOPMENT OF THE TECHNOLOGY AT THE TIME?
STEVEN BURD: I DID NOT.
MR. DOWNEY: WELL, I THOUGHT I ASKED YOU WHY YOU DIDN'T INCLUDE DEADLINES IN THE AGREEMENT AND YOU SAID IT WAS BECAUSE OF THE TECHNOLOGY.
STEVEN BURD: JUST THE IDEA OF GETTING EVERY INSURANCE COMPANY IN THE COUNTRY TO BUY INTO YOUR PRICE SCHEDULE, THAT'S A BIG EXERCISE IN ITS OWN, AND THEN WRITE SOFTWARE TO INTEGRATE IT WITH SAFEWAY, THAT'S A BIG EXERCISE, LAUNCHING, MARKETING, ALL OF THAT STUFF. I WAS NEVER TOLD THERE WAS A TECHNOLOGY PROBLEM WITH THE BOX ITSELF.
MR. DOWNEY: BUT YOU UNDERSTOOD THAT THE TECHNOLOGY HAD NOT BEEN SCALED TO A LARGE DEGREE?
STEVEN BURD: WHEN I THINK OF SCALE, I THINK OF THE ABILITY TO PRODUCE, YOU KNOW, SAY A THOUSAND OF THESE BOXES PER DAY AND A PRODUCTION PLAN, YOU KNOW, MAYBE HUNDREDS OF THOUSANDS OF CARTRIDGES. THEY DID BUY A PLANT IN FREMONT, AND I ASSUMED IT WAS FOR THAT PURPOSE.
MR. DOWNEY: AND YOU TOURED AT SOME POINT THE MANUFACTURING FACILITY?
STEVEN BURD: I DID NOT TOUR. I DID NOT GET TO SEE THE FREMONT FACILITY.
MR. DOWNEY: BUT YOU TOURED THE RESEARCH LAB?
STEVEN BURD: I TOURED PART OF THE RESEARCH LAB AND THE OFFICE OF THE COMPANY.
MR. DOWNEY: OKAY. BUT TO RETURN TO THE AGREEMENT, IT DIDN'T SAY WE HAVE TO LAUNCH BY A PARTICULAR DAY, DID IT?
STEVEN BURD: IT DIDN'T SAY THAT, BUT THE AGREEMENT SPELLED OUT THAT THEY CAN DO ALMOST ALL, YOU KNOW, ASSAYS.
MR. DOWNEY: AND THERE WAS NO DEADLINE IN CONNECTION WITH THE AGREEMENT IS MY QUESTION TO YOU.
STEVEN BURD: NO DEADLINE BECAUSE ALL OF THE OTHER PUZZLE PIECES NEEDED TO GET DONE.
MR. DOWNEY: OKAY. AND YOU, YOU -- SO THE PARTIES HAD AN EXPECTATION THAT THERE MIGHT BE A LAUNCH AS EARLY AS 2011; CORRECT?
STEVEN BURD: I THINK THAT WAS SUPPOSED TO BE THE PILOT.
MR. DOWNEY: OKAY. BUT DO YOU KNOW WHEN -- DO YOU RECALL WHEN THE REGULATORY APPROVAL FROM CLIA WAS OBTAINED?
STEVEN BURD: I JUST RECALL WHERE I WAS WHEN I GOT THE CELL CALL.
MR. DOWNEY: BUT YOU DON'T RECALL THE DATE IN 2011?
STEVEN BURD: NO.
MR. DOWNEY: AND YOU DON'T RECALL THAT THE DATE WAS WELL AFTER THE DATE THAT YOU HAD PROJECTED THE PILOT PERIOD TO BEGIN?
STEVEN BURD: IT WAS AFTER, AND I THINK IT'S JUST ONE OF THE UNCERTAINTIES.
MR. DOWNEY: OKAY. AND ALSO DO YOU KNOW WHEN THE NEGOTIATIONS WITH THE INSURERS WERE CONCLUDED?
STEVEN BURD: I DON'T KNOW WHEN THEY WERE CONCLUDED. I REMEMBER GETTING A PROGRESS REPORT ALONG THE WAY, BUT I DON'T RECALL A MOMENT WHERE SOMEONE SAID, WE'RE DONE.
MR. DOWNEY: OKAY. NOW, WE SAW IN THE AGREEMENT THAT WALGREENS ALSO HAD OBTAINED EXCLUSIVITY RIGHTS IN A DIFFERENT CHANNEL FROM THE CHANNEL THAT SAFEWAY HAD OBTAINED; CORRECT?
STEVEN BURD: WELL, THE ONLY COMPANY THEY TALKED ABOUT WAS WALGREENS AND, YOU KNOW, THEY'RE SMART ENOUGH TO ASK FOR AN EXCLUSIVE IN THEIR CHANNEL.
MR. DOWNEY: AND YOU UNDERSTOOD THAT WALGREENS AND SAFEWAY WERE BOTH WORKING WITH THERANOS AT THE SAME TIME?
STEVEN BURD: I DID.
MR. DOWNEY: AND I THINK WE TALKED ABOUT A MOMENT AGO YOU UNDERSTOOD THAT THE LAUNCHES OF, OF THERANOS WOULD BE ANNOUNCED IN CONNECTION WITH BOTH STORES AT THE SAME TIME; CORRECT?
STEVEN BURD: THAT WAS THE AGREEMENT.
MR. DOWNEY: NOW, DID THERE COME A TIME IN EARLY 2012 WHERE YOU LEARNED FROM MS. HOLMES THAT WALGREENS WAS UNWILLING TO LAUNCH UNDER THE MODEL WHERE DEVICES WOULD BE PLACED IN STORES? IS THAT SOMETHING THAT YOU LEARNED FROM HER?
STEVEN BURD: I DIDN'T LEARN IT IN CONNECTION WITH WAL-MART. I LEARNED IT IN CONNECTION WITH CONVERSATIONS THAT I HAD WITH ELIZABETH WHERE THEY WERE NOW SUGGESTING THAT THE PROCESSING ITSELF WOULDN'T TAKE PLACE IN THE STORE. WE TALKED ABOUT A COURIER NETWORK. I OFFERED TO GIVE HER SOME HELP ON HOW TO BUILD THAT. BUT IT WAS DESCRIBED AS AN EFFICIENT WAY TO START AND, YOU KNOW, UPON REFLECTION, IT WASN'T WHERE WE STARTED, BUT THEY THOUGHT THAT THAT WAS WHAT THE CURRENT SITUATION CALLED FOR.
MR. DOWNEY: BUT DID YOU HAVE ANY VISIBILITY ON WHAT THE POSITION OF WALGREENS WAS WITH RESPECT TO THAT?
STEVEN BURD: NO.
MR. DOWNEY: BUT YOU DID LEARN THAT THERANOS SAID TO INITIATE THE PROGRAM WE ARE ACTUALLY GOING TO DEVELOP A LABORATORY AT OUR MAIN HEADQUARTERS; RIGHT?
STEVEN BURD: THEY WOULD BE DOING THE PROCESSING THERE, CORRECT.
MR. DOWNEY: OKAY. AND YOU REFERENCED A COURIER SERVICE. BLOOD SAMPLES WOULDN'T BE PROCESSED IN THE STORE, THEY WOULD COME BACK TO THAT CENTRAL FACILITY; CORRECT?
STEVEN BURD: THAT'S CORRECT.
MR. DOWNEY: AND OF COURSE WHEN THAT WAS DONE, PRESUMABLY THERE HAD TO BE CHANGES TO THE SOFTWARE AND OTHER CHANGES THAT WOULD ACCOMMODATE THAT TYPE OF AN ALTERATION IN THE AGREEMENT?
STEVEN BURD: WELL, THERE WAS NEVER AN ALTERATION IN THE AGREEMENT. BUT, YOU KNOW, YOU POINTED OUT THE INTEGRATION PARAGRAPH. IT SAYS WE HAVE TO PUT IT IN WRITING IF IT'S GOING TO BE TRUE.
MR. DOWNEY: YOU'RE SAYING THERE'S NO AMENDMENT TO THE --
STEVEN BURD: CORRECT.
MR. DOWNEY: ALL RIGHT. BUT SAFEWAY HAD ITS TERMINATION RIGHTS THE ENTIRE TIME?
STEVEN BURD: CORRECT.
MR. DOWNEY: AND IN RESPONSE TO ANY OF THIS INFORMATION COULD HAVE TERMINATED THE AGREEMENT; CORRECT?
STEVEN BURD: CORRECT.
MR. DOWNEY: I WANT TO SHOW YOU AN EMAIL FROM 2012 IF I MIGHT. IT'S EXHIBIT 10537.
STEVEN BURD: IN THE WHITE BOOK OR THE BLACK?
MR. DOWNEY: NO, IT SHOULD BE IN THE BLACK.
STEVEN BURD: 10357?
MR. DOWNEY: I BEG YOUR PARDON, 10537. AND THIS WILL BE ON YOUR SCREEN AS WELL AS IN THE BOOK.
COURT CLERK: I DON'T BELIEVE THIS HAS BEEN ADMITTED INTO EVIDENCE.
MR. DOWNEY: I BEG YOUR PARDON.
MR. DOWNEY: LET ME ASK YOU IF THIS IS -- JUST TO LOOK INITIALLY AT THE GENERAL NATURE OF THE EMAIL AND ASK YOU IF THIS IS AN EMAIL EXCHANGE BETWEEN YOU AND MS. HOLMES IN 2012.
STEVEN BURD: IT SURE LOOKS THAT WAY.
MR. DOWNEY: AND THIS RELATES TO THE SAFEWAY-THERANOS RELATIONSHIP; CORRECT?
STEVEN BURD: YES.
MR. DOWNEY: YOUR HONOR, I MOVE THE ADMISSION OF 10537.
MR. LEACH: NO OBJECTION, YOUR HONOR.
JUDGE DAVILA: IT'S ADMITTED. IT MAY BE PUBLISHED.
(DEFENDANT'S EXHIBIT 10537 WAS RECEIVED IN EVIDENCE.)
BY MR. DOWNEY:
MR. DOWNEY: ON THE BOTTOM OF THE EMAIL YOU'LL SEE THAT THERE IS AN EMAIL FROM YOU TO MS. HOLMES IN JANUARY 2012. DO YOU SEE THAT?
STEVEN BURD: YES.
MR. DOWNEY: AND YOU INDICATE IN THE FIRST SENTENCE, "WHILE I AM COMMITTED TO GETTING THE GROCERY NETWORK UNDER CONTRACT WITHIN TWO AND A ONE HALF MONTHS OF SAFEWAY'S LAUNCH, I AM VERY CONCERNED ABOUT ALLOWING NETWORK PARTNERS OR ANYONE ELSE TO LAUNCH WITH A MERE FINGER STICK." DO YOU SEE THAT?
STEVEN BURD: I DO.
MR. DOWNEY: AND IN YOUR COMMENTS ABOUT A GROCERY NETWORK THERE, YOU'RE REFERRING TO GETTING PARTNERS WHO YOU HAD MADE PART OF A GROCERY NETWORK, YOU WERE TALKING ABOUT THE TIMING OF THEIR LAUNCH; CORRECT?
STEVEN BURD: CORRECT.
MR. DOWNEY: BUT YOU EXPRESSED THAT YOU WERE VERY CONCERNED ABOUT EITHER THE PARTNERS OR ANYONE ELSE LAUNCHING WITH WHAT YOU TERMED "A MERE FINGER STICK;" CORRECT?
STEVEN BURD: CORRECT.
MR. DOWNEY: AND "A MERE FINGER STICK" REFERS TO A MODEL UNDER WHICH THE BLOOD WAS COLLECTED AT A RETAIL STORE AND THEN THE BLOOD WAS SENT BACK TO THERANOS FOR ANALYSIS IN THEIR CENTRAL LAB; CORRECT?
STEVEN BURD: CORRECT.
MR. DOWNEY: AND THAT'S THE PROCESS THAT WE WERE TALKING ABOUT A MOMENT AGO; CORRECT?
STEVEN BURD: CORRECT.
MR. DOWNEY: AND YOU SUGGESTED THAT MODEL WOULD SEVERELY COMPROMISE AND PERMANENTLY DAMAGE THE BRAND WE ARE TRYING TO CREATE; CORRECT?
STEVEN BURD: IT CERTAINLY WASN'T THE ORIGINAL BRAND THAT WE TALKED ABOUT.
MR. DOWNEY: RIGHT. THE ORIGINAL PLAN WAS THAT YOU WOULD PLACE THE ANALYZERS IN THE STORE; CORRECT?
STEVEN BURD: CORRECT.
MR. DOWNEY: BUT MS. HOLMES HAD PROVIDED INFORMATION TO YOU IN JANUARY OF 2012 THAT SAID THERANOS WAS NO LONGER IN A POSITION TO DO THAT; CORRECT?
STEVEN BURD: THAT'S WHY WE -- THAT'S CORRECT. THAT'S WHY SHE OFFERED THE COURIER NETWORK, BUT I EXPECTED -- I ANTICIPATED THAT WOULD BE SHORT TERM.
MR. DOWNEY: AND YOU, YOU HAD A VARIETY OF CONCERNS THAT YOU EXPRESSED TO HER IN JANUARY OF 2012 ABOUT THAT MODEL; CORRECT?
STEVEN BURD: CORRECT.
MR. DOWNEY: AND FIRST AMONG THEM WAS THAT THE EXPERIENCE THAT PEOPLE MIGHT HAVE BETWEEN LOCATIONS MIGHT BE VERY INCONSISTENT; CORRECT?
STEVEN BURD: NO. THAT, PLUS THE ORIGINAL PROMISE HAS GONE AWAY.
MR. DOWNEY: WELL, AND, IN FACT, YOU SAY IN NUMBER 2 THAT YOU WOULD NOT BE ABLE TO HAVE A SCIENTIFIC STANDARD WHERE BLOOD WOULD BE BEING ANALYZED AS FRESH BLOOD; CORRECT?
STEVEN BURD: CORRECT.
MR. DOWNEY: AND THAT WAS A CONCERN THAT YOU HAD. AND YOU LAY OUT A VARIETY OF OTHER CONCERNS IN THIS JANUARY 2012 AGREEMENT; CORRECT?
STEVEN BURD: CORRECT.
MR. DOWNEY: BUT MS. HOLMES TOLD YOU AT THIS POINT THAT THIS WAS THE MODEL THAT THERANOS WAS GOING TO PURSUE WITH WALGREENS; CORRECT?
STEVEN BURD: I DON'T RECALL IF SHE SAID WALGREENS, BUT SHE SAID WE'VE DECIDED AT THERANOS THAT THIS IS THE BEST WAY FOR US TO START THIS COMPANY.
MR. DOWNEY: DID YOU UNDERSTAND THAT THAT WAS MOTIVATED BY SAFEWAY -- BY WALGREENS' POSITION AS TO THE LEGAL REQUIREMENTS BEING IMPOSED BY FDA?
STEVEN BURD: I DID NOT.
MR. DOWNEY: ALL RIGHT. YOU MENTIONED THAT AT SOME LATER POINT THERE WAS AN AGREEMENT, AND I DON'T MEAN THE AGREEMENT WAS AMENDED, BUT THERE WAS AN INFORMAL AGREEMENT BETWEEN YOU AND MS. HOLMES THAT THERE WOULD BE A TYPE OF PILOT RUN IN THE ON CAMPUS FACILITY AT SAFEWAY; CORRECT?
STEVEN BURD: I'M NOT SURE WE USED THE WORD "PILOT," BUT THAT WE WOULD PUT ONE OF THEIR ANALYZERS ON PROPERTY AND WE WOULD SUBMIT TO DOING SOME VOLUME AND WE COULD TEST OUT VIRTUALLY EVERY ASPECT OF THE OFFERING.
MR. DOWNEY: AND YOU TESTIFIED ON DIRECT EXAMINATION ABOUT A NUMBER OF EMAILS THAT YOU EXCHANGED WITH MS. HOLMES ABOUT YOUR CRITICISMS OF HOW THAT WAS RUNNING; CORRECT?
STEVEN BURD: CORRECT.
MR. DOWNEY: BUT YOU KNEW AT THE OUTSET OF THAT PROGRAM THAT THAT PROGRAM WOULD RUN UNDER THIS MODEL WHERE BLOOD WOULD BE TAKEN FROM A SAFEWAY LOCATION BACK TO THERANOS; CORRECT? IS THAT RIGHT OR NOT?
STEVEN BURD: NO.
MR. DOWNEY: YOU THOUGHT THE TESTING WOULD TAKE PLACE IN THE STORES?
STEVEN BURD: I CAN EXPLAIN.
MR. DOWNEY: LET ME ASK YOU, DID YOU KNOW THAT THE BLOOD WOULD BE TAKEN FROM THE STORES TO A CENTRAL LAB AT THERANOS FOR ANALYSIS? DID YOU KNOW THAT?
STEVEN BURD: WHAT TIMEFRAME?
MR. DOWNEY: WHEN THE CAMPUS PROJECT WAS BEING DISCUSSED BETWEEN YOU AND MS. HOLMES.
STEVEN BURD: WHEN THE CAMPUS PROJECT WAS BEING DISCUSSED, WE WERE GOING TO GET A BOX. NOW, THE BOX NEVER ARRIVED AND WE STARTED WITH A CONCEPT SIMILAR TO WHAT YOU DESCRIBED, BUT THE BLOOD WOULD BE DRAWN AND THEN IT WOULD GO TO THERANOS.
MR. DOWNEY: OKAY. AND YOU KNEW THAT'S HOW THE STORE WAS OPERATING; CORRECT?
STEVEN BURD: HOW WHAT STORE?
MR. DOWNEY: HOW THE STORE WAS OPERATING AND THE CAMPUS?
STEVEN BURD: THE CAMPUS. I KNEW ALMOST EVERYTHING ABOUT HOW IT WAS OPERATING.
MR. DOWNEY: WE LOOKED IN THE AGREEMENT ABOUT THE OBLIGATION THAT SAFEWAY HAD TO ASSIST THERANOS WITH MARKETING. DO YOU RECALL THAT?
STEVEN BURD: I'M SURE THERE'S SOME OFFERING TO HELP THEM.
MR. DOWNEY: AND THAT'S AN AREA OF ISSUE. YOU JUST RECALL HAVING DISCUSSIONS ABOUT MARKETING WITH MS. HOLMES; CORRECT?
STEVEN BURD: CORRECT.
MR. DOWNEY: AND THAT WAS A CONVERSATION THAT YOU HAD WITH HER OVER A LONG PERIOD OF TIME; CORRECT?
STEVEN BURD: YES.
MR. DOWNEY: I'M GOING TO SHOW YOU AN EMAIL FROM JULY OF 2011, WHICH IS EXHIBIT 7196, AND MY QUESTION WOULD SIMPLY BE AT THE OUTSET IF THIS IS AN EMAIL BETWEEN YOU AND MS. HOLMES IN THAT TIME PERIOD?
STEVEN BURD: YES.
MR. DOWNEY: AND IF YOU LOOK AT YOUR EMAIL, WE CAN -- MAY WE DISPLAY THAT, YOUR HONOR?
COURT CLERK: IT'S NOT BEEN ADMITTED, COUNSEL.
MR. DOWNEY: I'M SORRY. I MOVE FOR ITS ADMISSION.
MR. LEACH: NO OBJECTION.
JUDGE DAVILA: IT'S ADMITTED. IT MAY BE PUBLISHED.
(DEFENDANT'S EXHIBIT 7196 WAS RECEIVED IN EVIDENCE.)
BY MR. DOWNEY:
MR. DOWNEY: I WANT TO FOCUS ON YOUR EMAIL AT THE BOTTOM, THE EMAIL THAT YOU SENT AT 9:13 P.M. YOUR ADDRESS IS AT THE BOTTOM, BUT I THINK THE EMAIL ITSELF IS CONTAINED AT THE TOP OF THE NEXT PAGE. DO YOU SEE THAT?
STEVEN BURD: THE DISCUSSION ABOUT PRE-LAUNCH?
MR. DOWNEY: RIGHT.
(PAUSE IN PROCEEDINGS.)
BY MR. DOWNEY:
MR. DOWNEY: AND YOU WERE PUSHING MS. HOLMES IN THIS EMAIL TO FOCUS ON BRANDING AND MARKETING; CORRECT?
STEVEN BURD: CORRECT.
MR. DOWNEY: AND THE GIST OF THIS EMAIL WAS THAT YOU WERE SAYING THAT THERE'S A LOT OF WORK TO GET DONE TO DO MARKETING AND YOU HADN'T GOTTEN IT DONE; CORRECT?
STEVEN BURD: CORRECT.
MR. DOWNEY: OKAY. LET'S LOOK AT HER EMAIL --
STEVEN BURD: LET ME RESTATE. THERE'S A LOT OF MARKETING WORK TO BE DONE. WE WERE NOT SAYING IT WAS OUR RESPONSIBILITY AND WE DID NOT GET IT DONE. SO YOU USED THE TERM -- I THOUGHT YOU IMPLIED THAT SAFEWAY FAILED IN ITS MISSION TO IMPROVE THE MARKETING.
MR. DOWNEY: NO, NO. SAFEWAY WAS ONLY TO ASSIST THERANOS; CORRECT?
STEVEN BURD: CORRECT.
MR. DOWNEY: BUT YOU WERE SAYING TO MS. HOLMES THAT YOU, THERANOS, HAD NOT GOTTEN DONE ALL OF THE WORK YOU NEEDED TO GET DONE TO MARKET THE COMPANY; CORRECT?
STEVEN BURD: TO MARKET THE PRODUCT.
MR. DOWNEY: OKAY. AND SHE RESPONDED TO THAT EMAIL IT LOOKS LIKE A LITTLE BIT LATER, AND THAT'S IN THE MIDDLE OF THE PAGE, AND THAT'S BLOWN UP ON THE SCREEN. AND SHE SAYS YOU HAD SAID IN YOUR EMAIL THERE'S A LOT OF MOUNTAINS TO MOVE. SHE SAID, I APPRECIATE YOUR COMMENTS ON MOVING MOUNTAINS. AS YOU KNOW, WE ARE WORKING 24 HOURS A DAY, 7 DAYS A WEEK ON OUR END AS WELL TOWARD OUR COMMON GOALS. AND HER SECOND PARAGRAPH SAID, "THE MOST IMPORTANT THING FOR THERANOS TO SPEND TIME ON RIGHT NOW IS SCALING UP OUR INFRASTRUCTURE TO ESTABLISH OUR FOOTPRINT AND GO LIVE NATIONWIDE. OUR PRIORITY AND OBLIGATION THROUGH LAUNCH IS THE PRODUCT, OPERATIONS, SOFTWARE, PAYOR, PROVIDER IN PRACTICE STRUCTURES, AND THE THOUSANDS OF ASSOCIATED DETAILS FUNDAMENTAL TO BUILDING THIS COMPANY. THAT'S NOT TO SAY THAT OUR MARKETING PLAN IS ANY LESS IMPORTANT THAN ANY OF THESE, BUT WITH THE LIMITED RESOURCES OF A GROWING COMPANY, WE CANNOT DO BOTH AT THE SAME TIME UNTIL WE FREE UP RESOURCES TO GIVE THIS THE TIME AND ATTENTION THAT IT IS DUE." DO YOU SEE THAT --
STEVEN BURD: I DO.
MR. DOWNEY: -- IN HER EMAIL? AND THEN SHE TALKED ABOUT GETTING TOGETHER TO TALK ABOUT IT AND THE COSTS ASSOCIATED WITH IT AND GIVES SOME MORE DETAILS AS TO WHEN YOU MIGHT HAVE A MEETING. DO YOU SEE THAT?
STEVEN BURD: YES.
MR. DOWNEY: OKAY. AND YOU RESPONDED TO THIS EMAIL. YOU SAID "I COMPLETELY UNDERSTAND THE PRIORITIES." AND THEN YOU WENT ON IN SEVERAL SENTENCES AND SAID YOU COULD HELP WITH MARKETING IN ESSENCE?
STEVEN BURD: CORRECT.
MR. DOWNEY: ALL RIGHT. YOU CAN TAKE THAT DOWN. NOW, AS WE TALKED ABOUT IN CONNECTION WITH THE AGREEMENT, THE AGREEMENT ITSELF CONTEMPLATED THAT THERE WOULD BE A PRE-PILOT, A PILOT, AND THEN A LAUNCH; CORRECT?
STEVEN BURD: CORRECT.
MR. DOWNEY: BUT AT SOME POINT DURING THE PERIOD AFTER THE AGREEMENT WAS SIGNED, YOU CAME UP WITH AN IDEA TO ALTER HOW THE LAUNCH WOULD BE DONE, DIDN'T YOU?
STEVEN BURD: WE HAD DISCUSSIONS, BUT YOU HAVE TO GIVE ME MORE THAN THAT.
MR. DOWNEY: WELL, DO YOU RECALL DEVELOPING A STRATEGY THAT YOU REFERRED TO AS SHOCK AND AWE?
STEVEN BURD: THAT WAS ACTUALLY -- WE STILL WANTED THE PILOT, AND THAT DIDN'T SAY YOU WOULDN'T DO A PILOT. REMEMBER WE TALKED ABOUT DOING A PILOT IN A REMOTE AREA. VERY EARLY ON WE TALKED ABOUT KIND OF A SHOCK AND AWE. THAT'S WHY WE PREPARED OVER 900 FACILITIES TO HAVE THIS SPACE AVAILABLE FOR THERANOS.
MR. DOWNEY: AND YOU UNDERSTOOD THAT TO CHANGE THE TERMS OF THE AGREEMENT TO HAVE THOUSANDS OF STORES -- HOW MANY STORES WOULD LAUNCH IN A SHOCK AND AWE STRATEGY?
STEVEN BURD: IT COULD BE AS FEW AS A SINGLE DIVISION OR IT COULD BE 22 STATES.
MR. DOWNEY: AND HOW MANY WOULD BE IN 22 STATES?
STEVEN BURD: A LITTLE OVER 900.
MR. DOWNEY: AND THAT WAS NEVER DONE, WAS IT?
STEVEN BURD: NEVER.
MR. DOWNEY: AND THE AGREEMENT WAS NEVER AMENDED TO ENCOMPASS THAT?
STEVEN BURD: WELL, I DON'T THINK THE AGREEMENT NECESSARILY CALLED FOR SHOCK AND AWE.
MR. DOWNEY: OKAY. LET'S TALK A LITTLE BIT ABOUT THE TESTIMONY YOU GAVE ON DIRECT, ABOUT THE EXPERIENCE THAT PATIENTS WERE HAVING ON CAMPUS ON SAFEWAY WHEN THEY GOT THEIR BLOOD DRAWN. AND I WANT TO DIRECT YOUR ATTENTION TO EXHIBIT 12283.
STEVEN BURD: ALL RIGHT.
MR. DOWNEY: IS THIS AN EMAIL EXCHANGE THAT YOU HAD WITH MS. HOLMES IN SEPTEMBER OF 2012?
STEVEN BURD: IT APPEARS TO BE.
MR. DOWNEY: AND IS THIS A DISCUSSION OF PERFORMANCE AT THE LAB ON CAMPUS AT SAFEWAY?
STEVEN BURD: YES.
MR. DOWNEY: YOUR HONOR, I WOULD MOVE THE ADMISSION OF 12283.
MR. LEACH: NO OBJECTION, YOUR HONOR. I THINK THIS IS ALSO IN EVIDENCE AS EXHIBIT 670.
MR. DOWNEY: THERE IS AT LEAST PART OF IT AS 670, AND MAYBE ALL OF THIS.
JUDGE DAVILA: IT'S ADMITTED, AND IT MAY BE PUBLISHED.
(DEFENDANT'S EXHIBIT 12283 WAS RECEIVED IN EVIDENCE.)
BY MR. DOWNEY:
MR. DOWNEY: I WANT TO FOCUS ON MS. HOLMES'S RESPONSE TO -- WELL, DO YOU RECALL AT THE BOTTOM OF THIS, IN THE EMAIL THAT YOU SENT TO MS. HOLMES, YOU RAISED A NUMBER OF CONCERNS ABOUT PERFORMANCE; CORRECT?
STEVEN BURD: YES.
MR. DOWNEY: IN HER RESPONSE SHE SAYS, "AS YOU KNOW, WE WERE NOT EAGER TO START THE MANDATE FOR ALL EMPLOYEES FOR THIS REASON." DO YOU SEE THAT IN THE FIRST PARAGRAPH?
STEVEN BURD: I SEE THAT.
MR. DOWNEY: AND SHE GOES ON TO SAY, "AS YOU KNOW, WE DO NOT HAVE ALL TESTS RUN IN OUR LAB ONSITE," REFERRING TO THE THERANOS LAB; CORRECT?
STEVEN BURD: NOT NECESSARILY. IT COULD BE THE ESOTERIC AND THE SELDOM USED, WHICH THEY WOULD USE SOMETHING ELSE.
MR. DOWNEY: THOSE TESTS MIGHT GO OUT TO UCSF OR UTAH?
STEVEN BURD: RIGHT.
MR. DOWNEY: AND THEN SHE GOES ON TO DESCRIBE THE DIFFICULTIES THAT THEY ARE HAVING, AND SHE SAYS THEY GET A LOT OF PHONE CALLS THAT IN ESSENCE ARE ASKING WHEN WILL WE -- WHEN CAN MY PATIENT HAVE HER RESULTS OR HIS RESULTS?
STEVEN BURD: YES.
MR. DOWNEY: AND SHE COMPLAINS THAT PERSONNEL ARE COMMUNICATING TO PATIENTS THAT THE TESTS WILL BE AVAILABLE ON A TIMEFRAME THAT THERANOS CAN'T MAKE THEM AVAILABLE. DO YOU SEE THAT?
STEVEN BURD: I SEE THAT.
MR. DOWNEY: AND SHE GOES ON TO SAY, "THIS PROCESS DOES NOT TRANSLATE TO THE THERANOS TESTING PROCESS AS YOU KNOW." DO YOU SEE THAT?
STEVEN BURD: I SEE THAT.
MR. DOWNEY: AND DID YOU SEE THAT THAT -- DO YOU UNDERSTAND THAT AT THE TIME TO MEAN THAT THIS IS NOT THE PROCESS WHERE THERANOS WOULD HAVE A DEVICE ON SITE IN A STORE OR ANOTHER LOCATION AND RUN THE TESTS THERE?
STEVEN BURD: THAT'S TRUE. BUT THAT'S NOT HOW THIS ON CAMPUS FACILITY STARTED. IT STARTED THAT WE WERE GOING TO GET A BOX, AND THEN THAT, FOR SECRECY REASONS, NO, NOW WE'RE GOING TO DO IT AT THE COMPANY.
MR. DOWNEY: WELL, I MOVE TO STRIKE THAT, YOUR HONOR. I JUST MOVE TO STRIKE EVERYTHING AFTER "THAT'S TRUE."
JUDGE DAVILA: I'LL LEAVE THAT IN. YOU CAN ASK ANOTHER QUESTION.
BY MR. DOWNEY:
MR. DOWNEY: WELL, MY QUESTION IS THAT THE SENTENCE IN THE EMAIL WHERE SHE SAYS A PROCESS THAT WAS CURRENTLY HAPPENING WAS NOT THE THERANOS PROCESS WHERE A DEVICE WOULD BE PLACED ON SITE; CORRECT?
STEVEN BURD: I AGREE WITH THAT.
MR. DOWNEY: AND SHE SAID WE'RE DOING THIS PROCESS TO SERVE SAFEWAY PATIENTS, BUT IT DOES NOT MAKE SENSE FOR US, MEANING THERANOS, TO INVEST IN A FULL SERVICE DINOSAUR LAB. DO YOU SEE THAT?
STEVEN BURD: I SEE IT. THAT WASN'T OUR PURPOSE.
MR. DOWNEY: AND DID YOU UNDERSTAND HER TO BE REFERRING TO THE FACT THAT SOME RESULTS ARE DELAYED BECAUSE THEY ACTUALLY HAVE TO SEND THEM OUT TO ANOTHER LAB?
STEVEN BURD: I DID.
MR. DOWNEY: AND THEN SHE GOES ON TO INDICATE THAT SHE WILL SEND YOU OTHER INFORMATION THAT YOU HAD REQUESTED. BUT YOU CONTINUED TO, I THINK, HAVE SOME CONCERNS, AND WE SAW THAT ON DIRECT, YOU CONTINUED TO RAISE ISSUES WITH THE ON CAMPUS FACILITY; CORRECT?
STEVEN BURD: WELL, I FINALLY -- I THINK WE HAD A PHONE CALL AND I SAID THAT EITHER WE FIX IT OR LET'S GET RID OF IT, AND WE DECIDED ON THAT CALL TO GET RID OF IT.
MR. DOWNEY: BUT IN -- I WANT TO SHOW YOU AN EMAIL, I BELIEVE 715. I BELIEVE THIS IS IN EVIDENCE.
MR. LEACH: WHICH ONE?
MR. DOWNEY: 715.
JUDGE DAVILA: DO YOU SHOW IT IN EVIDENCE?
STEVEN BURD: IS IT IN THE BLACK BINDER?
BY MR. DOWNEY:
MR. DOWNEY: IT SHOULD BE IN THE WHITE BOOK. I'M SORRY.
STEVEN BURD: ALL RIGHT. I HAVE IT.
MR. DOWNEY: AND YOU SEE AT THE BOTTOM OF THAT EMAIL YOU TALK ABOUT SOME OF THE CONCERNS ABOUT PATIENT EXPERIENCE; CORRECT?
STEVEN BURD: CORRECT.
MR. DOWNEY: AND THEN SHE RESPONDS SAYING THAT THERANOS'S FOCUS ON PATIENT EXPERIENCE HAS BEEN IN THE CONTEXT OF OUR ACTUAL PRODUCT; CORRECT?
STEVEN BURD: CAN YOU REPEAT THAT?
MR. DOWNEY: YEAH. SHE RESPONDS TO YOUR COMPLAINTS ABOUT PATIENT EXPERIENCE BY SAYING, "AS DISCUSSED, OUR FOCUS ON PATIENT EXPERIENCE HAS BEEN IN THE CONTEXT OF OUR ACTUAL PRODUCT." DO YOU SEE THAT IN THE FIRST SENTENCE OF HER RESPONSE?
STEVEN BURD: I DO.
MR. DOWNEY: AND SHE GOES ON TO SAY, "WHAT WE HAVE RUNNING AT THE HEALTH CENTER IS NOT THAT." AND THEN SHE GOES ON TO TALK ABOUT AN INDIVIDUAL FROM THERANOS WHO WAS PART OF A CALL AND HE WAS REALLY NOT AN EXPERT IN PATIENT EXPERIENCE. DO YOU SEE THAT?
STEVEN BURD: I DO.
MR. DOWNEY: AND THEN YOU GO ON TO SAY YOU WANT TO COME TO AN AGREEMENT AS TO HOW THE ON CAMPUS FACILITY SHOULD BE RUN; RIGHT?
STEVEN BURD: RIGHT.
MR. DOWNEY: AND WAS IT AS A RESULT OF THIS EXCHANGE THAT YOU AGREED TO SHUT DOWN THE ON CAMPUS FACILITY?
STEVEN BURD: I DON'T KNOW IF IT WAS THIS EXCHANGE, BUT THERE WAS AN EXCHANGE WHERE WE HAD THIS CONVERSATION, AND I SAID IF WE CAN'T GET IT RIGHT, LET'S SHUT IT DOWN, AND SHE AGREED.
MR. DOWNEY: NOW, I THINK YOU TESTIFIED ON DIRECT THAT YOU LEFT SAFEWAY IN MAY OF 2013; IS THAT RIGHT?
STEVEN BURD: CORRECT.
MR. DOWNEY: AND YOU ANNOUNCED THAT YOU WOULD BE LEAVING IN EARLY JANUARY OF 2013; CORRECT?
STEVEN BURD: I CAN'T SAY IT WAS EARLY JANUARY. I ACTUALLY THOUGHT IT WAS SOMETIME IN LATE DECEMBER.
MR. DOWNEY: DECEMBER OF 2012?
STEVEN BURD: CORRECT.
MR. DOWNEY: BUT AT SOME POINT FIVE OR SO MONTHS BEFORE THE ANNUAL MEETING?
STEVEN BURD: CORRECT.
MR. DOWNEY: AND YOU HAD BEEN THE PERSON AT SAFEWAY WHO HAD REALLY CHAMPIONED THE THERANOS PROJECT; CORRECT?
STEVEN BURD: I WAS THE -- I WAS THE WHAT YOU WOULD CALL THE SPONSOR CHAMPION, SURE.
MR. DOWNEY: AND TELL US WHAT THAT MEANS.
STEVEN BURD: WELL, IT MEANS THAT I HOLD MYSELF PERSONALLY RESPONSIBLE FOR GETTING THIS DEAL DONE AND EXECUTED.
MR. DOWNEY: NOW, IN 2012, IS IT FAIR TO SAY THAT THE STOCK PERFORMANCE OF SAFEWAY WAS, WAS LESS SUCCESSFUL THAN IT HAD BEEN IN PRIOR YEARS?
STEVEN BURD: I'D HAVE TO LOOK AT THE -- AND IT'S HARD TO DO TODAY BECAUSE WE'RE NO LONGER A PUBLIC COMPANY, SO I CAN'T CONFIRM THAT.
MR. DOWNEY: WELL, DO YOU RECALL THAT THERE WAS A SIGNIFICANT DROP IN THE SAFEWAY STOCK PRICE IN 2012?
STEVEN BURD: IN 20 YEARS, THAT HAPPENED FREQUENTLY.
MR. DOWNEY: WELL, LET ME SHOW YOU AN EXHIBIT WHERE WE CAN JUST FOCUS ON 2012. IT'S EXHIBIT 10568.
STEVEN BURD: WHITE BOOK?
MR. DOWNEY: BLACK BOOK.
STEVEN BURD: BLACK BOOK. OKAY.
MR. DOWNEY: AND I'LL ALSO GIVE YOU AND ASK YOU TO LOOK AT EXHIBIT 10569 JUST SO YOU CAN HAVE THOSE AVAILABLE FOR -- TO REVIEW BECAUSE THEY'RE RELATED AS I THINK YOU'LL SEE.
STEVEN BURD: SO THE FIRST ONE IS JUST TAKING A DAILY READ ON THE STOCK PRICE.
MR. DOWNEY: WELL, LET ME HAVE A CONVERSATION WITH THE JUDGE BEFORE YOU DESCRIBE IT.
STEVEN BURD: OKAY.
MR. DOWNEY: YOUR HONOR, I MOVE THE ADMISSION OF 10568 AND -69.
MR. LEACH: THERE'S NOT YET A FOUNDATION LAID FOR IT YET, YOUR HONOR. THERE MIGHT BE.
MR. DOWNEY: WELL, I THINK --
JUDGE DAVILA: DO YOU WANT TO LAY A FOUNDATION FOR THIS?
BY MR. DOWNEY:
MR. DOWNEY: DO YOU RECALL THIS AS BLOOMBERG CHARTS TRACKING THE DAILY PERFORMANCE OF SAFEWAY STOCK IN 2000 -- THE PERIOD BETWEEN 2010 AND 2013?
STEVEN BURD: IT SAYS IT'S BLOOMBERG. IT'S NOT THE WAY THAT WE TRACK THE STOCK.
MR. DOWNEY: BUT YOU RECOGNIZE THAT THAT'S WHAT THIS IS?
STEVEN BURD: I RECOGNIZE IT AS A DAILY KIND OF THE OPEN HIGH, LOW, AND CLOSE.
MR. DOWNEY: YOUR HONOR, I MOVE THE ADMISSION OF 10568 AND -69.
JUDGE DAVILA: WELL, DID YOU COMMENT? I DON'T THINK THIS WITNESS HAS COMMENTED ON -69 YET.
STEVEN BURD: I HAVE NOT.
BY MR. DOWNEY:
MR. DOWNEY: WELL, DO YOU RECOGNIZE 10569?
STEVEN BURD: WELL, WHAT IT IS PRESUMABLY DESCRIBING -- I'M NOT DISPUTING THAT THESE ARE THE NUMBERS. IT'S JUST THAT I HAVE NOT SEEN THIS EXHIBIT. BUT AS I SAID EARLIER, YOU HAD YOUR UPS AND DOWNS OVER THE COURSE OF, YOU KNOW, 20 YEARS.
MR. DOWNEY: FOR NOW I'M JUST FOCUSSED ON THE DOCUMENT. DO YOU SEE AT THE BOTTOM OF 10568 THERE'S AN INTERNET ADDRESS?
STEVEN BURD: HANG ON A SECOND. ON THE BOTTOM OF THE VERY FIRST PAGE?
MR. DOWNEY: AT THE BOTTOM OF THE VERY FIRST PAGE, YES.
STEVEN BURD: SURE, SURE.
MR. DOWNEY: AND DO YOU SEE THE SAME ON THE BOTTOM OF 10569?
STEVEN BURD: I DO.
MR. DOWNEY: YOUR HONOR, I MOVE THE ADMISSION OF 10568 AND 10569.
JUDGE DAVILA: SIR, DO YOU HAVE ANY DOUBT ABOUT THE RELIABILITY OF EITHER OF THESE DOCUMENTS?
STEVEN BURD: I DON'T HAVE ANY DOUBT. IT'S JUST THAT IT'S NOT THE WAY THAT WE RECOVERED THE INFORMATION. IT WAS ALWAYS AN ONLINE SOURCE, YOU KNOW, NOT OFTEN PRINTED. BUT IF IT COMES FROM BLOOMBERG, IT SHOULD BE ACCURATE.
JUDGE DAVILA: I'LL ADMIT IT AND IT MAY BE PUBLISHED.
(DEFENDANT'S EXHIBITS 10569 AND 10569 WERE RECEIVED IN EVIDENCE.)
JUDGE DAVILA: THANK YOU, SIR.
STEVEN BURD: SURE.
BY MR. DOWNEY:
MR. DOWNEY: LET ME FOCUS ON THE PERIOD THAT STARTS IN 2012 ON 10569.
STEVEN BURD: I'M SORRY. CAN YOU GIVE ME THE PAGE NUMBER?
MR. DOWNEY: I'M SORRY. I'M ON 10569, WHICH IS JUST THE GRAPH.
STEVEN BURD: OH, OKAY.
MR. DOWNEY: AND FOR NOW I'M JUST LOOKING AT THE PICTURE. AND DO YOU SEE EARLY, IF YOU LOOK AT THE BOTTOM AXIS, YOU CAN SEE THAT THAT REFLECTS TIMES AND VARIOUS DATES IN 2010 ALL OF THE WAY THROUGH 2013?
STEVEN BURD: YES.
MR. DOWNEY: AND IF YOU SEE ON THE GRAPH ON THE LEFT SIDE THAT IS VERTICAL, THAT REFLECTS THE PRICE OF SAFEWAY STOCK. DO YOU SEE THAT?
STEVEN BURD: I DO.
MR. DOWNEY: AND DO YOU SEE, IF YOU LOOK AT THE PRICE POINT FOR JANUARY 1, 2012, YOU SEE IT APPEARS THAT THE STOCK APPEARS TO HAVE BEEN RISING AROUND THAT DATE? DO YOU SEE THAT?
STEVEN BURD: YES.
MR. DOWNEY: AND THEN IN A PERIOD A LITTLE BIT THEREAFTER, DO YOU SEE THAT A VERY PRECIPITOUS DECLINE IN THE PRICE OF SAFEWAY STOCK BEGINS?
STEVEN BURD: YES.
MR. DOWNEY: SO THAT BY MID-YEAR, THE STOCK PRICE IS CONSIDERABLY LOWER THAN IT HAD BEEN AT THE BEGINNING OF THE YEAR; CORRECT?
STEVEN BURD: CORRECT.
MR. DOWNEY: AND IF YOU LOOK AT THE DAILY CHART, THE DAILY PRICING TABLE THAT IS CONTAINED IN 10568, YOU WILL SEE THAT THE PRICE OF SAFEWAY STOCK DROPPED FROM ABOUT $19 A SHARE TO ABOUT $14 PER SHARE. DO YOU SEE THAT? BETWEEN JANUARY 1ST AND JULY 1ST?
STEVEN BURD: OF 2012?
MR. DOWNEY: YES, SIR.
STEVEN BURD: I MEAN, IT CERTAINLY REFLECTS THAT ON THE GRAPH. I'M STILL NOT FINDING JANUARY ON THE TABLES.
MR. DOWNEY: LET ME SEE IF I CAN GIVE YOU A HAND. IF YOU LOOK AT --
STEVEN BURD: IF YOU'RE LOOKING AT 1/1/12.
MR. DOWNEY: DO YOU HAVE IT ON PAGE 10 OF 10568?
STEVEN BURD: OKAY. AND WHAT IS THE DATE THAT YOU'RE LOOKING FOR?
MR. DOWNEY: AND YOU COMPARE THAT TO -- LOOK AT JANUARY 3RD, 2012.
STEVEN BURD: JANUARY 3RD. YES.
MR. DOWNEY: DO YOU SEE THE CLOSE ON THAT DAY IS ABOUT 19.2?
STEVEN BURD: CORRECT.
MR. DOWNEY: AND THEN IF YOU FORWARD FROM THERE TO JULY 1ST, YOU WILL SEE THAT IT WASN'T TRADED ON JULY 1ST, BUT AS OF JULY 2ND, IT'S ABOUT 16.2, 16.3.
STEVEN BURD: YES.
MR. DOWNEY: AND THEN BY JULY 17TH, IT HAD DROPPED DOWN TO ABOUT 14 AND A QUARTER? CLOSER TO 14 AND A HALF AT THE CLOSE?
STEVEN BURD: ARE YOU SAYING JULY 13TH?
MR. DOWNEY: JULY 17TH?
STEVEN BURD: 17TH. YES. 14.6.
MR. DOWNEY: AND THEN IT BEGAN TO DROP AGAIN. AND DO YOU SEE BY AUGUST 6TH THE STOCK HAD DROPPED ALL OF THE WAY TO WHERE IT CLOSED AROUND 14.1, WHICH WAS JUST SLIGHTLY UP FROM 13.8, AND THEN IT STABILIZED AROUND THAT POINT. DO YOU SEE IT?
STEVEN BURD: IT STABILIZED FOR AWHILE.
MR. DOWNEY: SO BETWEEN 14 AND, OVER THE NEXT PERIOD, SOMEWHERE BETWEEN 14 AND 14 AND A HALF THROUGH OCTOBER. DO YOU SEE THAT?
STEVEN BURD: I SEE THAT.
MR. DOWNEY: AND DID YOU BELIEVE THAT THE RELATIONSHIP BETWEEN THERANOS AND SAFEWAY HAD ANY RELATIONSHIP TO THE DROP IN THE VALUE OF SAFEWAY STOCK?
STEVEN BURD: I CAN'T IMAGINE THAT I DID BECAUSE I DON'T THINK I EVER THOUGHT THAT.
MR. DOWNEY: CAN I ASK YOU TO LOOK IN THE BLACK NOTEBOOK AT EXHIBIT 13947. YOUR HONOR, THIS IS RATHER A RECORD OF A COMMUNICATION THAT WOULD CONTAIN A MOBILE PHONE NUMBER WHICH WE HAVE REDACTED FOR PURPOSES OF DISPLAYING PUBLICLY OR ADMITTING AS AN EXHIBIT.
STEVEN BURD: DID YOU SAY 13, 13 --
MR. DOWNEY: -947?
STEVEN BURD: -- 947.
JUDGE DAVILA: 13947?
MR. DOWNEY: YES, SIR.
STEVEN BURD: I DON'T HAVE 13947. MY LAST ONE IN THE BINDER IS 12293 IN THE BLACK.
BY MR. DOWNEY:
MR. DOWNEY: ALL RIGHT. BEAR WITH ME FOR A MOMENT. THAT'S BECAUSE I HAVE ALL OF THE COPIES.
STEVEN BURD: THAT EXPLAINS IT.
MR. DOWNEY: YOUR HONOR, IS THAT ALSO MISSING FROM YOUR NOTEBOOK?
JUDGE DAVILA: IT IS.
MR. DOWNEY: (HANDING.) MAY I APPROACH THE WITNESS, YOUR HONOR?
JUDGE DAVILA: YOU MAY.
MR. DOWNEY: (HANDING.)
MR. DOWNEY: MY QUESTION IS, JUST BEFORE ANYTHING ELSE, IS THIS A TEXT MESSAGE THAT WAS EXCHANGED -- A SERIES OF TEXT MESSAGES THAT WERE EXCHANGED BETWEEN YOU AND MS. HOLMES IN JULY OF 2012?
STEVEN BURD: I CAN'T SAY FOR CERTAIN BECAUSE I DON'T KNOW HOW THESE MESSAGES WERE CAPTURED.
MR. DOWNEY: DO YOU KNOW IF YOU TEXTED MS. HOLMES IN 2000 -- JULY OF 2012 TO THE EFFECT THAT THE SHARE PRICE OF SAFEWAY WOULD IMPROVE SIGNIFICANTLY IF WE LAUNCHED, CALL ME WHEN YOU CAN?
MR. LEACH: OBJECTION, YOUR HONOR.
JUDGE DAVILA: SUSTAINED. I'M NOT SURE THAT WAS A QUESTION. WHY DON'T YOU REPHRASE YOUR QUESTION?
BY MR. DOWNEY:
MR. DOWNEY: WELL, DID YOU COMMUNICATE WITH MS. HOLMES, BY TEXT OR OTHERWISE, AND TELL HER THAT YOU THOUGHT THE STOCK PRICE OF SAFEWAY WOULD IMPROVE IF YOU COULD ANNOUNCE A LAUNCH OF THERANOS PRODUCT IN SAFEWAY STORES?
STEVEN BURD: I CAN'T SAY FOR CERTAIN. I WOULD TELL YOU, SITTING HERE TODAY, THAT I THINK IT WOULD HAVE MOVED THE STOCK PRICE UP HAD WE LAUNCHED.
MR. DOWNEY: BUT AS TO WHETHER IT HAPPENED OR NOT YOU JUST DON'T --
STEVEN BURD: DON'T KNOW.
MR. DOWNEY: -- RECALL? LET ME ASK YOU ABOUT A FEW OF THE AREAS BRIEFLY THAT YOU TOUCHED ON DURING THE COURSE OF YOUR DIRECT TESTIMONY. YOU TALKED BRIEFLY ABOUT THE FACT THAT RENOVATIONS WERE MADE IN SAFEWAY STORES TO ACCOMMODATE THERANOS BEING IN THE STORES; CORRECT?
STEVEN BURD: CORRECT.
MR. DOWNEY: AND IF YOU WALK INTO A SAFEWAY TODAY, DO YOU KNOW WHAT IS IN MANY OF THOSE LOCATIONS?
STEVEN BURD: YEAH. I DON'T KNOW THE COUNT, BUT ONE OF THE STORES THAT I GET PHARMACY PRESCRIPTIONS FROM HAS A QUEST LAB IN IT.
MR. DOWNEY: SO IN THE SPACES THAT WERE INTENDED FOR THERANOS, PERHAPS WITH SOME MODIFICATION, THERE'S AN OPERATOR OF ONE OF ITS COMPETITORS; CORRECT?
STEVEN BURD: CORRECT.
MR. DOWNEY: AND DO YOU KNOW HOW BLOOD IS DRAWN FROM THE PATIENTS AT THOSE LOCATIONS?
STEVEN BURD: I DO.
MR. DOWNEY: AND HOW IS IT DRAWN?
STEVEN BURD: IT'S DRAWN THROUGH, TYPICALLY FOR ADULTS AT LEAST, A VEIN IN THE ARM.
MR. DOWNEY: YOUR HONOR, WILL YOU BEAR WITH ME FOR ONE MOMENT?
JUDGE DAVILA: OF COURSE.
(DISCUSSION AMONGST DEFENSE COUNSEL OFF THE RECORD.)
BY MR. DOWNEY:
MR. DOWNEY: ONE LAST QUESTION, MR. BURD. I WANT TO ASK YOU ABOUT THE AGREEMENTS BETWEEN THERANOS AND OTHER PARTIES, NOT ITS AGREEMENT WITH SAFEWAY. WE'VE TALKED ABOUT THE AGREEMENT THAT THERANOS HAD REACHED WITH WALGREENS AT SOME POINT; CORRECT?
STEVEN BURD: YES.
MR. DOWNEY: DO YOU RECALL THAT? AND DO YOU ALSO RECALL HEARING AT SOME POINT FROM MS. HOLMES ABOUT THE DEPARTMENT OF DEFENSE AND THERANOS HAVING A RELATIONSHIP WITH THE DEPARTMENT OF DEFENSE AND YOU TESTIFIED ABOUT MEDEVAC AND SO FORTH?
STEVEN BURD: YES.
MR. DOWNEY: DID MS. HOLMES TELL YOU AS PART OF ANY CONVERSATION THAT THERANOS HAD ENTERED INTO A CONTRACT WITH THE DEPARTMENT OF DEFENSE IN LATE 2012 TO TEST ITS DEVICES BY CENTRAL COMMAND IN AFGHANISTAN?
STEVEN BURD: NO.
MR. DOWNEY: I WANT TO JUST SHOW YOU A DOCUMENT WHICH YOU MAY OR MAY NOT HAVE SEEN BEFORE, SO MY QUESTION IS SIMPLY -- WILL SIMPLY BE WHETHER YOU'VE EVER HAD OCCASION TO SEE THE DOCUMENT, AND IT'S 10547 IN THE BLACK NOTEBOOK. IF YOU WOULD LOOK AT THE -- WELL, LET ME ASK YOU, DO YOU RECALL EVER SEEING THIS DOCUMENT BEFORE?
STEVEN BURD: NO.
MR. DOWNEY: DID YOU KNOW DANIEL EDLIN AT THERANOS?
STEVEN BURD: NO.
MR. DOWNEY: OTHER THAN MS. HOLMES, DID YOU KNOW ANY OF THE OTHER SENDERS OR RECIPIENTS OF THESE EMAILS, CHRISTIAN HOLMES, DANIEL EDLIN?
STEVEN BURD: CHRISTIAN I MET.
MR. DOWNEY: AND YOU DON'T RECALL HER TELLING YOU IN DECEMBER OF 2012 THAT AN AGREEMENT HAD BEEN EXECUTED APPROVING A PROTOCOL FOR THERANOS WITH THE DEPARTMENT OF DEFENSE? THAT'S JUST A QUESTION --
STEVEN BURD: YEAH.
MR. DOWNEY: THAT'S THE SPECIFIC QUESTION.
STEVEN BURD: I CAN TELL YOU WHAT I DO RECALL IF YOU WANT.
MR. DOWNEY: I'M JUST ASKING YOU ABOUT THE AGREEMENT BETWEEN THERANOS AND THE DEPARTMENT OF DEFENSE. YOU DON'T RECALL TALKING ABOUT ANY CONTRACT?
STEVEN BURD: NO.
MR. DOWNEY: OKAY. AND YOU ALSO TESTIFIED THAT THE BUSINESS MADE SENSE TO YOU BECAUSE THERE WERE, I THINK YOU SAID, ADMIRALS AND GENERALS ON THE BOARD; CORRECT?
STEVEN BURD: CORRECT.
MR. DOWNEY: AND IS THAT A REFERENCE TO GENERAL MATTIS?
STEVEN BURD: THERE WERE -- THAT WAS JUST MY IMPRESSION. IT HAD CREDIBILITY, AND SHE SAID SHE HAD THESE BECAUSE OF THE COMPOSITION OF HER BOARD. THERE WERE NO NAMES MENTIONED.
MR. DOWNEY: I JUST WANT TO BE CERTAIN THAT I UNDERSTAND YOUR TESTIMONY ON ONE LAST SUBJECT, WHICH IS EXHIBIT 370 WHICH YOU WERE SHOWN AND WHICH WAS ADMITTED ON DIRECT.
STEVEN BURD: 370?
MR. DOWNEY: YES, SIR. THAT'S IN THE WHITE NOTEBOOK.
STEVEN BURD: I THOUGHT I HAD THE WHITE NOTEBOOK. I HAVE IT.
MR. DOWNEY: OKAY. AND I THINK YOU TESTIFIED THAT THE ITEM IN HERE WHICH SAYS REVENUE FROM SAFEWAY NETWORK IS A PROJECTION ABOUT REVENUE THAT SAFEWAY MIGHT RECEIVE FROM OTHER PARTNERS; IS THAT RIGHT?
STEVEN BURD: I ACTUALLY SAID I WASN'T SURE IF ALL OTHER REVENUE -- REVENUE FROM SAFEWAY NETWORK, THAT WOULD CLEARLY BE THE NETWORK THAT WE WERE GOING TO BUILD. ALL OTHER REVENUE, WITHOUT SEEING SOME OTHER DOCUMENTS, EITHER REFERS TO THE DIRECT WORK THAT WE DID AT OUR STORES WITH THESE LABS, OR IT REFERS TO ALL REVENUE, ALL OTHER REVENUE THAT THERANOS HAS.
MR. DOWNEY: BUT WITHOUT SEEING MORE DOCUMENTATION, YOU DON'T KNOW?
STEVEN BURD: CORRECT.
MR. DOWNEY: OKAY. THAT'S ALL I HAVE OF THIS WITNESS ON CROSS-EXAMINATION.
JUDGE DAVILA: OKAY. REDIRECT?
MR. LEACH: BRIEFLY, YOUR HONOR, YES.
JUDGE DAVILA: FOLKS, FEEL FREE TO STAND AND STRETCH FOR A MOMENT IF YOU WOULD LIKE. YOU MAY AS WELL, SIR, WHILE WE DO A TRANSITION.
(STRETCHING.)
JUDGE DAVILA: MR. LEACH.
MR. LEACH: THANK YOU, YOUR HONOR.
REDIRECT EXAMINATION BY MR. LEACH:
MR. LEACH: MR. BURD, I'D LIKE TO DRAW YOUR ATTENTION TO EXHIBIT 332, WHICH IS IN THE WHITE BINDER.
STEVEN BURD: YES.
MR. LEACH: AND I BELIEVE IT'S IN EVIDENCE. MR. BURD, DO YOU HAVE THE PRINT COPY OF 332 IN FRONT OF YOU?
STEVEN BURD: I DO.
MR. LEACH: AND DO YOU SEE THE SECOND LINE OF THE -- OR THE FIRST LINE OF THE SECOND PARAGRAPH, THERANOS STARTED OUT OF STANFORD UNIVERSITY IN 2003. DO YOU SEE THAT LANGUAGE?
STEVEN BURD: I DO.
MR. LEACH: AND YOU WERE ASKED A NUMBER OF QUESTIONS ON
MR. LEACH: CROSS-EXAMINATION BY MR. DOWNEY ABOUT WHETHER THERANOS WAS A STARTUP OR WHAT YOUR UNDERSTANDING WAS. DO YOU RECALL THOSE QUESTIONS?
STEVEN BURD: I DO.
MR. LEACH: AND YOU UNDERSTOOD IN 2010 THAT THERANOS HAD BEEN IN BUSINESS FOR ROUGHLY SEVEN YEARS?
STEVEN BURD: CORRECT.
MR. LEACH: AND YOU UNDERSTOOD IN 2013 THAT IT HAD BEEN IN BUSINESS FOR ABOUT TEN YEARS BY THAT PERIOD OF TIME?
STEVEN BURD: YES.
MR. LEACH: AND YOU ALSO TESTIFIED THAT MS. HOLMES TOLD YOU THERANOS WAS CASH FLOW NEUTRAL. DO YOU RECALL THAT TESTIMONY?
STEVEN BURD: CORRECT.
MR. LEACH: AND WAS THAT RELEVANT TO YOU?
STEVEN BURD: YES.
MR. LEACH: HOW SO?
STEVEN BURD: IT MADE US FEEL BETTER ABOUT THE COMPANY, THAT THEY WERE NOT JUST, YOU KNOW, LOOKING FORWARD NUMBERS, THEY ACTUALLY HAD ACHIEVED A LEVEL OF PERFORMANCE WHICH MADE THEM CASH FLOW NEUTRAL, MEANING REVENUE AND EXPENSES WERE MATCHING.
MR. LEACH: AND DO YOU DIFFERENTIATE A BUSINESS THAT IS SEVEN TO TEN YEARS OLD FROM A STARTUP THAT IS OPENING UP OUT OF A GARAGE ON DAY ONE?
STEVEN BURD: YES.
MR. LEACH: EXPLAIN THAT FOR US, PLEASE.
STEVEN BURD: WELL, I THINK -- I MEAN, THERE'S NO MAGIC LINE HERE WHEN ONE SHIFTS FROM A STARTUP TO A SMALL COMPANY, BUT IF YOU HAVE VERY FEW REVENUE DOLLARS, I THINK YOU WOULD CONSIDER A STARTUP. IF YOU'RE HITTING SOME STRONG REVENUE DOLLARS RELATIVE TO YOUR SIZE AND YOU'RE MAKING MONEY, I WOULD SAY, YOU KNOW, YOU WERE ON YOUR WAY. SO I WOULD ALWAYS ARGUE THAT WITH THE CEO OF BLACK HAWK NETWORK THAT HE WAS NO LONGER A STARTUP, YOU KNOW, HE WAS GENERATING A HUNDRED MILLION IN PROFITS. SO THIS WAS A STARTUP FOR AT LEAST SEVEN YEARS.
MR. LEACH: LET ME DRAW YOUR ATTENTION -- THANK YOU FOR THAT. LET ME DRAW YOUR ATTENTION TO ANOTHER DOCUMENT THAT YOU WERE EXAMINED ABOUT, AND THAT IS EXHIBIT 7104. IT SHOULD BE IN YOUR BLACK BINDER.
STEVEN BURD: I HAVE IT.
MR. LEACH: MS. KRATZMANN, MAY I USE THE ELMO. MR. BURD, DO YOU RECALL QUESTIONS ABOUT THIS EXHIBIT DURING YOUR CROSS-EXAMINATION?
STEVEN BURD: I DO.
MR. LEACH: AND YOU'RE NOT ON THIS EMAIL, RIGHT? THIS IS NOT SOMETHING THAT YOU SAW AT THE TIME?
STEVEN BURD: THAT'S CORRECT.
MR. LEACH: OKAY. I WANTED TO DRAW YOUR ATTENTION TO THE ENTIRETY OR THE FIRST PART OF THE EMAIL CHAIN WHERE BRAD WOLFSEN IS WRITING TO ELIZABETH HOLMES AND KEN SHACHMUT WITH A REQUEST TO SHARE INFORMATION WITH OUTSIDE COUNSEL. DO YOU SEE THAT?
STEVEN BURD: YES.
MR. LEACH: AND REMIND US, WHO IS KEN SHACHMUT?
STEVEN BURD: KEN SHACHMUT WAS THE CHIEF FINANCIAL OFFICER OF SAFEWAY HEALTH.
MR. LEACH: AND BRAD WOLFSEN, WHO WAS HE?
STEVEN BURD: BRAD WORKED FOR SAFEWAY HEALTH. I DON'T RECALL HIS EXACT RESPONSIBILITIES.
MR. LEACH: OKAY. AND MR. WOLFSEN IS WRITING, "ELIZABETH, "I'VE RECEIVED A REQUEST FROM OUR LAWYERS TO SEND THE 'SELECTED ASSAYS FROM THE THERANOS ASSAY LIBRARY' TO OUR OUTSIDE COUNSEL WHO IS ASSISTING WITH THE CLIA AND STATE REGULATIONS RESEARCH." DO YOU SEE THAT LANGUAGE?
STEVEN BURD: I DO.
MR. LEACH: AND DO YOU SEE MS. HOLMES'S RESPONSE, "BRAD, THIS IS FINE, BUT THAT LIST IS NOT AN ACCURATE REFLECTION OF THE TESTS WE WILL ACTUALLY MAKE AVAILABLE IN THE STORES - THAT LIST IS THE LIBRARY WE PROVIDE FOR OUR PHARMACEUTICAL CLIENTS CLINICAL TRIALS." DO YOU SEE THAT?
STEVEN BURD: YES.
MR. LEACH: AND SITTING HERE TODAY, DO YOU UNDERSTAND THAT TO MEAN THE PHARMACEUTICAL LIST IS ACTUALLY NARROWER THAN WHAT IS GOING TO BE OFFERED ON THE THERANOS DEVICE?
STEVEN BURD: YES, I BELIEVE IT'S NARROWER.
MR. LEACH: OKAY. IF WE CAN GO NOW PLEASE TO EXHIBIT 375, PAGE 12.
STEVEN BURD: IN THE WHITE BINDER?
MR. LEACH: IN THE WHITE BINDER. DO YOU RECALL THIS PORTION OF THE AUGUST 2012 BOARD PRESENTATION -- LET ME ASK A BETTER QUESTION. DO YOU RECALL THIS AS A PORTION OF THE POWERPOINT THAT WAS PREPARED IN CONNECTION WITH THE AUGUST 2012 SAFEWAY BOARD MEETING?
STEVEN BURD: YES.
MR. LEACH: OKAY. AND THAT'S A BOARD MEETING THAT MS. HOLMES ATTENDED, AT LEAST IN PART?
STEVEN BURD: YES, SHE DID IN PART.
MR. LEACH: AND I DRAW YOUR ATTENTION TO THE PORTION "ONE CARTRIDGE WILL SATISFY 95 PERCENT OF ALL CPT CODES." DO YOU SEE THAT?
STEVEN BURD: WHAT PAGE?
MR. LEACH: PAGE 11. OR PAGE 12, EXCUSE ME.
STEVEN BURD: SORRY FOR BEING SO CASUAL. OKAY. YES.
MR. LEACH: AND IS THAT INFORMATION THAT YOU GOT FROM MS. HOLMES?
STEVEN BURD: YES, IT IS.
MR. LEACH: AND WAS THAT YOUR UNDERSTANDING OF WHAT THE THERANOS DEVICE AND CARTRIDGE COULD DO AT THIS TIME PERIOD IN AUGUST OF 2012?
STEVEN BURD: YES.
MR. LEACH: YOU ALSO TESTIFIED ABOUT RECEIVING A CALL FROM MS. HOLMES ABOUT CLIA CERTIFICATION OR CLIA APPROVAL. DO YOU RECALL THAT?
STEVEN BURD: I DO.
MR. LEACH: AND THAT WAS GOOD NEWS TO YOU, WASN'T IT?
STEVEN BURD: IT WAS GREAT NEWS.
MR. LEACH: AND WHY WAS IT GREAT NEWS?
STEVEN BURD: I THOUGHT AT THE TIME IT MEANT THAT THE REGULATORY BODY HERE WAS ACTUALLY BUYING INTO ALL OF THE ASSAYS. I LEARNED LATER THAT'S NOT THE CASE, BUT THAT'S WHAT I THOUGHT.
MR. LEACH: SO AT THE TIME YOU THOUGHT IT REFLECTED APPROVAL OF THE DEVICE IN SOME FORM?
STEVEN BURD: CORRECT.
MR. LEACH: APPROVAL OF THE ASSAYS THAT WERE GOING TO BE RUN ON THE DEVICE?
STEVEN BURD: CORRECT.
MR. LEACH: AND YOU HAVE A DIFFERENT UNDERSTANDING SITTING HERE TODAY?
STEVEN BURD: I DO JUST BECAUSE OF WHAT I HAVE LEARNED.
MR. LEACH: BUT AT THE TIME YOU VIEWED THAT AS GOOD NEWS?
STEVEN BURD: YES.
MR. LEACH: AND CMS VALIDATION OF THE DEVICE?
STEVEN BURD: IT WAS AN IMPORTANT MILESTONE. BUT I, OF COURSE, THOUGHT IT MEANT ALL OF THE CPT CODES.
MR. LEACH: LET ME DRAW YOUR ATTENTION, PLEASE, TO THE MASTER SERVICES AGREEMENT, EXHIBIT 387. YOU WERE ASKED SOME QUESTIONS ABOUT THAT ON CROSS-EXAMINATION.
STEVEN BURD: ALL RIGHT.
MR. LEACH: AND IF WE COULD GO TO PAGE 9.
STEVEN BURD: YES.
MR. LEACH: YOU WERE ASKED SOME QUESTIONS ABOUT THE TIMING OF THE SAFEWAY PRE-PILOT, THE SAFEWAY PRE-PILOT AND THE SAFEWAY LAUNCH VIS-A-VIS WALGREENS. DO YOU RECALL THOSE QUESTIONS?
STEVEN BURD: YES.
MR. LEACH: OKAY. IN PARAGRAPH C IT SAYS, I DRAW YOUR ATTENTION TO THE LANGUAGE, "THE PARTIES' EXPECTATION IS THAT THE PILOT WILL LAST FOR APPROXIMATELY 90 CALENDAR DAYS, AND THAT THE PILOT OF THE PROGRAM AT SAFEWAY WILL RUN CONCURRENTLY WITH ANY PILOT OF THE PROGRAM CONDUCTED BY WALGREENS." DO YOU SEE THAT LANGUAGE?
STEVEN BURD: YES.
MR. LEACH: AND DID YOU VIEW THAT AS AN OBLIGATION TO HAVE THEM RUN CONCURRENTLY OR AN EXPECTATION?
STEVEN BURD: AN EXPECTATION.
MR. LEACH: SO IF YOU HAD SAID TO MS. HOLMES, WALGREENS SEEMS LIKE THEY'RE WAY BEHIND US, I WANT TO GO FORWARD WITH THE PILOT, IS THAT SOMETHING THAT YOU FELT FREE TO DO?
STEVEN BURD: REPEAT THAT, PLEASE.
MR. LEACH: SO IF YOU BELIEVED WALGREENS WAS TAKING TOO MUCH TIME, THAT THEY WERE WAY BEHIND YOU, DID YOU FEEL FREE TO GO TO MS. HOLMES AND SAY, I'D LIKE TO GO FORWARD WITH THE PILOT NOW?
STEVEN BURD: I THOUGHT THAT MIGHT BE A PROBLEM, THAT WE WOULD HAVE TO GO TOGETHER.
MR. LEACH: LET ME DRAW YOUR ATTENTION TO WHERE IT SAYS "THE LAUNCH OF THE PROGRAM WILL NOT OCCUR AT WALGREENS STORES PRIOR TO THE LAUNCH OF THE PROGRAM AT SAFEWAY STORES." WHAT DID THAT MEAN?
STEVEN BURD: NOW WE'RE BEYOND THE PILOT AND NOW IT'S LAUNCHED, AND IT SAID IT WOULD LAUNCH SIMULTANEOUSLY.
MR. LEACH: DID IT SAY SIMULTANEOUSLY OR THAT WALGREENS WON'T GO FIRST?
STEVEN BURD: IT SAYS THAT WALGREENS WON'T GO FIRST, BUT MY EXPECTATION IS THAT IT WOULD GO AROUND THE SAME TIME.
MR. LEACH: OKAY. YOU WANTED THEM TO GO AT THE SAME TIME?
STEVEN BURD: CORRECT.
MR. LEACH: AND WHY WAS THAT?
STEVEN BURD: WELL, WE DIDN'T WANT, YOU KNOW, WALGREENS TO HAVE AN EDGE ON US, AND MY GUESS IS THAT THEY FELT THE SAME WAY. SO RATHER THAN BARGAIN FROM THEM INSISTING THAT WE GO FIRST, WE WERE CONTENT THAT WE WOULD GO AT THE SAME TIME.
MR. LEACH: IN THE DECEMBER 2012 TIME PERIOD, DID MS. HOLMES EVER ATTRIBUTE DELAYS OF THE LAUNCH TO WALGREENS?
STEVEN BURD: NO.
MR. LEACH: DID SHE EVER ATTRIBUTE THE DELAYS TO SOME ISSUE WITH THE MAIN LAB OR THE DEVICE THAT YOU'D BEEN SHOWN?
STEVEN BURD: NO.
MR. LEACH: LET ME PLEASE DRAW YOUR ATTENTION TO WHAT IS IN EVIDENCE AS EXHIBIT 10537.
STEVEN BURD: WHICH BOOK?
MR. LEACH: THE BLACK BOOK PLEASE.
STEVEN BURD: I HAVE IT.
MR. LEACH: AND DO YOU RECALL BEING ASKED QUESTIONS ABOUT YOUR EMAIL WHERE YOU WROTE IN THE FIRST PARAGRAPH, "I'M VERY CONCERNED ABOUT ALLOWING NETWORK PARTNERS OR ANYONE ELSE TO LAUNCH WITH A MERE FINGER STICK." DO YOU RECALL BEING ASKED QUESTIONS ABOUT THAT?
STEVEN BURD: YES.
MR. LEACH: AND FURTHER DOWN IN THE EMAIL YOU WROTE, "I ALSO UNDERSTAND THAT THIS IS INTENDED AS ONLY A 'STOP GAP MEASURE.'" DO YOU SEE THAT LANGUAGE?
STEVEN BURD: I DON'T. HELP ME OUT A LITTLE BIT.
MR. LEACH: SECOND TO THE LAST PARAGRAPH ON THE BOTTOM, YOU WROTE, "I REALIZE THAT YOU HAVE INFORMATION THAT I DON'T HAVE THAT IS CAUSING YOU TO THINK ABOUT A POSSIBLE FINGER STICK ONLY LAUNCH. I ALSO UNDERSTAND THAT THIS IS INTENDED AS ONLY A 'STOP GAP MEASURE.'" DO YOU SEE THAT?
STEVEN BURD: I DO.
MR. LEACH: AND WHAT DID YOU MEAN BY "STOP GAP MEASURE"?
STEVEN BURD: I WOULD HAVE TO READ THE WHOLE MEMO, BUT I KNEW WE DIDN'T DO FINGERSTICK EXCLUSIVELY, YOU KNOW, IN THE ON CAMPUS LAB AND WE WERE ANTICIPATING THAT WHEN YOU LAUNCH, YOU WOULD BE DOING FINGERSTICK.
MR. LEACH: AND THIS EMAIL IS FROM JANUARY OF 2012?
STEVEN BURD: CORRECT.
MR. LEACH: BY THE DECEMBER 2012 TIME PERIOD, DID MS. HOLMES INDICATE TO YOU THAT THERE WAS ANY ISSUE WITH PUTTING THE DEVICE IN SAFEWAY STORES?
STEVEN BURD: NO. WELL, LET ME BACK UP ONE SECOND.
MR. LEACH: PLEASE.
STEVEN BURD: I DON'T RECALL WHEN THIS COURIER MODEL WAS DONE, BUT THAT WAS CONSIDERED TO BE TEMPORARY, AND THE INTENT ALL ALONG HAS BEEN DEVICES IN THE STORES. OTHERWISE YOU CAN'T ACCOMPLISH 20 TO 30 MINUTES.
MR. LEACH: LET ME NEXT DRAW YOUR ATTENTION TO EXHIBIT 7196, WHICH SHOULD BE IN YOUR BLACK BINDER.
STEVEN BURD: I HAVE IT.
MR. LEACH: YOUR HONOR, WITH THE COURT'S PERMISSION, I'D LIKE TO INQUIRE ABOUT -- THIS IS IN EVIDENCE, BUT THERE'S A MATTER THAT I WOULD LIKE TO INQUIRE ABOUT, THE TOP EMAIL.
JUDGE DAVILA: THIS WAS -- THE DEFENSE PUT THIS IN EVIDENCE.
MR. DOWNEY: YES.
JUDGE DAVILA: YOU CAN ASK YOUR QUESTION.
MR. LEACH: OKAY. THANK YOU, YOUR HONOR.
MR. DOWNEY: YOUR HONOR, I HAD INTENDED TO REDACT THAT AND I WONDER, CONSISTENT WITH THE PRIOR DISCUSSION --
JUDGE DAVILA: NO. IT WAS MOVED INTO EVIDENCE BY YOU WITHOUT OBJECTION.
MR. DOWNEY: THAT'S FINE, YOUR HONOR.
JUDGE DAVILA: SO --
MR. LEACH: THERE WERE ALSO NEVER QUESTIONS ABOUT THE REASONS FOR THE TERMINATION.
JUDGE DAVILA: YOU CAN ASK YOUR QUESTION.
MR. DOWNEY: YOUR HONOR, THE REASON THAT I DID NOT PRESENT THE REDACTED FORM IN EITHER THE WITNESS'S NOTEBOOK AND THE WITNESS'S AND YOURS AND THE ONE ON THE SCREEN IS BECAUSE WE DIDN'T HAVE A RULING WHEN WE PREPARED THIS. BUT I UNDERSTAND THE COURT'S RULING.
JUDGE DAVILA: WELL, I'M LEFT IN A BIT OF A QUANDARY HERE. IT WAS ADMITTED AND OFFERED BY YOU WITHOUT ANY REDACTIONS AS I RECALL.
MR. DOWNEY: I UNDERSTAND.
JUDGE DAVILA: IT WAS ADMITTED WITHOUT OBJECTION. SO IN ANY EVENT, YOU CAN ASK A QUESTION IF YOU HAVE ONE.
MR. LEACH: OKAY.
MR. LEACH: MR. BURD, MY ONLY QUESTION WAS THERE'S A REFERENCE IN -- DO YOU RECALL BEING ASKED QUESTIONS ABOUT THIS EMAIL REGARDING THE PLAN LAUNCH IN CONNECTION WITH MARKETING?
STEVEN BURD: YES.
MR. LEACH: AND THERE'S A LINE IN YOUR RESPONSE WHERE YOU QUOTE, "I ALSO WANT TO MAXIMIZE MY RETURN ON MY $275 MILLION REMODEL INVESTMENT." DO YOU SEE THAT LANGUAGE?
STEVEN BURD: YES.
MR. LEACH: AND WHAT IS THAT A REFERENCE TO?
STEVEN BURD: WELL, WE MADE THE INVESTMENT AND WE NEEDED TO LAUNCH. IF THE BOX WORKS AS WE THOUGHT IT DOES, THEN WE WOULD GENERATE A REVENUE STREAM AND GENERATE PROFITS.
MR. LEACH: AND THE REMODEL INVESTMENT, WHAT DO YOU MEAN BY THAT? IS THAT MONEY THAT YOU GAVE TO THERANOS OR MONEY THAT YOU --
STEVEN BURD: NO. THIS WAS MONEY THAT WE USED TO REMODEL THE STORES.
MR. LEACH: I HAVE NO FURTHER QUESTIONS. THANK YOU, MR. BURD.
JUDGE DAVILA: MR. DOWNEY.
RECROSS-EXAMINATION BY MR. DOWNEY
MR. DOWNEY: VERY BRIEFLY, MR. BURD. YOU WERE JUST ASKED A QUESTION ABOUT A REFERENCE IN A DOCUMENT TO A REMODEL INVESTMENT. DO YOU RECALL THAT?
STEVEN BURD: YES.
MR. DOWNEY: AND DO YOU RECALL TESTIFYING ON DIRECT EXAMINATION THAT QUEST STORES NOW SIT IN MANY OF THOSE LOCATIONS?
STEVEN BURD: I DON'T KNOW HOW MANY, BUT I WOULD BET THAT IT'S -- THEY STARTED IN ARIZONA, BUT I DON'T KNOW HOW MANY.
MR. DOWNEY: OKAY. BUT LOCATIONS OF THE STORES YOU'RE FAMILIAR WITH, ARE THOSE THE SAME LOCATIONS?
STEVEN BURD: CORRECT.
MR. DOWNEY: I WANT TO ASK YOU ABOUT YOUR EXCHANGE WITH MS. HOLMES IN EARLY 2012 WHEN YOU WERE TALKING ABOUT YOUR DISAPPOINTMENT WITH GOING TO A FINGERSTICK ONLY MODEL. DO YOU RECALL THAT?
STEVEN BURD: ARE YOU TALKING ON CAMPUS?
MR. DOWNEY: WELL, I DON'T KNOW IF THE CAMPUS PROJECT HAD BEEN INITIATED OR NOT. BUT YOU SENT HER AN EMAIL IN JANUARY OF 2010 EXPRESSING A CONCERN ABOUT EITHER ANY NETWORK PARTNER OR ANY OTHER PARTNER OR ANY OTHER -- ANYONE ELSE LAUNCHING UNDER WHAT YOU TERMED A FINGERSTICK ONLY MODEL. DO YOU RECALL THAT?
STEVEN BURD: SURE, THAT RINGS A BELL.
MR. DOWNEY: AND AM I RIGHT TO SAY THAT YOU SAY YOU DID NOT UNDERSTAND THAT THAT WAS HAPPENING BECAUSE OF A REQUEST FROM WALGREENS?
STEVEN BURD: CORRECT.
MR. DOWNEY: AND YOU DID NOT UNDERSTAND IT TO BE HAPPENING BECAUSE OF A REGULATORY REQUIREMENT?
STEVEN BURD: CORRECT.
MR. DOWNEY: WHAT DID YOU UNDERSTAND WAS THE REASON AS TO WHY THERE WAS NOT A LAUNCH WITHOUT -- UNDER THE MODEL THAT HAD ORIGINALLY BEEN CONTEMPLATED?
STEVEN BURD: SO THE ORIGINAL MODEL WAS FINGERSTICK RESULTS IN STORE. WE KNOW THAT THERE WAS A TEMPORARY MODEL THAT WAS VEIN DRAW PROCESSED ELSEWHERE. SO I DIDN'T WANT, I DIDN'T WANT OTHER NETWORK PLAYERS TO LAUNCH FINGERSTICK WHILE WE WERE DOING SOMETHING DIFFERENT.
MR. DOWNEY: I UNDERSTAND THAT. MY QUESTION TO YOU IS, WHAT WAS YOUR UNDERSTANDING AS TO WHY THERANOS WAS PROPOSING LAUNCHING A FINGERSTICK ONLY PROCESS WITH THOSE --
STEVEN BURD: CAN YOU DIRECT ME TO THE EMAIL?
MR. DOWNEY: SURE. PULL IT UP FOR ONE MOMENT.
(PAUSE IN PROCEEDINGS.)
BY MR. DOWNEY:
MR. DOWNEY: THE DOCUMENT I WAS REFERRING TO, MR. BURD, IS 10537 IN THE WHITE NOTEBOOK.
STEVEN BURD: IN THE WHITE?
MR. DOWNEY: BUT I DON'T MEAN TO CONFINE YOU TO THAT. THERE ARE OTHER DOCUMENTS THAT REFERENCE FINGERSTICK ONLY AS WELL.
STEVEN BURD: YEAH. YOU SAID 10357 WHAT?
MR. DOWNEY: 10537.
STEVEN BURD: 10537. YOU SAID WHITE?
MR. DOWNEY: I'M SORRY, I BEG YOUR PARDON. BLACK.
STEVEN BURD: OKAY. GIVE ME A MOMENT AND I'LL READ THE EMAIL FROM THE TOP DOWN.
MR. DOWNEY: I THINK IT ACTUALLY GOES FROM THE BOTTOM UP.
STEVEN BURD: YEAH, OKAY. BUT I'LL START WITH THE -- IT'S MY EMAIL THAT YOU'RE REFERRING TO; RIGHT?
MR. DOWNEY: THAT'S RIGHT. AND I'M JUST REFERRING TO YOUR REFERENCE TO FINGERSTICK ONLY.
STEVEN BURD: SURE.
(PAUSE IN PROCEEDINGS.)
STEVEN BURD: OKAY. I DON'T HAVE THE CONTEXT.
BY MR. DOWNEY:
MR. DOWNEY: IF YOU SEE THE SECOND TO THE LAST PARAGRAPH, YOU SAY, "I REALIZE THAT YOU HAVE INFORMATION THAT I DON'T HAVE THAT IS CAUSING YOU TO THINK ABOUT A POSSIBLE FINGER STICK ONLY LAUNCH." DO YOU SEE THAT?
STEVEN BURD: I DO.
MR. DOWNEY: AND DOES THAT -- DID YOU HAVE A CONVERSATION BEFORE YOU WROTE THIS EMAIL WHERE YOU LEARNED SHE WAS CONTEMPLATING THAT?
STEVEN BURD: WE MUST HAVE. SO WHAT I NOW UNDERSTAND FINGERSTICK TO MEAN WHEN IT SAYS "FINGER STICK ONLY," I DIDN'T LIKE THE IDEA OF LAUNCHING WITH A FINGERSTICK AND THEN HAVE EVERYTHING PROCESS OFF THE STORE PROPERTY.
MR. DOWNEY: OKAY. SO, IN OTHER WORDS, THE SAMPLE WOULD BE SENT BACK TO A LAB AT THERANOS?
STEVEN BURD: YES, YES.
MR. DOWNEY: AND MS. HOLMES TOLD YOU AT SOME POINT PRIOR TO JANUARY 12TH THAT THERANOS WAS CONSIDERING THAT MODEL WITH SOME PARTNER?
JUDGE DAVILA: MR. BURD, WHY DON'T YOU SPEAK IN THE MICROPHONE THERE? THANK YOU.
STEVEN BURD: NO, NO, I DON'T RECALL THAT.
BY MR. DOWNEY:
MR. DOWNEY: OKAY. WHAT PROMPTED YOU TO WRITE THIS EMAIL?
STEVEN BURD: WELL, WE MUST HAVE HAD A CONVERSATION ABOUT LAUNCHING PURE FINGERSTICK, WHICH IS DISTINGUISHING PURE FINGERSTICK FROM YOU DRAW THE BLOOD THAT WAY, AND IN THIS CASE YOU PICK IT UP WITH A COURIER AND YOU TAKE IT TO A CENTRAL LOCATION. WHAT WE WANTED WAS THE ORIGINAL DESIGN AT LAUNCH, WHICH GAVE US RESULTS IN 20, 30 MINUTES, WHICH COULD ONLY HAPPEN IF DONE IN THE STORE.
MR. DOWNEY: YOU SAY IN THE SECOND SENTENCE OF THIS EMAIL, "I AM VERY CONCERNED ABOUT ALLOWING NETWORK PARTNERS FOR ANYONE ELSE TO LAUNCH WITH A MERE FINGER STICK." DO YOU SEE THAT?
STEVEN BURD: I SEE THAT, AND, YOU KNOW, REMEMBER, I'M NOW TRYING TO RECALL, YOU KNOW, EIGHT, NINE YEARS AGO. BUT, YOU KNOW, IN BUILDING THE NETWORK, WE WERE MAKING THE SAME PROMISE, YOU KNOW, TO THE -- TO OTHER SUPERMARKETS THAT HAD BEEN MADE TO US, AND I THINK THAT'S WHAT THIS REFERS TO, THAT THEY WOULDN'T GET THAT PROMISE, AND IT DIDN'T LOOK LIKE WE WERE GOING TO GET THAT EITHER.
MR. DOWNEY: AND IS IT FAIR TO SAY THAT IN TERMS OF WHATEVER THE CONVERSATION THAT YOU HAD WITH MS. HOLMES THAT PROMPTED THIS EMAIL, TODAY YOU DON'T REMEMBER IT?
STEVEN BURD: CORRECT.
MR. DOWNEY: THANK YOU, MR. BURD.
JUDGE DAVILA: MR. LEACH?
MR. LEACH: NOTHING FURTHER, YOUR HONOR. THANK YOU.
JUDGE DAVILA: MAY THIS WITNESS BE EXCUSED?
MR. LEACH: HE MAY, YES.
MR. DOWNEY: YES.
JUDGE DAVILA: SIR, YOU'RE EXCUSED. THANK YOU.
STEVEN BURD: THANK YOU.
JUDGE DAVILA: YOU'RE WELCOME.
STEVEN BURD: I'M JUST GOING TO LEAVE THE BOOKS THERE.
JUDGE DAVILA: JUST LEAVE IT THERE. THEY'LL CLEAN IT UP.
STEVEN BURD: OKAY.
JUDGE DAVILA: WE WILL TAKE OUR AFTERNOON BREAK NOW, LADIES AND GENTLEMEN. IS 20 MINUTES ABOUT RIGHT? WHY DON'T WE TAKE 30 MINUTES? LET'S TAKE A 30 MINUTE BREAK, PLEASE. WE'LL COME BACK -- THE GOVERNMENT WILL HAVE A WITNESS, I THINK?
MR. SCHENK: YES, YOUR HONOR.
JUDGE DAVILA: ALL RIGHT. WE'LL TAKE OUR RECESS. THANK YOU.
COURT CLERK: COURT IS IN RECESS.
(RECESS FROM 1:24 P.M. UNTIL 2:11 P.M.)