Trial Scheduling, Pfizer Report, and Military Exhibit Hearings
67 linesSAN JOSE, CALIFORNIA OCTOBER 19, 2021 P R O C E E D I N G S
(COURT CONVENED AT 8:38 A.M.)
(JURY OUT AT 8:38 A.M.)
JUDGE DAVILA: LET'S GO ON THE RECORD IN THE HOLMES MATTER. ALL COUNSEL ARE PRESENT. MS. HOLMES IS PRESENT. WE'RE OUTSIDE OF THE PRESENCE OF THE JURY. I WANTED TO TALK ABOUT A COUPLE OF THINGS WITH COUNSEL. FIRST OF ALL, WE HAD CONVERSATION LAST WEEK WITH A JUROR WHO LOST A RELATIVE. I UNDERSTAND -- I'VE RECEIVED INFORMATION ABOUT THAT JUROR'S TRAVEL PLANS. RESPECTING THAT, WE WILL NOT BE IN SESSION ON OCTOBER 29TH, FRIDAY, OCTOBER 29TH. THE JUROR PLANS TO TRAVEL THE 27TH OR 28TH, BUT WE'LL RETURN THE FOLLOWING WEEK, SO IT SHOULDN'T DISRUPT OUR SCHEDULE THE FOLLOWING WEEK. WE WILL BE ABLE TO RESUME ON -- I THINK NOVEMBER 2ND WOULD BE THE NEXT TRIAL DAY?
COURT CLERK: YES, YOUR HONOR.
JUDGE DAVILA: SO THAT WILL BE OUR SCHEDULE. WE'LL TRY TO MAKE UP SOME OF OUR TIME. I'LL ASK IF MAYBE WE CAN EXTEND OUR COURT DAYS UNTIL 4:00 O'CLOCK A COUPLE OF DAYS. SO THAT'S THAT FOR SCHEDULING. I'LL INFORM THE JURY OF THAT WHEN THEY COME IN. AND THEN I RECEIVED DOCUMENT 1098. MR. CLINE, I THINK YOU FILED THAT.
MR. CLINE: I DID, YOUR HONOR.
JUDGE DAVILA: GOOD MORNING.
MR. CLINE: THIS HAS TO DO WITH DR. WEBER WHO I DON'T THINK WILL BE ON TODAY. THIS WILL BE AN EDLIN DAY. PERHAPS WE CAN TAKE IT UP TOMORROW MORNING.
JUDGE DAVILA: SURE. WE CAN CHAT ABOUT IT A LITTLE MORE TODAY SINCE YOU'RE HERE.
MR. CLINE: THAT'S FINE.
JUDGE DAVILA: MR. LEACH.
MR. LEACH: YES, YOUR HONOR. THE GOVERNMENT INTENDS TO CALL SHANE WEBER, WHO WAS A DIRECTOR OF DIAGNOSTICS AT PFIZER. HIS JOB WAS ESSENTIALLY TO EVALUATE TECHNOLOGIES THAT MIGHT BE OF INTEREST TO PFIZER, AND IN THE COURSE OF HIS WORK HE PREPARED A REPORT REVIEWING THERANOS'S TECHNOLOGY. THIS REPORT IS DEEPLY RELEVANT TO THE ALLEGATIONS IN THE INDICTMENT. THE DEFENDANT MADE SWEEPING CLAIMS TO INVESTORS THAT PFIZER HAD VALIDATED THERANOS'S TECHNOLOGY. SHE ESSENTIALLY TOLD HER INVESTORS WHAT PFIZER THOUGHT, AND THE FIRST STEP OF PROVING THAT IS TO SHOW WHAT PFIZER ACTUALLY THOUGHT, AND THIS DOCUMENT DOES THAT IN MANY, MANY WAYS. THE DOCUMENT PROVES THE FALSITY OF THE DEFENDANT'S STATEMENTS TO INVESTORS, AND FOR THAT REASON IT PASSES ANY 401 RELEVANCE OBJECTION. WITH RESPECT TO 403, I UNDERSTAND THE ARGUMENT TO BE, WELL, THIS DOCUMENT DOESN'T GO DIRECTLY TO ELIZABETH HOLMES, AND THEREFORE, THE JURY MIGHT WRONGLY INFER THAT THIS DOCUMENT WAS PROVIDED TO THE DEFENDANT.
THAT'S A MATTER FOR CROSS-EXAMINATION. THE GOVERNMENT WILL NOT SUGGEST THAT THE DOCUMENT WENT DIRECTLY TO HER, AND THAT'S A MATTER THAT MR. CLINE CAN EXPLORE AND EVALUATE WITH THIS PARTICULAR WITNESS. BUT IT DOESN'T UNDERCUT THE PROBITY OF THE EVIDENCE IN TERMS OF SHOWING THE FALSITY OF THE STATEMENT, AND THERE'S NO GENUINE PREJUDICE IF YOU CAN EXPLORE THAT PARTICULAR ASPECT OF IT. I WILL SAY THAT DR. WEBER DOES HAVE A CONVERSATION WITH MS. HOLMES AFTER THE REVIEW WHERE HE TELLS MS. HOLMES PFIZER HAS NO INTEREST IN GOING FORWARD WITH THERANOS'S TECHNOLOGY. HE DOESN'T COMMUNICATE THE SPECIFIC REASONS TO HER, AND THE GOVERNMENT WON'T SUGGEST THAT THE DOCUMENT WENT TO HER, BUT THEY ARE TIED IN THAT WAY, AND THE EVIDENCE IS PROBATIVE OF FALSITY, WHICH IS SOMETHING THAT THE GOVERNMENT NEEDS TO SUPPORT ITS ALLEGATIONS. THERE'S ALSO A BUSINESS RECORDS OBJECTION TO THIS. I BELIEVE I CAN LAY A FOUNDATION WITH DR. WEBER THAT THIS IS THE TYPE OF DOCUMENT THAT HE PREPARED IN THE ORDINARY COURSE OF BUSINESS, THAT HE WAS UNDER A DUTY TO REPORT ACCURATELY, THAT THIS WAS MAINTAINED IN THE ORDINARY COURSE, THAT THIS WAS THE FINAL VERSION OF HIS REPORT TO HIS SUPERIORS. SO I BELIEVE THAT WE CAN LAY A FOUNDATION UNDER 803(6) FOR THE BUSINESS RECORDS EXCEPTION. AND FOR ALL OF THOSE REASONS, THIS IS HIGHLY PROBATIVE EVIDENCE THAT SHOWS THE FALSITY OF WHAT MS. HOLMES WAS SAYING ABOUT WHAT PFIZER DID AND THOUGHT AND IT SHOULD COME IN.
JUDGE DAVILA: LET ME ASK YOU -- THANK YOU. LET ME ASK YOU, TWO OTHER OBJECTIONS WERE 702 AND THEN 403, OF COURSE, AND UNDER 702, IT SEEMS LIKE THERE'S A COUPLE OF THE PARAGRAPHS -- THERE'S 25 QUESTIONS THAT WERE ANSWERED. THIS IS THE PART THAT I'M FOCUSSING ON. AND THERE WERE THREE OR FOUR QUESTIONS, PERHAPS MORE, THAT TALK ABOUT SPECIFIC, USE SPECIFIC SCIENTIFIC TERMS AND WHETHER CERTAIN PROCESSES WERE USED, AND THAT MIGHT BE A 702 ISSUE. I LOOKED AT THAT, AND YOU'RE SEEKING TO INTRODUCE THE DOCUMENT IN TOTO I ASSUME?
MR. LEACH: YES, YOUR HONOR. ALTHOUGH IF THERE ARE PARTICULAR QUESTIONS IN THE QUESTIONS THAT MR. WEBER PUT TO THE FOLKS AT THERANOS, I THINK THOSE CAN BE REDACTED. I DO THINK THIS IS MORE ALONG THE LINES OF PERCIPIENT -- IT'S A PERCIPIENT EVALUATION. THERE'S CERTAINLY SOME TECHNICAL ASPECTS TO WHAT HE'S ASKING, BUT IT'S NO DIFFERENT THAN WHAT DR. ROSENDORFF, THE ASPECTS OF WHAT DR. ROSENDORFF TESTIFIED TO THAT SHEKAR GANGAKHEDKAR TESTIFIED TO, AND I THINK THOSE ARE QUITE -- BUT IF THERE ARE PARTICULAR QUESTIONS THAT THE COURT VIEWS IN THAT LAND, I AM PREPARED TO REDACT THOSE.
JUDGE DAVILA: WELL, MAYBE THEY WERE -- MAYBE I WAS USING MY PERSONAL STANDARD, BUT YOU LOOK AT 17 THROUGH 20, SOMETHING LIKE THAT, AND IN THAT RANGE I THINK THERE ARE SOME VERY TECHNICAL -- IT LOOKS LIKE THERE ARE TECHNICAL QUESTIONS THAT -- AND I DON'T KNOW IF THAT'S SOMETHING THAT WOULD BE REDACTED OR WHATEVER, BUT THAT WAS THE 702 ISSUE THAT I LOOKED AT. AND THEN FROM A 403 STANDPOINT, THERE'S SOME -- IT SEEMS LIKE HE USES SOME TERMS, "UNCONVINCING" AND OTHER TERMS LIKE THAT THAT MY SENSE IS WHAT THE 403 OBJECTIONS WERE ABOUT.
MR. LEACH: THE -- YOUR HONOR, I DON'T THINK THERE'S A 403 ISSUE THERE BECAUSE IT'S MS. HOLMES THAT IS PURPORTING TO TALK ABOUT WHAT PFIZER THOUGHT, AND IF WHAT PFIZER THOUGHT WAS THE REPORT THAT WE RECEIVED FROM THERANOS IS UNCONVINCING OR LACKING IN FOUNDATION, YOU KNOW, THAT'S PROBATIVE EVIDENCE OF WHAT WAS IN, YOU KNOW, THIS WITNESS'S MIND AT THE TIME WHEN HE'S ASKED TO REVIEW THE TECHNOLOGY. AND SO --
JUDGE DAVILA: I'M SORRY TO INTERRUPT YOU. PARDON ME. ON PAGE 3 I THINK IT IS, QUESTION 3 USES A TERM "ARE NOT BELIEVABLE, UNCONVINCINGLY, POORLY PREPARED," THOSE TYPES OF STATEMENTS. I'M NOT ADVOCATING FOR MR. CLINE, BUT BASED ON HIS PLEADINGS, IT SEEMS LIKE THAT'S WHAT HE'S REFERENCING.
MR. CLINE: AND I MIGHT ADD -- SORRY TO INTERRUPT, YOUR HONOR -- BUT TERMS LIKE "EVASIVE" AND "NONRESPONSIVE" -- AND AGAIN, I'M SORRY TO INTERRUPT MR. LEACH AND YOUR HONOR -- BUT THIS WAS AN INTERNAL PFIZER REPORT. NOT ONLY DID IT NOT GO TO MS. HOLMES, IT DIDN'T GO TO THERANOS AT ALL. MR. -- DR. WEBER DID HAVE A CONVERSATION WITH MS. HOLMES.
JUDGE DAVILA: SIXTY MINUTES ACCORDING TO THIS, IT WAS ABOUT AN HOUR.
MR. CLINE: WELL, THERE WAS THAT CONVERSATION AND HE CAN TESTIFY ABOUT THAT OF COURSE, BUT THEN THERE WAS A LATER CONVERSATION IN JANUARY OF 2009 WHERE HE CONVEYED THE VIEW, AS MR. LEACH HAS SAID, THAT PFIZER DID NOT HAVE AN INTEREST IN DOING BUSINESS WITH THERANOS. HE CAN TESTIFY ALL ABOUT THAT CONFERENCE BECAUSE THAT OBVIOUSLY GOES TO MS. HOLMES'S KNOWLEDGE AND INTENT. IT'S THE PEJORATIVE NATURE OF THIS INTERNAL TO PFIZER, NOT CONVEYED TO MS. HOLMES THAT IS SO OBJECTIONABLE UNDER 403, AND THEN, OF COURSE, THERE'S THE 702 ISSUE THAT YOUR HONOR HAS ALSO FLAGGED.
JUDGE DAVILA: BUT IS IT APPROPRIATE FOR HIM TO SAY, AS A REPRESENTATIVE OF PFIZER, I WAS TASKED TO DO, MY JOB IS TO LOOK AT BUSINESS OPPORTUNITIES TO EVALUATE WHETHER OR NOT THAT BUSINESS ARRANGEMENT AND ENGAGEMENT IS SOMETHING THAT IS APPROPRIATE FOR OUR BUSINESS, SOMETHING THAT WE SHOULD DO. AND MY ANALYSIS OF THAT IS THE FOLLOWING. ISN'T THAT APPROPRIATE?
MR. CLINE: I THINK IT IS. I THINK WHAT HE COULD SAY IS, I WAS TASKED TO REVIEW THIS, I DID REVIEW IT, I TALKED TO PEOPLE INTERNALLY AT PFIZER, AND I CONCLUDED THAT THERE WAS NO BUSINESS -- NO BASIS FOR FURTHER BUSINESS BETWEEN PFIZER AND THERANOS, I RECOMMENDED THAT INTERNALLY, AND THEN I CALLED MS. HOLMES IN JANUARY OF 2009 AND I CONVEYED, WHATEVER HE'S GOING TO SAY HE CONVEYED TO HER. THERE'S AN EMAIL WHERE HE TALKS ABOUT IT. ALL OF THAT IS FAIR GAME. IT'S THE SORT OF DETAILED BOTH SCIENTIFIC ON ONE HAND THAT IS THE 702 ISSUE, AND THEN THE SORT OF HIGHLY PEJORATIVE CHARACTERIZATION THAT IS THE 403 ISSUE THAT I DON'T THINK SHOULD COME IN.
JUDGE DAVILA: OKAY. MR. LEACH?
MR. LEACH: YOUR HONOR, THE DEFENDANT PURPORTED TO SPEAK ABOUT WHAT PFIZER THOUGHT. THIS IS THE BEST EVIDENCE AVAILABLE OF WHAT THIS PARTICULAR WITNESS FROM PFIZER REALLY THOUGHT IN THE MOMENT WHILE HE'S GETTING ANSWERS FROM MS. HOLMES ABOUT HER TECHNOLOGY. HE PUTS QUESTIONS TO HER, SHE DOESN'T ANSWER THEM. SHE DEFLECTS. THEY'RE NONINFORMATIVE. THAT'S HIS CONCLUSION IN THE MOMENT. AND I -- YOU KNOW, PART OF THE GOVERNMENT -- YOU KNOW, PART OF THE ALLEGATION IS PROVING THE FALSITY OF THE STATEMENT. AND SO, YES, THESE ARE HARSH WORDS, BUT THESE ARE WORDS THAT HE THOUGHT IN THE MOMENT, THEY'RE WORDS THAT WERE RELEVANT TO HIM IN ASSESSING THE TECHNOLOGY, AND THEY'RE FODDER FOR CROSS-EXAMINATION, HOW THOROUGH WAS YOUR REVIEW? YOU KNOW, WHAT WAS THE SPECIFIC QUESTION? BUT THIS IS A PERCIPIENT REACTION TO WHAT, YOU KNOW, HE WAS DOING IN THE MOMENT, AND THE FACT THAT THEY DON'T LIKE WHAT HE CONCLUDED IS NOT A 403 PROBLEM, PARTICULARLY IN LIGHT OF HOW PROBATIVE THIS IS OF, OF THE FALSITY OF THE DEFENDANT'S STATEMENTS.
JUDGE DAVILA: IT LOOKS LIKE THE TRAJECTORY, THE GENESIS I SHOULD SAY IS THE OCTOBER -- THIS IS EXHIBIT 2, I THINK, IF I'M READING YOUR PLEADINGS CORRECT, AN OCTOBER 11, 2008 EMAIL FROM YOUR CLIENT TO PFIZER, I THINK, HERE'S OUR REPORT. IT'S ALMOST LIKE AN INVITATION. HERE'S WHAT WE HAVE DONE, THIS IS WHAT WE CAN DO, THIS IS OUR PRODUCT, GO FOR IT, LOOK AT IT. AND THEN MR. WEBER IS TASKED BY PFIZER TO DO JUST THAT, AND THEN HE FILES HIS REPORT. IS THAT THE CHRONOLOGY?
MR. LEACH: THAT'S EXACTLY RIGHT, YOUR HONOR.
MR. CLINE: THAT IS THE CHRONOLOGY. THERE HAD BEEN A LENGTHY INTERACTION BETWEEN THERANOS AND PFIZER BEFORE DR. WEBER EVER GOT INVOLVED. THEN PFIZER TASKED HIM, IN OCTOBER OR SO, TO REVIEW THE REPORT THAT THERANOS SUBMITTED. HE CONDUCTS THE REVIEW OVER THE NEXT COUPLE OF MONTHS. HE DOES HAVE THIS CONVERSATION WITH MS. HOLMES AND OTHERS, AND HE PREPARES THIS INTERNAL DOCUMENT, WHICH IS THE SUBJECT OF OUR MOTION. HE THEN HAS A TELEPHONE CALL IN JANUARY OF 2009, AND THE INTERNAL DOCUMENT, AS I'VE SAID, DIDN'T EVER GO TO THERANOS OR MS. HOLMES. IT WAS PURELY FOR INTERNAL PFIZER USE. THEN HE HAS A TELEPHONE CALL WITH MS. HOLMES IN JANUARY OF 2009 WHERE HE SAYS POLITELY, AS HE SAYS IN HIS EMAIL MEMORIALIZING THIS CONVERSATION, THAT THERE'S NO -- HE DOESN'T SEE ANY BUSINESS FUTURE BETWEEN -- AT THE MOMENT BETWEEN THERANOS AND PFIZER. HE KEEPS OPEN THE POSSIBILITY OF SOME CHANGE. WITH ALL DUE RESPECT TO MR. LEACH, THAT'S THE BEST EVIDENCE OF MS. HOLMES'S KNOWLEDGE AND INTENT, WHAT SHE WAS ACTUALLY TOLD, NOT SOME INTERNAL PFIZER DOCUMENT THAT IS HARSHLY CRITICAL BUT NEVER GOES TO HER. SHE NEVER SEES IT. IT'S NEVER CONVEYED TO HER. THAT'S NOT EVIDENCE OF HER KNOWLEDGE OR INTENT AT ALL. IT'S JUST PREJUDICIAL.
JUDGE DAVILA: WELL, IS HE ENTITLED, IS MR. LEACH ENTITLED TO QUESTION THE WITNESS AS TO WHY HE FORMED -- WHY PFIZER -- AS A REPRESENTATIVE OF PFIZER, WHY PFIZER DECIDED NOT TO DO BUSINESS? CAN'T HE PROBE THAT?
MR. CLINE: I THINK PERHAPS AT A HIGH LEVEL HE CAN. I MEAN, I'M NOT SAYING THAT DR. WEBER CAN'T SAY ANYTHING ABOUT WHY HE CAME TO THE CONCLUSION THAT HE CAME TO. WHAT I'M SAYING IS THAT THE SORT OF SCIENTIFIC ANALYSIS, WHICH IS THE 702 ISSUE, SHOULD NOT COME IN. IT CAN BE DESCRIBED AT A HIGH LEVEL. IT SHOULD NOT COME IN IN DETAIL. AND THE PEJORATIVE CHARACTERIZATION ABOUT THE INTERACTIONS WITH THERANOS SHOULD NOT COME IN.
JUDGE DAVILA: OKAY.
MR. CLINE: BECAUSE, AGAIN, IF HE HAD TOLD MS. HOLMES, I THINK YOU'RE BEING EVASIVE AND DEFLECTIVE, YOU'RE A BAD PERSON, MAYBE THAT COMES IN BECAUSE IT GOES TO HIS KNOWLEDGE AND INTENT. HE DIDN'T. HE HAD A MUCH DIFFERENT CONVERSATION WITH HER THAN WHAT IS REPRESENTED IN THIS REPORT. AND I THINK IT'S JUST UNFAIR TO HER AND MISLEADING TO THE JURY TO SUGGEST THAT SOMEHOW THIS REPORT REFLECTS WHAT WAS IN MS. HOLMES'S MIND AND HER KNOWLEDGE AND INTENT.
JUDGE DAVILA: MR. LEACH?
MR. LEACH: THE WHY IS IMPORTANT, YOUR HONOR, AND THE WHY IS IMPORTANT NOT JUST FOR MS. HOLMES'S INTENT, BUT THE FALSITY OF THE STATEMENTS THAT SHE'S MAKING. THE GOVERNMENT DOESN'T NEED TO PROVE THROUGH A SINGLE PIECE OF EVIDENCE ALL OF THE ELEMENTS, KNOWLEDGE AND FALSITY AND MATERIALITY. WE CAN DO THAT IN PIECES. THIS IS EVIDENCE OF THE FALSITY OF THE DEFENDANT'S STATEMENTS. SHE HELD HERSELF OUT AS BEING KNOWLEDGEABLE ABOUT WHAT PFIZER REALLY THOUGHT. PFIZER THOUGHT HER ANSWERS WERE DEFLECTIVE, EVASIVE, NONINFORMATIVE, AND THEY MEMORIALIZED THAT IN A REPORT THAT IS PART OF THEIR ROUTINE BUSINESS ACTIVITIES. I UNDERSTAND THAT IT LOOKS FORCEFUL IN DEMONSTRATING HOW STRONGLY PFIZER FELT ABOUT THIS, AND THIS IS CRITICAL CONTEXT FOR WHY THERE'S NO MORE WORK AFTER THIS. SO WE WILL NOT SUGGEST THAT THE DOCUMENT WENT TO MS. HOLMES. BUT THE WHY HERE IS CRITICAL. I REALLY -- IT, IT -- THE GOVERNMENT DOESN'T NEED TO PROVE KNOWLEDGE, FALSITY, MATERIALITY, AND THE WHY ALL IN ONE COMMUNICATION. WE CAN DO IT IN PIECES, AND THIS IS AN IMPORTANT PIECE OF THE FALSITY.
JUDGE DAVILA: OKAY. ALL RIGHT. WELL, THANK YOU FOR THE HELP THIS MORNING. I THINK -- WOULD YOU AGREE, MR. LEACH, THAT WE'RE NOT GOING TO GET TO THIS WITNESS TODAY?
MR. LEACH: IF WE'RE GOING TO GET TO HIM, I THINK IT WOULD BE VERY LATE.
JUDGE DAVILA: RIGHT.
MR. LEACH: SO I THINK IT WOULD BE VERY LATE. I THINK WE HAVE TIME TO REACH A CONCLUSION ON THIS.
JUDGE DAVILA: OKAY. OKAY.
MR. LEACH: AND I CERTAINLY WON'T GET INTO IT WITHOUT ANOTHER DISCUSSION.
JUDGE DAVILA: ALL RIGHT. THANK YOU. OF COURSE. THANK YOU FOR THAT. LET'S TALK WITH MR. BOSTIC ABOUT MR. EDLIN AND SEE WHERE THAT GOES.
MR. CLINE: THANK YOU, YOUR HONOR.
JUDGE DAVILA: THANK YOU, MR. CLINE. I THINK WE WERE HAVING A DISCUSSION ABOUT A DOCUMENT, MR. BOSTIC.
MR. BOSTIC: YES. GOOD MORNING, YOUR HONOR.
JUDGE DAVILA: GOOD MORNING.
MR. BOSTIC: THE DEFENSE HAD RAISED CONCERNS ABOUT TWO EXHIBITS THAT I BELIEVE THE GOVERNMENT INTENDED TO EXPLORE WITH MR. EDLIN. THOSE TWO EXHIBITS WERE 504 AND 551. THOSE SHOULD BE IN THE COURT'S BINDER. THEY BOTH INCLUDE PRESENTATIONS OR MEMORANDA SENT FROM THERANOS TO THE MILITARY. THOSE PRESENTATION WERE APPROVED BY MS. HOLMES WE EXPECT THIS WITNESS WILL TESTIFY. AND THE CONTENT INCLUDES SOME FALSE STATEMENTS. SPECIFICALLY EXHIBIT 504 INCLUDES THE REPRESENTATION TO THE MILITARY, EACH THERANOS DEVICE CAN RUN EVERY TEST CURRENTLY AVAILABLE THROUGH TRADITIONAL OR HOSPITAL LAB INFRASTRUCTURE. I PARAPHRASED THE SECOND PORTION OF THAT. THAT WAS NOT TRUE AT THE TIME. IT WAS NEVER TRUE DURING THE OPERATION OF THERANOS. THE FACT THAT THAT REPRESENTATION WAS MADE TO THE MILITARY IS NOT BEING PRESENTED AS CHARACTER EVIDENCE AGAINST MS. HOLMES. IT'S ANYTHING BUT EXTRANEOUS TO THE CHARGED FRAUD. IT'S INEXTRICABLY INTERTWINED WITH THE CHARGED FRAUD FOR TWO REASONS.
FIRST, THIS WAS PART OF THE OVERALL SCHEME TO MISLEAD INVESTORS AS TO THE NATURE OF THERANOS'S CONTACTS WITH THE MILITARY. IN ORDER TO MAKE THAT DECEPTION MORE BELIEVABLE, IN ORDER TO ADD A KERNEL OF TRUTH TO FALSE STATEMENTS ABOUT THERANOS'S CONTACT WITH THE MILITARY, IT WAS IMPORTANT FOR THE MILITARY TO HAVE SOME LEVEL OF CONNECTION WITH THERANOS. IT WAS NECESSARY TO GET THE MILITARY ON THE HOOK, AS IT WERE, AND TO ESTABLISH THAT RELATIONSHIP THAT COULD THEN BE EXAGGERATED LATER. SECONDLY, THIS EVIDENCE IS IMPORTANT BECAUSE IT SHOWS THAT MS. HOLMES WAS AWARE OF THE FALSITY OF HER STATEMENTS WHEN SHE WAS CLAIMING THAT THE THERANOS DEVICE HAD BEEN DEPLOYED BY THE MILITARY. AND BY THE WAY, JUST TO BE CLEAR, THE INDICTMENT IN THIS CASE EXPRESSLY SAYS THAT A CATEGORY OF FALSE STATEMENTS AT ISSUE HERE IS NOT JUST THE AMOUNT OF REVENUE IN THE THERANOS MILITARY RELATIONSHIP, BUT ALSO WHETHER THE DEVICE WAS, IN FACT, DEPLOYED.
THE INDICTMENT ALLEGES THAT HOLMES SAID IT WAS WHEN, IN FACT, IT WAS NOT. TO PROVE THAT SHE WAS AWARE THAT THAT WAS NOT HAPPENING, IT'S IMPORTANT FOR THE JURY TO UNDERSTAND THAT THE MILITARY'S INTEREST IN THE THERANOS DEVICE IN THE FIRST PLACE WAS PREMISED ON A FALSEHOOD. THE MILITARY WANTED A DEVICE THAT COULD DO ALL OF THESE TESTS, A LAB IN A BOX THAT COULD DO EVERYTHING THAT A CONVENTIONAL LAB COULD DO. THAT WAS THE BASIS FOR THE MILITARY'S INTEREST, AND THOSE WERE THE TERMS ON WHICH MS. HOLMES GOT THE MILITARY INTERESTED. BECAUSE SHE KNEW THAT'S WHAT THEY WANTED, AND BECAUSE SHE KNEW THAT THE COMPANY COULDN'T DELIVER ON THAT SPECIFIC PROMISE, SHE WAS WELL AWARE THAT THE DEVICE WAS NOT BEING USED BY THE MILITARY WHEN SHE WAS TELLING PEOPLE IT WAS, AND THAT IT WAS UNLIKELY TO BE USED BY THE MILITARY IN ITS CURRENT FORM BECAUSE IT COULD NOT DO WHAT SHE TOLD THE MILITARY IT COULD DO.
JUDGE DAVILA: AND WHAT IS THE CHRONOLOGY -- WE TALKED ABOUT THIS BEFORE WITH MR. DOWNEY. I THINK MR. DOWNEY'S POINT WAS A POINT THAT YOU RAISED, THE FINANCIAL ARRANGEMENT, AND HE SUGGESTS, MR. DOWNEY -- AND I DON'T MEAN TO SPEAK FOR YOU, MR. DOWNEY -- BUT YOU SUGGESTED LAST WEEK THAT THAT WAS THE CRITICAL -- YOU CAN COME FORWARD. THANK YOU. -- THAT WAS THE COMPONENT THAT THE INDICTMENT SUGGESTS, THAT THE FINANCIAL RELATIONSHIP WAS NOT AS GREAT AS SHE SUGGESTS THAT IT WAS, AND THAT WAS THE FALSITY, IF YOU WILL, AS OPPOSED TO BEING AN INTEGRAL PART, AN IMPORTANT PART OF THE OVERALL SCHEME, IF YOU WILL, THE PLAN AS YOU'VE JUST ARTICULATED. THERE IS A DISTINCTION THERE, MR. DOWNEY.
MR. BOSTIC: AND, YOUR HONOR, MR. DOWNEY AND I ARE TALKING ABOUT THE SAME PARAGRAPH OF THE INDICTMENT. IT'S JUST THAT HE'S TALKING ABOUT ONE PORTION OF IT, WHILE I'M TALKING ABOUT ANOTHER.
JUDGE DAVILA: SURE.
MR. DOWNEY: YOUR HONOR, I THINK THERE'S A COUPLE OF ISSUES. ONE IS WE KNOW AS A BASIC MATTER THIS CAN'T BE INTRODUCED AS PROPENSITY EVIDENCE. MUCH OF WHAT MR. BOSTIC JUST SAID IS OF THE NATURE THAT THERE IS, YOU KNOW, THESE FALSE STATEMENTS WERE MADE IN ONE PLACE, AND THEY'RE MADE IN ANOTHER PLACE, AND MAKING THEM IN MULTIPLE PLACES MAKES THEM MORE CREDIBLE IN OTHER PLACES. THAT'S DRESSED UP PROPENSITY EVIDENCE THAT IS PRECLUDED UNDER 404(A). SECOND, THE HISTORY OF THIS CASE IS IMPORTANT. AS YOUR HONOR KNOWS, WE ASKED, AFTER THE INDICTMENT WAS SUPERSEDED, WHO ARE THE RELEVANT BUSINESS PARTNERS? AND WE SPECIFICALLY ASKED, IS THE DEPARTMENT OF DEFENSE, FOR ANY REASON, ONE OF THOSE BUSINESS PARTNERS THAT IS BEING REFERENCED IN ANY WAY IN THE INDICTMENT? THE GOVERNMENT SAID NO. AS WELL IN THE HISTORY OF THE CASE, WE -- THE 404(B) NOTICE GAVE 80 PAGES OF DISCLOSURE OF REPRESENTATIONS, MISREPRESENTATIONS THAT WERE MADE ON THE VERY ISSUES THAT MR. BOSTIC IS NOW TOUCHING ON, AND NONE OF IT REFERENCED ANY OF WHAT HE'S REFERRING TO NOW, INCLUDING THE EXHIBIT THAT IS AT ISSUE HERE. 551. SO I, I THINK IT'S -- HE IS NOW LEFT SORT OF STANDING ON THE THIN READ OF TRYING TO MAKE AN INEXTRICABLY INTERTWINED EVIDENCE, BUT WHAT HE'S TRYING TO ARGUE IS CONTRARY TO THE RECORD. THE INVESTOR PRESENTATIONS, THE DEPARTMENT OF DEFENSE PRESENTATIONS THAT HE WANTS TO INTRODUCE LONG POST-DATE THE RELATIONSHIP BETWEEN THERANOS AND THE DEPARTMENT OF DEFENSE. EXHIBIT 551 IS A DOCUMENT THAT WAS SENT TO AN ARMY SURGEON THAT THERANOS HAD BEEN WORKING WITH FOR YEARS. SO I THINK WE CAN MISPORTRAY THE HISTORY OF THE CASE, MISPORTRAY WHETHER IT'S PROPENSITY EVIDENCE, AND MISPORTRAY THE FACTS, BUT UNDER NOT -- BUT UNDER ANY OF THOSE THREE CONCERNS, NONE OF THIS SHOULD COME IN.
JUDGE DAVILA: SO I THINK WHAT I HEAR MR. BOSTIC SAYING IS THAT IN ORDER TO GET AND KEEP INVESTORS INTERESTED AND TO USE THE MILITARY AS AN IMPRIMATUR, WE HAVE THE MILITARY, SO THAT SHOULD BE AN INTEREST TO AN INVESTOR BECAUSE IF THE MILITARY IS INTERESTED IN THE TOPIC IN THE TECHNOLOGY, THEN THAT IMPRIMATUR WILL ENCOURAGE OTHER INVESTORS TO INVEST. I THINK -- IS THAT WHAT YOU'RE SAYING, MR. BOSTIC?
MR. BOSTIC: YES, YOUR HONOR. I THINK IT'S THE FALSE STATEMENTS ABOUT THERANOS'S RELATIONSHIP WITH THE MILITARY WERE MATERIAL TO INVESTORS. THE JURY WILL HEAR THAT. IN ORDER TO MAKE THOSE STATEMENTS MORE CREDIBLE, AND IN ORDER TO MAKE THEM MORE DIFFICULT TO DETECT AS FALSE STATEMENTS, IT WAS IMPORTANT FOR THERANOS TO HAVE AN ACTUAL RELATIONSHIP WITH THE MILITARY, AND IN ORDER TO CREATE THAT RELATIONSHIP, IN ORDER TO CREATE THAT INTEREST ON THE PART OF THE MILITARY, MS. HOLMES RELIED ON FALSE MISREPRESENTATIONS TO THE MILITARY. SO IT WAS ALL IN SERVICE OF THE SCHEME TO DEFRAUD INVESTORS.
JUDGE DAVILA: AND WHAT ABOUT THE TIMING? THIS IS SOMETHING I'M CONCERNED ABOUT, THE TIMING OF IT. IT SOUNDS LIKE THERE'S AN 18-MONTH SWING ON EITHER SIDE OF THIS, AND DOES THAT DO ANYTHING TO THE RELEVANCE OF IT THEN?
MR. BOSTIC: SO I'M NOT SURE I UNDERSTAND MR. DOWNEY'S POINT THERE, TO BE HONEST. THE KEY CHRONOLOGY POINT HERE IS THAT THOSE FALSE STATEMENTS TO THE MILITARY PREDATED FALSE STATEMENTS THAT MS. HOLMES MADE TO INVESTORS AND OTHERS ABOUT THE STATUS OF THE THERANOS MILITARY RELATIONSHIP. SO BECAUSE MS. HOLMES KNEW ABOUT THESE FALSE STATEMENTS TO THE MILITARY, KNEW THAT THE MILITARY'S CONTINUED INTEREST WAS BASED ON A FALSE IMPRESSION OF WHAT THE THERANOS DEVICE COULD DO, SHE KNEW MONTHS LATER, YEARS LATER, THAT WHEN SHE WAS TELLING ANYONE THAT THE THERANOS DEVICE WAS BEING USED BY THE MILITARY, THAT THAT WAS FALSE, THAT THAT COULD NOT BE THE CASE BECAUSE THE MILITARY WASN'T INTERESTED IN THE THERANOS DEVICE AS IT EXISTED, IT WAS INTERESTED IN THE THERANOS DEVICE AS IT HAD BEEN REPRESENTED BY MS. HOLMES EARLIER.
JUDGE DAVILA: AND SO DOES IT MATTER ABOUT THE TIMING OF THOSE? I UNDERSTAND THAT IF THERE WAS KNOWLEDGE AT TIME ONE THAT THIS DIDN'T WORK OR THERE WAS AN ISSUE WITH IT, AND THEN TIME THREE I'M MAKING A REPRESENTATION TO INVESTORS THAT'S CONTRARY TO -- THAT'S MISLEADING, THAT'S ONE THING. AND I'M NOT SURE -- AND I THINK THAT'S WHAT IS MR. DOWNEY IS TALKING ABOUT, THAT -- THERE'S SOME BREAK THERE IN THAT TIMELINE.
MR. BOSTIC: I THINK THESE EVENTS DO OCCUR IN THE CORRECT ORDER FOR ADMISSIBILITY BECAUSE THE FALSE STATEMENTS TO THE MILITARY THAT WE'RE SEEKING TO ADMIT DO PREDATE THE FALSE STATEMENTS TO INVESTORS. IF I WERE SEEKING TO ADMIT A FALSE STATEMENT TO THE MILITARY IN 2016 OR 2017, THEN IT MIGHT BE LESS CLEAR HOW THAT RELATES TO MS. HOLMES'S KNOWLEDGE YEARS EARLIER WHEN SHE WAS MISREPRESENTING TO INVESTORS THE NATURE OF THE MILITARY RELATIONSHIP. BECAUSE THIS IS IN 2012, IT DOES BEAR ON HER KNOWLEDGE LATER WHEN THOSE STATEMENTS WERE MADE.
JUDGE DAVILA: SO YOU SEEK TO GET THIS INFORMATION IN NOW, AND THEN PERHAPS LATER YOU'LL CALL IN INVESTORS WHO ACTED IN RELIANCE ON THIS EVIDENCE? IS THAT HOW THAT WILL WORK?
MR. BOSTIC: SO THE INVESTORS RELIED ON WHAT MS. HOLMES TOLD THEM ABOUT THE STATUS OF MILITARY RELATIONSHIP AFTER SHE HAD MADE THESE MISREPRESENTATIONS TO THE MILITARY. THESE MISREPRESENTATIONS ARE IMPORTANT TO SHOW THAT WHEN MS. HOLMES SAID WHAT SHE SAID TO INVESTORS, SHE KNEW IT WAS FALSE.
MR. DOWNEY: YOUR HONOR, IF I MAY? THE STATUS OF THE RELATIONSHIP WITH THE MILITARY WHEN MS. HOLMES SPEAKS TO INVESTORS IS WHAT IT IS. IF THE REPRESENTATIONS ARE IN 2013, LATE 2013, AND WE'RE TALKING ABOUT EARLY 2012 IS WHEN THIS DOCUMENT IS, THE STATUS OF THAT RELATIONSHIP IS WHAT IT IS. THAT SHOULD BE EVALUATED BY AN EVALUATION OF WHAT THAT RELATIONSHIP LOOKED LIKE AND MS. HOLMES'S STATE OF MIND AS TO WHERE IT WAS AND WHERE IT WAS GOING. IT HAS NOTHING TO DO WITH THE INITIATION OF THE RELATIONSHIP OR REPRESENTATIONS THAT WERE MADE TO CREATE IT, YOU KNOW, 18 TO 24 OF MONTHS BEFORE. IT'S COMPLETELY DISCONNECTED AND BEING INTRODUCED TO SHOW SOME PURPORTED PROPENSITY. I THINK THE CONCERN THAT THE GOVERNMENT HAS IS THERE'S A VERY RICH DIALOGUE BETWEEN THE GOVERNMENT AND THERANOS OVER A LONG PERIOD OF TIME, MANY YEARS, DATING YEARS BACK BEFORE THE PRESENTATION THAT THE GOVERNMENT IS ATTEMPTING TO INTRODUCE, AND THEY WANT TO NULLIFY THE SIGNIFICANCE OF THAT. THAT'S WHAT THIS IS ABOUT.
MR. BOSTIC: YOUR HONOR, ON THAT --
JUDGE DAVILA: ISN'T THAT SOMETHING YOU CAN PROBE ON CROSS-EXAMINATION?
MR. DOWNEY: WELL, OF COURSE I CAN. BUT IT HAS NOTHING REALLY TO DO WITH THESE REPRESENTATIONS. WHAT I'LL BE PROBING ON CROSS-EXAMINATION IS, WHAT WAS THE STATUS OF THE RELATIONSHIP. THAT'S WHAT IS RELEVANT IN THE CASE.
MR. BOSTIC: YOUR HONOR, I JUST HAVE TO POINT OUT SOME TENSION IN THE POSITION THAT THE DEFENSE IS TAKING NOW VERSUS THE POSITION THAT IT TOOK A FEW MINUTES AGO WHEN IT SAID THAT ALL THAT MATTERED WAS MS. HOLMES'S STATE OF MIND, THAT IT'S ALL ABOUT SHOWING WHAT SHE WAS AWARE OF, HER KNOWLEDGE, HER INTENT, AND THAT THESE THINGS NEED TO BE JUDGED FROM HER PERSPECTIVE, NOT JUST BASED ON WHAT THE REALITY WAS. I'M NOW HEARING SOMETHING LIKE THE OPPOSITE, THAT THE GOVERNMENT IS ONLY ENTITLED TO EXPLORE WHAT WAS HAPPENING IN THAT RELATIONSHIP AND THAT EVIDENCE OF WHAT MS. HOLMES KNEW AND THE STATEMENTS THAT SHE MADE AREN'T RELEVANT. BUT, OF COURSE, THIS IS A WIRE FRAUD CASE. IT DOES ALL COME BACK TO MS. HOLMES'S INTENT, AND HER STATEMENTS JUST MONTHS BEFORE SHE WAS MAKING FALSE MISREPRESENTATIONS TO INVESTORS ON THIS SAME TOPIC ARE HIGHLY PROBATIVE OF HER INTENT THERE.
MR. DOWNEY: YOUR HONOR, IF I MAY, AND I KNOW WE'VE EXHAUSTED THIS ISSUE, I THINK THAT STATEMENT DEMONSTRATES THE PROBLEM. THE GOVERNMENT IS ENTITLED TO EXPLORE MS. HOLMES'S STATE OF MIND. THEY'RE NOT ENTITLED TO EXPLORE IT THROUGH PROPENSITY EVIDENCE.
JUDGE DAVILA: ALL RIGHT. THANK YOU FOR THE CONVERSATION. I APPRECIATE IT. I'LL STEP DOWN AND I'LL BRING OUR JURY OUT.
MR. DOWNEY: YOUR HONOR, UNFORTUNATELY, I HAVE ONE OTHER THING BASED ON A DISCLOSURE THAT I GOT FROM THE GOVERNMENT THIS MORNING.
JUDGE DAVILA: OH.