Alan Eisenman — Direct/Cross
1,205 linesDIRECT EXAMINATION BY MR. BOSTIC:
MR. BOSTIC: GOOD AFTERNOON, MR. EISENMAN.
ALAN EISENMAN: GOOD AFTERNOON.
MR. BOSTIC: LET ME START BY ASKING WAS THERE A TIME WHEN YOU WERE AN INVESTOR IN A COMPANY CALLED THERANOS?
ALAN EISENMAN: YES, THERE WAS.
MR. BOSTIC: I'D LIKE TO TALK TO YOU ABOUT THAT, BUT FIRST LET ME ASK YOU SOME QUESTIONS ABOUT YOUR BACKGROUND. FIRST, WHERE DO YOU LIVE?
ALAN EISENMAN: HOUSTON, TEXAS.
MR. BOSTIC: ARE YOU CURRENTLY EMPLOYED?
ALAN EISENMAN: I AM RETIRED.
MR. BOSTIC: BEFORE YOU RETIRED, WHAT WAS YOUR PROFESSION?
ALAN EISENMAN: I WOULD SAY FINANCIAL PLANNER AND A MONEY MANAGER.
MR. BOSTIC: AND FOR HOW LONG WERE YOU A FINANCIAL PLANNER AND MONEY MANAGER?
ALAN EISENMAN: THIRTY-FIVE YEARS.
MR. BOSTIC: AND WHEN DID YOU RETIRE?
ALAN EISENMAN: FOUR YEARS AGO.
MR. BOSTIC: CAN YOU GIVE US AN OVERVIEW OF YOUR EDUCATIONAL BACKGROUND, PLEASE?
ALAN EISENMAN: I WENT TO UNDERGRAD AT UNIVERSITY OF TEXAS AT AUSTIN; WENT TO LAW SCHOOL AT UNIVERSITY OF HOUSTON; AND A YEAR AFTER LAW SCHOOL I PICKED UP MY CPA CERTIFICATE.
MR. BOSTIC: AND CAN YOU GIVE US, JUST AT A HIGH LEVEL, AN OVERVIEW OF YOUR CAREER FOLLOWING YOUR EDUCATION?
ALAN EISENMAN: FOLLOWING MY EDUCATION, I DID SOME ESTATE PLANNING AND TAX WORK FOR A COUPLE OF YEARS, AND THEN I WENT TO WORK FOR A COUPLE OF REAL ESTATE DEVELOPERS IN HOUSTON WHO WERE GENERATING SIGNIFICANT CASH FLOW, AND I WAS RESPONSIBLE FOR PUTTING THEIR CASH FLOW TO WORK AND LOOKING AT A VARIETY OF INVESTMENTS, ALSO DOING A LITTLE BIT OF TAX WORK FOR THEM. AFTER THAT I GOT MY SERIES 7 AND STARTED ACQUIRING CLIENTS AND DOING INVESTING IN PUBLIC MARKETS.
MR. BOSTIC: YOU MENTIONED YOUR WORK AS A MONEY MANAGER. IN YOUR PERSONAL CAPACITY, DID YOU ALSO DO SOME INVESTING IN COMPANIES?
ALAN EISENMAN: FREQUENTLY.
MR. BOSTIC: AS OF AROUND 2005, CAN YOU TELL ME ABOUT THAT ACTIVITY AT A HIGH LEVEL? WHAT WERE YOUR PRACTICES THERE?
ALAN EISENMAN: IN 2005 I HAD CLIENTS THAT I WAS INVESTING IN PUBLIC MARKETS, BUT I ALSO HAD A NETWORK OF FRIENDS AND FAMILY THAT WE WERE LOOKING AT PRIVATE EQUITY.
MR. BOSTIC: AND DID THAT INCLUDE INVESTING YOUR PERSONAL ASSETS IN COMPANIES?
ALAN EISENMAN: YES, IT DID.
MR. BOSTIC: APPROXIMATELY WHEN DID YOU FIRST INVEST IN THERANOS?
ALAN EISENMAN: I BELIEVE IT WAS 2006.
MR. BOSTIC: AND UP TILL THAT POINT HAD YOU HAD ANY PREVIOUS EXPERIENCE INVESTING IN A BIOTECH COMPANY?
ALAN EISENMAN: NO.
MR. BOSTIC: LET'S TALK ABOUT HOW YOU CAME TO BE ACQUAINTED WITH THERANOS, THE COMPANY. DO YOU REMEMBER HOW YOU FIRST HEARD ABOUT IT?
ALAN EISENMAN: YES, I DO.
MR. BOSTIC: HOW WAS THAT?
ALAN EISENMAN: ONE OF MY CLOSE PERSONAL FRIENDS IN HOUSTON, DAVID HARRIS, WAS THE FINANCIAL ADVISOR TO THE HOLMES FAMILY, AND HE TOLD ME AND ANOTHER GROUP OF FRIENDS ABOUT THIS OPPORTUNITY.
MR. BOSTIC: AND WHAT DID HE TELL YOU ABOUT THE COMPANY AT THAT TIME?
ALAN EISENMAN: HE TOLD ME THAT ELIZABETH WAS BRILLIANT; THAT SHE WAS DROPPING OUT OF SCHOOL TO START A COMPANY; AND SHE WAS PARTIALLY ON HER WAY. HE HAD INVESTED IN THE FIRST SEED ROUND, AND THEY WERE RAISING MONEY IN A SECOND SEED ROUND, AND GOT ME INVOLVED TO DO A LITTLE DUE DILIGENCE AND MAKE A DECISION WHETHER I WANTED TO CO-INVEST WITH HIS OTHER GROUP OF HOUSTON INVESTORS IN THE SECOND SEED ROUND.
MR. BOSTIC: AND YOU'RE USING THAT TERM "SEED ROUND." WHAT DOES THAT MEAN IN THE CONTEXT OF AN INVESTMENT IN A COMPANY LIKE THIS?
ALAN EISENMAN: JUST LIKE IN A TREE, IT'S A VERY EARLY STAGE.
MR. BOSTIC: AND YOUR UNDERSTANDING WHEN YOU FIRST FOUND OUT ABOUT THE COMPANY WAS THAT THERE HAD BEEN ONE ROUND OF INVESTMENT THAT HAD ALREADY OCCURRED?
ALAN EISENMAN: CORRECT.
MR. BOSTIC: AND THE SECOND ROUND OF SEED FUNDING WAS PENDING?
ALAN EISENMAN: THAT IS CORRECT.
MR. BOSTIC: WAS MR. HARRIS ABLE TO PUT YOU IN CONTACT WITH MS. HOLMES AT THERANOS?
ALAN EISENMAN: YES, HE WAS.
MR. BOSTIC: AND WERE YOU IN TOUCH WITH MS. HOLMES PRIOR TO YOUR FIRST INVESTMENT IN THE COMPANY?
ALAN EISENMAN: YES, I WAS.
MR. BOSTIC: WHAT FORM DID THAT CONTACT TAKE? DID YOU HAVE AN IN-PERSON MEETING? DID YOU SPEAK ON THE PHONE?
ALAN EISENMAN: WE HAD SEVERAL CONVERSATIONS ON THE PHONE.
MR. BOSTIC: WHAT DO YOU RECALL ABOUT THOSE CONVERSATIONS AND INFORMATION THAT YOU GAINED?
ALAN EISENMAN: I RECALL THAT LARRY ELLISON WAS INVOLVED IN THE COMPANY, WAS ON HER BOARD. IT WAS THE ONLY BOARD THAT HE SERVED ON OTHER THAN ORACLE. THE SEED ROUND WAS APPROXIMATELY $30 MILLION. HE WAS TAKING $20 MILLION OF THE SEED ROUND. I WAS TOLD THAT HE WAS A PERSONAL ADVISOR AND SPOKE TO ELIZABETH ON A WEEKLY BASIS.
MR. BOSTIC: DID YOU HAVE -- BEFORE YOU INVESTED IN THE COMPANY IN 2006, DID YOU HAVE A SINGLE CONVERSATION WITH MS. HOLMES OR MULTIPLE CONVERSATIONS?
ALAN EISENMAN: MULTIPLE CONVERSATIONS.
MR. BOSTIC: AROUND THE TIME THAT YOU INVESTED, WHAT WAS YOUR UNDERSTANDING FROM THOSE CONVERSATIONS AS TO WHAT THE COMPANY WAS DOING?
ALAN EISENMAN: MY UNDERSTANDING IS THEY HAD A TECHNOLOGY THAT WOULD TAKE A RELATIVELY SMALL AMOUNT OF BLOOD AND WOULD PERFORM A LOT OF TESTS THAT WERE CURRENTLY REQUIRED BY A MUCH LARGER BLOOD DRAW, AND IT WOULD PROVIDE THOSE TESTS IN A MUCH MORE RAPID FASHION.
MR. BOSTIC: AROUND THIS TIME PERIOD, THE TIMING OF YOUR FIRST INVESTMENT, HOW ACCESSIBLE WAS MS. HOLMES TO YOU?
ALAN EISENMAN: EXTREMELY ACCESSIBLE. WE WOULD HAVE UPDATED QUARTERLY MEETINGS BY TELEPHONE, AND THAT OCCURRED FOR THE FIRST COUPLE YEARS OF OUR INVESTMENT.
MR. BOSTIC: DID YOU HAVE, FOR EXAMPLE, MS. HOLMES'S DIRECT CONTACT INFORMATION, INCLUDING HER CELL NUMBER?
ALAN EISENMAN: I DID.
MR. BOSTIC: AND DID YOUR CONVERSATIONS WITH MS. HOLMES CONTINUE AFTER YOU MADE YOUR INITIAL INVESTMENT IN THE COMPANY?
ALAN EISENMAN: THEY DID.
MR. BOSTIC: BASED ON YOUR CONVERSATIONS WITH MS. HOLMES AROUND THE TIME OF THAT FIRST INVESTMENT, SO AROUND 2006, HOW FAR ALONG DID YOU UNDERSTAND THE THERANOS TECHNOLOGY TO BE?
ALAN EISENMAN: I UNDERSTOOD THE TECHNOLOGY TO BE SIGNIFICANTLY FAR ALONG FOR AN EARLY STAGE COMPANY. ONE OF THE THINGS THAT IMPRESSED ME, IN ADDITION TO HAVING LARRY ELLISON INVOLVED WITH CAPITAL AND WITH TIME, IS BEFORE I MADE MY FIRST INVESTMENT I WAS ALSO TOLD THAT THEY CURRENTLY HAD CONTRACTS WITH FIVE OR SIX MAJOR INTERNATIONAL PHARMACEUTICAL COMPANIES. AND I TOOK NOTES AND CONTEMPORANEOUS NOTES. AND IT WAS AN IMPRESSIVE LIST OF COMPANIES. IT WAS COMPANIES LIKE PFIZER, BRISTOL MYERS, NOVARTIS, SMITHKLINE BEECHAM. SO TO ME, THAT PUT AN ADDITIONAL STAMP OF APPROVAL ON THIS INVESTMENT.
MR. BOSTIC: AND YOU SAID THAT YOU UNDERSTOOD FROM THOSE CONVERSATIONS THAT THE TECHNOLOGY WAS, I'LL PARAPHRASE IT, FAIRLY FAR ALONG FOR AN EARLY STAGE COMPANY; IS THAT CORRECT?
ALAN EISENMAN: MY UNDERSTANDING IS THAT THESE INTERNATIONAL PHARMACEUTICAL COMPANIES HAD ADOPTED THIS TECHNOLOGY IN SOME OF THEIR CLINICAL TRIALS. SO I WAS UNDER THE IMPRESSION THAT NOT ONE COMPANY, AND NOT ONE MINOR COMPANY, BUT SEVERAL MAJOR COMPANIES WERE USING THIS TECHNOLOGY FOR SOME OF THEIR CLINICAL STUDIES AND DRUGS. SO MY UNDERSTANDING WAS THAT IT WAS SIGNIFICANTLY FAR ALONG FOR AN EARLY STAGE COMPANY.
MR. BOSTIC: YOU STILL UNDERSTOOD, THOUGH, THAT THIS WAS AN EARLY STAGE COMPANY?
ALAN EISENMAN: ABSOLUTELY, YES.
MR. BOSTIC: AND DID YOU HAVE AN UNDERSTANDING AS TO WHETHER R&D WORK AT THERANOS WAS COMPLETE OR WHETHER THERE WAS STILL RESEARCH AND DEVELOPMENT TO BE DONE?
ALAN EISENMAN: MY UNDERSTANDING IS THAT THE TECHNOLOGY WAS TO A POINT WHERE IT WAS SOLVING PROBLEMS AND IT WAS BEING USED, BUT IT WAS A WORK-IN-PROCESS AND THAT THERE WERE GOING TO BE FUTURE ITERATIONS AND FUTURE IMPROVEMENTS.
MR. BOSTIC: AND THAT UNDERSTANDING THAT THERE WAS STILL SOME DEVELOPMENT WORK TO BE DONE, DID THAT COME THROUGH IN MS. HOLMES'S DESCRIPTIONS TO YOU?
ALAN EISENMAN: THAT'S A HARD QUESTION TO ANSWER BECAUSE MY UNDERSTANDING IS THE TECHNOLOGY WAS WORKING BUT WAS WORKING AT A LEVEL THAT COULD BE IMPROVED UPON OVER TIME.
MR. BOSTIC: AROUND THAT TIME WHAT WERE YOUR SOURCES OF INFORMATION ABOUT WHAT THERANOS WAS DOING? AGAIN, WE'RE STILL IN THE 2006 TIMEFRAME.
ALAN EISENMAN: MY SOURCE OF INFORMATION WERE PRIMARILY CALLS WITH ELIZABETH.
MR. BOSTIC: WAS THERE ANYONE ELSE THAT YOU WERE GETTING INFORMATION ABOUT THE COMPANY FROM?
ALAN EISENMAN: THERE WAS A TIME, AND I THINK IT WAS A LITTLE BIT LATER IN THE TIMEFRAME, THAT I REACHED OUT TO DON LUCAS, WHO WAS THEIR CHAIRMAN OF THE BOARD AND ALSO THE CHAIRMAN OF THE BOARD OF ORACLE, AND THERE WERE SOME CONVERSATIONS AMONG THE HOUSTON INVESTORS, BUT THE INFORMATION REALLY WASN'T FRESH INFORMATION, IT WAS JUST PASSING ALONG. SOMETIMES DAVID HARRIS WOULD HAVE CALLS, AND HE WOULD PASS ALONG INFORMATION TO ME. AND OCCASIONALLY I WOULD HAVE AN INDEPENDENT CALL, AND I WOULD PASS ALONG INFORMATION TO DAVID AND A COUPLE OF THE OTHER HOUSTON INVESTORS.
MR. BOSTIC: WHAT WAS YOUR PRIMARY SOURCE OF INFORMATION ABOUT THE COMPANY DURING AT THAT TIME?
ALAN EISENMAN: ELIZABETH.
MR. BOSTIC: AND AGAIN, WE'RE TALKING ABOUT ONE-ON-ONE CALLS BETWEEN YOU AND MS. HOLMES?
ALAN EISENMAN: MOSTLY ONE-ON-ONE CALLS. THERE WERE A COUPLE OF QUARTERLY CALLS WHERE SOME OF THE OTHER HOUSTON INVESTORS WERE INVOLVED, BUT MOSTLY ONE-ON-ONE CALLS.
MR. BOSTIC: YOU MENTIONED THAT YOU TOOK CONTEMPORANEOUS NOTES OF THESE CALLS; IS THAT CORRECT?
ALAN EISENMAN: YES, I DID FROM EVERY CALL.
MR. BOSTIC: TELL ME ABOUT THAT. TELL ME ABOUT YOUR NOTE TAKING PRACTICE FOR THESE CALLS?
ALAN EISENMAN: I'VE BEEN INVOLVED IN INVESTMENTS FOR DECADES, AND IT'S JUST MY PRACTICE ANY TIME I TALK TO SOMEONE I TAKE CONTEMPORANEOUS NOTES BECAUSE PEOPLE HAVE A TENDENCY TO EXAGGERATE, AND I LIKE TO TAKE A SNAPSHOT OF THAT POINT IN TIME AND WHAT THEIR THINKING IS, AND USE THAT AS A BASELINE TO COMPARE AND SEE WHY WE'RE ON SCHEDULE AND WHY WE'RE NOT ON SCHEDULE.
MR. BOSTIC: AND DO YOU TAKE THOSE NOTES DURING THE CONVERSATIONS? IMMEDIATELY AFTERWARDS? WHAT IS YOUR PRACTICE THERE?
ALAN EISENMAN: CONTEMPORANEOUS, DURING THE CONVERSATIONS.
MR. BOSTIC: AND JUST TO BE CLEAR, WAS THAT YOUR PRACTICE, GENERALLY SPEAKING, AS TO THE CALLS WITH MS. HOLMES?
ALAN EISENMAN: YES.
MR. BOSTIC: AROUND THE 2006 TIME PERIOD, DO YOU RECALL MS. HOLMES TELLING YOU ANYTHING ABOUT THE FINANCIAL HEALTH OR THE FINANCIAL STATUS OF THE COMPANY?
ALAN EISENMAN: YES, I DO.
MR. BOSTIC: WHAT DO YOU REMEMBER ABOUT THAT?
ALAN EISENMAN: THEY'RE IN MY NOTES, BUT SHE TOLD ME CERTAIN REVENUE LEVELS THAT THEY WERE ACHIEVING, CERTAIN REVENUE LEVELS THAT THEY WERE GOING TO ACHIEVE IN THE NEXT YEAR OR TWO, SAID THAT AT THE TIME OF MY INVESTMENT THEY WERE ALREADY TALKING TO INVESTMENT BANKERS, SPECIFICALLY MORGAN STANLEY, ABOUT AN IPO IN THE 12 TO 18 MONTH TIME PERIOD, WHICH WAS ANOTHER REASON THAT COMPELLED ME TO MAKE MY INVESTMENT KNOWING THAT ALREADY INVESTMENT BANKERS ARE LOOKING AT THIS OR THEY'RE HAVING CONVERSATIONS AND THERE'S A POSSIBILITY FOR LIQUIDITY EVENT IN THE NEXT YEAR OR SO.
MR. BOSTIC: AND I WANT TO FOLLOW UP MORE ON THE REVENUE NUMBERS THAT YOU HEARD FROM MS. HOLMES. SITTING HERE TODAY, DO YOU HAVE A MEMORY OF WHAT REVENUE NUMBERS MS. HOLMES WAS REPRESENTING TO YOU AROUND THE 2006 TIME PERIOD?
ALAN EISENMAN: YES, I DO. THEY WERE SUPPOSED TO GENERATE ABOUT $50 OR $60 MILLION IN REVENUES IN THE COMING YEAR AND POTENTIALLY $200 MILLION IN REVENUES IN 2008.
MR. BOSTIC: AND AS AN INVESTOR IN THE COMPANY, WAS THAT IMPORTANT INFORMATION FOR YOU?
ALAN EISENMAN: EXTREMELY IMPORTANT.
MR. BOSTIC: WHY SO?
ALAN EISENMAN: A START-UP COMPANY WHO IS GENERATING HUNDREDS OR HUNDREDS OF THOUSANDS OR A FEW MILLION DOLLARS OF REVENUE, A COMPANY THAT HAS THE POTENTIAL A YEAR OR SO DOWN THE ROAD TO GENERATE $200 MILLION IN REVENUE IS PRETTY FAR ALONG AND POTENTIALLY VERY SUCCESSFUL AND VERY VALUABLE.
MR. BOSTIC: AND THAT $200 MILLION NUMBER, IS THAT REFLECTED IN THE NOTES THAT YOU TOOK DURING YOUR CALLS WITH MS. HOLMES?
MR. DOWNEY: YOUR HONOR, OBJECTION TO THE DESCRIPTION TO THESE DOCUMENTS. EITHER THE DOCUMENTS COME IN OR THEY DON'T. I DON'T THINK WE SHOULD BE TALKING ABOUT UNADMITTED DOCUMENTS.
JUDGE DAVILA: ARE YOU ASKING WHETHER HE MEMORIALIZED THESE THINGS?
MR. BOSTIC: YES, YOUR HONOR. I CAN REFRAME THE QUESTION.
JUDGE DAVILA: SURE, WHY DON'T YOU.
BY MR. BOSTIC:
MR. BOSTIC: MR. EISENMAN, HAVE YOU REVIEWED THE NOTES OF YOUR CONVERSATIONS WITH MS. HOLMES SINCE THOSE CONVERSATIONS?
ALAN EISENMAN: YES, I HAVE.
MR. BOSTIC: AND WHEN WAS THE LAST TIME THAT YOU REVIEWED THOSE NOTES?
ALAN EISENMAN: LAST NIGHT.
MR. BOSTIC: AND DID THEY GENERALLY REFRESH YOUR RECOLLECTION ABOUT THE CONTENT OF YOUR CONVERSATIONS WITH MS. HOLMES?
ALAN EISENMAN: YES, THEY DO. I HAVE A CLEAR RECOLLECTION OF THAT.
MR. BOSTIC: APOLOGIES FOR TALKING OVER YOU. SITTING HERE TODAY, DO YOU HAVE A RECOLLECTION OF MS. HOLMES CONVEYING TO YOU THAT REVENUE PROJECTION OF $200 MILLION?
ALAN EISENMAN: YES, I DO. AND I KNOW YOU'RE SUPPOSED TO ASK THE QUESTIONS, BUT HOW THAT RELATES IS THE ROUND THAT WE WERE IN WAS A $20 MILLION ROUND.
MR. DOWNEY: OBJECTION.
JUDGE DAVILA: EXCUSE ME. EXCUSE ME. LET'S WAIT FOR THE NEXT QUESTION.
ALAN EISENMAN: OKAY.
BY MR. BOSTIC:
MR. BOSTIC: THANK YOU, MR. EISENMAN.
ALAN EISENMAN: SORRY.
MR. BOSTIC: SO BASED ON THE INFORMATION THAT YOU WERE RECEIVING FROM MS. HOLMES IN THAT 2006 TIME PERIOD, YOU MADE THE DECISION TO INVEST IN THE COMPANY; CORRECT?
ALAN EISENMAN: THAT IS CORRECT.
MR. BOSTIC: AND HOW MUCH DID YOU INVEST IN THAT FIRST ROUND IN THE COMPANY?
ALAN EISENMAN: PERSONALLY OR FAMILY WIDE?
MR. BOSTIC: GIVE US A BREAKDOWN IF YOU CAN?
ALAN EISENMAN: OKAY. MY WIFE AND I SHARED A $900,000 INVESTMENT, AND EACH OF MY THREE KIDS HAD A $90,000 INVESTMENT.
MR. BOSTIC: DOES THAT MEAN APPROXIMATELY $1.1 MILLION?
ALAN EISENMAN: APPROXIMATELY. A LITTLE CLOSER TO 1.2 BUT --
MR. BOSTIC: FOLLOWING THAT INVESTMENT, HOW FREQUENTLY WERE YOU IN CONTACT WITH MS. HOLMES?
ALAN EISENMAN: AT LEAST QUARTERLY.
MR. BOSTIC: AND GENERALLY SPEAKING, WERE THOSE PHONE CALLS?
ALAN EISENMAN: THOSE WERE PHONE CALLS. ONE PERSONAL VISIT.
MR. BOSTIC: OKAY. I'LL CIRCLE BACK TO THAT. FOR THOSE PHONE CALLS, WERE THEY PRESCHEDULED AT A CERTAIN TIME? HOW DID THEY COME TO TAKE PLACE?
ALAN EISENMAN: WE HAD AN UNDERSTANDING THAT THERE WOULD BE A QUARTERLY UPDATE, AND EVERY QUARTER TYPICALLY I WOULD REACH OUT AND SAY, YOU KNOW, WE'RE COMING UP TO THE QUARTER, CAN WE SCHEDULE SOMETHING? AND WE WOULD PUT SOMETHING ON THE CALENDAR.
MR. BOSTIC: AND FROM YOUR PERSPECTIVE, WHAT WAS THE PURPOSE OF THOSE CALLS WITH MS. HOLMES?
ALAN EISENMAN: TO DETERMINE THE PROGRESS OF THE COMPANY.
MR. BOSTIC: AND WHY WAS THAT INFORMATION THAT YOU NEEDED TO HAVE?
ALAN EISENMAN: BECAUSE I'M ALWAYS INTERESTED IN FOLLOWING THE COMPANIES THAT I'M INVESTED IN. THERE'S ALWAYS AN OPPORTUNITY TO INVEST MORE IN LATER ROUNDS. THERE'S POTENTIALLY AN OPPORTUNITY FOR AN EXIT, WHICH IN THE EARLY YEARS THERE WAS COMMUNICATED THAT THERE WOULD BE AN EXIT ONE YEAR AWAY, TWO YEARS AWAY, AND THAT KEPT GETTING PUSHED FURTHER AWAY. AND I WANT TO BE SENSITIVE TO THE VALUE PROPOSITION IF I'M GOING TO CONSIDER A POTENTIAL EXIT.
MR. BOSTIC: DO YOU RECALL WHETHER YOUR DISCUSSIONS DURING THOSE CALLS INCLUDED MS. HOLMES PROVIDING INFORMATION ABOUT PRODUCT DEVELOPMENT AND THE STATE OF THE TECHNOLOGY?
ALAN EISENMAN: YES, I DO RECALL, AND THAT WAS THE SUBSTANCE OF THE CALLS.
MR. BOSTIC: DURING THAT TIME PERIOD, SO NOW WE'RE TALKING ABOUT FOLLOWING YOUR INVESTMENT, 2006, 2007, DID YOU HAVE AN UNDERSTANDING OF WHAT TECHNOLOGY OR WHAT KIND OF DEVICE THERANOS WAS DEVELOPING?
ALAN EISENMAN: YES.
MR. BOSTIC: AND WHAT WAS YOUR UNDERSTANDING?
ALAN EISENMAN: MY UNDERSTANDING WAS IT WAS A DEVICE TO ANALYZE BLOOD THAT WAS MORE ACCURATE, AND PROVIDED MORE RAPID RESULTS, AND INVOLVED A SMALLER BLOOD DRAW THAN CONVENTIONAL BLOOD TESTING EQUIPMENT AND BLOOD TESTING THERAPIES.
MR. BOSTIC: DID MS. HOLMES TELL YOU ANYTHING ABOUT THE SCALEABILITY OF THE THERANOS TECHNOLOGY?
ALAN EISENMAN: IT DEPENDS ON WHICH YEAR, BUT, YES, THERE WERE CONVERSATIONS ALONG THE WAY ABOUT THE SCALEABILITY, ABOUT THE APPLICATION. AND THERE WERE ALSO CONVERSATIONS A COUPLE OF YEARS AFTER WE INVESTED ABOUT THE DATA THAT THEY WERE GATHERING FROM THESE PHARMACEUTICAL COMPANIES THAT WOULD BE A SECOND SOURCE OF REVENUE POSSIBLY EQUALLING THE FIRST SOURCE OF REVENUE.
MR. BOSTIC: AND WHEN WE'RE TALKING ABOUT SCALEABILITY, WHAT DOES THAT MEAN IN THE CONTEXT OF A COMPANY LIKE THIS?
ALAN EISENMAN: SCALEABILITY MEANS ACCEPTANCE INTO THE MARKETPLACE, MORE APPLICATIONS, MORE PHARMACEUTICAL COMPANIES USING IT IN CLINICAL TRIALS, DRUG DEVELOPMENT. AND THIS IS A FEW YEARS FURTHER DOWN THE ROAD, BUT THERE WAS ALSO TALK ABOUT APPLICATIONS IN THE MILITARY, APPLICATIONS IN FOREIGN COUNTRIES FOR DIFFERENT TYPES OF DISEASES THAT WERE MORE RAMPANT IN CERTAIN AREAS OF THE WORLD.
MR. BOSTIC: AND THIS WAS -- WHAT YOU'RE DESCRIBING NOW IS CONTENT OF YOUR CONVERSATIONS WITH MS. HOLMES?
ALAN EISENMAN: YES.
MR. BOSTIC: YOU MENTIONED ONE IN-PERSON MEETING AS WELL DURING THESE EARLY YEARS; IS THAT CORRECT?
ALAN EISENMAN: THAT'S CORRECT.
MR. BOSTIC: AND WHEN DID THAT HAPPEN?
ALAN EISENMAN: IT HAPPENED APPROXIMATELY 2008 OR '09. IT WAS MY HIGH SCHOOL SON'S SPRING BREAK TRIP TO CALIFORNIA, AND OUR FIRST STOP WAS VISITING ELIZABETH AND GETTING A TOUR OF THE LAB.
MR. BOSTIC: WAS THAT AT THE THERANOS HEADQUARTERS?
ALAN EISENMAN: THAT WAS AT THE EARLY THERANOS HEADQUARTERS.
MR. BOSTIC: AND WHAT DO YOU REMEMBER ABOUT THAT VISIT?
ALAN EISENMAN: I REMEMBER BEING TAKEN INTO THE LAB AND SHOWN AN EARLY VERSION OF THE READERS. I RECALL THAT IT HAD MULTIPLE TESTS ON EACH READER. I THINK IT WAS MAYBE FIVE TESTS. SO THEY HAD A PROTOTYPE THAT THEY APPARENTLY WERE USING, AND YOU HAD THE CARTRIDGES, AND THEN YOU HAD THE READER. YOU PUT -- IT WAS EXPLAINED THAT YOU PUT THE BLOOD IN THE CARTRIDGES, YOU PUT THE CARTRIDGE IN THE READER, AND THE READER GAVE YOU THE TEST RESULTS.
MR. BOSTIC: YOU DESCRIBED WHAT YOU SAW AS AN "EARLY VERSION" OF THE READER; IS THAT CORRECT?
ALAN EISENMAN: YES.
MR. BOSTIC: AND WHAT MAKES YOU CALL WHAT YOU SAW AS AN EARLY VERSION?
ALAN EISENMAN: BECAUSE WE LEARNED EITHER FROM RESOURCES IN THE COMPANY OR THE WEBSITE OR PUBLICITY THAT IT WAS DIFFERENT VERSIONS THAT CAME OUT. I THINK THEY CALLED ONE OF THE EARLY VERSIONS THE EDISON, AND THEN THERE WAS THE EDISON 2. I DON'T REMEMBER THE EXACT LABELLING, BUT THERE WERE BETTER AND BETTER VERSIONS OF THE EARLIER TECHNOLOGY THAT APPARENTLY THE FINANCIAL PRESS BROUGHT TO LIGHT.
MR. BOSTIC: CAN YOU DESCRIBE WHAT YOU SAW PHYSICALLY? WHAT DID THE DEVICE OR DEVICES LOOK LIKE?
ALAN EISENMAN: I DON'T HAVE A STRONG RECOLLECTION, BUT I DO REMEMBER THAT THE THING THAT YOU PUT THE SAMPLES IN WAS FAIRLY SMALL, AND THERE WAS SOME KIND OF A BOX THAT LOOKED LIKE A COMPUTER THAT THOSE SAMPLES WENT INTO FOR READING PURPOSES. BUT AGAIN, I DON'T HAVE A STRONG RECOLLECTION. JUST A LITTLE BIT FUZZY.
MR. BOSTIC: AND DO YOU REMEMBER ANYTHING ABOUT THE OVERALL SIZE OF THE DEVICE, JUST ROUGHLY SPEAKING?
ALAN EISENMAN: I REMEMBER THE READER BEING FAIRLY SMALL, AND I THINK IT WAS SORT OF RECTANGULAR.
MR. BOSTIC: WHEN YOU SAY "SMALL," CAN YOU ATTEMPT TO QUANTIFY IT TO SOMETHING?
ALAN EISENMAN: MAYBE A HALF AN INCH BY FOUR INCHES.
MR. BOSTIC: SOMETHING THAT YOU CAN HOLD IN YOUR HANDS?
ALAN EISENMAN: YES.
MR. BOSTIC: AND DID YOU LATER COME TO UNDERSTAND THAT THERANOS WAS WORKING ON A LARGER ANALYZER THAT WOULD SIT ON A DESKTOP?
ALAN EISENMAN: THERE WERE TWO OR THREE ADVANCED ITERATIONS, AND I REMEMBER THERE WAS SOME CONVERSATIONS A FEW YEARS AFTER WE INVESTED THAT THERE WERE -- THERE WAS SOME KIND OF A DESKTOP THAT WAS FIRST PUT IN PHARMACEUTICAL COMPANIES FOR CLINICAL TESTS, BUT THEN THERE WAS SOME CONVERSATION ABOUT THESE THINGS WERE PORTABLE, AND THESE COULD BE IN EVERY DOCTOR'S OFFICES AND POTENTIALLY IN PEOPLE'S HOMES.
MR. BOSTIC: THE LARGER ANALYZER THAT WE'RE REFERENCING, DID YOU EVER SEE A PHYSICAL EXAMPLE OF THAT?
ALAN EISENMAN: YOU KNOW, I THINK I DID, BUT I'M NOT POSITIVE.
MR. BOSTIC: OKAY. DID YOU HAVE AN UNDERSTANDING FROM YOUR CONVERSATIONS WITH MS. HOLMES ABOUT CARTRIDGES THAT WOULD BE USED IN CONNECTION WITH THE THERANOS ANALYZERS?
ALAN EISENMAN: YES.
MR. BOSTIC: AND WHAT DID YOU UNDERSTAND CARTRIDGES TO BE REFERRING TO?
ALAN EISENMAN: ARE WE TALKING ABOUT IN THE EARLY STAGE OR THE MIDDLE STAGE BECAUSE THERE WAS A LITTLE BIT OF A DIFFERENCE?
MR. BOSTIC: I THINK WE'RE INTO THE MIDDLE STAGE NOW. SO FIRST CAN YOU DEFINE WHAT YEARS WE'RE TALKING ABOUT IN THE MIDDLE STAGE?
ALAN EISENMAN: OKAY. THIS WAS, YOU KNOW, THREE OR FOUR YEARS INTO OUR INVESTMENT. THERE WERE CONVERSATIONS, AND THERE WAS AN EMAIL EXCHANGE THAT THERE WAS, THERE WAS WIDE ACCEPTANCE IN THE MARKETPLACE WITH THESE CARTRIDGES THAT COULD DO BETWEEN ONE AND EITHER FIVE OR SIX TESTS, AND THEY WERE GOING TO CHARGE $30 PER TEST FOR THESE CARTRIDGES. AND THERE WAS CURRENT DEMAND FOR A MILLION OF THESE CARTRIDGES A MONTH. THAT THEY WERE SCALING UP. THAT THEY WERE DOING 200,000 IN FEBRUARY; THEY WERE GOING TO DO 300,000 IN MARCH, BUT WITHIN A PERIOD OF 6 MONTHS THEY WERE GOING TO SCALE UP TO MEET THE MARKET DEMAND OF 1 MILLION CARTRIDGES PER MONTH, AND THEY THOUGHT THAT DEMAND IN THE NEXT YEAR WOULD GO TO 2 MILLION CARTRIDGES PER MONTH. SO JUST DOING SIMPLE MATH, IF THE AVERAGE CARTRIDGE DOES UP TO 5 TESTS AT $30 A TEST AND IT'S $100 FOR 3 TESTS, AND YOU'RE DOING A MILLION OF THESE A MONTH, GOING TO 2 MILLION A MONTH, AND THERE'S CURRENT DEMAND FOR A MILLION A MONTH, THESE ARE NUMBERS THAT ARE PRETTY ASTOUNDING AND WOULD CREATE A VERY SIGNIFICANT VALUE FOR THIS COMPANY.
MR. BOSTIC: YOU UNDERSTOOD THAT THIS WOULD BE REVENUE GENERATING ACTIVITY BY THE COMPANY?
ALAN EISENMAN: YES.
MR. BOSTIC: THESE REPRESENTATIONS ABOUT THE DEMAND AND MANUFACTURING OF THESE CARTRIDGES, WHEN DID THOSE CONVERSATIONS TAKE PLACE, IF YOU RECALL?
ALAN EISENMAN: I WOULD HAVE TO LOOK AT MY NOTES, BUT MY RECOLLECTION IS IT WAS ABOUT THREE OR FOUR YEARS AFTER MY INVESTMENT. SO 2008, 2009.
MR. BOSTIC: LET ME DIRECT YOU TO YOUR NOTES. IF YOU COULD TURN IN THE BINDER IN FRONT OF YOU TO TAB 14.
ALAN EISENMAN: OKAY.
MR. BOSTIC: FIRST OF ALL, DOES THE DOCUMENT AT TAB 14 INCLUDE YOUR HANDWRITTEN NOTES?
ALAN EISENMAN: YES, IT DOES.
MR. BOSTIC: I'LL DIRECT YOUR ATTENTION TO PAGE 14 OF TAB 14.
ALAN EISENMAN: OKAY.
MR. BOSTIC: AND I WANT YOU TO, JUST WHEN YOU GET THERE, ON PAGE 14 --
ALAN EISENMAN: GOT IT.
MR. BOSTIC: PAGE 14, TAKE A MOMENT AND REVIEW THAT PAGE TO YOURSELF AND DON'T READ IT OUT LOUD, AND THEN LET ME KNOW WHEN YOU'RE DONE.
(PAUSE IN PROCEEDINGS.)
ALAN EISENMAN: OKAY.
BY MR. BOSTIC:
MR. BOSTIC: DOES THAT REFRESH YOUR RECOLLECTION AS TO WHEN THESE CONVERSATIONS ABOUT THE NUMBER OF CARTRIDGES TOOK PLACE?
ALAN EISENMAN: YES. EARLIER THAN I RECALLED. THIS WAS DATED 10-1-09.
MR. BOSTIC: DURING THESE CONVERSATIONS WITH MS. HOLMES IN THIS TIME PERIOD DID SHE TELL YOU ANYTHING ABOUT WHETHER THE COMPANY WAS CASH FLOW POSITIVE OR WHEN THAT WOULD HAPPEN?
ALAN EISENMAN: YES. THERE WAS ONE ANNUAL MEETING IN THE WHOLE HISTORY OF THE COMPANY, AND THEY WERE TALKING ABOUT THE REVENUES THAT WERE CURRENTLY GENERATED AND THE CONTRACTS THAT THEY WERE CAPTURING. THEY SAID AT THAT TIME THEY HAD ENOUGH CASH IN THE TREASURY FOR A ONE AND A HALF YEAR RUNWAY, BUT WITHIN THAT ONE AND A HALF YEAR RUNWAY, THE OTHER CONTRACTS WOULD START CATCHING UP AND THEY WOULD NOT HAVE TO GO TO THE MARKETS TO RAISE ADDITIONAL CAPITAL.
MR. BOSTIC: AND WHAT DID YOU HEAR ABOUT THE TIMING OF WHEN THE COMPANY WOULD BE CASH FLOW POSITIVE, IF YOU RECALL?
ALAN EISENMAN: THE TIMING WAS -- I'D HAVE TO REFER TO MY NOTES, BUT THE TIMING WAS WITHIN A YEAR OR SO OF THIS POINT IN TIME. SO AROUND 2010.
MR. BOSTIC: LET ME INVITE YOU TO LOOK AT PAGE 10 OF TAB 14. WHEN YOU GET THERE, SAME THING AS BEFORE, JUST TAKE A MOMENT TO REVIEW THOSE NOTES ON YOUR OWN. LET ME KNOW WHEN YOU'RE DONE.
(PAUSE IN PROCEEDINGS.)
ALAN EISENMAN: OKAY.
BY MR. BOSTIC:
MR. BOSTIC: AND, MR. EISENMAN, DOES THAT REFRESH YOUR RECOLLECTION AS TO INFORMATION THAT MS. HOLMES GAVE YOU ABOUT THE COMPANY BECOMING CASH FLOW POSITIVE?
ALAN EISENMAN: YES.
MR. BOSTIC: DID MS. HOLMES -- WELL, FIRST LET ME ASK, WHAT DOES "CASH FLOW POSITIVE" MEAN IN THE CONTEXT OF A COMPANY LIKE THIS?
ALAN EISENMAN: CASH FLOW POSITIVE MEANS THAT YOU'RE GENERATING MORE CASH THAN YOU'RE EXPENDING, AND ONE OF THE REASONS THAT THAT'S IMPORTANT IS THAT YOU DON'T HAVE TO GO OUT TO THE MARKETS AND RAISE MORE CASH, MORE CAPITAL.
MR. BOSTIC: IS THAT AN IMPORTANT MILESTONE FROM AN INVESTOR'S PERSPECTIVE?
ALAN EISENMAN: IT'S A HUGE MILESTONE BECAUSE YOUR COMPANY IS NO LONGER A SEED COMPANY, IT'S A GROWING COMPANY. IT'S A MUCH LATER STAGE AND MUCH LESS RISKY AND MUCH MORE VALUABLE.
MR. BOSTIC: AND WHAT DID MS. HOLMES TELL YOU ABOUT THE TIMING OF THERANOS BECOMING CASH FLOW POSITIVE?
ALAN EISENMAN: CASH FLOW POSITIVE BY THE END OF '08.
MR. BOSTIC: AND WAS THAT GOOD NEWS TO YOU AS AN INVESTOR?
ALAN EISENMAN: THAT WAS TREMENDOUS NEWS, VERY GOOD NEWS.
MR. BOSTIC: YOUR HONOR, DID THE COURT SAY IT INTENDED TO TAKE A BREAK AT 1:30?
JUDGE DAVILA: YES.
MR. BOSTIC: THIS MAY BE A GOOD STOPPING POINT.
JUDGE DAVILA: LET'S DO THAT. LET'S TAKE A BREAK FOR 30 MINUTES, LADIES AND GENTLEMEN, 30 MINUTES. YOU CAN STEP DOWN, SIR. WE WILL RESUME IN 30 MINUTES.
ALAN EISENMAN: OKAY. THANK YOU.
JUDGE DAVILA: YOU'RE WELCOME.
(LUNCH RECESS TAKEN AT 1:32 P.M.) AFTERNOON SESSION
(JURY IN AT 2:07 P.M.)
JUDGE DAVILA: THANK YOU. LADIES AND GENTLEMEN, PLEASE BE SEATED. WE'RE BACK ON THE RECORD. THE JURY IS PRESENT. ALL COUNSEL IS PRESENT. MS. HOLMES IS PRESENT. THE WITNESS IS ON THE STAND. MR. BOSTIC, YOU'D LIKE TO CONTINUE?
MR. BOSTIC: YES, YOUR HONOR. THANK YOU.
MR. BOSTIC: WELCOME BACK, MR. EISENMAN.
ALAN EISENMAN: THANK YOU.
MR. BOSTIC: IN THE BINDER IN FRONT OF YOU CAN I ASK YOU TO TURN TO THE TAB MARKED 663, PLEASE.
ALAN EISENMAN: OKAY.
MR. BOSTIC: AND AT TAB 663 ARE YOU LOOKING AT AN EMAIL CHAIN INCLUDING MESSAGES BETWEEN YOU, SOMEONE NAMED NANCY MINNIG, AND ELIZABETH HOLMES?
ALAN EISENMAN: YES.
MR. BOSTIC: AND IS THIS EMAIL CORRESPONDENCE RELATING TO INFORMATION THAT YOU WERE SEEKING TO OBTAIN FROM MS. HOLMES ABOUT THERANOS?
ALAN EISENMAN: YES.
MR. BOSTIC: YOUR HONOR, I OFFER EXHIBIT 663.
MR. DOWNEY: NO OBJECTION.
JUDGE DAVILA: IT'S ADMITTED. IT MAY BE PUBLISHED.
(GOVERNMENT'S EXHIBIT 663 WAS RECEIVED IN EVIDENCE.)
MR. BOSTIC: MS. HOLLIMAN, IF WE CAN START WITH PAGE 4 OF EXHIBIT 663.
ALAN EISENMAN: OKAY.
BY MR. BOSTIC:
MR. BOSTIC: MR. EISENMAN, THIS WILL BE ON THE SCREEN IN FRONT OF YOU, AND YOU CAN ALSO REFERENCE THE COPY IN THE BINDER. LET'S ZOOM IN ON THE BOTTOM OF PAGE 4 AND LOOK AT THE HEADER THERE. AND, MR. EISENMAN, DO YOU SEE WE'RE ABOUT TO LOOK AT AN EMAIL FROM YOU TO ELIZABETH HOLMES?
ALAN EISENMAN: YES.
MR. BOSTIC: LET'S GO TO THE NEXT PAGE, PAGE 5. LET'S ZOOM IN ON THE TEXT OF THE EMAIL. FIRST OF ALL, DO YOU SEE THE DATE OF THE EMAIL IS MAY 3RD, 2010?
ALAN EISENMAN: YES, I DO.
MR. BOSTIC: IN THE EMAIL YOU WRITE, "ELIZABETH, "CAN WE SCHEDULE OUR QUARTERLY UPDATE THE WEEK OF JUNE FIRST TO JUNE 4TH." DO YOU SEE THAT?
ALAN EISENMAN: YES, I DO.
MR. BOSTIC: DURING THAT PERIOD OF MID 2010 HAD YOU STILL BEEN HAVING THOSE QUARTERLY UPDATE CALLS WITH MS. HOLMES?
ALAN EISENMAN: YES.
MR. BOSTIC: YOU ALSO HAVE SOME QUESTIONS FOR HER IN THIS EMAIL; IS THAT RIGHT?
ALAN EISENMAN: YES.
MR. BOSTIC: YOU'RE ASKING FOR A RESPONSE TO A COUPLE OF QUESTIONS. ITEM NUMBER 1 YOU WRITE, "YOU SAID IN MARCH YOU WERE MANUFACTURING ABOUT 500,000 CARTRIDGES AND SELLING ABOUT 400,000 AT ABOUT $80 PER CARTRIDGE. CAN YOU SHARE THE SAME STATISTICS FOR APRIL, AND AN ESTIMATE FOR MAY?" DO YOU SEE THAT?
ALAN EISENMAN: YES, I DO.
MR. BOSTIC: DO YOU RECALL MS. HOLMES TELLING YOU ABOUT MANUFACTURING HUNDREDS OF THOUSANDS OF CARTRIDGES ON A MONTHLY BASIS?
ALAN EISENMAN: YES, I DO.
MR. BOSTIC: AND AGAIN, WHAT WAS YOUR UNDERSTANDING OF WHAT THESE CARTRIDGES WERE AND HOW THEY WERE BEING USED?
ALAN EISENMAN: THE CARTRIDGES HAD BETWEEN ONE AND EITHER FIVE OR SIX TESTS, AND THEY WERE SELLING THEM FOR $30 PER TEST, AND THEY WERE GEARING UP TO MEET THE DEMAND, WHICH THEY SAID WAS OR SHE SAID WAS CURRENTLY A MILLION A MONTH, POSSIBLY GOING TO 2 MILLION A MONTH IN THE NEXT YEAR.
MR. BOSTIC: AND IN YOUR EMAIL YOU ASK FOR CARTRIDGE MANUFACTURE NUMBERS FOR APRIL AND AN ESTIMATE FOR MAY; IS THAT RIGHT?
ALAN EISENMAN: CORRECT.
MR. BOSTIC: AND WHY WERE YOU ASKING FOR THAT INFORMATION?
ALAN EISENMAN: TO SEE THE TREND IF INDEED THEY WERE MANUFACTURING AND DELIVERING INCREASING NUMBERS APPROACHING THE MILLION -- A MILLION CARTRIDGES PER MONTH.
MR. BOSTIC: AND WHY WERE YOU INTERESTED IN THAT AS AN INVESTOR?
ALAN EISENMAN: ONE OF THE MAIN INDICATIONS OF VALUE IS REVENUE AND EARLY STAGE COMPANIES SELL AT A MULTITUDE OF REVENUE, SO IF THEY WERE POTENTIALLY GENERATING $200- OR $300,000 MILLION IN REVENUE, THE COMPANY WAS POTENTIALLY WORTH $1, $2, OR $3 BILLION AT THAT TIME. AND AT THE POINT OF OUR INVESTMENT, THE ENTIRE COMPANY WAS ONLY WORTH $150 MILLION.
MR. BOSTIC: SO THIS WAS AN EFFORT BY YOU TO TRY TO BETTER UNDERSTAND WHAT YOUR INVESTMENT WAS WORTH?
ALAN EISENMAN: EXACTLY.
MR. BOSTIC: AND IN THAT SAME EMAIL YOU ASK ABOUT WHETHER MS. HOLMES HAS ANY THOUGHTS OF A SHAREHOLDER MEETING IN ITEM NUMBER 2. DO YOU SEE THAT?
ALAN EISENMAN: YES.
MR. BOSTIC: AND WAS THAT ALSO FOR THE PURPOSE OF POTENTIALLY GETTING MORE INFORMATION ABOUT THE COMPANY?
ALAN EISENMAN: YES.
MR. BOSTIC: AND IN ITEM NUMBER 4 YOU SAY, "ARE THERE ANY OTHER SIGNIFICANT ITEMS THAT YOU CAN SHARE BEFORE WE HAVE OUR QUARTERLY UPDATE CALL?" WERE YOU ASKING THAT QUESTION FOR THE SAME REASON?
ALAN EISENMAN: YES.
MR. BOSTIC: LET'S LOOK AT PAGE 4 OF THIS EXHIBIT. ZOOM IN ON THE MIDDLE OF THE PAGE. THERE'S AN EMAIL FROM YOU ON MAY 10TH, 2010. SO ONE WEEK AFTER THE EMAIL THAT WE JUST LOOKED AT; CORRECT?
ALAN EISENMAN: YES.
MR. BOSTIC: IN THAT MESSAGE YOU WRITE AGAIN TO MS. HOLMES, "WOULD IT BE POSSIBLE TO GET A RESPONSE TODAY? I HAVE BEEN TRYING SINCE LAST MONDAY." WAS THIS A CONTINUING EFFORT TO TRY TO OBTAIN INFORMATION ABOUT THE COMPANY?
ALAN EISENMAN: YES, IT WAS.
MR. BOSTIC: LET'S GO TO PAGE 3 OF THIS EXHIBIT NOW, SO WE'RE MOVING FORWARD IN TIME. LET'S ZOOM IN ON THE BOTTOM TWO-THIRDS OF THE PAGE. STARTING WHERE IT SAYS, "ALAN."
ALAN EISENMAN: OKAY.
MR. BOSTIC: WE SEE HERE A RESPONSE FROM MS. HOLMES; IS THAT RIGHT?
ALAN EISENMAN: YES.
MR. BOSTIC: SHE SAYS THAT SHE RECEIVED YOUR EMAILS. SHE SAYS, "JUNE IS A TOUGH MONTH FOR US, AND I DON'T KNOW WHEN WE CAN DO OUR NEXT CALL. AS YOU KNOW, WE DON'T DO QUARTERLY CALLS WITH OUR OTHER INVESTORS, MANY OF WHOM INVESTED MUCH GREATER AMOUNTS THAN YOU DID." DO YOU SEE THAT?
ALAN EISENMAN: YES, I DO.
MR. BOSTIC: SHE THEN SAYS IN THE FOLLOWING PARAGRAPH, "AS DISCUSSED IN OUR CALL IN MARCH, WE CANNOT PROVIDE THE LEVEL OF COMMUNICATION YOU KEEP REQUESTING." DO YOU RECALL AROUND THIS TIME PERIOD CONVERSATIONS WITH MS. HOLMES ABOUT HER NOT BEING ABLE OR WILLING TO PROVIDE THE LEVEL OF COMMUNICATION THAT YOU WANTED?
ALAN EISENMAN: YES, I DO.
MR. BOSTIC: AND DID SHE GIVE YOU AN EXPLANATION AS TO WHY THAT WAS THE CASE?
ALAN EISENMAN: THERE WAS NO EXPLANATION.
MR. BOSTIC: BELOW THAT HER EMAIL GOES ON TO SAY, "WITH THE DEALS WE ARE FORMALIZING WITH RETAILERS, WE ARE NOW OBLIGATED NOT TO DISCLOSE OUR PRODUCTION VOLUMES AND CARTRIDGE SALE PRICES." DO YOU SEE THAT?
ALAN EISENMAN: YES.
MR. BOSTIC: AND WHAT WAS YOUR UNDERSTANDING OF THAT STATEMENT?
ALAN EISENMAN: THERE WAS SOME INFORMATION THAT THEY WERE TRYING TO HAVE THEIR DEVICES AND CHANGE THE PHARMACIES. THERE WAS THE NAME WAL-MART THAT WAS MENTIONED, CVS, WALGREENS. SO WE DIDN'T HAVE ANY DIRECT KNOWLEDGE, BUT THERE WAS SOME INFORMATION THAT THEY WERE TRYING TO MOVE ALL OF THE READERS INTO ONE CHAIN OF PHARMACIES.
MR. BOSTIC: AND WHAT DID THAT HAVE TO DO WITH YOUR REQUEST FOR INFORMATION ABOUT PRODUCTION VOLUME INFORMATION?
ALAN EISENMAN: I THINK IT WAS IRRELEVANT. AS A SHAREHOLDER, I'VE HAD LOTS OF CONVERSATIONS WITH SIMILAR SITUATIONS WHERE THERE IS A CERTAIN LEVEL OF COMMUNICATION AND IF IT IS SENSITIVE INFORMATION, THERE'S A SIMPLE SOLUTION, YOU JUST SIGN AN NDA, NONDISCLOSURE AGREEMENT, SO ANY CONVERSATION THAT YOU HAVE --
MR. DOWNEY: YOUR HONOR, EXCUSE ME. I MOVE TO STRIKE EVERYTHING AFTER "IRRELEVANT" IN THE ANSWER GIVEN.
(PAUSE IN PROCEEDINGS.)
JUDGE DAVILA: ALL RIGHT. I'LL STRIKE EVERYTHING AFTER THE WORD "IRRELEVANT." THE ANSWER WAS "I THINK IT WAS IRRELEVANT." AND THEN EVERYTHING AFTER THAT, LADIES AND GENTLEMEN, IS STRICKEN AS NONRESPONSIVE. YOU CAN ASK ANOTHER QUESTION, MR. BOSTIC.
BY MR. BOSTIC:
MR. BOSTIC: MR. EISENMAN, DID MS. HOLMES EVER EXPLAIN TO YOU THAT SHE WAS UNABLE TO PROVIDE THE INFORMATION THAT YOU WERE REQUESTING BECAUSE IT WAS CONFIDENTIAL?
MR. BOSTIC: IF SHE HAD EXPLAINED THAT TO YOU AND ASKED YOU TO SIGN AN NDA, WOULD YOU HAVE BEEN WILLING TO SIGN ONE?
ALAN EISENMAN: YES. I'VE DONE IT MANY TIMES.
MR. BOSTIC: LET'S MOVE ON IN THIS EMAIL. AT THE BOTTOM OF PAGE 3 MS. HOLMES WRITES -- IF WE COULD ZOOM BACK IN ON THE VERY BOTTOM PARAGRAPH. MS. HOLMES WRITES, "GIVEN YOUR FRUSTRATION LEVEL AND OUR FRUSTRATION LEVEL WITH THIS INTERACTION, I STRONGLY ENCOURAGE YOU TO RE-CONSIDER THE OPPORTUNITY I PRESENTED ON OUR LAST CALL TO REALIZE THE RETURN ON YOUR INVESTMENT." LET'S GO TO PAGE 4. AT THE TOP OF THE PAGE MS. HOLMES SAYS, "WE RECOGNIZE YOU HAVE BEEN AN INVESTOR FOR SOME TIME, AND IF WE PROCEED WITH THE TRANSACTION WE ARE PROPOSING WE CAN PROVIDE YOU WITH A GREATER THAN 5X RETURN ON YOUR INVESTMENT IN THERANOS." DO YOU SEE THAT?
ALAN EISENMAN: YES.
MR. BOSTIC: AROUND THIS TIME PERIOD, DO YOU RECALL CONVERSATIONS WITH MS. HOLMES ABOUT POTENTIALLY EXITING FROM YOUR INVESTMENT IN THE COMPANY?
ALAN EISENMAN: YES, I HAVE A CLEAR RECOLLECTION.
MR. BOSTIC: AND TELL US ABOUT THOSE COMMUNICATIONS?
ALAN EISENMAN: AS ELIZABETH MENTIONED, THERE WAS FRUSTRATION WITH ME TRYING TO GET INFORMATION ON THE COMPANY. AND THERE WAS NOT JUST A LIMITED AMOUNT OF INFORMATION, THERE WAS NO INFORMATION COMING FROM THE COMPANY. AND TO ME THAT'S, THAT'S A SIGN OF TROUBLE. I'VE BEEN INVESTORS IN OTHER COMPANIES, AND WHEN INFORMATION DOESN'T FLOW --
MR. DOWNEY: YOUR HONOR, YOUR HONOR, I MOVE TO STRIKE THIS ANSWER AS NONRESPONSIVE. AND MAYBE THE QUESTION CAN BE ASKED AGAIN.
JUDGE DAVILA: WELL, I THINK THE LAST TWO WORDS ARE NONRESPONSIVE, BUT THE BALANCE OF THE ANSWER WILL REMAIN. BUT WHY DON'T YOU ASK ANOTHER QUESTION TO FOLLOW UP.
MR. BOSTIC: SURE.
MR. BOSTIC: MR. EISENMAN, TELL US WHAT YOU RECALL ABOUT THE CONTENT OF YOUR COMMUNICATIONS WITH MS. HOLMES AROUND THIS TIME ABOUT POSSIBLY EXITING FROM YOUR INVESTMENT? WHAT WAS SAID BETWEEN THE TWO OF YOU?
ALAN EISENMAN: UM, THERE WAS A SERIES OF CONVERSATIONS ABOUT A LIQUIDITY EVENT THAT WE WERE EXPECTING. IT WAS FIRST 12 TO 18 MONTHS AFTER WE INVESTED, AND THEN IT WAS 2 YEARS AFTER, THEN 3 YEARS AFTER, THEN 4 YEARS AFTER, AND THAT WAS ONE OF THE DATA POINTS THAT I WAS TRYING TO GET BECAUSE ALL INVESTORS WOULD LIKE TO EXIT AT SOME POINT. AND THAT POINT -- IF A COMPANY SAYS SOMETHING AND IT CHANGES, THAT'S OKAY, BUT IF IT KEEPS CHANGING YEAR AFTER YEAR AFTER YEAR, IT RAISES SUSPICION. AND I WAS, I WAS MORE PROACTIVE AS A STAKEHOLDER THAN OTHER STAKEHOLDERS. AND MANAGEMENT, PARTICULARLY ELIZABETH, DID NOT LIKE THE FACT THAT I WAS TRYING TO COMMUNICATE AND TRYING TO GET INFORMATION. SO THIS WAS A WAY THAT WAS PROPOSED FROM ELIZABETH TO ME TO TAKE ME OUT OF MY POSITION.
MR. BOSTIC: AND WHAT WAS THAT PROPOSAL FROM MS. HOLMES?
ALAN EISENMAN: THE PROPOSAL IS STATED HERE. SHE WAS GOING TO PROVIDE A LIQUIDITY EVENT FOR MY INVESTMENT OF GREATER THAN 5 TIMES MY COST.
MR. BOSTIC: AT THAT TIME DID YOU FEEL LIKE YOU HAD THE INFORMATION FROM THE COMPANY THAT YOU NEEDED TO DECIDE WHETHER TO TAKE PART IN THAT TRANSACTION?
MR. DOWNEY: YOUR HONOR, I OBJECT TO THIS AS 401 AND 403. WE'RE WELL OUTSIDE ANY ISSUES IN THE CASE HERE IN TERMS OF HAVING HIM NARRATE HIS MINDSET ON THESE ISSUES.
JUDGE DAVILA: MR. BOSTIC, WHAT IS THE RELEVANCE OF THIS?
MR. BOSTIC: SO, YOUR HONOR, PART OF THE SCOPE OF THE TESTIMONY HERE WILL RELATE TO MR. EISENMAN'S CONTINUING EFFORTS TO GET INFORMATION FROM THE COMPANY. I BELIEVE HE SHOULD BE ALLOWED TO EXPLAIN WHY HE WAS SEEKING THAT INFORMATION.
JUDGE DAVILA: WELL, I'LL ALLOW HIM TO CONTINUE WITH THIS BY QUESTION AND ANSWER.
BY MR. BOSTIC:
MR. BOSTIC: AND LET ME ASK, MR. EISENMAN, AROUND THIS TIME PERIOD WHEN MS. HOLMES HAD MADE THIS PROPOSAL, WERE YOU SEEKING MORE INFORMATION FROM THE COMPANY TO HELP YOU DECIDE WHETHER TO ACCEPT THAT OFFER OR NOT?
ALAN EISENMAN: YES.
MR. BOSTIC: LET'S LOOK AT PAGE 2 OF EXHIBIT 663. LET'S ZOOM IN ON THE TOP HALF. MR. EISENMAN, IS THIS YOUR RESPONSE TO THE EMAIL FROM MS. HOLMES THAT WE JUST SAW?
ALAN EISENMAN: YES, IT IS.
MR. BOSTIC: YOU THANK HER FOR HER RESPONSE AND YOU SAY, "MY QUESTIONS WERE MERELY A FOLLOW UP FROM OUR DECEMBER CALL WHEN YOU SAID THAT:" AND THEN YOU INCLUDE A LIST BELOW. DO YOU SEE THAT?
ALAN EISENMAN: YES, I DO.
MR. BOSTIC: IS THIS LIST RECOUNTING THINGS THAT MS. HOLMES TOLD YOU ON A PHONE CALL IN DECEMBER?
ALAN EISENMAN: YES, IT WAS.
MR. BOSTIC: ITEM NUMBER 1 ON THIS LIST TALKS ABOUT A STATEMENT FROM MS. HOLMES THAT "THE COMPANY WAS CLOSE TO ACHIEVING $200 MILLION IN SALES FOR 2009." DO YOU SEE THAT?
ALAN EISENMAN: YES.
MR. BOSTIC: AND DO YOU RECALL MS. HOLMES TELLING YOU THAT THERANOS WAS GOING TO ACHIEVE $200 MILLION IN SALES FOR THE YEAR 2009?
ALAN EISENMAN: YES, I DO.
MR. BOSTIC: AND YOU'RE WRITING THIS EMAIL IN MAY OF 2010?
ALAN EISENMAN: YES.
MR. BOSTIC: AND SO WERE YOU SEEKING TO FIND OUT IF THE COMPANY HAD HIT THAT TARGET?
ALAN EISENMAN: YES.
MR. BOSTIC: YOU ASK FOR THE FINAL FIGURE? DID MS. HOLMES EVER PROVIDE THAT INFORMATION? DID SHE EVER TELL YOU WHETHER THE COMPANY HIT THAT $200 MILLION MARK?
ALAN EISENMAN: THERE WAS AN EMAIL THAT SAID THAT THAT GOAL WAS STRETCHED ANOTHER YEAR.
MR. BOSTIC: UNDER ITEM 2 YOU TALK ABOUT THE QUARTERLY UPDATE SCHEDULE THAT YOU HAD UNTIL THEN AND YOU SAY, "SINCE THIS IS MY ONLY AVENUE FOR INFORMATION, I HOPE YOU THAT YOU CAN FIND 20 TO 30 MINUTES FOR AN UPDATE IN JUNE AND I AM HAPPY TO CONTACT AFTER HOURS OR ON A WEEKEND." DO YOU SEE THAT?
ALAN EISENMAN: YES.
MR. BOSTIC: AND ABOUT HOW LONG HAD EACH OF THESE QUARTERLY CALLS BEEN?
ALAN EISENMAN: TWENTY TO THIRTY MINUTES.
MR. BOSTIC: SO APPROXIMATELY ONE TO TWO HOURS PER YEAR OF PHONE COMMUNICATIONS WITH MS. HOLMES DURING THESE QUARTERLY CALLS?
ALAN EISENMAN: YES, AND OCCASIONAL CALLS IN BETWEEN.
MR. BOSTIC: UNDER ITEM 3 THERE'S SOME ADDITIONAL DISCUSSION ABOUT DEMAND PER CARTRIDGES PER MONTH AND PRODUCTION NUMBERS. DO YOU SEE THAT?
ALAN EISENMAN: YES.
MR. BOSTIC: DID MS. HOLMES EVER RESPOND TO PROVIDE YOU WITH UPDATED INFORMATION ABOUT THE VOLUME OF THERANOS'S CARTRIDGE PRODUCTION?
MR. BOSTIC: LOOKING AT PAGE 1 OF THE EXHIBIT, THERE ARE SOME EMAILS BETWEEN YOU AND SOMEONE NAMED NANCY MINNIG. DO YOU SEE THAT?
ALAN EISENMAN: YES.
MR. BOSTIC: AND WHO WAS NANCY MINNIG?
ALAN EISENMAN: NANCY MINNIG WAS DON LUCAS'S EXECUTIVE ASSISTANT.
MR. BOSTIC: AND WHY DID YOU REACH OUT TO HER AT THIS TIME?
ALAN EISENMAN: BECAUSE I WAS A FRUSTRATED STAKEHOLDER TRYING TO SEEK INFORMATION ON MY INVESTMENT, AND I WASN'T GETTING IT FROM THE COMPANY.
MR. BOSTIC: FOLLOWING THIS APPROXIMATE TIME PERIOD, WHAT HAPPENS WITH THE FREQUENCY OF YOUR CONTACT WITH MS. HOLMES?
ALAN EISENMAN: IT DROPPED TO ZERO.
MR. BOSTIC: DID THE QUARTERLY CALLS CEASE?
ALAN EISENMAN: THEY CEASED.
MR. BOSTIC: WERE THERE ANY IN-PERSON MEETINGS FOLLOW THIS MID 2010 TIME PERIOD FOR THE NEXT YEAR OR TWO?
MR. BOSTIC: DID YOU CONTINUE TO MAKE ATTEMPTS TO GET MORE INFORMATION FROM MS. HOLMES ABOUT THERANOS?
ALAN EISENMAN: I MADE AN ATTEMPT TO GET INFORMATION WHEREVER I COULD, FROM DIRECTORS, FROM WHATEVER SOURCES WERE AVAILABLE, AND THEY WERE VERY LIMITED.
MR. BOSTIC: I'LL ASK YOU TO LOOK AT TAB 713 IN YOUR BINDER, PLEASE. IS EXHIBIT 713 ANOTHER EMAIL CHAIN BETWEEN YOU, AND MS. HOLMES, AND MS. MINNIG RELATING TO REQUESTS FOR INFORMATION ABOUT THERANOS?
ALAN EISENMAN: YES.
MR. BOSTIC: YOUR HONOR, I OFFER EXHIBIT 713.
MR. DOWNEY: YOUR HONOR, I HAVE NO OBJECTION TO THE DOCUMENT. THERE ARE SOME LAYERS OF DOUBLE HEARSAY IN HERE AT THE BOTTOM OF PAGE 4, THE FIRST SENTENCE OF THE NOVEMBER 13TH EMAIL AT 9:39 A.M., AND THERE ARE TWO OTHER INSTANCES.
JUDGE DAVILA: MR. BOSTIC?
MR. BOSTIC: YOUR HONOR, I DON'T NEED THIS ADMITTED FOR THE TRUTH. THIS IS SIMPLY TO SHOW THE CORRESPONDENCE BETWEEN THIS WITNESS AND THE DEFENDANT.
JUDGE DAVILA: SO IT GOES TO THIS WITNESS'S STATE OF MIND AS TO CORRESPONDENCE.
MR. BOSTIC: CORRECT, THIS WITNESS'S STATE OF MIND AS WELL AS HIS DECISION MAKING AND THE DEFENDANT'S STATE OF MIND AND KNOWLEDGE.
MR. DOWNEY: WELL, YOUR HONOR, IF I MIGHT? IF YOU LOOK AS WELL AT THE LAST SENTENCE ON PAGE 3 AND ON PAGE 2, REALLY JUST THE SECOND HALF OF THE FIRST SENTENCE IN THE BOTTOM EMAIL, THIS EMAIL IS COMPLETELY DIVORCED IN TIME FROM ANY INVESTMENT DECISION MADE BY THIS WITNESS, IT DOESN'T DISCUSS THAT OR SAY ANYTHING ABOUT IT. SO I DON'T KNOW THAT THIS WITNESS'S STATE OF MIND AT THIS POINT IN TIME IS REALLY RELEVANT TO THE CASE.
JUDGE DAVILA: WELL, I WOULD -- I THINK THE PAGE 4 THAT YOU MENTIONED, I THINK WE CAN STRIKE THAT. MR. BOSTIC, I DON'T THINK YOU NEED THAT.
MR. BOSTIC: IS THAT THE EMAIL MESSAGE AT THE BOTTOM OF PAGE 4?
JUDGE DAVILA: YES.
MR. BOSTIC: IF I COULD HAVE A MOMENT TO MAKE SURE THAT REDACTION GETS IMPLEMENTED.
JUDGE DAVILA: OTHERWISE I'LL ALLOW THIS TO COME IN.
MR. DOWNEY: YOUR HONOR, IF I MIGHT? WELL, THE INFORMATION AT THE BOTTOM OF PAGE 2 IS ACTUALLY THE SAME AS THE COMMUNICATION AT THE BOTTOM OF PAGE 4 AND THE FIRST SENTENCE OF THE NOVEMBER 20TH, 8:36 A.M. EMAIL. IT'S ESSENTIALLY THE SAME STATEMENT.
JUDGE DAVILA: YES, IT'S THE SAME CONTEXT.
MR. DOWNEY: YES.
MR. BOSTIC: YOUR HONOR, I THINK I SEE THAT ISSUE AS TO SOME OF THE CONTENT IN THAT MESSAGE, BUT I THINK TO THE EXTENT -- AND THIS IS BEING COMMUNICATED TO THE DEFENDANT --
JUDGE DAVILA: I'M LOOKING AT THIS AGAIN. AND PARDON ME FOR INTERRUPTING YOU, MR. BOSTIC. I THINK I SEE YOUR CONCERN, BUT I DON'T THINK IT IS PRESENT AS IT WAS IN 4. SO I WILL ALLOW THIS TO COME IN, NOTING YOUR OBJECTION. SO YOU CAN REDACT THAT LAST PORTION.
MR. BOSTIC: UNDERSTOOD. WITH THE EXCEPTION OF THE BOTTOM MESSAGE ON PAGE 4, IS THAT DOCUMENT ADMITTED, YOUR HONOR?
JUDGE DAVILA: YES.
MR. BOSTIC: MAY I PUBLISH?
JUDGE DAVILA: YES, YOU MAY PUBLISH.
(GOVERNMENT'S EXHIBIT 713, REDACTED, WAS RECEIVED IN EVIDENCE.)
BY MR. BOSTIC:
MR. BOSTIC: WHILE WE'RE WAITING FOR THAT TO COME UP ON THE SCREEN, MR. EISENMAN, CAN YOU EXPLAIN IN NOVEMBER OF 2012, WHAT ADDITIONAL EFFORTS WERE YOU MAKING TO TRY TO LEARN ABOUT THE STATUS OF THERANOS?
ALAN EISENMAN: I WAS REACHING OUT TO DON LUCAS, WHO WAS CHAIRMAN OF THE BOARD.
MR. BOSTIC: AND WHAT WAS YOUR PURPOSE IN REACHING OUT TO MR. LUCAS?
ALAN EISENMAN: TO GET UPDATED INFORMATION ON MY INVESTMENT.
MR. BOSTIC: LET'S LOOK AT PAGE 3 OF THIS EXHIBIT. LET'S ZOOM IN ON THE BOTTOM EMAIL MESSAGE. ARE WE LOOKING AT AN EMAIL FROM SOMEONE IN DON LUCAS'S OFFICE TO MS. HOLMES CC'ING YOU?
ALAN EISENMAN: YES.
MR. BOSTIC: AND SHE SAYS TO ELIZABETH HOLMES, "PLEASE SEE THE NOTE FROM ALAN EISENMAN. WOULD YOU PLEASE HAVE THE APPROPRIATE PERSON GET IN TOUCH WITH HIM TO PROVIDE A STATUS REPORT?" DO YOU SEE THAT?
ALAN EISENMAN: YES.
MR. BOSTIC: AND LET'S JUST ABOVE THAT MESSAGE. AND THERE'S A MESSAGE FROM MS. HOLMES DIRECTLY TO YOU. DO YOU SEE THAT?
ALAN EISENMAN: YES.
MR. BOSTIC: AND SHE SAYS, "ALAN, "WE HAVE COMMUNICATED ABOUT THIS MULTIPLE TIMES BEFORE YET YOU CHOOSE TO CONTINUE GOING DOWN THIS PATH." WHAT WAS YOUR UNDERSTANDING OF WHAT MS. HOLMES WAS REFERENCING THERE?
ALAN EISENMAN: I FIRST TRIED TO CORRESPOND WITH ELIZABETH ABOUT A BUSINESS UPDATE, WOULD NOT GET A RESPONSE, SO I WAS THEN TRYING TO COMMUNICATE WITH THE CHAIRMAN OF THE BOARD, DON LUCAS, AND THAT WAS NOT TAKEN VERY KINDLY BY ELIZABETH THAT I APPARENTLY WAS GOING AROUND HER.
MR. BOSTIC: LET'S LOOK AT YOUR RESPONSE ON PAGE 2, AND LET'S ZOOM IN ON THE BOTTOM OF PAGE 2. MR. EISENMAN, IS THIS A MESSAGE FROM YOU TO MS. HOLMES ON NOVEMBER 20TH, 2012?
ALAN EISENMAN: YES, IT IS.
MR. BOSTIC: YOU WRITE, "ELIZABETH. "IT HAS BEEN OVER 2 YEARS SINCE YOU COMMUNICATED WITH YOUR INVESTORS. I EMAILED YOU ONE WEEK AGO, FOLLOWING YOUR INSTRUCTIONS THAT INVESTORS SHOULD COMMUNICATE DIRECTLY WITH THE COMPANY." YOU THEN ASK WHETHER MS. HOLMES CAN'T OR WON'T COMMUNICATE WITH YOU OR OTHER INVESTORS? IS THIS ALL PART OF YOUR CONTINUING EFFORTS TO TRY TO REESTABLISH COMMUNICATION SO THAT YOU COULD GET INFORMATION ABOUT THE COMPANY?
ALAN EISENMAN: YES.
MR. BOSTIC: IN NOVEMBER OF 2012, WERE YOUR EFFORTS SUCCESSFUL? WERE YOU ABLE TO OBTAIN ANY UPDATED INFORMATION ABOUT THE STATUS OF THERANOS?
MR. BOSTIC: DID THERE COME A TIME WHEN YOU CONSIDERED INVESTING MORE MONEY IN THERANOS?
ALAN EISENMAN: YES.
MR. BOSTIC: AND WHEN DID THAT HAPPEN?
ALAN EISENMAN: IN 2013 WHEN THEY APPARENTLY WERE SUCCESSFUL IN PERFECTING THEIR READER AND THEY WERE TRYING TO RAISE GROWTH CAPITAL TO MOVE THE COMPANY FORWARD IN A FASTER FASHION.
MR. BOSTIC: BEFORE THAT INVESTMENT, DID YOU HAVE A CALL WITH SUNNY BALWANI IN MID 2014?
ALAN EISENMAN: YES.
MR. BOSTIC: AND WHAT DO YOU RECALL ABOUT THAT TELEPHONE CALL?
ALAN EISENMAN: THE CALL WAS UNUSUALLY FRIENDLY AFTER A PERIOD OF VERY STRONG HOSTILITY. IN RETROSPECT, THEY WERE RAISING MONEY, AND WHEN YOU ARE RAISING MONEY SOMETIMES YOU PUT ON A DIFFERENT FACE. I WOULD BE HESITANT TO COMMIT MORE CAPITAL TO A COMPANY THAT WAS NOT COMMUNICATING WITH A SHAREHOLDER, BUT WITH THE PUBLICITY SURROUNDING THEIR LAUNCH OF THIS ROUND AND WITH THE INFORMATION THAT I GOT FROM DIRECT CONVERSATIONS WITH SUNNY AND ELIZABETH, I WAS OF THE UNDERSTANDING THAT NOT ONLY WAS THE TECHNOLOGY WORKING, THERE WAS A HUGE AND GROWING MARKET THAT WAS ALSO COMMUNICATED TO ME THAT BECAUSE I WAS AN EARLIER INVESTOR, THEY WERE DOING A SPECIAL FAVOR FOR EXISTING INVESTORS, THEY WERE PRICING THIS ROUND AT $15 A SHARE, AND IT WAS A SMALL ROUND, AND AFTER THEY FINISHED RAISING THE MONEY IN THIS ROUND, THEY WERE GOING TO DO A MUCH LARGER INSTITUTIONAL ROUND AT $17 A SHARE.
MR. BOSTIC: THE INFORMATION THAT YOU JUST DESCRIBED GETTING FROM MS. HOLMES AND MR. BALWANI, DID YOU OBTAIN THAT INFORMATION IN 2013 BEFORE YOU MADE THE DECISION TO INVEST MORE MONEY?
ALAN EISENMAN: YES.
MR. BOSTIC: LET'S LOOK AT SOME OF THE PUBLICITY THAT YOU WERE TALKING ABOUT. LET'S START WITH EXHIBIT 1106, WHICH IS IN EVIDENCE. PERMISSION TO PUBLISH, YOUR HONOR?
JUDGE DAVILA: YES.
BY MR. BOSTIC:
MR. BOSTIC: THIS IS IN YOUR BINDER BUT ALSO ON THE SCREEN IN FRONT OF YOU OR WILL BE.
ALAN EISENMAN: OKAY.
MR. BOSTIC: DO YOU SEE IN FRONT OF YOU A "WALL STREET JOURNAL" ARTICLE DATED SEPTEMBER 8TH, 2013?
ALAN EISENMAN: YES, I DO.
MR. BOSTIC: AND THE TITLE IS "ELIZABETH HOLMES: THE BREAKTHROUGH OF INSTANT DIAGNOSIS"?
ALAN EISENMAN: YES.
MR. BOSTIC: AND DO YOU RECALL READING THIS ARTICLE?
ALAN EISENMAN: YES.
MR. BOSTIC: AND GENERALLY SPEAKING, WHAT WAS YOUR REACTION UPON READING THIS PIECE ABOUT THERANOS?
ALAN EISENMAN: TREMENDOUS AMOUNT OF EXCITEMENT AND ENTHUSIASM.
MR. BOSTIC: FIRST LOOK AT SOME OF THE CONTENT. FIRST LET'S GO DOWN AND LOOK AT THE FIRST INDENTED PARAGRAPH ON PAGE 1. MR. EISENMAN, DO YOU SEE IN THIS ARTICLE LANGUAGE THAT SAYS, "THE SECRET THAT HUNDREDS OF EMPLOYEES ARE NOW REFINING INVOLVES DEVICES THAT AUTOMATE AND MINIATURIZE MORE THAN 1,000 LABORATORY TESTS"?
ALAN EISENMAN: YES.
MR. BOSTIC: AND DO YOU SEE BELOW THAT A CLAIM THAT "THERANOS'S PROCESSES ARE FASTER, CHEAPER, AND MORE ACCURATE THAN THE CONVENTIONAL METHODS AND REQUIRE ONLY MICROSCOPIC BLOOD VOLUMES, NOT VIAL AFTER VIAL OF THE STUFF"?
ALAN EISENMAN: YES.
MR. BOSTIC: I WANT TO ASK YOU ABOUT THOSE CLAIMS. FIRST, "AUTOMATING AND MINIATURIZING MORE THAN 1,000 LABORATORY TESTS," THE ABILITY OF THE DEVICE TO DO THAT, WAS THAT AN IMPORTANT FACT TO YOU AS A POTENTIAL INVESTOR?
ALAN EISENMAN: YES.
MR. BOSTIC: WHY?
ALAN EISENMAN: BECAUSE THIS IS WHAT LABCORP AND QUEST DO WITH MUCH LARGER BLOOD DRAWS AND THEY CAN ONLY ANALYZE A LIMITED NUMBER OF TESTS. SO THIS IS A BREAKTHROUGH IN TERMS OF THE VOLUME OF BLOOD, AND THE QUANTITY OF TESTS, AND THE SPEED OF RESULTS BACK TO THE PATIENT.
MR. BOSTIC: SO THE SPEED OF THE TECHNOLOGY WAS ALSO A MATERIAL FACT TO YOU?
ALAN EISENMAN: YES.
MR. BOSTIC: HOW ABOUT ACCURACY, THAT PARAGRAPH SAYS THAT THERANOS'S PROCESSES WERE MORE ACCURATE THAN THE CONVENTIONAL METHODS. DO YOU SEE THAT LANGUAGE?
ALAN EISENMAN: YES.
MR. BOSTIC: WAS THE ACCURACY OF THE THERANOS DEVICE IMPORTANT TO YOU WHEN YOU WERE DECIDING WHETHER TO INVEST MORE MONEY IN THE COMPANY?
ALAN EISENMAN: YES, BECAUSE IT'S IMPORTANT TO PATIENTS AND IT'S IMPORTANT TO THE MEDICAL COMMUNITY. IT'S A VALUE PROPOSITION.
MR. BOSTIC: BEFORE YOU INVESTED, DID YOU EVER HAVE CONVERSATIONS WITH MS. HOLMES ABOUT THE CAPABILITIES OF THE THERANOS TECHNOLOGY?
ALAN EISENMAN: YES.
MR. BOSTIC: AND DID SHE EVER MAKE ANY COMPARISONS HOLDING UP THERANOS'S ANALYZERS TO THE CONVENTIONAL ANALYZERS THAT WERE USED BY OTHER LABS?
ALAN EISENMAN: YES.
MR. BOSTIC: AND WHAT DID SHE SAY ABOUT HOW THERANOS'S STACKED UP?
ALAN EISENMAN: SHE COMPARED HER TECHNOLOGY TO THE TWO BIG PLAYERS IN THE MARKET, LABCORP AND QUEST, AND SAID THAT HERS WERE CHEAPER, FASTER, MORE ACCURATE, SMALLER BLOOD DRAW.
MR. BOSTIC: THE SAME REPRESENTATIONS THAT YOU SEE IN THE ARTICLE IN FRONT OF YOU?
ALAN EISENMAN: YES.
MR. BOSTIC: LET'S LOOK AT PAGE 2 OF THIS ARTICLE. AND LET'S ZOOM IN ON THE BOTTOM HALF OF THE PAGE. THERE'S A PARAGRAPH BEGINNING "THERANOS'S TECHNOLOGY." MS. HOLLIMAN, LET'S SEE IF WE CAN -- THAT'S PERFECT. DO YOU SEE AT THE TOP, MR. EISENMAN, IT SAYS, "THERANOS'S TECHNOLOGY ELIMINATES MULTIPLE LAB TRIPS BECAUSE IT CAN 'RUN ANY COMBINATION OF TESTS, INCLUDING SETS OF FOLLOW-ON TESTS,' AT ONCE VERY QUICKLY ALL FROM A SINGLE MICRO SAMPLE."
ALAN EISENMAN: YES.
MR. BOSTIC: WAS THE ABILITY OF THE TECHNOLOGY TO RUN ANY COMBINATION OF TESTS ALL FROM A SINGLE MICRO SAMPLE AN IMPORTANT FACT FOR YOU?
ALAN EISENMAN: YES.
MR. BOSTIC: AND WHY IS THAT?
ALAN EISENMAN: IT'S ONE OF MANY FACTORS THAT SHOW THAT THIS TECHNOLOGY IS SUPERIOR TO CONVENTIONAL TECHNOLOGIES IN THE COMPANIES THAT THERANOS WAS GOING TO COMPETE AGAINST, LABCORP AND QUEST, ARE MULTI BILLION DOLLAR COMPANIES.
MR. BOSTIC: AT THE BOTTOM OF THIS PAGE IN THE SECOND TO LAST PARAGRAPH THERE'S A PARAGRAPH THAT BEGINS, "THAT'S BECAUSE THE PRECISION OF LAB INSTRUMENTS, AND THEIR REFERENCE RANGES, VARY FROM MANUFACTURE TO MANUFACTURER. LABS BUY FROM DIFFERENT VENDORS AND OFTEN DON'T CALIBRATE THE MACHINES TO EACH OTHER." DO YOU SEE THAT?
ALAN EISENMAN: YES.
MR. BOSTIC: DID MS. HOLMES EVER TELL YOU ABOUT THERANOS PURCHASING ANALYZERS FROM OTHER MANUFACTURERS?
ALAN EISENMAN: NEVER.
MR. BOSTIC: WAS THE COMPANY'S ABILITY TO RUN ALL OF ITS TESTS ON ITS OWN TECHNOLOGY AN IMPORTANT FACT FOR YOU AS A POTENTIAL INVESTOR?
ALAN EISENMAN: YES.
MR. BOSTIC: I'LL ASK YOU TO TURN NOW TO TAB 1334 IN THE BINDER. THAT SHOULD BE THE NEXT ONE. AND DO YOU RECOGNIZE 1334?
ALAN EISENMAN: YES.
MR. BOSTIC: IS THIS A DECEMBER EMAIL CHAIN -- I'M SORRY, DECEMBER 2013 EMAIL CHAIN BETWEEN YOU AND THERANOS RELATING TO A POTENTIAL INVESTMENT?
ALAN EISENMAN: YES.
MR. BOSTIC: YOUR HONOR, I OFFER EXHIBIT 1334.
MR. DOWNEY: NO OBJECTION.
JUDGE DAVILA: IT'S ADMITTED. IT MAY BE PUBLISHED.
(GOVERNMENT'S EXHIBIT 1334 WAS RECEIVED IN EVIDENCE.)
BY MR. BOSTIC:
MR. BOSTIC: LET'S START WITH THE BOTTOM OF PAGE 1. MR. EISENMAN, DO YOU SEE AN EMAIL SENT FROM THERANOS AT THE EMAIL ADDRESS SHAREHOLDERINFO@THERANOS.COM TO YOU?
ALAN EISENMAN: YES.
MR. BOSTIC: AND THIS IS ON DECEMBER 16TH, 2013; IS THAT RIGHT?
ALAN EISENMAN: YES.
MR. BOSTIC: SO A FEW MONTHS AFTER THE ARTICLE THAT WE JUST LOOKED AT?
ALAN EISENMAN: YES.
MR. BOSTIC: THE EMAIL SAYS, "DEAR ALAN. "WE HOPE THIS EMAIL FINDS YOU WELL." AND THEN IT SAYS BELOW, "PLEASE FIND A MEMO TO STOCKHOLDERS REGARDING CERTAIN DEALS AND TRANSACTIONS." DO YOU SEE THAT?
ALAN EISENMAN: YES.
MR. BOSTIC: AND LET'S LOOK AT THAT MEMO ON PAGE 2 OF THAT EXHIBIT, AND LET'S ZOOM IN ON THE TOP THIRD. AND DO YOU SEE THAT THIS MEMO TO THERANOS INVESTORS SAYS, "WITH OUR LAUNCH TO CONSUMER HEALTH CARE THIS YEAR, WE ARE RAPIDLY SCALING TO ESTABLISH A NATIONAL FOOTPRINT AND CAPTURE THE OPPORTUNITY WE HAVE TO SERVE AS THE ONLY CERTIFIED, NATIONAL LABORATORY CAPABLE OF RUNNING ANY OF ITS LABORATORY TESTS FROM A FEW TINY DROPLETS OF BLOOD." DO YOU SEE THAT?
ALAN EISENMAN: YES.
MR. BOSTIC: AND WHEN IT REFERENCES THE LAUNCH TO CONSUMER HEALTH CARE THAT YEAR, WHAT DID YOU UNDERSTAND THAT TO MEAN?
ALAN EISENMAN: MY UNDERSTANDING WAS THE TECHNOLOGY WAS PROVEN, AND THEY WERE OFFERING THE SHAREHOLDERS A DISCOUNTED VALUE BEFORE THEY RAISED THE PRICE AND RAISED A SIGNIFICANT AMOUNT OF ADDITIONAL CAPITAL TO GROW THE COMPANY, AND THIS IS WHAT I THOUGHT WAS GROWTH CAPITAL. THE COMPANY HAD PROVEN ITSELF, AND NOW THEY WERE TRYING TO SCALE UP AS FAST AS POSSIBLE AND TAKING IN CAPITAL TO SCALE UP.
MR. BOSTIC: AT THE BOTTOM OF THAT PARAGRAPH THERE'S LANGUAGE THAT SAYS, "WE ARE ACTIVELY INVESTING IN INFRASTRUCTURE TO BUILD THIS NEW INDUSTRY WE HAVE CREATED." DID THAT CONTRIBUTE TO THAT IMPRESSION IN YOUR MIND?
ALAN EISENMAN: YES.
MR. BOSTIC: THE LANGUAGE IN THAT MEMO THAT SAYS, "WE ARE RAPIDLY SCALING," DID THAT LANGUAGE HAVE ANY EFFECT ON YOUR PERCEPTION OF THE AMOUNT OF RISK INVOLVED IN THIS INVESTMENT?
ALAN EISENMAN: YES.
MR. BOSTIC: HOW SO?
ALAN EISENMAN: THE INVESTMENT WAS SUBSTANTIALLY DE-RISKED.
MR. BOSTIC: IN WHAT WAY?
ALAN EISENMAN: THEY HAD PROVEN THEMSELVES, THEY HAD A TECHNOLOGY THAT THEY CLAIMED WORKED, THERE WAS A HUGE MARKET, AND THIS WAS AN OPPORTUNITY TO RAISE CAPITAL TO GROW THAT MARKET AS RAPIDLY AS POSSIBLE.
MR. BOSTIC: LET'S LOOK AT TAB 1371 NEXT. AND I WANT TO HAVE YOU TAKE A LOOK AT THE FIRST EIGHT PAGES OF 1371. AND IS THAT AN EMAIL CHAIN BETWEEN YOU AND MR. BALWANI RELATING TO THIS POTENTIAL INVESTMENT IN DECEMBER OF 2013?
ALAN EISENMAN: YES.
MR. BOSTIC: YOUR HONOR, I OFFER PAGES 1 THROUGH 8 OF EXHIBIT 1371.
MR. DOWNEY: 1 THROUGH 8 IS FINE, YOUR HONOR. NO OBJECTION.
JUDGE DAVILA: THOSE PAGES ARE ADMITTED. THEY MAY BE PUBLISHED.
(GOVERNMENT'S EXHIBIT 1371, PAGES 1 THROUGH 8, WAS RECEIVED IN EVIDENCE.)
BY MR. BOSTIC:
MR. BOSTIC: AND LET'S START WITH PAGE 6 OF THAT EXHIBIT. AND AT THE BOTTOM OF PAGE 6, MR. EISENMAN, DO YOU SEE THE MESSAGE TO ALL STOCKHOLDERS THAT WE WERE JUST LOOKING AT?
ALAN EISENMAN: YES.
MR. BOSTIC: LET'S GO TO PAGE 3, AND AT THE BOTTOM OF PAGE 3 THERE'S AN EMAIL FROM YOU BACK TO THERANOS. DO YOU SEE THAT?
ALAN EISENMAN: YES.
MR. BOSTIC: AND YOU ASK FOR A PHONE CALL. AND YOU SAY, "I WOULD LIKE TO KNOW HOW MUCH ADDITIONAL INVESTMENT IS AVAILABLE, AND WHAT THE TIMING IS FOR PAPERWORK IN, AND FUNDING." DO YOU SEE THAT?
ALAN EISENMAN: YES.
MR. BOSTIC: AND YOU SAY, "WE MAY BE INTERESTED IN $1 MILLION." IS THAT CORRECT?
ALAN EISENMAN: YES.
MR. BOSTIC: AND THIS EMAIL WAS SENT TO THERANOS AT THAT SHAREHOLDER INFO ADDRESS; IS THAT RIGHT?
ALAN EISENMAN: CORRECT.
MR. BOSTIC: AND LET'S LOOK AT THE EMAIL MESSAGE ABOVE THIS ONE. AND SEE WE THAT SUNNY BALWANI WRITES DIRECTLY BACK TO YOU; IS THAT CORRECT?
ALAN EISENMAN: YES.
MR. BOSTIC: AND HE SAYS, "ALAN. LET ME KNOW WHAT TIME WOULD BE GOOD TO TALK AND I CAN CALL AND DISCUSS THIS." DO YOU SEE THAT?
ALAN EISENMAN: YES.
MR. BOSTIC: AND LET'S LOOK AT THE NEXT EMAIL IN THE CHAIN ABOVE THAT. JUST ZOOM IN ON THE TOP PORTION OF THE PAGE.
ALAN EISENMAN: OKAY.
MR. BOSTIC: DID WE LOSE ALL OF THE SCREENS OR JUST MINE? IS YOUR SCREEN STILL DISPLAYING THE DOCUMENT?
ALAN EISENMAN: YES.
MR. BOSTIC: AT THE TOP OF THE PAGE DO YOU SEE A MESSAGE FROM YOU THAT SAYS, "I AM AVAILABLE ANY TIME TODAY UNTIL MIDNIGHT CENTRAL TIME"?
ALAN EISENMAN: YES.
MR. BOSTIC: AND ABOVE THAT MR. BALWANI WRITES, "OK. I WILL CALL YOU IN 5-10 MINUTES"?
ALAN EISENMAN: YES.
MR. BOSTIC: HOW DID THIS LEVEL OF RESPONSIVENESS COMPARE TO WHAT YOU HAD BEEN EXPERIENCING FROM THE COMPANY IN THE MONTHS AND YEARS LEADING UP TO IT?
ALAN EISENMAN: SHOCKING AND SURPRISING.
MR. BOSTIC: IN WHAT WAY?
ALAN EISENMAN: HE WAS -- TO SAY IT MINIMALLY, HE WAS HOSTILE FOR AN EXTENDED PERIOD OF TIME AND NOT ONLY NONRESPONSIVE BUT ACTUALLY AGGRESSIVE IN HIS COMMUNICATIONS WITH ME IN THE PAST COUPLE OF YEARS.
MR. BOSTIC: SO THIS WAS A CHANGE IN TUNE TO THAT?
ALAN EISENMAN: 180 DEGREES.
MR. BOSTIC: LET'S LOOK AT PAGE 2 OF THIS EXHIBIT AND THE TOP HALF. DO YOU SEE AN EMAIL FROM MR. BALWANI TO YOU ON CHRISTMAS, 2013?
ALAN EISENMAN: YES.
MR. BOSTIC: AND HE THANKS YOU FOR YOUR EMAIL, AND HE SENDS YOU A SIGNATURE PAGE AND WIRING INSTRUCTIONS. WAS THAT TO FACILITATE YOUR INVESTMENT IN THERANOS?
ALAN EISENMAN: YES.
MR. BOSTIC: FINALLY, LET'S GO TO PAGE 1 OF THIS EXHIBIT. LET'S ZOOM IN ON FIRST THE BOTTOM HALF. MR. EISENMAN, DO YOU SEE THAT YOU'RE ASKING SOME QUESTIONS HERE IN CONNECTION WITH THIS POTENTIAL INVESTMENT?
ALAN EISENMAN: YES.
MR. BOSTIC: GENERALLY SPEAKING, WHY DID YOU WANT TO OBTAIN THIS INFORMATION FROM THE COMPANY?
ALAN EISENMAN: TO FIND OUT MORE ABOUT THE SIZE OF THE ROUND VERSUS THE SIZE OF THE NEXT ROUND. AND IF ANY DIRECTORS ARE PARTICIPATING IN THE ROUND, THAT'S A VERY POSITIVE SIGN IF DIRECTORS OF THE COMPANY ARE ALSO PUTTING MONEY IN AT THIS ROUND.
MR. BOSTIC: LET'S LOOK AT THE TOP MESSAGE ON THIS PAGE. DO YOU SEE THAT MESSAGE WHICH IS A RESPONSE FROM MR. BALWANI TO YOU?
ALAN EISENMAN: YES.
MR. BOSTIC: IN SHORT, HE DECLINES TO PROVIDE THE REQUESTED INFORMATION; IS THAT RIGHT?
ALAN EISENMAN: THAT'S CORRECT.
MR. BOSTIC: AROUND THIS TIME PERIOD DID YOU ALSO LOOK AT THE THERANOS PUBLIC WEBSITE?
ALAN EISENMAN: YES.
MR. BOSTIC: DID YOU LOOK AT IT IN ORDER TO GAIN MORE INFORMATION TO HELP YOU DECIDE WHETHER TO INVEST IN THE COMPANY?
ALAN EISENMAN: YES.
MR. BOSTIC: AND DID THE INFORMATION ON THE WEBSITE ALSO MAKE YOU FEEL POSITIVE OR INCLINED TO INVEST IN THE COMPANY?
ALAN EISENMAN: YES.
MR. BOSTIC: LET'S LOOK AT EXHIBIT 4845. YOUR HONOR, THIS IS IN EVIDENCE. PERMISSION TO PUBLISH?
JUDGE DAVILA: YES.
BY MR. BOSTIC:
MR. BOSTIC: LET'S GO TO PAGE 18 OF 4845. MR. EISENMAN, DO YOU SEE ON THE SCREEN IN FRONT OF YOU A WIRE TRANSFER RECORD? IT MAY NOT BE IN YOUR BINDER.
ALAN EISENMAN: OKAY. I DON'T SEE IT IN MY BINDER. BUT, YES, I DO SEE A WIRE TRANSFER.
MR. BOSTIC: AND IF YOU LOOK AT THE LINE NEAR THE TOP LABELLED OMAD THERE'S A DATE INDICATED DECEMBER 30TH, 2013. DO YOU SEE THAT?
ALAN EISENMAN: YES.
MR. BOSTIC: AND THIS WIRE TRANSFER IS IN THE AMOUNT OF $99,990. DO YOU SEE THAT?
ALAN EISENMAN: YES.
MR. BOSTIC: WAS THIS THE WIRE TRANSFER FOR WHICH YOU INVESTED MORE MONEY IN THERANOS IN DECEMBER?
ALAN EISENMAN: YES, IT IS.
MR. BOSTIC: AND WE SEE THAT YOUR NAME IS INDICATED UNDER ORIGINATOR. DO YOU SEE THAT?
ALAN EISENMAN: YES.
MR. BOSTIC: AND THERANOS IS LISTED UNDER BENEFICIARY. DO YOU SEE THAT?
ALAN EISENMAN: YES.
MR. BOSTIC: TOWARDS THE BOTTOM OF THE PAGE?
ALAN EISENMAN: YES.
MR. BOSTIC: SO AT THE POINT THAT YOU DECIDED TO INVEST, YOU JUST TESTIFIED THAT YOU HAD HAD A CONTENTIOUS, LET'S CALL IT, RELATIONSHIP WITH MR. BALWANI; IS THAT RIGHT?
ALAN EISENMAN: THAT'S PUTTING IT MILDLY.
MR. BOSTIC: YOU HAD HAD SOME DIFFICULTY GETTING INFORMATION FROM MS. HOLMES?
ALAN EISENMAN: YES.
MR. BOSTIC: WHY DID YOU DECIDE TO INVEST MORE IN THERANOS FOLLOWING THAT EXPERIENCE?
ALAN EISENMAN: THIS IS WHAT WE CALL A SEAT AT THE TABLE. IF YOU PUT MONEY IN AT AN EARLY STAGE AND THEY ARE SUCCESSFUL, YOU'RE THE FIRST ONE THAT IS ALLOWED TO PUT MONEY IN AS THEY RAISE MORE MONEY AND THE VALUATION INCREASES. AND THIS WAS RATIFIED BY THE PRESS AND BY THIRD PARTIES, AND BY SUNNY AND BY ELIZABETH, THAT THEY WERE SUCCESSFUL, THAT THEY HAD CROSSED THE FINISH LINE, AND THIS WAS TO GROW THE COMPANY. THEY ALSO TOLD ME THAT THIS WAS A SPECIAL VALUATION FOR EXISTING SHAREHOLDERS; THAT THEY WERE GOING TO ALLOW US IN A SMALL ROUND TO BUY STOCK AT $15 A SHARE, AND THEY WERE GOING TO CLOSE THIS ROUND, AND SHORTLY THEREAFTER THEY WERE GOING TO DO A MUCH MORE INSTITUTIONAL ROUND AT $17 A SHARE.
MR. BOSTIC: AND IN YOUR MIND THOSE FACTS WERE ENOUGH TO OVERCOME THE EXPERIENCE THAT YOU HAD HAD IN TRYING TO GET INFORMATION IN THE PAST?
ALAN EISENMAN: YES.
MR. BOSTIC: LET'S MOVE FORWARD IN TIME TO 2014. I'LL ASK YOU TO LOOK AT TAB 2223 IN THE BINDER. AND IS THIS AN EMAIL CHAIN BETWEEN YOU, ELIZABETH HOLMES, AND SUNNY BALWANI RELATING TO SOME INFORMATION ABOUT THERANOS?
ALAN EISENMAN: YES.
MR. BOSTIC: YOUR HONOR, I OFFER EXHIBIT 2223.
MR. DOWNEY: NO OBJECTION, YOUR HONOR.
JUDGE DAVILA: IT'S ADMITTED. IT MAY BE PUBLISHED.
(GOVERNMENT'S EXHIBIT 2223 WAS RECEIVED IN EVIDENCE.)
BY MR. BOSTIC:
MR. BOSTIC: LET'S START AT THE BOTTOM OF PAGE 1 OF 2223. MR. EISENMAN, DO YOU SEE AN EMAIL THAT YOU SENT ON OCTOBER 8TH, 2014, TO MS. HOLMES AND MR. BALWANI?
ALAN EISENMAN: YES.
MR. BOSTIC: AND THE SUBJECT IS "NEGATIVE REPORT ON THERANOS FROM UBS"?
ALAN EISENMAN: YES.
MR. BOSTIC: AND FIRST OF ALL, LET ME ASK, BETWEEN THE TIME OF YOUR INVESTMENT AT THE END OF 2013, AND AT THIS POINT IN LATE 2014, HAD YOU REESTABLISHED COMMUNICATION WITH MS. HOLMES AT THERANOS?
MR. BOSTIC: HAD YOU HAD ANY ADDITIONAL LUCK IN OBTAINING MORE DETAILS ABOUT HOW THE COMPANY WAS DOING?
MR. BOSTIC: DURING THIS TIME PERIOD WERE YOU MONITORING PUBLIC MEDIA TO TRY TO GET INFORMATION ABOUT THE COMPANY?
ALAN EISENMAN: YES.
MR. BOSTIC: IN THIS EMAIL YOU WRITE TO MS. HOLMES AND MR. BALWANI PROVIDING INFORMATION ABOUT A UBS REPORT ON THERANOS; IS THAT CORRECT?
ALAN EISENMAN: YES.
MR. BOSTIC: YOUR EMAIL SAYS THAT UBS CLAIMS THAT THE BLOOD SAMPLES HAVE TO BE SENT TO PALO ALTO, THEY ARE LESS RELIABLE THAN TRADITIONAL TESTS, AND THE TURNAROUND TIME IS OVER 24 HOURS. DO YOU SEE THAT?
ALAN EISENMAN: YES.
MR. BOSTIC: AND WAS READING THESE CLAIMS ABOUT THE COMPANY CONCERNING TO YOU AT THIS TIME?
ALAN EISENMAN: DEEPLY CONCERNING.
MR. BOSTIC: WHY WAS THAT?
ALAN EISENMAN: BECAUSE I WAS UNDER THE IMPRESSION THAT THE TECHNOLOGY WORKED, THAT THE SAMPLES WERE DONE ON SITE, OR AS ONE OF THEIR DIRECTORS SAID, IT WAS SENT TO THE CLOUD, AND THE CLOUD WOULD ANALYZE IT AND YOU WOULD HAVE RESULTS BACK IN 20 TO 30 MINUTES. SO IF THE TECHNOLOGY WAS WORKING, WHY WASN'T IT BEING USED IN THESE PHARMACIES? WHY WAS IT -- WERE THEY PHYSICALLY TRANSPORTED BACK TO PALO ALTO USING WHATEVER TECHNOLOGY THEY HAD IN PALO ALTO WITH THE SAME TWO-DAY TURNAROUND THAT THE COMPETITORS HAD?
MR. BOSTIC: WAS THAT NEGATIVE INFORMATION THAT YOU READ DIFFERENT FROM THE INFORMATION THAT YOU HAD RECEIVED FROM MS. HOLMES AND MR. BALWANI?
ALAN EISENMAN: TOTALLY CONTRADICTORY.
MR. BOSTIC: LET'S LOOK AT THE UBS REPORT ON PAGE 2 OF THIS EXHIBIT. LET'S ZOOM IN ON THE TEXT ON THE TOP HALF OF THE PAGE. DO YOU SEE TOWARDS THE BOTTOM OF THAT SELECTION THERE'S A SUBHEADING, "THERANOS REMAINS A FOCUS FOR INVESTORS"?
ALAN EISENMAN: YES.
MR. BOSTIC: AND IT READS THERE, "OUR INDUSTRY CONSULTANT WAS INITIALLY OPTIMISTIC ABOUT THE PROMISE OF THERANOS." DO YOU SEE THAT?
ALAN EISENMAN: YES.
MR. BOSTIC: AND IT SAYS IN THE NEXT SENTENCE, "HOWEVER, THE MODEL AS SEEN IN A HANDFUL OF WALGREENS'S LOCATIONS, HAS EVOLVED INTO A TRADITIONAL REFERENCE LAB," EXCUSE ME, "A TRADITIONAL REFERENCE LAB OFFERING WHERE BLOOD IS DRAWN MOSTLY THROUGH VENIPUNCTURE AND SENT THROUGH A REGIONAL LAB LOCATION WITH A 24 PLUS HOUR TURN AROUND." DO YOU SEE THAT?
ALAN EISENMAN: YES.
MR. BOSTIC: AND THIS TALKS ABOUT THE ORIGINAL CONCEPT BEING THAT THE ORIGINAL TEST MENU COULD BE PERFORMED ON ONE MACHINE IN THE WALGREENS. WAS THAT YOUR UNDERSTANDING UNTIL YOU READ THIS?
ALAN EISENMAN: THAT WAS MY UNDERSTANDING.
MR. BOSTIC: THAT REPORT GOES ON TO SAY, "HOWEVER, THE TEST MENU AT THE RELEVANT WALGREENS'S LOCATIONS HAS EVOLVED TO OVER 215 TODAY (INCLUDING MANY ESOTERIC TESTS), WHICH BASED ON EXISTING TECHNOLOGY WOULD TEND TO REQUIRE 10-20 DIFFERENT TESTING PLATFORMS. OUR CONSULTANT BELIEVES IT IS HIGHLY UNLIKELY THAT ALL OF THESE TESTS ARE BEING DONE ON ONE MACHINE." DO YOU SEE THAT?
ALAN EISENMAN: I DO.
MR. BOSTIC: AND UP UNTIL THIS POINT, BASED ON THE INFORMATION THAT YOU HAD OBTAINED FROM MS. HOLMES AND MR. BALWANI, DID YOU UNDERSTAND THAT ALL OF THERANOS'S TESTS WERE BEING DONE ON ONE MACHINE?
ALAN EISENMAN: YES.
MR. BOSTIC: IN ANY OF YOUR COMMUNICATIONS WITH MS. HOLMES OR MR. BALWANI, DID THEY EXPLAIN TO YOU THE COMPANY'S USE OF THIRD PARTY ANALYZERS?
MR. BOSTIC: LET'S LOOK AT THE RESPONSE OF MR. BALWANI TO YOUR EMAIL. IF WE GO BACK TO PAGE 1 AND ZOOM IN ON THE BOTTOM HALF OF THE PAGE. DO YOU SEE A RESPONSE FROM MR. BALWANI TO YOU IN OCTOBER OF 2014?
ALAN EISENMAN: YES.
MR. BOSTIC: AND HIS REACTION TO THAT UBS REPORT IS, "DOESN'T SURPRISE US. SOUNDS LIKE AN UNINFORMED CONSULTANT." DO YOU SEE THAT?
ALAN EISENMAN: YES.
MR. BOSTIC: AND WHAT CONCLUSION DID YOU DRAW FROM THAT ABOUT THE TRUTH OF THE STATEMENTS IN THE UBS REPORT?
ALAN EISENMAN: IT RAISED SUSPICION, AND THE SUSPICION IN MY COMMUNICATION WITH SUNNY ACTUALLY INCREASED MY SUSPICION.
MR. BOSTIC: DID YOU TAKE THIS AS A DENIAL OF THE INFORMATION IN THE UBS REPORT?
ALAN EISENMAN: IT WAS AN OPPORTUNITY TO DENY IT, BUT IT WAS KIND OF A KICK THE CAN DOWN THE ROAD, NOT REALLY ADDRESSING THE SITUATION.
MR. BOSTIC: LET'S LOOK AT THE TOP HALF OF PAGE 1. IN RESPONSE YOU ASK FOR SOME MORE INFORMATION; IS THAT CORRECT?
ALAN EISENMAN: YES.
MR. BOSTIC: AND MR. BALWANI WRITES BACK IN THE MIDDLE OF THAT SELECTION, "ALAN. "I HAVE NO INTENTION OF RESPONDING TO THIS EMAIL AND EXPLAINING THE TECH AND PROCESSES. PLEASE STOP SENDING ME WITH EMAILS EVERYDAY." DO YOU SEE THAT?
ALAN EISENMAN: YES.
MR. BOSTIC: AND AROUND THIS TIME PERIOD IN NOVEMBER OF 2014 WERE YOU EMAILING THERANOS EVERY DAY?
ALAN EISENMAN: PROBABLY NOT EVERY DAY BUT PROBABLY ON A REGULAR COURSE WHEN THERE WAS INFORMATION THAT WAS CONTRADICTORY TO WHAT I HAD BEEN LED TO BELIEVE.
MR. BOSTIC: IF YOU HAD KNOWN BEFORE YOU INVESTED IN 2013 THAT THE COMPANY WAS RELYING ON THIRD PARTY DEVICES FOR MANY OF THE TESTS THAT IT WAS OFFERING, WOULD THAT HAVE BEEN AN IMPORTANT FACT TO YOUR DECISION MAKING?
ALAN EISENMAN: YES.
MR. BOSTIC: LET'S LOOK IN YOUR BINDER, PLEASE, AT EXHIBIT 2216 NEXT. DO YOU SEE THAT THIS IS A CONTINUATION OF THAT SAME EMAIL CHAIN?
ALAN EISENMAN: YES.
MR. BOSTIC: YOUR HONOR, I OFFER EXHIBIT 2216.
MR. DOWNEY: YOUR HONOR, OTHER THAN THE REDACTION THAT WE'VE REQUESTED ON THE FIRST PAGE OF THIS, NO OBJECTION.
JUDGE DAVILA: ALL RIGHT. WITH THAT REDACTION IT CAN BE PUBLISHED. IT'S ADMITTED, AND IT CAN BE PUBLISHED. THANK YOU.
(GOVERNMENT'S EXHIBIT 2216, REDACTED, WAS RECEIVED IN EVIDENCE.)
MR. BOSTIC: MS. HOLLIMAN, LET'S DISPLAY PAGE 1, THE TOP HALF.
MR. DOWNEY: YOUR HONOR, IF I MIGHT? HAVE YOU REDACTED IT?
MR. BOSTIC: YES.
MR. BOSTIC: MR. EISENMAN, IN THE MIDDLE OF THAT SELECTION DO YOU SEE A RESPONSE EMAIL THAT YOU WROTE BACK TO MR. BALWANI?
ALAN EISENMAN: YES.
MR. BOSTIC: YOU WRITE, "I DON'T MEAN TO BROTHER YOU." THEN THERE'S SOME CONTENT THAT WE'VE REDACTED. YOU SAY, "I AM CLOSE TO RETIREMENT AND I AM TRYING TO DECIDE WHETHER TO LIGHTEN UP IF THERE IS A LIQUIDITY EVENT IN 2015. HOPEFULLY THERE WILL BE ADDITIONAL INFORMATION AVAILABLE IN THE NOT TOO DISTANT FUTURE, OR THERANOS WILL CONSIDER AN INFORMATION EVENT FOR EXISTING SHAREHOLDERS." WHY WERE YOU TRYING TO OBTAIN ADDITIONAL INFORMATION ABOUT THE COMPANY AT THIS TIME AFTER YOUR INVESTMENT?
ALAN EISENMAN: BECAUSE I HAD SUSPICIONS THAT THINGS WERE NOT AS THEY WERE COMMUNICATED. I HAD A SIGNIFICANT AMOUNT OF NET WORTH INVOLVED IN THIS COMPANY, AND I HAD BEEN LOOKING FOR FURTHER OPPORTUNITIES FOR A LIQUIDITY EVENT TO REDUCE MY POSITION.
MR. BOSTIC: I'LL ASK YOU TO TURN TO -- WELL, BEFORE WE GO TO THE NEXT EXHIBIT, WERE YOUR EFFORTS TO GET MORE INFORMATION IN 2014 SUCCESSFUL?
MR. BOSTIC: PLEASE TURN TO TAP 2468. AT 2468, DO YOU SEE AN EMAIL CHAIN BETWEEN YOU, MS. HOLMES, AND MR. BALWANI IN APRIL 2015?
ALAN EISENMAN: YES.
MR. BOSTIC: YOUR HONOR, I OFFER EXHIBIT 2468 WITH THE REDACTION THAT WE DISCUSSED.
MR. DOWNEY: WITH THAT REDACTION, YOUR HONOR, NO OBJECTION.
JUDGE DAVILA: THE REDACTED VERSION IS ADMITTED. IT MAY BE PUBLISHED.
(GOVERNMENT'S EXHIBIT 2468, REDACTED, WAS RECEIVED IN EVIDENCE.)
BY MR. BOSTIC:
MR. BOSTIC: IF WE CAN START ON PAGE 2 AT THE BOTTOM. MR. EISENMAN, DO YOU SEE AN EMAIL THAT YOU SENT MR. BALWANI IN MARCH OF 2015?
ALAN EISENMAN: YES.
MR. BOSTIC: YOU SAY "SUNNY, "WE HAVE BEEN INFORMED OF AN OPPORTUNITY TO SELL THERANOS STOCK. BEFORE WE DO, WE WANTED TO GET SOME NARRATIVE FROM YOU, TO GET A SENSE OF WHETHER OUR VALUE HAS GROWN IN THE YEAR AND 3 MONTHS SINCE THE ROUND VALUING THE COMPANY AT 9 BILLION WAS PRICED." DO YOU SEE THAT?
ALAN EISENMAN: YES.
MR. BOSTIC: IN THE PARAGRAPH BELOW THAT YOU SAY, "WOULD IT BE POSSIBLE TO SCHEDULE A SHORT CATCH UP CALL?" DO YOU SEE THAT?
ALAN EISENMAN: YES.
MR. BOSTIC: LET'S LOOK AT MR. BALWANI'S RESPONSE. IN HIS EMAIL BACK TO YOU HE TELLS YOU ABOUT THE PRICE OF THE LAST TRANSACTION. HE SAYS, "I DID NOT SAY WE WILL HAVE, OR CONSIDER A LIQUIDITY EVENT IN 2015." DO YOU SEE THAT?
ALAN EISENMAN: YES.
MR. BOSTIC: AND HE SAYS, "WE DON'T KNOW ANYTHING OF THIS TRANSACTION BELOW." DO YOU SEE THAT?
ALAN EISENMAN: YES.
MR. BOSTIC: AND LET'S LOOK AT YOUR EMAIL BACK. AND YOU EXPLAIN THAT IN ADDITION TO THE FACT THAT YOU ARE RETIRING, YOUR DAUGHTER NEEDS LIQUIDITY TO BUY A HOUSE. DO YOU SEE THAT?
ALAN EISENMAN: YES.
MR. BOSTIC: AND YOU'RE TRYING HERE TO DECIDE, AGAIN, WHETHER TO UNLOAD YOUR THERANOS STOCK; IS THAT CORRECT?
ALAN EISENMAN: THAT'S CORRECT.
MR. BOSTIC: YOU MENTION AT THE BOTTOM OF YOUR EMAIL THAT YOU ALSO DIDN'T GET A RESPONSE TO YOUR REQUEST FOR A COMPANY VISIT?
ALAN EISENMAN: YES.
MR. BOSTIC: WERE YOU ASKING FOR A VISIT TO THE COMPANY AT THIS TIME?
ALAN EISENMAN: YES.
MR. BOSTIC: AND WAS THAT FOR THE SAME PURPOSE, TO TRY TO LEARN ABOUT WHAT WAS HAPPENING WITH YOUR INVESTMENT?
ALAN EISENMAN: YES, IT WAS.
MR. BOSTIC: LET'S GO TO PAGE 1. LET'S ZOOM IN ON THE BOTTOM HALF OF THE PAGE. WE SEE THERE AN EMAIL ON APRIL 12TH, 2015. SO -- I'M SORRY, APRIL 11TH, 2015, THE FOLLOWING MONTH. AND YOU'VE CHANGED THE SUBJECT LINE TO "PLEASE RESPOND" IN ALL CAPS; IS THAT RIGHT?
ALAN EISENMAN: THAT'S CORRECT.
MR. BOSTIC: AND YOU SAY, "I WOULD APPRECIATE A RESPONSE OR CALL THIS WEEKEND." MR. BALWANI WRITES BACK THAT HE ALREADY RESPONDED TO YOUR QUESTION ABOUT WANTING TO SELL YOUR SHARES. DO YOU SEE THAT?
ALAN EISENMAN: YES.
MR. BOSTIC: AT THIS POINT DID YOU HAVE THE INFORMATION THAT YOU NEEDED TO WEIGH THAT OPTION?
ALAN EISENMAN: NO, I HAD NO INFORMATION.
MR. BOSTIC: LET'S LOOK AT THE TOP HALF OF PAGE 1. AND, MR. EISENMAN, IN THIS EMAIL YOU INCLUDE MS. HOLMES ON APRIL 12TH, 2015; IS THAT CORRECT?
ALAN EISENMAN: YES.
MR. BOSTIC: AND YOU SAY, "THE RESPONSE I AM LOOKING FOR FROM YOU OR ELIZABETH IS A BUSINESS UPDATE LIKE YOU PROVIDED LAST YEAR WHEN WE DISCUSSED THE COMPANY'S TIMETABLE FOR A PRIVATE OR PUBLIC LIQUIDITY EVENT." AT THE BOTTOM OF THAT PARAGRAPH YOU SAY, "IT IS REALLY UNFAIR FOR YOU TO PLAY THIS CAT AND MOUSE GAME WITH ME. I HAVE BEEN A SHAREHOLDER FOR OVER 9 YEARS AND I, AS WELL AS MY DAUGHTER, ALSO A SHAREHOLDER, ARE IN A DIFFERENT STAGE OF LIFE. I CAN'T MAKE A RATIONAL DECISION TO SELL OR HOLD MY STOCK WITH THE LACK OF INFORMATION THAT YOU HAVE PROVIDED." DO YOU SEE THAT?
ALAN EISENMAN: YES.
MR. BOSTIC: WAS THIS EMAIL MESSAGE SUCCESSFUL IN BREAKING LOOSE THE LOG JAM AND REESTABLISHING THE FLOW OF INFORMATION?
MR. BOSTIC: AT THE TOP OF THIS PAGE THERE'S A RESPONSE FROM MR. BALWANI. DO YOU SEE THAT?
ALAN EISENMAN: YES.
MR. BOSTIC: HE SAYS TO YOU, "YOUR EMAILS ARE INSULTING, FULL OF INACCURATE STATEMENTS AND WASTEFUL OF OUR TIME. "OUR NEXT RESPONSE TO THIS EMAIL AND ALL YOUR FUTURE EMAILS WILL COME FROM OUR COUNSEL." DO YOU SEE THAT?
ALAN EISENMAN: YES.
MR. BOSTIC: AND FOLLOWING THIS POINT IN APRIL OF 2015 WERE YOU EVER ABLE TO GET A SATISFACTORY LEVEL OF INFORMATION FROM THE COMPANY ABOUT WHAT WAS HAPPENING THERE?
ALAN EISENMAN: NONE WHATSOEVER.
MR. BOSTIC: DID YOU END UP ULTIMATELY SELLING ANY OF YOUR SHARES?
MR. BOSTIC: TO YOUR KNOWLEDGE DID THE COMPANY ULTIMATELY CEASE OPERATIONS?
ALAN EISENMAN: YES.
MR. BOSTIC: ONE MOMENT, YOUR HONOR.
JUDGE DAVILA: YES.
(DISCUSSION AMONGST GOVERNMENT COUNSEL OFF THE RECORD.)
MR. BOSTIC: NO FURTHER QUESTIONS AT THIS TIME. THANK YOU.
JUDGE DAVILA: CROSS-EXAMINATION?
MR. DOWNEY: YES, YOUR HONOR. IT MIGHT TAKE US A MOMENT.
JUDGE DAVILA: YES. SO, FOLKS, I'LL REMIND YOU THAT WE'RE GOING UNTIL 4:00 O'CLOCK TODAY. PLEASE FEEL FREE TO STAND AND STRETCH IF YOU WOULD LIKE. YOU MAY AS WELL, SIR, IF YOU WOULD LIKE TO STRETCH FOR A MOMENT, YOU'RE FREE TO STAND. WHILE WE'RE DOING THIS, SCHEDULING WISE, LADIES AND GENTLEMEN, PLEASE RECALL THAT WE WILL BE IN SESSION THE 15TH IN THE MORNING, MONDAY IN THE MORNING. I WANT TO REMIND YOU OF THAT. WE'RE SCHEDULED TO GO UNTIL NOON, I THINK. THERE'S A POSSIBILITY THAT I COULD FREE UP THE AFTERNOON, JUST A POSSIBILITY, AND I JUST WANT TO SHARE THAT WITH YOU. IF THAT'S TOO MUCH -- I KNOW NEXT WEEK IS A HEAVY LIFT FOR US. WE'RE MEETING EVERY DAY NEXT WEEK. BUT THAT REMAINS A POSSIBILITY. SO I JUST WANT TO SHARE THAT WITH YOU FOR NOW. THANK YOU.
(PAUSE IN PROCEEDINGS.)
CROSS-EXAMINATION BY MR. DOWNEY:
MR. DOWNEY: GOOD AFTERNOON, MR. EISENMAN.
ALAN EISENMAN: GOOD AFTERNOON.
MR. DOWNEY: MY NAME IS KEVIN DOWNEY, AND I REPRESENT MS. HOLMES. I'M GOING TO ASK YOU SOME QUESTIONS TODAY AND POSSIBLY CONTINUING INTO MONDAY. LET ME FIRST TRY TO PIN DOWN THE DATE OF THE FIRST INVESTMENT THAT YOU MADE IN THERANOS. DO YOU RECALL DISCUSSING THAT INVESTMENT WITH MR. BOSTIC?
ALAN EISENMAN: YES.
MR. DOWNEY: I'M GOING TO SHOW YOU A DOCUMENT THAT RELATES TO THAT TO SEE IF THAT HELPS US IN IDENTIFYING THAT DATE. YOUR HONOR, MAY I APPROACH THE WITNESS?
JUDGE DAVILA: YES.
BY MR. DOWNEY:
MR. DOWNEY: IF YOU CAN LOOK AT THE NOTEBOOK THAT I'VE HANDED YOU, MR. EISENMAN, AT THE TAB THAT IS MARKED 12003A.
ALAN EISENMAN: OKAY.
MR. DOWNEY: AND IF YOU LOOK AT THE FIRST PAGE OF THAT -- YOUR HONOR, THIS DOCUMENT IS ALREADY IN EVIDENCE, AND I'M GOING TO DISPLAY IT. IF YOU LOOK AT THE FIRST PAGE HERE, THIS IS A SERIES C PREFERRED STOCK PURCHASE AGREEMENT. DO YOU SEE THAT?
ALAN EISENMAN: YES.
MR. DOWNEY: AND DO YOU SEE UNDERNEATH THAT IT LISTS A SERIES OF CLOSINGS?
ALAN EISENMAN: YES.
MR. DOWNEY: AND THAT THE FIRST CLOSING IS BOLDED, AND IT'S DATED OCTOBER 13TH, 2006. DO YOU SEE THAT?
ALAN EISENMAN: YES.
MR. DOWNEY: AND THEN IF YOU TURN TO THE FIFTH PAGE OF THE EXHIBIT WHERE THE TEXT ACTUALLY BEGINS AND YOU ZERO IN ON THE FIRST PARAGRAPH. WE'LL DO THAT ON THE SCREEN FOR YOU. IT MIGHT MAKE IT A LITTLE EASIER FOR YOU TO FOLLOW. IT INDICATES THAT THE STOCK PURCHASE AGREEMENT WAS MADE AS OF OCTOBER 13TH, 2006. DO YOU SEE THAT?
ALAN EISENMAN: YES.
MR. DOWNEY: AND THEN IF WE LOOK AT THE BACK OF THE DOCUMENT, AND WE'LL PUT THIS ON THE SCREEN SO YOU DON'T HAVE TO GO FENDING THROUGH ALL OF THE PAGES.
ALAN EISENMAN: OKAY.
MR. DOWNEY: BUT IF YOU LOOK AT WHAT IS PAGE 45 OF THE EXHIBIT, IS THAT YOUR SIGNATURE THERE ON PAGE 45?
ALAN EISENMAN: YES.
MR. DOWNEY: AND LET ME GO FORWARD. AND I JUST WANT TO SEE IF WE CAN SEE THE AMOUNT THAT YOU INVESTED AS OF THE OCTOBER 13TH INVESTMENT. I'M DRAWING YOUR ATTENTION TO PAGE 94, WHICH IS EXHIBIT 8380. DO YOU SEE THERE EXHIBIT A?
ALAN EISENMAN: YES.
MR. DOWNEY: AND THAT'S A SCHEDULE OF PURCHASERS; CORRECT?
ALAN EISENMAN: CORRECT.
MR. DOWNEY: AND THAT'S A LISTING OF ALL OF THE PEOPLE WHO HAVE BOUGHT STOCK AS PART OF THE OFFERING THAT YOU WERE PURCHASING STOCK AS PART OF; CORRECT?
ALAN EISENMAN: YES.
MR. DOWNEY: AND IT INDICATES HERE THAT YOU BOUGHT ABOUT A LITTLE OVER 402 SHARES IN THIS OFFERING; IS THAT RIGHT?
ALAN EISENMAN: YES.
MR. DOWNEY: AND YOU PAID A PRICE OF -- YOU AND MR. BOSTIC WERE TRYING TO FIGURE OUT WHETHER IT WAS CLOSER TO 1.1 OR 1.2 BUT --
ALAN EISENMAN: SOMEWHERE IN THE MIDDLE.
MR. DOWNEY: TO BE PRECISE IT WAS $1,134,243; RIGHT?
ALAN EISENMAN: YES.
MR. DOWNEY: AND IT LOOKS LIKE YOU PAID SOMEWHERE UNDER $3 A SHARE FOR THIS?
ALAN EISENMAN: $2.82.
MR. DOWNEY: $2.82. FAIR ENOUGH. ALL RIGHT. I WANT TO TAKE YOU BACK TO THE PERIOD BEFORE YOU DECIDED TO MAKE THIS INVESTMENT. YOU COME FROM HOUSTON, TEXAS; RIGHT?
ALAN EISENMAN: YES.
MR. DOWNEY: AND AS OF 2006 YOU HAD BEEN WORKING IN HOUSTON PROFESSIONALLY FOR A NUMBER OF DECADES; RIGHT?
ALAN EISENMAN: CORRECT.
MR. DOWNEY: AND YOU HAD WORKED AS AN ADVISOR TO INDIVIDUALS AS TO HOW TO MANAGE THEIR MONEY; CORRECT?
ALAN EISENMAN: CORRECT.
MR. DOWNEY: AND AS A RESULT OF THAT WORK YOU MADE SOME CONTACTS WHO HAD SOME EXPERTISE IN INVESTMENT AND ADVISED PEOPLE ON HOW BEST TO INVEST THEIR MONEY FOR WHATEVER THEIR PURPOSE WAS?
ALAN EISENMAN: CORRECT.
MR. DOWNEY: AND THAT WAS -- I THINK YOU CALLED THAT A NETWORK. YOU HAD A NETWORK; IS THAT RIGHT?
ALAN EISENMAN: NO. THERE WERE THINGS. THERE WERE CLIENTS THAT I INVESTED CONSERVATIVELY IN SECURITIES, AND I HAD A NETWORK OF FRIENDS AND FAMILY THAT WE LOOKED AT PRIVATE SECURITIES LIKE THIS THERANOS --
MR. DOWNEY: I SEE. AND WAS DAVID HARRIS ONE OF THOSE FRIENDS?
ALAN EISENMAN: YES.
MR. DOWNEY: AND I ASSUME YOU INVESTED ON YOUR OWN BEHALF?
ALAN EISENMAN: CORRECT.
MR. DOWNEY: AND THAT INCLUDED IN PRIVATE COMPANIES; CORRECT?
ALAN EISENMAN: CORRECT.
MR. DOWNEY: AND SO YOU HAD YOUR EARS OPEN ON AN ONGOING BASIS TO MAKE AN EFFORT TO TRY TO HEAR ABOUT PRIVATE INVESTING OPPORTUNITIES THAT MIGHT BE OF INTEREST TO YOU; CORRECT?
ALAN EISENMAN: CORRECT.
MR. DOWNEY: AND DAVID HARRIS MENTIONED TO YOU THAT HE HAD INVESTED IN A COMPANY A COUPLE OF YEARS BEFORE IN CALIFORNIA CALLED THERANOS; CORRECT?
ALAN EISENMAN: CORRECT.
MR. DOWNEY: AND HE TOLD YOU A LITTLE BIT ABOUT THE FOUNDER OF THE COMPANY; CORRECT?
ALAN EISENMAN: CORRECT.
MR. DOWNEY: MS. HOLMES; CORRECT?
ALAN EISENMAN: YES.
MR. DOWNEY: AND HE TOLD YOU THAT MS. HOLMES WAS SOMEONE WHO HE HAD A LOT OF CONFIDENCE IN; CORRECT?
ALAN EISENMAN: THAT'S CORRECT.
MR. DOWNEY: AND HE TOLD YOU THAT SHE HAD INVENTED A TECHNOLOGY THAT HAD TO DO WITH MEASURING BLOOD AND MEASURING THE DISTRIBUTION OF DRUGS; CORRECT?
ALAN EISENMAN: NOT EXACTLY IN THOSE WORDS BUT SIMILAR.
MR. DOWNEY: OKAY. THE GIST OF IT WAS ALONG THOSE LINES?
ALAN EISENMAN: YES.
MR. DOWNEY: OKAY. HE TOLD YOU HE KNEW HER FAMILY A LITTLE BIT?
ALAN EISENMAN: HE WAS THEIR FINANCIAL ADVISOR.
MR. DOWNEY: OKAY. AND HE TOLD YOU THAT, IN FACT, MS. HOLMES HAD ROOTS IN HOUSTON; CORRECT?
ALAN EISENMAN: CORRECT.
MR. DOWNEY: AND SHE HAD ATTENDED HIGH SCHOOL IN HOUSTON; CORRECT?
ALAN EISENMAN: YES.
MR. DOWNEY: AND A FEW YEARS BEFORE THE CONVERSATION THAT YOU WERE HAVING WITH MR. HARRIS, SHE HAD GRADUATED FROM HIGH SCHOOL AND GONE ON TO STANFORD UNIVERSITY; CORRECT?
ALAN EISENMAN: CORRECT.
MR. DOWNEY: AND HE TOLD YOU THAT WHILE AT STANFORD UNIVERSITY, SHE HAD COME UP WITH THE IDEA FOR THIS INVENTION AND APPLIED FOR A PATENT; CORRECT?
ALAN EISENMAN: CORRECT.
MR. DOWNEY: AND THAT HE HAD BEEN ASKED A COUPLE YEARS BEFORE THIS CONVERSATION, HE HAD BEEN ASKED TO INVEST IN A COMPANY THAT SHE HAD JUST FOUNDED; CORRECT?
ALAN EISENMAN: I WAS NOT AWARE OF THE TIMING OR THE EXTENT OF HIS EARLIER INVESTMENT. WE ONLY TALKED ABOUT THIS SECOND ROUND.
MR. DOWNEY: I SEE. OKAY. BUT YOU KNEW THAT HE WAS ALREADY AN INVESTOR?
ALAN EISENMAN: I'M NOT SURE IF I KNEW THAT HE WAS AN INVESTOR IN THE FIRST ROUND.
MR. DOWNEY: OKAY. DID HE TELL YOU THE NAMES OF OTHER INDIVIDUALS IN HOUSTON WHO WERE CONSIDERING BECOMING INVESTORS AT THE SAME TIME YOU WERE CONSIDERING THE INVESTMENT?
MR. DOWNEY: BUT HE TOLD YOU, DID HE NOT, THAT THERE WERE SOME INDIVIDUALS IN SILICON VALLEY WHO MIGHT ALSO BE INVESTING IN THE COMPANY; CORRECT?
MR. DOWNEY: MR. HARRIS DID NOT TELL YOU THAT?
ALAN EISENMAN: NO. HE MENTIONED LARRY ELLISON WAS INVOLVED WITH THE COMPANY, BUT AS FAR AS OTHER INDIVIDUALS, NOT TO MY RECOLLECTION.
MR. DOWNEY: OKAY. HE MENTIONED MR. ELLISON'S INVOLVEMENT; CORRECT?
ALAN EISENMAN: YES.
MR. DOWNEY: AND DID HE MENTION MR. LUCAS'S INVOLVEMENT AT THAT TIME?
ALAN EISENMAN: I DON'T RECALL IF I GOT THAT INFORMATION FROM DAVID OR FROM ELIZABETH.
MR. DOWNEY: OKAY. NOW, YOU SAY -- AND HE, I PRESUME IT IS HE WHO PUT YOU IN TOUCH WITH MS. HOLMES FOR PURPOSES OF HAVING A PHONE CALL?
ALAN EISENMAN: THAT'S CORRECT.
MR. DOWNEY: AND YOU KNEW WHO MR. ELLISON WAS OF COURSE; CORRECT?
ALAN EISENMAN: OF COURSE.
MR. DOWNEY: AND YOU KNOW THAT HE WAS VERY SUCCESSFUL AND HAD BEEN VERY SUCCESSFUL IN BUILDING ORACLE; CORRECT?
ALAN EISENMAN: CORRECT.
MR. DOWNEY: AND DID YOU KNOW WHO MR. LUCAS WAS?
ALAN EISENMAN: I DIDN'T AT THE TIME, BUT I FOUND OUT THAT HE WAS THE CHAIRMAN OF THE BOARD OF ORACLE AND THAT'S A LEVEL OF RESPECTABILITY.
MR. DOWNEY: NOW, PRIOR TO THIS OCTOBER 13TH INVESTMENT, YOU SAY YOU CALLED MS. HOLMES; CORRECT?
ALAN EISENMAN: CORRECT.
MR. DOWNEY: AND YOU HAD A SERIES OF TELEPHONE CONVERSATIONS WITH HER; RIGHT?
ALAN EISENMAN: THAT'S CORRECT.
MR. DOWNEY: AND DURING THOSE TELEPHONE CONVERSATIONS SHE WENT THROUGH ALL SORTS OF FINANCIAL INFORMATION ABOUT THE COMPANY; CORRECT?
ALAN EISENMAN: PROJECTIONS OVER THE NEXT FEW YEARS, PHARMACEUTICAL COMPANIES SHE WAS DOING BUSINESS WITH, INVESTMENT BANKERS THAT SHE WAS ALREADY IN CONTACT WITH, YES.
MR. DOWNEY: SO HOW MANY PHONE CONVERSATIONS WAS THAT PRIOR TO THE DATE OF YOUR OCTOBER 13TH INVESTMENT?
ALAN EISENMAN: I'M GUESSING THREE OR FOUR.
MR. DOWNEY: OKAY. HOW LONG DID THOSE CONVERSATIONS TAKE?
ALAN EISENMAN: IT'S JUST A GUESS BUT, YOU KNOW, 5 TO 15 MINUTES.
MR. DOWNEY: ISN'T IT TRUE, MR. EISENMAN, THAT YOU ONLY HAD ONE CONVERSATION WITH MS. HOLMES PRIOR TO THE TIME THAT YOU INVESTED AND IT WAS A VERY BRIEF CONVERSATION?
MR. DOWNEY: LET ME ASK YOU TO LOOK AT A DOCUMENT IN YOUR BINDER THAT IS MARKED AS EXHIBIT 10626.
ALAN EISENMAN: OKAY.
MR. DOWNEY: AND IS THIS AN EMAIL EXCHANGE BETWEEN YOU AND MR. HARRIS DISCUSSING YOUR POTENTIAL INVESTMENT IN THERANOS AT THAT TIME?
ALAN EISENMAN: YES.
MR. DOWNEY: YOUR HONOR, I MOVE THE ADMISSION OF EXHIBIT 10626.
MR. BOSTIC: NO OBJECTION.
JUDGE DAVILA: IT'S ADMITTED. IT MAY BE PUBLISHED.
(DEFENDANT'S EXHIBIT 10626 WAS RECEIVED IN EVIDENCE.)
BY MR. DOWNEY:
MR. DOWNEY: IF WE JUST BLOW UP -- THERE'S REALLY JUST ONE EMAIL HERE. THIS IS YOU EMAILING MR. HARRIS. IT LOOKS LIKE IN THE EVENING OF OCTOBER 12TH. DO YOU SEE THAT?
ALAN EISENMAN: YES.
MR. DOWNEY: AND YOU SAY TO MR. HARRIS, "THANK YOU FOR ALLOWING ME TO CO-INVEST IN THERANOS." DO YOU SEE THAT?
ALAN EISENMAN: YES.
MR. DOWNEY: AND WHAT DID YOU MEAN WHEN YOU USED THE TERM "CO-INVEST"?
ALAN EISENMAN: DAVID WAS INVESTING IN THIS ROUND.
MR. DOWNEY: OKAY. WERE YOU INVESTING ALONGSIDE HIM, OR WHAT DID YOU MEAN WITH THE TERM "CO-INVEST"?
ALAN EISENMAN: NO. I WAS JUST ANOTHER INVESTOR IN THIS ROUND.
MR. DOWNEY: I SEE. AND THEN YOU GO ON TO SAY, "I CALLED ELIZABETH YESTERDAY AND CHATTED FOR ABOUT 5 MINUTES." AND THAT WAS TRUE, WASN'T IT?
ALAN EISENMAN: APPARENTLY SO.
MR. DOWNEY: AND YOU GO ON TO SAY, "SHE SEEMS LIKE A TERRIFIC PERSON." CORRECT?
ALAN EISENMAN: CORRECT.
MR. DOWNEY: AND THEN YOU SAY YOU LOOK FORWARD TO MEETING HER AND YOU TALK A LITTLE INSIDE SHOP ABOUT THE MARKET WITH MR. HARRIS; CORRECT?
ALAN EISENMAN: CORRECT.
MR. DOWNEY: AND THIS WAS THE EVENING OF OCTOBER 12TH; CORRECT?
ALAN EISENMAN: CORRECT.
MR. DOWNEY: AND YOUR INVESTMENT TOOK PLACE ON OCTOBER 13TH; CORRECT?
ALAN EISENMAN: I'D HAVE TO LOOK AT THE INVESTMENT AGAIN.
MR. DOWNEY: WELL, LOOK AT -- LET'S PUT BACK UP EXHIBIT 12003A. AND YOU CAN LOOK AT PAGE 1 AND 5 OF THAT. LET ME DRAW THAT BACK UP FOR YOUR -- JUST LOOK AT THE FIRST PAGE. DO YOU SEE THAT REFERENCE TO THE OCTOBER 13TH AS THE FIRST CLOSING BOLDED?
ALAN EISENMAN: YES.
MR. DOWNEY: AND DO YOU SEE THAT REFERENCE THERE?
ALAN EISENMAN: YES.
MR. DOWNEY: AND IF WE GO TO THE FIRST PAGE IT INDICATES THE DATE OF THE AGREEMENT WHICH I THINK YOU SIGNED, WHICH IS OCTOBER 13TH, 2006; CORRECT?
ALAN EISENMAN: YES. ALSO, MY RECOLLECTION IS THE FIRST INVESTMENT I INVESTED A SMALLER AMOUNT, AND IT WAS A BACK AND FORTH BETWEEN ME AND THE CHIEF COUNSEL AT THE TIME, I THINK HIS NAME WAS DAVID ESQUIVEL, AND THERE WAS AN OPPORTUNITY THAT SOME INVESTORS DID NOT GET THEIR MONEY IN, AND THERE WAS AN OPPORTUNITY TO ADD TO MY INVESTMENT. AND MY RECOLLECTION IS THAT MY INVESTMENTS WERE STAGED OVER A PERIOD OF TIME.
MR. DOWNEY: ARE YOU SAYING THAT YOU INVESTED MORE THAN THE MILLION DOLLARS THAT IS REFLECTED IN THE DOCUMENT THAT IS --
ALAN EISENMAN: NO, NO. MY FIRST INVESTMENT --
JUDGE DAVILA: LET HIM FINISH HIS QUESTION.
BY MR. DOWNEY:
MR. DOWNEY: LET ME JUST ASK THE QUESTION AGAIN SO WE HAVE A CLEAR RECORD.
ALAN EISENMAN: OKAY.
MR. DOWNEY: ARE YOU SAYING THAT YOU INVESTED MORE THAN THE MILLION 1.34 THAT IS INDICATED IN THE OCTOBER 13TH DOCUMENT?
ALAN EISENMAN: NO. WHAT I'M SAYING IS THAT I INVESTED MUCH LESS, AND IN CONVERSATIONS WITH THEIR GENERAL COUNSEL HE SAID THAT SOME OF OUR INVESTORS DID NOT GET THEIR WIRES IN TIME, THERE'S MORE ROOM IN THIS ROUND IF YOU'RE INTERESTED. SO I MADE A SERIES OF INVESTMENTS OVER A PERIOD OF TIME THAT TOTALLED THE AMOUNT THAT YOU REFERENCED.
MR. DOWNEY: I SEE. BUT YOUR DECISION TO MAKE THE FIRST INVESTMENT WAS AS OF THIS OCTOBER 13TH DATE; CORRECT?
ALAN EISENMAN: APPARENTLY SO, YES.
MR. DOWNEY: ALL RIGHT. NOW, I WANT TO ASK YOU ABOUT THE PERIOD THAT FOLLOWED THE DECISION TO MAKE YOUR ORIGINAL INVESTMENT AND SOME OF THE COMMENTS OR THE TESTIMONY THAT YOU GAVE DURING YOUR DIRECT EXAMINATION. I GATHERED THAT PERIOD IS A LITTLE HARD TO SEPARATE EXACTLY THE DATE ON WHICH YOU WERE TOLD PARTICULAR INFORMATION THAT YOU RECALL RECEIVING?
ALAN EISENMAN: SURE. YES. OKAY. THERE'S ALSO A CONTRADICTION ON NUMBER OF CALLS AND TIMING OF CALLS, BUT I CAN SEE ON MY NOTES THAT WAS MORE THAN ONE 5 MINUTE CALL. IF IT WAS ONE CALL, WHICH I DON'T RECALL, IT WAS A MUCH LONGER CALL TO TAKE THIS SERIES OF NOTES THAT WERE IMPORTANT TO ME BEFORE I MADE THAT INVESTMENT.
MR. DOWNEY: I MOVE TO STRIKE EVERYTHING AFTER "SURE."
JUDGE DAVILA: ALL RIGHT. EVERYTHING AFTER "SURE" IS STRICKEN AS NONRESPONSIVE. EXCUSE ME. THE ANSWER "YES" WILL REMAIN. EVERYTHING AFTER THAT IS STRICKEN.
MR. DOWNEY: THANK YOU.
MR. DOWNEY: I THINK YOU MENTIONED THAT YOU RECALL LEARNING AT SOME POINT FROM MS. HOLMES THAT THERANOS HAD DEVELOPED RELATIONSHIPS WITH CERTAIN PHARMACEUTICAL COMPANIES. DO YOU REMEMBER THAT?
ALAN EISENMAN: I REMEMBER THAT BEFORE I MADE MY INVESTMENT THAT SHE WAS CURRENTLY DOING BUSINESS WITH FIVE INTERNATIONAL PHARMACEUTICAL COMPANIES.
MR. DOWNEY: AND I THINK YOU IDENTIFIED THEM; CORRECT?
ALAN EISENMAN: CORRECT.
MR. DOWNEY: AND YOU ARE READING THE NOTES THAT YOU BROUGHT WITH YOU HERE?
ALAN EISENMAN: YES.
MR. DOWNEY: WAS ONE OF THEM GLAXOSMITHKLINE?
ALAN EISENMAN: YES, IT WAS.
MR. DOWNEY: AND IT IS TRUE THAT AS OF THE TIME OF THIS 2006 AGREEMENT THAT THERANOS HAD, IN FACT, DEVELOPED A RELATIONSHIP WITH GLAXOSMITHKLINE, WASN'T IT?
MR. BOSTIC: OBJECTION. FOUNDATION.
ALAN EISENMAN: FIRST OF ALL --
JUDGE DAVILA: EXCUSE ME. EXCUSE ME.
ALAN EISENMAN: OH, OKAY.
JUDGE DAVILA: THERE'S AN OBJECTION. I HAVE TO RULE ON THE OBJECTION.
ALAN EISENMAN: OH, OKAY.
JUDGE DAVILA: DO YOU WANT TO ASK A LITTLE MORE FOUNDATIONAL QUESTION ABOUT THAT?
BY MR. DOWNEY:
MR. DOWNEY: WELL, YOU, AS PART OF THE PURCHASE AGREEMENT THAT YOU SIGNED, CERTAIN DISCLOSURES WERE MADE TO YOU ABOUT IMPORTANT AGREEMENTS THAT THE COMPANY HAD ENTERED INTO, WEREN'T THEY?
ALAN EISENMAN: I DON'T RECALL.
MR. DOWNEY: OKAY. BUT DO YOU HAVE A GENERAL KNOWLEDGE THAT SOMETIMES IN CONNECTION WITH MAKING INVESTMENTS IN A PRIVATE COMPANY, THEY MAKE DISCLOSURES OF CERTAIN IMPORTANT FACTS ABOUT THE COMPANY LIKE PATENTS THAT THE COMPANY HOLDS OR MATERIAL CONTRACTS THAT THE COMPANY HAS?
ALAN EISENMAN: IT'S POSSIBLE. I DON'T KNOW.
MR. DOWNEY: LET ME ASK YOU TO LOOK BACK AT EXHIBIT 12003 AGAIN, 12003A. THIS IS THE EXHIBIT THAT WE WERE LOOKING FOR -- LOOKING AT A MOMENT AGO.
ALAN EISENMAN: DO I NEED TO LOOK OR ARE YOU GOING TO PUT IT ON THE SCREEN?
MR. DOWNEY: I'LL PUT IT ON THE SCREEN. THAT MIGHT BE EASIER FOR YOU TO OPERATE WITH. SO JUST TO RE-ORIENT YOU, THIS IS THE DOCUMENT THAT REFLECTS THE STOCK PURCHASE AGREEMENT THAT WE WERE TALKING ABOUT A MOMENT AGO. DO YOU SEE THAT?
ALAN EISENMAN: OKAY. AND THEN I HAVE A QUESTION. THAT SAYS FIRST, SECOND, THIRD, AND FOURTH CLOSING.
MR. DOWNEY: WELL, LET ME ASK THE QUESTIONS FOR PURPOSES OF THIS EXERCISE. LET ME ASK YOU TO GO TO THE PAGE THAT IS BATES LABELLED 8041, AND WE'LL FIND THAT FOR YOU AND PUT IT UP. ACTUALLY, IF YOU GO A FEW PAGES BEFORE THAT, MAYBE TO THE BEGINNING OF THIS APPENDIX TO PAGE 1 HERE OF THIS APPENDIX. OKAY. DO YOU SEE THERE'S A SCHEDULE OF EXCEPTIONS HERE?
ALAN EISENMAN: YES.
MR. DOWNEY: AND DO YOU SEE HERE IT INDICATES -- IF YOU READ THE FIRST PARAGRAPH AND BLOW THAT UP, ABOUT HALFWAY THROUGH THAT PARAGRAPH IT SAYS, "THE SECTION NUMBERS BELOW CORRESPOND TO THE SECTION NUMBERS OF THE REPRESENTATIONS AND WARRANTIES IN THIS AGREEMENT; PROVIDED, HOWEVER, THAT ANY INFORMATION DISCLOSED HEREIN UNDER ANY SECTION NUMBER SHALL BE DEEMED TO BE DISCLOSED AND INCORPORATED," ET CETERA, ET CETERA. DO YOU SEE THAT LANGUAGE?
ALAN EISENMAN: UH-HUH.
MR. DOWNEY: AND IF YOU FOLLOW THROUGH TO THE NEXT PAGE, THIS CONTAINS INFORMATION ABOUT THE DIFFERENT ASPECTS OF THE COMPANY. SO, FOR EXAMPLE, AT 3.3(C) AT THE TOP OF PAGE 2 THERE'S AN INDICATION THAT THERE WAS AN ERROR IN SHAREHOLDER GRANTS AND IT'S ATTEMPTING TO CORRECT THOSE ERRORS. DO YOU SEE THAT?
ALAN EISENMAN: YES.
MR. DOWNEY: AND IF YOU GO TO THE BOTTOM OF PAGE 2 THERE'S AN INDICATION THAT THEY'VE ENTERED INTO CHANGE OF CONTROL AGREEMENTS WITH THE FOLLOWING PEOPLE. DO YOU SEE THAT?
ALAN EISENMAN: YES.
MR. DOWNEY: AND DO YOU KNOW WHAT A CHANGE OF CONTROL AGREEMENT IS?
ALAN EISENMAN: NOT EXACTLY.
MR. DOWNEY: AND LET'S GO TO THE PAGE THAT WE WERE LOOKING AT A MOMENT AGO WHICH IS THE BATES LABELLED 8401. IF YOU LOOK AT THE SECTION LABELLED 3.8(B) AND BLOW THAT UP. DO YOU SEE THERE -- I LOST MY MONITOR.
COURT CLERK: CAN WE DO A QUICK RESET?
BY MR. DOWNEY:
MR. DOWNEY: IF YOU LOOK IN THE MIDDLE OF THE PAGE SCHEDULE 3.8(B) IT SAYS AN EVALUATION --
JUDGE DAVILA: NOW WE JUST LOST EVERYBODY.
COURT CLERK: I'M DOING A RESET.
ALAN EISENMAN: YES, I SAW IT.
JUDGE DAVILA: GIVE US A MOMENT HERE. THERE WE ARE. IS THAT UP NOW FOR YOU, MR. DOWNEY?
MR. DOWNEY: IT IS, YOUR HONOR.
MR. DOWNEY: AND DO YOU SEE THERE'S A REFERENCE TO AN AGREEMENT BETWEEN THERANOS AND SMITHKLINE BEECHAM CORPORATION? DO YOU SEE THAT?
ALAN EISENMAN: YES.
MR. DOWNEY: AND SMITHKLINE DOES BUSINESS AS GLAXOSMITHKLINE; CORRECT?
ALAN EISENMAN: CORRECT.
MR. DOWNEY: AND SO IN THIS WRITTEN DISCLOSURE THAT WAS TOLD TO YOU, IF NOT ELSEWHERE, THEY TOLD YOU THAT WE HAVE THIS AGREEMENT; CORRECT?
ALAN EISENMAN: CAN YOU SHOW ME ON THIS AGREEMENT WHERE SHE'S DOING BUSINESS WITH PFIZER, BRISTOL MYERS, AND NOVARTIS BECAUSE THAT'S ALSO WHAT SHE TOLD ME AT THE TIME.
MR. DOWNEY: YOUR HONOR, I MOVE TO STRIKE THAT.
MR. DOWNEY: I WANT TO ASK YOU --
JUDGE DAVILA: HE'S GOING TO ASK YOU QUESTIONS.
BY MR. DOWNEY:
MR. DOWNEY: I'M GOING TO SHOW YOU A DOCUMENT, WHICH I DON'T KNOW IF YOU SAW THE DOCUMENT IN REAL TIME OR NOT, BUT I'M GOING TO DO IT FOR PURPOSES OF SEEING IF I CAN -- IF YOU'RE FAMILIAR WITH THE DOCUMENT. SO DON'T DESCRIBE THE DOCUMENT. DON'T COMMENT ON THE DOCUMENT FOR PURPOSES OF THE JURY. JUST TAKE A LOOK AT THE DOCUMENT, AND TELL ME IF IT'S A DOCUMENT THAT YOU HAVE EVER SEEN BEFORE. OKAY? AND THIS WILL BE EXHIBIT 14111.
ALAN EISENMAN: ARE YOU PUTTING IT ON THE SCREEN, OR DO I NEED TO LOOK AT IT IN MY BOOK.
MR. DOWNEY: NO. YOU JUST NEED TO LOOK AT IT PRIVATELY. BECAUSE IF IT'S NOT A DOCUMENT THAT YOU SAW IN REAL TIME, THEN I'M --
ALAN EISENMAN: 14110?
MR. DOWNEY: 14111. DO YOU HAVE THAT?
ALAN EISENMAN: NO, I DON'T HAVE THAT.
MR. DOWNEY: OKAY. LET ME SEE IF I CAN GET YOU A COPY OF THAT. YOUR HONOR, MAY I APPROACH THE WITNESS?
JUDGE DAVILA: YES.
BY MR. DOWNEY:
MR. DOWNEY: AND I'LL GIVE YOU MY QUESTION IN ADVANCE SO YOU DON'T LABOR NEEDLESSLY OVER IT. THE ONLY QUESTION I HAVE IS HAVE YOU SEEN THAT DOCUMENT BEFORE?
ALAN EISENMAN: I DON'T RECALL.
MR. DOWNEY: OKAY. NOW, YOU MENTIONED IN ADDITION TO GLAXO, THAT MS. HOLMES HAD MENTIONED TO YOU THAT AROUND THE TIME OF YOUR INVESTMENT, SO THE 2006 TIMEFRAME, THAT THERANOS WAS ALSO DOING BUSINESS WITH PFIZER; CORRECT?
ALAN EISENMAN: CORRECT.
MR. DOWNEY: LET ME ASK YOU TO LOOK AT ANOTHER DOCUMENT -- BY THE WAY, WITH THE COMMENTARY, YOU DON'T MEAN TO IMPLY TO THIS JURY THAT MS. HOLMES DID NOT HAVE AGREEMENTS OR DISCUSSIONS WITH THESE COMPANIES. I THINK YOU'RE SAYING THAT YOU DON'T KNOW; CORRECT?
ALAN EISENMAN: UM, SKEPTICAL.
MR. DOWNEY: WELL, DO YOU HAVE ANY FOUNDATION TO KNOW THAT?
ALAN EISENMAN: I HAVE A HISTORY OF INFORMATION THAT WAS TOLD TO ME OVER THE COURSE OF YEARS THAT WAS NOT ACCURATE.
MR. DOWNEY: EXCUSE ME?
JUDGE DAVILA: YOU ASKED THE QUESTION.
MR. DOWNEY: EXCUSE ME.
MR. DOWNEY: YOU DON'T KNOW WHAT WAS GOING ON INTERNALLY AT THERANOS IN TERMS OF THEIR WORKING WITH PHARMACEUTICAL COMPANIES, DO YOU?
ALAN EISENMAN: I HAD SOME PRETTY STRONG EVIDENCE FROM A LOT OF SOURCES THAT A LOT OF THINGS THAT WERE TOLD TO ME WERE NOT ACCURATE.
MR. DOWNEY: OKAY. WELL, WHAT ABOUT THE EVIDENCE THAT I JUST SHOWED YOU, DOES THAT REFRESH YOUR RECOLLECTION, FOR EXAMPLE, THAT THEY WERE WORKING WITH GLAXO?
ALAN EISENMAN: I DON'T RECALL SEEING THIS AT THIS TIME. THAT WAS 2006.
MR. DOWNEY: OKAY.
ALAN EISENMAN: AND THERE'S A LOT OF INFORMATION AND A LOT OF DOCUMENTS.
MR. DOWNEY: OKAY. LET ME SHOW YOU ANOTHER DOCUMENT, WHICH I REGRET TO SAY IS ALSO FROM 2006, BUT LET'S SEE IF YOU SAW IT IN REAL TIME.
COURT CLERK: WHAT EXHIBIT NUMBER IS THAT, COUNSEL?
MR. DOWNEY: YES. I DON'T THINK I IDENTIFIED THE EXHIBIT NUMBER, WHICH IS EXHIBIT 14112.
ALAN EISENMAN: CAN YOU TELL ME IF I WAS PROVIDED THESE DOCUMENTS AT THE TIME OF MY INVESTMENT, BECAUSE I DON'T RECALL SEEING THESE?
BY MR. DOWNEY:
MR. DOWNEY: WELL, I DON'T KNOW. THAT'S WHY YOU'RE HERE TO ANSWER OUR QUESTIONS ABOUT THAT. MY QUESTION --
ALAN EISENMAN: I DON'T RECALL.
MR. DOWNEY: YOU DON'T RECALL?
ALAN EISENMAN: SO WE HAVE TWO LEFT, BRISTOL MYERS AND NOVARTIS.
MR. DOWNEY: WE DON'T WANT YOU TO IMPLY WHAT THE CONTENT OF THE DOCUMENT IS TO THE JURY IF IT'S NOT YET ADMITTED INTO EVIDENCE. SO THAT'S FINE. SO GLAXOSMITHKLINE. BY THE WAY, DO YOU REMEMBER A DESCRIPTION OF THE PARTICULARS OF THE WORK THAT WAS DONE WITH EITHER GLAXO OR SMITHKLINE AS OF 2006?
ALAN EISENMAN: THE DETAILS WEREN'T DISCUSSED. JUST THE NAMES WERE DISCUSSED THAT PFIZER WAS CURRENTLY DOING BUSINESS WITH THESE FIVE COMPANIES, OR THESE FOUR COMPANIES.
MR. DOWNEY: OKAY. SO WE'VE TALKED ABOUT PFIZER AND WE'VE TALKED ABOUT SMITHKLINE. WHO WERE THE OTHERS?
ALAN EISENMAN: BRISTOL MYERS AND NOVARTIS.
MR. DOWNEY: LET ME ASK YOU TO LOOK AT EXHIBIT 14113, WHICH I THINK ALSO IS NOT IN YOUR NOTEBOOK.
ALAN EISENMAN: CAN I ASK YOU WHAT A SERVICE FRAME AGREEMENT IS? I DON'T KNOW WHAT THAT MEANS.
MR. DOWNEY: YOU CANNOT.
JUDGE DAVILA: HE'LL, HE'LL ASK YOU THE QUESTIONS.
ALAN EISENMAN: OKAY.
JUDGE DAVILA: AND THEN YOU CAN DO YOUR BEST TO ANSWER THE QUESTIONS.
MR. DOWNEY: MAY I APPROACH THE WITNESS, YOUR HONOR?
JUDGE DAVILA: YES.
BY MR. DOWNEY:
MR. DOWNEY: SO I THINK THE THIRD COMPANY THAT YOU MENTIONED WAS NOVARTIS?
ALAN EISENMAN: CORRECT.
MR. DOWNEY: AND I'VE SHOWN YOU EXHIBIT 14113. DO YOU SEE THAT?
ALAN EISENMAN: I DO.
MR. DOWNEY: AND DID YOU SEE THIS DOCUMENT IN OR AROUND THE TIME OF YOUR 2006 INVESTMENT?
MR. DOWNEY: OKAY. AND I THINK THE LAST COMPANY THAT YOU MENTIONED WAS BRISTOL MYERS; CORRECT?
ALAN EISENMAN: YES.
MR. DOWNEY: AND DO YOU KNOW THAT THERANOS MET WITH BRISTOL MYERS?
ALAN EISENMAN: I DON'T KNOW.
MR. DOWNEY: OKAY. YOU DIDN'T KNOW ANY OF THE DETAILS AT THAT TIME, YOU JUST KNEW THE NAMES OF THESE COMPANIES?
ALAN EISENMAN: YES.
MR. DOWNEY: NOW, IN CONNECTION WITH THE AGREEMENT, YOU SIGNED THE EXHIBIT THAT WE SAW BEFORE THAT WAS THE STOCK PURCHASE AGREEMENT; CORRECT?
ALAN EISENMAN: WELL, YOU PRESENTED THE THREE COMPANIES. YOU DIDN'T PRESENT BRISTOL MYERS. IS THERE EVIDENCE THAT THEY'RE DOING BUSINESS WITH BRISTOL MYERS?
JUDGE DAVILA: I'M SORRY, SIR. LISTEN TO HIS QUESTION AND TRY TO ANSWER HIS QUESTION AS BEST YOU CAN.
BY MR. DOWNEY:
MR. DOWNEY: DO YOU RECALL LOOKING AT THE STOCK PURCHASE AGREEMENT IN CONNECTION WITH YOUR OCTOBER 2006 INVESTMENT?
ALAN EISENMAN: I DON'T RECALL.
MR. DOWNEY: WELL, DO YOU RECALL THAT WE JUST LOOKED AT IT A MOMENT AGO?
ALAN EISENMAN: YES.
MR. DOWNEY: AND LET ME JUST DRAW THAT BACK UP. THAT'S EXHIBIT 12003A. AND WHEN YOU ENTERED INTO THE AGREEMENT WITH THERANOS, THIS IS NOT THE FIRST TIME THAT YOU HAD ENTERED INTO A STOCK PURCHASE AGREEMENT; CORRECT?
ALAN EISENMAN: CORRECT.
MR. DOWNEY: AND YOU HAD INVESTED IN A NUMBER OF PRIVATE COMPANIES; CORRECT?
ALAN EISENMAN: CORRECT.
MR. DOWNEY: AND TYPICALLY THERE'S SOME AGREEMENT BETWEEN THE COMPANY AND THE SHAREHOLDER AS TO THE TERMS ON WHICH THE SHAREHOLDER WILL INVEST; CORRECT?
ALAN EISENMAN: CORRECT.
MR. DOWNEY: AND YOU HAD, PRIOR TO 2006, YOU HAD EXPERIENCE REVIEWING AND EDITING AND SIGNING STOCK PURCHASE AGREEMENTS; CORRECT?
ALAN EISENMAN: TYPICALLY NOT EDITING. REVIEWING AND SIGNING.
MR. DOWNEY: OKAY. WELL, YOU'RE TRAINED AS A LAWYER; CORRECT?
ALAN EISENMAN: NOT EXACTLY. I WENT TO LAW SCHOOL. I DID TAX WORK. IT WAS -- I DIDN'T PRACTICE IN THESE AREAS OF LAW.
MR. DOWNEY: WELL, I, I THINK A TAX LAWYER COUNTS AS A LAWYER, BUT IF YOU DON'T ACCEPT IT, THAT'S OKAY. BUT YOU HAD LEGAL TRAINING; CORRECT?
ALAN EISENMAN: CORRECT.
MR. DOWNEY: AND YOU TOOK THE COURSES IN CONTRACT AND THE BASIC COURSES IN LAW SCHOOL; CORRECT?
ALAN EISENMAN: CORRECT.
MR. DOWNEY: AND WHEN YOU GOT THIS AGREEMENT, DO YOU RECALL MAKING REQUESTS FOR ANY CHANGES TO THE AGREEMENT?
ALAN EISENMAN: NO. COMPANIES DO NOT CHANGE AGREEMENTS, ESPECIALLY A SMALL SHAREHOLDER. IT WOULD HAVE BEEN A WASTE OF TIME.
MR. DOWNEY: SO YOU DID NOT ASK FOR CHANGES IN THE AGREEMENT?
MR. DOWNEY: I WANT TO TAKE A LOOK AT SOME OF THE TERMS UNDER WHICH YOU AGREED. AND I'M GOING TO BEGIN BY -- BY THE WAY, THIS IS IN YOUR BINDER, AND YOU MAY WANT TO REVIEW SOME OF THE SURROUNDING LANGUAGE, BUT SINCE IT'S IN EVIDENCE, I'M GOING TO DISPLAY IT JUST SO THE JURY CAN SEE IT. I'M GOING TO GO TO SECTION 4.9 OF THE AGREEMENT. OKAY?
ALAN EISENMAN: IT'S GOING TO BE ON THE SCREEN?
MR. DOWNEY: IT WILL BE ON THE SCREEN, YEAH. IT'S AT BATES LABELLED 8302. AND I WANT TO JUST HIGHLIGHT THAT PARAGRAPH. NOW, YOU WERE TALKING DURING OF COURSE OF YOUR DIRECT ABOUT AN OPPORTUNITY TO, YOU KNOW, FOR I THINK WHAT YOU CALL A LIQUIDITY EVENT?
ALAN EISENMAN: YES.
MR. DOWNEY: AND ONE OF THOSE LIQUIDITY EVENTS MIGHT BE THAT THERE MIGHT BE SOME KIND OF A PUBLIC MARKET THAT MIGHT BE CREATED FOR SHARES IN A COMPANY; CORRECT?
ALAN EISENMAN: IN OUR EARLY CONVERSATIONS THERE WAS A CONVERSATION THAT ELIZABETH TOLD ME THAT SHE HOPED TO IPO IN 12 TO 18 MONTHS.
MR. DOWNEY: FAIR ENOUGH.
ALAN EISENMAN: THEY WERE ALREADY TALKING TO AN INVESTMENT BANKER MORGAN STANLEY.
MR. DOWNEY: OKAY. AND WHEN YOU SIGNED THIS AGREEMENT, YOU ACKNOWLEDGED THAT YOU KNEW THAT THERE WAS -- THESE STOCKS WERE PRIVATE STOCKS; CORRECT?
ALAN EISENMAN: CORRECT.
MR. DOWNEY: AND THERE WAS NO PUBLIC MARKET ON WHICH TO TRADE THESE STOCKS; CORRECT?
ALAN EISENMAN: CORRECT.
MR. DOWNEY: AND THE COMPANY HAD GIVEN YOU NO ASSURANCES THAT THERE WOULD EVER BE A PUBLIC MARKET?
ALAN EISENMAN: SHE -- WELL, THERE'S NEVER ANY GUARANTEE, BUT SHE THOUGHT THE COMPANY WOULD IPO IN 12 TO 18 MONTHS, AND AFTER THAT 12 TO 18 MONTHS IT WAS GOING TO BE WITHIN THE NEXT YEAR OR 2. AND AFTER THAT, WITHIN THE NEXT YEAR OR 2, THERE WAS JUST A WHOLE SERIES OF DELAYS.
MR. DOWNEY: AND, WELL, I WANT TO FOCUS YOU ON THE AGREEMENT THAT YOU SIGNED. IN THE AGREEMENT THAT YOU SIGNED, DID YOU AGREE THAT THE COMPANY HAD NOT MADE ANY ASSURANCES THAT A PUBLIC MARKET WOULD EVER EXIST FOR THE COMPANY'S SECURITIES?
ALAN EISENMAN: THERE WAS NO GUARANTEE, BUT IT WAS STATED TO ME THAT THAT WAS THEIR INTENT, AND IT WOULD HAPPEN WITHIN THE NEXT YEAR OR TWO.
MR. DOWNEY: WELL, MR. EISENMAN, I'M JUST ASKING YOU A QUESTION ABOUT THE TERMS OF THE AGREEMENT THAT YOU SIGNED. DO YOU AGREE WITH ME THAT IN THE STOCK PURCHASE AGREEMENT, YOU AGREED THAT THE COMPANY HAD MADE NO ASSURANCES THAT A PUBLIC MARKET WILL EVER EXIST FOR THE COMPANY'S SECURITIES?
ALAN EISENMAN: THIS IS WHAT WE CALL BOILERPLATE, AS YOU KNOW AS AN ATTORNEY. THIS IS IN EVERY AGREEMENT AND EVERY PRIVATE INVESTMENT, AND THIS IS WHAT ANY INVESTOR HAS TO SIGN IF THEY WANT TO INVEST IN A PRIVATE COMPANY. BUT WHAT IS MORE IMPORTANT ARE CONVERSATIONS THAT YOU HAVE WITH THE PRINCIPALS, AND THEY WILL TELL YOU WHAT THEIR THOUGHTS ARE, WHAT THEY THINK WILL HAPPEN. AND THAT'S MORE IMPORTANT THAN THIS STATEMENT.
JUDGE DAVILA: MR. EISENMAN, MR. EISENMAN, I'M SORRY, SIR. I APPRECIATE YOUR ASSISTANCE HERE, BUT YOU JUST NEED TO LISTEN TO HIS QUESTION AND THEN ANSWER THE QUESTION AS BEST YOU CAN, AND THEN HE'LL ASK YOU ANOTHER QUESTION.
ALAN EISENMAN: OKAY.
MR. DOWNEY: IN CONNECTION WITH THAT, YOUR HONOR, I MOVE TO STRIKE THE ANSWER.
JUDGE DAVILA: YES. THE COLLOQUY WOULD BE STRICKEN THEN. YOU CAN ASK ANOTHER QUESTION.
BY MR. DOWNEY:
MR. DOWNEY: DID YOU, IN THE STOCK PURCHASE AGREEMENT THAT YOU SIGNED WITH THERANOS, ACKNOWLEDGE THAT NO ASSURANCES HAD BEEN GIVEN TO YOU THAT A PUBLIC MARKET WOULD EVER EXIST FOR THE COMPANY'S SECURITIES?
ALAN EISENMAN: I DON'T UNDERSTAND YOUR LANGUAGE. WHEN YOU SAY "ACKNOWLEDGE," I SIGNED A DOCUMENT THAT EVERY INVESTOR SIGNS AND HAS TO SIGN BEFORE MAKING AN INVESTMENT, BUT THIS IS PART OF LANGUAGE THAT IS IN EVERY PRIVATE INVESTMENT THAT THERE'S NO ASSURANCES BUT THAT'S NOT WHY WE INVEST. AN INVESTOR DOES NOT INVEST IN SOMETHING WHEN THERE'S NO --
JUDGE DAVILA: MR. EISENMAN, MR. EISENMAN, I HAVE TO STOP YOU AGAIN, SIR. SO I'M GOING TO ASK YOU TO FOCUS ON THE LAWYERS, NOT JUST THIS LAWYER, BUT ANY LAWYER WHO ASKS YOU A QUESTION. JUST FOCUS ON THE QUESTION THAT THEY ASK.
ALAN EISENMAN: OKAY.
JUDGE DAVILA: AND THEN ANSWER THAT QUESTION.
ALAN EISENMAN: I'M TRYING.
JUDGE DAVILA: OKAY. SO THE QUESTION THAT IS BEFORE YOU NOW I BELIEVE IS WHETHER OR NOT YOU SIGNED THIS DOCUMENT. I'M GOING TO ASK MR. WADE TO ASK THAT QUESTION -- EXCUSE ME, MR. DOWNEY TO ASK THAT QUESTION AGAIN.
MR. DOWNEY: THAT IS CORRECT, YOUR HONOR.
ALAN EISENMAN: DID I SIGN THIS?
MR. DOWNEY: YES.
JUDGE DAVILA: SO LET ME -- HERE'S THE WAY IT WORKS. THEY GET TO ASK THE QUESTIONS. THEY ALSO GET TO OBJECT TO QUESTIONS.
ALAN EISENMAN: OKAY.
JUDGE DAVILA: IF THEY OBJECT, THE WITNESS CAN'T ANSWER UNTIL THE JUDGE, THAT'S WHO I AM, MAKES A DECISION AS TO WHETHER A QUESTION CAN BE ANSWERED OR NOT.
ALAN EISENMAN: OKAY.
JUDGE DAVILA: AND THEN THE WITNESS CAN EITHER ANSWER OR WHAT HAPPENS. BUT THEY GET TO ASK THE QUESTIONS.
ALAN EISENMAN: OKAY.
JUDGE DAVILA: AND YOU GET TO ANSWER THOSE QUESTIONS AS BEST YOU CAN.
ALAN EISENMAN: OKAY.
JUDGE DAVILA: OKAY. GREAT. MR. DOWNEY.
MR. DOWNEY: JUST IN THE INTEREST OF PERFECT CLARITY.
MR. DOWNEY: YOU SIGNED THE DOCUMENT WHICH CONTAINS THE LANGUAGE REFLECTED IN SECTION 4.9 OF EXHIBIT 12003A; CORRECT?
ALAN EISENMAN: I SIGNED THIS DOCUMENT, CORRECT.
MR. DOWNEY: OKAY. AND YOU ALSO AGREED IN SIGNING THAT DOCUMENT THAT YOU DIDN'T HAVE ANY PRESENT INTENTION TO TRY TO SELL THE SHARES; CORRECT?
MR. DOWNEY: LET ME ASK YOU TO LOOK AT WITHIN EXHIBIT 12003A, SECTION 4.2.
ALAN EISENMAN: ARE YOU GOING TO PUT IT ON THE SCREEN?
MR. DOWNEY: I'M GOING TO PUT IT ON THE SCREEN, YEAH. DO YOU SEE THAT THAT PARAGRAPH READS, "SUCH INVESTOR IS ACQUIRING THE SHARES AND THE CONVERSION SHARES, FOR INVESTMENT FOR ITS OWN ACCOUNT, NOT AS A NOMINEE OR AGENT, AND NOT WITH THE VIEW TO, OR FOR RESALE IN CONNECTION WITH ANY DISTRIBUTION THEREOF, AND THAT SUCH INVESTOR HAS NO PRESENT INTENTION OF SELLING, GRANTING ANY PARTICIPATION IN OR OTHERWISE DISTRIBUTING THE SAME." DO YOU SEE THAT?
ALAN EISENMAN: YES.
MR. DOWNEY: AND THAT'S PART OF THE AGREEMENT THAT YOU SIGNED AS WELL; CORRECT?
ALAN EISENMAN: CORRECT.
MR. DOWNEY: AND THEN DO YOU RECALL TALKING DURING YOUR DIRECT EXAMINATION ABOUT CERTAIN PREDICTIONS MS. HOLMES MADE OR PROJECTIONS SHE GAVE TO YOU AS TO WHAT THE PERFORMANCE OF THE COMPANY WOULD BE. DO YOU REMEMBER THAT?
ALAN EISENMAN: YES.
MR. DOWNEY: AND YOU WENT OVER THAT IN SOME DETAIL WITH MR. BOSTIC; CORRECT?
ALAN EISENMAN: CORRECT.
MR. DOWNEY: LET ME ASK YOU TO LOOK AT SECTION 4.5, AND I WANT TO DRAW YOUR ATTENTION ACTUALLY DOWN TO THE NEXT PARAGRAPH OF THE NEXT BOTTOM HALF OF THIS. ALL RIGHT. DO YOU SEE THE PART THAT WE'VE HIGHLIGHTED WHERE IT SAYS THAT YOU'VE RECEIVED ALL OF THE INFORMATION THAT THE INVESTOR CONSIDERS NECESSARY OR APPROPRIATE FOR DECIDING WHETHER TO PURCHASE THE SHARES AND CONVERSION SHARES. AND THAT WAS TRUE; CORRECT?
ALAN EISENMAN: YES.
MR. DOWNEY: AND THEN YOU -- IT GOES ON TO SAY THAT YOU UNDERSTOOD THAT SUCH DISCUSSIONS AS WELL AS ANY INFORMATION ISSUED BY THE COMPANY WERE INTENDED TO DESCRIBE CERTAIN ASPECTS OF THE COMPANY'S BUSINESS AND PROSPECTS BUT WERE NOT NECESSARILY A THOROUGH OR EXHAUSTIVE DESCRIPTION. DO YOU SEE THAT?
ALAN EISENMAN: YES.
MR. DOWNEY: SO, FOR EXAMPLE, THEY DIDN'T MAKE AVAILABLE TO YOU INFORMATION ABOUT THE TECHNOLOGY OR TESTS IN ANY, IN ANY -- YOU DIDN'T GO AND INSPECT THE TECHNOLOGY OR ANYTHING?
MR. DOWNEY: AND YOU DIDN'T LOOK AT ANY CONTRACTS THAT THE COMPANY HAD IN PLACE, DID YOU?
MR. DOWNEY: OKAY. AND THEN IF YOU GO ON TO THE NEXT SENTENCE IT SAYS, "SUCH INVESTOR ACKNOWLEDGES THAT ANY BUSINESS PLANS PREPARED BY THE COMPANY HAVE BEEN, AND CONTINUE TO BE, SUBJECT TO CHANGE AND THAT ANY PROJECTIONS INCLUDED IN SUCH BUSINESS PLANS, OR OTHERWISE, ARE NECESSARILY SPECULATIVE IN NATURE, AND IT CAN BE EXPECTED THAT SOME OR ALL OF THE ASSUMPTIONS UNDERLYING THE PROJECTIONS WILL NOT MATERIALIZE OR WILL VARY SIGNIFICANTLY FROM ACTUAL RESULTS." DO YOU SEE THAT?
ALAN EISENMAN: YES.
MR. DOWNEY: AND YOU SIGNED THAT ACKNOWLEDGEMENT AS PART OF THIS AGREEMENT AS WELL; CORRECT?
ALAN EISENMAN: CORRECT.
MR. DOWNEY: AND AM I RIGHT THAT IN ORDER TO ENTER INTO -- BE ELIGIBLE TO BUY STOCK FROM THERANOS, YOU HAD TO BE AN ACCREDITED INVESTOR; CORRECT?
ALAN EISENMAN: CORRECT.
MR. DOWNEY: AND YOU WERE AN ACCREDITED INVESTOR IN 2006?
ALAN EISENMAN: CORRECT.
MR. DOWNEY: AND CAN YOU TELL US WHAT THAT MEANS?
ALAN EISENMAN: IT MEANS THAT YOU HAVE A CERTAIN LEVEL OF NET WORTH OR INCOME.
MR. DOWNEY: OKAY. AND DO YOU KNOW WHAT THAT LEVEL OF INCOME IS?
ALAN EISENMAN: THERE'S DIFFERENT LEVELS AND I DON'T RECALL.
MR. DOWNEY: OKAY. BUT, IN OTHER WORDS, YOU EITHER HAVE TO MAKE A CERTAIN AMOUNT PER YEAR OR YOU HAVE TO BE WORTH A CERTAIN AMOUNT IN TERMS OF YOUR NET WORTH I GUESS?
ALAN EISENMAN: YES.
MR. DOWNEY: OKAY. NOW, YOU TESTIFIED ON DIRECT WHEN YOU WERE DISCUSSING MATTERS WITH MR. BOSTIC, YOU SAID THAT FOR THE CLIENTS WHO YOU ADVISED ON WEALTH MANAGEMENT AND -- MAYBE YOU DIDN'T USE THE TERM WEALTH MANAGEMENT. WHAT TERM DID YOU USE TO DESCRIBE YOUR PROFESSION?
ALAN EISENMAN: I DON'T RECALL.
MR. DOWNEY: OKAY. BUT WHAT WAS YOUR PROFESSION BEFORE YOU WERE RETIRED?
ALAN EISENMAN: FINANCIAL PLANNER, INVESTMENT MANAGER, INVESTMENT COUNSELLOR.
MR. DOWNEY: RIGHT. AND YOU SAID THAT YOU ADVISED THOSE CLIENTS TYPICALLY TO INVEST IN WHAT YOU CALLED PUBLIC EQUITIES?
ALAN EISENMAN: YES.
MR. DOWNEY: AND THAT MEANS STOCK IN A PUBLICLY TRADED COMPANY; CORRECT?
ALAN EISENMAN: CORRECT.
MR. DOWNEY: AND SO STOCK THAT WOULD BE TRADED ON THE NASDAQ OR THE NEW YORK STOCK EXCHANGE OR SOMETHING; CORRECT?
ALAN EISENMAN: CORRECT.
MR. DOWNEY: AND THOSE INFORMATION -- THOSE COMPANIES DISCLOSE INFORMATION EVERY QUARTER ABOUT THEIR OPERATIONS; CORRECT?
ALAN EISENMAN: CORRECT.
MR. DOWNEY: AND THEY'RE REQUIRED BY LAW TO DO THAT; CORRECT?
ALAN EISENMAN: CORRECT.
MR. DOWNEY: BUT YOU SAID THAT FOR PURPOSES OF YOUR OWN INVESTMENTS THAT YOU AT LEAST HAD AN ASPECT OF THEM THAT WAS FOCUSSED ON INVESTING IN PRIVATE COMPANIES; CORRECT?
ALAN EISENMAN: CORRECT.
MR. DOWNEY: NOW, YOU DIDN'T INVEST OR YOU DIDN'T ADVISE YOUR CLIENTS IN YOUR WORK TO INVEST IN PRIVATE COMPANIES; IS THAT RIGHT?
ALAN EISENMAN: THAT'S CORRECT.
MR. DOWNEY: AND WHY IS THAT?
ALAN EISENMAN: BECAUSE PRIVATE COMPANIES HAVE A HIGHER LEVEL OF RISK BUT A HIGHER LEVEL OF RETURN. AND TO BE SUCCESSFUL, WHAT MOST PEOPLE DO IS THAT THEY INVEST IN A LOT OF COMPANIES, BECAUSE SOME OF THEM ARE GOING TO GO OUT OF BUSINESS AND SOME OF THEM ARE GOING TO DO REALLY WELL. IT'S A HIGH RISK, HIGHER POTENTIAL REWARD SITUATION.
MR. DOWNEY: BUT YOUR CLIENTS GENERALLY WERE NOT PEOPLE WHO YOU WANTED TO SEE LOSE THE ENTIRE AMOUNT OF AN INVESTMENT, FOR EXAMPLE?
ALAN EISENMAN: THEIR RISK TOLERANCE WAS AT A DIFFERENT LEVEL WHERE THEY WERE SUITED TO INVEST IN PUBLIC SECURITIES, NOT PRIVATE EQUITIES.
MR. DOWNEY: FAIR ENOUGH. AND WHEN YOU WERE SIGNING THE DOCUMENT THAT IS 12003A, THE STOCK PURCHASE AGREEMENT FOR THERANOS, YOU ACKNOWLEDGED THAT THIS WAS A LITTLE BIT OF A SPECULATIVE INVESTMENT; CORRECT?
ALAN EISENMAN: YES.
MR. DOWNEY: AND LET'S PUT THAT LANGUAGE UP. THAT'S SECTION 4.4 OF EXHIBIT 12003A, AND IF WE BLOW THAT UP -- FIRST OF ALL, IT INDICATED THAT THE COMPANY HAD A LIMITED FINANCIAL AND OPERATING HISTORY; RIGHT?
ALAN EISENMAN: RIGHT.
MR. DOWNEY: AND YOU KNEW THAT WAS TRUE; CORRECT?
ALAN EISENMAN: CORRECT.
MR. DOWNEY: IN FACT, IT WAS ONLY, WHAT, A COUPLE YEARS OLD WHEN YOU MADE YOUR INVESTMENT?
ALAN EISENMAN: I BELIEVE SO.
MR. DOWNEY: OKAY. AND YOU REPRESENTED THAT YOU COULD BE BEAR THE ECONOMIC RISK OF YOUR INVESTMENT; CORRECT?
ALAN EISENMAN: CORRECT.
MR. DOWNEY: AND THAT IT WOULDN'T IMPAIR YOUR FINANCIAL CONDITION IF THERE WERE A LOSS; CORRECT?
ALAN EISENMAN: CORRECT.
MR. DOWNEY: AND THAT YOU COULD SUFFER A COMPLETE LOSS OF YOUR INVESTMENT; CORRECT?
ALAN EISENMAN: CORRECT.
MR. DOWNEY: I WANT TO SHOW YOU JUST ON THE ATTACHMENT OF SCHEDULES THAT WE LOOKED AT A MOMENT AGO, SOME ADDITIONAL INFORMATION THAT WAS PROVIDED WITH THIS STOCK PURCHASE AGREEMENT. SO IF WE CAN GO BACK TO THE SCHEDULE OF PURCHASERS ON 8377. YOU MAY RECALL WE WERE LOOKING AT THIS EARLIER, AND THIS REFLECTED THE LIST OF INDIVIDUALS WHO HAD INVESTED IN THERANOS AS PART OF THE SAME ROUND WHERE YOU INVESTED; CORRECT?
ALAN EISENMAN: OKAY.
MR. DOWNEY: AND I WANT TO JUST DRAW YOUR ATTENTION TO A FEW OF THEM. THE ENTITY HIGHLIGHTED RIGHT NOW IS ATA VENTURES. DID YOU RECOGNIZE THAT NAME WHEN YOU WERE INVESTING IN 2006?
ALAN EISENMAN: I DON'T RECALL.
MR. DOWNEY: OKAY. LET ME ASK YOU -- LET ME GO DOWN A LITTLE BIT TO THE E SECTION. LET ME GO FORWARD A FEW PAGES. YEAH, HERE. IF WE COULD GO UP SORT OF THE FIRST THREE ENTRIES HERE. THIS WAS THE SECTION THAT WE WERE LOOKING AT BEFORE. DO YOU SEE YOUR OWN INVESTMENT AGAIN?
ALAN EISENMAN: YES.
MR. DOWNEY: AND THEN YOU SEE UNDER THAT AN INVESTMENT BY MR. LUCAS OF ABOUT A MILLION DOLLARS. DO YOU SEE THAT?
ALAN EISENMAN: YES.
MR. DOWNEY: AND YOU SEE THAT MR. ELLISON INVESTED AS WELL AT THE SAME TIME; CORRECT?
ALAN EISENMAN: CORRECT.
MR. DOWNEY: OR I SHOULD SAY EACH OF THEM I THINK PERHAPS INVESTED THROUGH TRUSTS, BUT EFFECTIVELY INVESTED?
ALAN EISENMAN: YES.
MR. DOWNEY: OKAY. NOW, LET'S MOVE FORWARD FROM THE TIME OF -- THAT YOU MAKE THE DECISION TO INVEST AND GO AHEAD AND INVEST, AND LET'S TALK ABOUT THE PERIOD BETWEEN LET'S SAY 2006 AND 2010. OKAY?
ALAN EISENMAN: OKAY.
MR. DOWNEY: NOW, I THINK YOU SAID THAT IN SOME RANGE, AND I DON'T WANT TO PUT WORDS IN YOUR MOUTH AS TO WHAT THE RANGE WAS, BUT THAT YOU WERE ABLE TO HAVE QUARTERLY MEETINGS WITH THE COMPANY; CORRECT?
ALAN EISENMAN: WITH ELIZABETH.
MR. DOWNEY: OKAY. AND THEY WOULD TYPICALLY TAKE PLACE TELEPHONICALLY; CORRECT?
ALAN EISENMAN: CORRECT.
MR. DOWNEY: AND WAS THAT SOMETHING THAT EVERY SHAREHOLDER OF THE COMPANY WAS DOING?
ALAN EISENMAN: NOT TO MY KNOWLEDGE.
MR. DOWNEY: OKAY. IN FACT, YOU AND YOUR GROUP FROM HOUSTON WERE THE ONLY GROUP OF SHAREHOLDERS WHO WERE HAVING THAT QUARTERLY MEETING WITH MS. HOLMES; ISN'T THAT RIGHT?
MR. BOSTIC: FOUNDATION. CALLS FOR SPECULATION.
JUDGE DAVILA: IF YOU COULD LAY A FOUNDATION. I'LL SUSTAIN THE OBJECTION.
MR. DOWNEY: SURE.
MR. DOWNEY: WELL, DID MS. HOLMES TELL YOU OVER TIME THAT YOUR GROUP WAS THE ONLY GROUP THAT SHE WAS MEETING WITH ON A QUARTERLY BASIS?
MR. BOSTIC: HEARSAY, YOUR HONOR.
JUDGE DAVILA: SUSTAINED.
MR. DOWNEY: OKAY. FAIR ENOUGH.
MR. DOWNEY: BUT YOU RECOGNIZE GENERALLY THAT NOT EVERY INVESTOR HAD A QUARTERLY MEETING WITH THE CEO OF THE COMPANY; CORRECT?
MR. BOSTIC: SAME OBJECTION, YOUR HONOR.
ALAN EISENMAN: I DON'T KNOW.
JUDGE DAVILA: THE ANSWER IS STRICKEN. YOU CAN ASK ANOTHER QUESTION. THE OBJECTION IS SUSTAINED.
MR. DOWNEY: SURE.
MR. DOWNEY: NOW, UNDER -- YOU WERE PROVIDED INFORMATION ABOUT THE COMPANY, CORRECT, AND ITS OPERATIONS BY MS. HOLMES DURING THOSE MEETINGS; CORRECT?
ALAN EISENMAN: CORRECT.
MR. DOWNEY: BUT YOU UNDERSTOOD ACTUALLY THAT YOU DIDN'T HAVE ANY RIGHT TO INFORMATION UNDER THE AGREEMENTS THAT YOU HAD SIGNED; CORRECT?
ALAN EISENMAN: CORRECT.
MR. DOWNEY: AND THAT'S BECAUSE UNLIKE IN A PUBLIC COMPANY WHERE THERE'S A LOT OF INFORMATION PROVIDED SO THAT EVERYBODY CAN HAVE IT AT THE SAME TIME, PRIVATE COMPANIES DON'T TYPICALLY PROVIDE THAT SAME LEVEL OF DISCLOSURE; CORRECT?
ALAN EISENMAN: INCORRECT.
MR. DOWNEY: WELL, LET ME ASK YOU TO LOOK AT THE EXHIBIT THAT IS IN YOUR -- LET ME GIVE YOU A DIFFERENT NOTEBOOK, OKAY? YOUR HONOR, MAY I JUST HAVE A MOMENT TO GRAB ANOTHER NOTEBOOK?
JUDGE DAVILA: YES, OF COURSE.
MR. DOWNEY: ACTUALLY, I THINK THIS WILL BE IN THE COURT'S BINDER, AND IT'S IN A DIFFERENT BINDER FOR ME.
MR. DOWNEY: IT SHOULD BE IN YOUR BINDER, MR. EISENMAN. I'M GOING TO DRAW YOUR ATTENTION TO EXHIBIT 11021.
ALAN EISENMAN: WILL THAT BE ON THE SCREEN?
MR. DOWNEY: IT WILL NOT BE ON THE SCREEN, NO. SO I'M GOING TO ASK YOU, FIRST OF ALL, JUST TO LOOK AT IT. BUT BEFORE WE GET INTO IT, AM I RIGHT THAT AT SOME POINT DURING THE COURSE OF YOUR DEALINGS WITH THERANOS, I THINK IT'S FAIR TO SAY FROM YOUR DIRECT TESTIMONY THAT YOU HAD A LEVEL OF FRUSTRATION WITH THE AMOUNT OF COMMUNICATION THAT YOU WERE RECEIVING; CORRECT?
ALAN EISENMAN: CORRECT.
MR. DOWNEY: AND YOU WENT BACK AND YOU TRIED TO FIGURE OUT WHETHER YOU HAD A RIGHT UNDER YOUR AGREEMENTS TO GET INFORMATION FROM THERANOS; CORRECT?
ALAN EISENMAN: INCORRECT.
MR. DOWNEY: OKAY. AND DID YOU ALSO HAVE AN ATTORNEY LOOK AT THE AGREEMENTS FOR PURPOSES OF DETERMINING WHETHER OR NOT YOU HAD A RIGHT TO INFORMATION?
ALAN EISENMAN: NO. IT WAS IRRELEVANT.
MR. DOWNEY: OKAY. LET ME ASK YOU IN EXHIBIT 11021 TO LOOK AT PAGE 129, LINE 7. AND DON'T SAY ANYTHING OUT LOUD.
ALAN EISENMAN: I'M SORRY, WHAT PAGE? I'VE GOT 11021. WHAT PAGE?
MR. DOWNEY: 11021.
ALAN EISENMAN: OKAY.
MR. DOWNEY: PAGE 129.
ALAN EISENMAN: I DON'T SEE WHERE THE PAGE -- OH, OKAY. OKAY.
MR. DOWNEY: CAN YOU SEE IT IN THE BOTTOM --
ALAN EISENMAN: YEAH.
MR. DOWNEY: UNFORTUNATELY, I CAN'T BRING THIS UP ON THE SCREEN.
ALAN EISENMAN: OKAY.
MR. DOWNEY: ALL RIGHT. NOW, YOU RECALL THAT IN CONNECTION WITH ANOTHER PROCEEDING RELATED TO THERANOS YOU GAVE A DEPOSITION. DO YOU RECALL THAT?
ALAN EISENMAN: YES.
MR. DOWNEY: AND YOU WENT TO AN OFFICE AND WERE QUESTIONED BY SOME LAWYERS ABOUT YOUR EXPERIENCES INVESTING IN THERANOS; CORRECT?
ALAN EISENMAN: CORRECT.
MR. DOWNEY: AND YOU, AS YOU DID HERE TODAY, YOU TOOK AN OATH TO TELL THE TRUTH; CORRECT?
ALAN EISENMAN: CORRECT.
MR. DOWNEY: AND DURING THE COURSE OF THAT DEPOSITION, I WANT TO ASK YOU IF YOU WERE ASKED THE FOLLOWING QUESTION AND GAVE THE FOLLOWING ANSWER: "AND IS THAT A TRUE STATEMENT OF YOUR UNDERSTANDING OF YOUR RIGHTS, THAT YOU HAD NO INFORMATION RIGHTS?" "ANSWER: YES." I'M SORRY. THE QUESTION IS, THEN YOU WROTE, QUOTE, "IT IS MY UNDERSTANDING" -- I'M SORRY. "QUESTION: AND IS THAT A TRUE STATEMENT OF YOUR UNDERSTANDING OF YOUR RIGHTS, THAT YOU HAD NO INFORMATION RIGHTS? "ANSWER: YES." AND THEN MY QUESTION TO THE WITNESS IS, WERE YOU ASKED THAT QUESTION AND DID YOU GIVE THAT ANSWER IN THE DEPOSITION ABOUT THERANOS?
ALAN EISENMAN: APPARENTLY SO.
MR. DOWNEY: YOUR HONOR, I'M GOING TO MOVE TO A DIFFERENT TOPIC AT THIS POINT.
JUDGE DAVILA: WELL, LET'S MOVE TO OUR WEEKEND THEN, SHALL WE?
(LAUGHTER.)
JUDGE DAVILA: THANK YOU, MR. DOWNEY. I APPRECIATE THAT. LADIES AND GENTLEMEN, WE'RE GOING TO TAKE OUR RECESS NOW, AND THIS WILL BE A LONG RECESS. AS YOU KNOW TOMORROW IS A HOLIDAY. WE RECOGNIZE VETERAN'S DAY TOMORROW. THEN WE WILL NOT BE IN SESSION ON FRIDAY, WE WILL NOT BE IN SESSION ON FRIDAY. WE'LL NEXT BE IN SESSION MONDAY NEXT, WHICH IS THE 15TH, NOVEMBER 15TH. AND WE'VE SCHEDULED THAT FOR THE MORNING, 9:00 O'CLOCK. I'D LIKE TO START AT 9:00 O'CLOCK IF WE CAN. I'LL DEFER WHETHER OR NOT WE CAN GO IN THE AFTERNOON OR NOT. I'M JUST SAYING THAT THAT'S AVAILABLE FOR US. IT MIGHT BE AVAILABLE. IF IT CAUSES PROBLEMS FOR ANY JUROR, THAT'S FINE. AS I SAID, OUR SCHEDULE NEXT WEEK, WE'RE SCHEDULED TO SEE EACH OTHER EVERY DAY OF THE WEEK, 16TH, 17TH, 18TH, 19TH. THERE'S AN ABBREVIATED BREAK ON THE 17TH, BUT OTHERWISE NEXT WEEK WILL BE A FULL WEEK. WE'LL TRY TO ACCOMMODATE YOU AS BEST WE CAN WITH OTHER TREATS TO HELP MAKE YOUR STAY MORE ENJOYABLE. BUT UNTIL THEN, PLEASE, DURING THIS LONG BREAK, AGAIN, I REMIND YOU OF THE ADMONITION, DO NOT, DO NOT DO ANY INVESTIGATION, DO NOT COMMUNICATE WITH ANYONE IN ANY WAY, DO NOT READ, DISCUSS, GO ON SOCIAL MEDIA, OR IN ANY WAY ATTEMPT TO FIND OUT ANYTHING ABOUT THIS CASE OR LEARN ANYTHING ABOUT THIS CASE. IF SUCH A THING HAPPENS, PLEASE TURN AWAY, TURN OFF THE DEVICE, CLOSE THE PAPER, WHATEVER IT IS, AND I'LL ASK YOU WHETHER OR NOT ANY OF THESE THINGS HAPPENED WHEN WE SEE EACH OTHER NEXT ON THE 15TH. SO DO HAVE A GOOD LONG WEEKEND. ENJOY. WE'LL SEE YOU NEXT WEEK. THANK YOU VERY MUCH.
(JURY OUT AT 4:00 P.M.)
JUDGE DAVILA: AND WE'LL SEE YOU BACK NEXT WEEK AS WELL, SIR. THANK YOU VERY MUCH. YOU'RE FREE TO GO. ALL RIGHT. THANK YOU. PLEASE BE SEATED. THANK YOU. THE RECORD SHOULD REFLECT THAT OUR JURY HAS LEFT FOR THE LONG WEEKEND. THE WITNESS HAS LEFT THE COURTROOM. ALL COUNSEL AND MS. HOLMES ARE PRESENT. ANYTHING THAT EITHER COUNSEL WOULD LIKE TO PUT ON THE RECORD BEFORE WE BREAK?
MR. SCHENK: YES, YOUR HONOR, JUST TWO QUICK THINGS. FIRST, MR. EISENMAN JUST ASKED US A QUESTION ABOUT TRAVEL. SO I WOULD SEEK PERMISSION FROM THE COURT AND NOTIFY COUNSEL THAT ORDINARILY WE WOULD NOT TALK TO A WITNESS ONCE WE PASS THE WITNESS. WE WILL STILL COMMUNICATE WITH MR. EISENMAN IF THAT'S OKAY, BUT JUST ABOUT SCHEDULING, FLIGHTS, THINGS LIKE THAT.
JUDGE DAVILA: RIGHT. THAT'S FINE. MR. DOWNEY?
MR. DOWNEY: YEAH, I THINK IF IT'S CONFINED TO THAT IT'S FINE.
JUDGE DAVILA: SURE. OKAY.
MR. SCHENK: THANK YOU, YOUR HONOR. THE SECOND TOPIC IS SCHEDULING FOR NEXT WEEK. I THINK IT IS LIKELY THAT THE GOVERNMENT WILL REST NEXT WEEK. I THINK IT IS LIKELY THAT WE DO NOT HAVE ENOUGH WITNESSES TO FILL THE WEEK. I DON'T KNOW EXACTLY WHICH DAY NEXT WEEK WE WOULD REST. IT'S GOING TO DEPEND ON HOW QUICKLY WE MOVE THROUGH THE REMAINING WITNESSES. WHAT WE WOULD ASK IS A COUPLE OF THINGS. THURSDAY AT 7:00 P.M. HAS BEEN THE ROLLING DISCLOSURE DEADLINE. WE WILL MAKE OUR DISCLOSURE BY 7:00 P.M. TOMORROW OF THE WITNESSES WE ANTICIPATE CALLING NEXT WEEK. WE WOULD ASK THAT THAT DISCLOSURE OBLIGATION KICK IN FOR THE DEFENSE TOMORROW AT 7:00, THAT THEY GIVE US A FIRST HALF, THAT THEY GIVE US NEXT WEEK WITNESSES, AND ALSO JENCKS. I DON'T BELIEVE WE'VE RECEIVED A JENCKS PRODUCTION SINCE THE THIRD DAY OF OUR MOTION IN LIMINE HEARING. SO I THINK IT'S APPROPRIATE FOR THOSE OBLIGATIONS TO NOW KICK IN.
JUDGE DAVILA: ALL RIGHT. THANK YOU VERY MUCH.
MR. DOWNEY: ALL OF THAT IS FINE WITH US, YOUR HONOR. ONE THING THAT WOULD HELP TO GET SOME SENSE OF IS WHAT DAY DURING THE WEEK THEY WOULD BE IN THE BEST POSITION TO REST.
JUDGE DAVILA: WELL, WHILE YOU PONDER THAT, I KNOW YOU'RE GOING TO GIVE SOME INFORMATION TO THE GOVERNMENT ABOUT THIS LIS BUSINESS AND WHETHER OR NOT THAT POTENTIALLY COULD EXTEND THIS CASE. SO YOU'LL BE INFORMED, MR. SCHENK, BY THAT -- I THINK YOU SAID TOMORROW AT 4:00 P.M.?
MR. DOWNEY: WE'LL DO THAT TOMORROW BY 4:00 SO AS NOT TO DISTURB THE NORMAL PROCEDURE.
JUDGE DAVILA: RIGHT.
MR. DOWNEY: AND THEN WE WILL COMPLY WITH MR. SCHENK'S REQUEST IN TERMS OF IDENTIFYING FIRST HALF WITNESSES.
JUDGE DAVILA: THAT WOULD BE HELPFUL.
MR. DOWNEY: AT 7:00 P.M. I SHOULD SAY.
JUDGE DAVILA: RIGHT. AND THEN MAYBE WHAT WE SHOULD DO IS WHY DON'T WE PLAN ON -- CAN WE GET TOGETHER THE MORNING OF THE 15TH JUST TO GET ANOTHER PLOT ABOUT SCHEDULING BEFORE WE START?
MR. DOWNEY: IS THAT MONDAY, YOUR HONOR?
JUDGE DAVILA: YES.
MR. DOWNEY: YES, THAT WOULD BE GOOD.
MR. SCHENK: YES.
JUDGE DAVILA: WERE YOU SUGGESTING THE WEEKEND, MR. DOWNEY?
MR. DOWNEY: NO. I'M SO DISORIENTED AT THIS POINT AS TO DATES, I DIDN'T KNOW WHAT DAY IT WAS.
JUDGE DAVILA: THEY ALL BLEND TOGETHER. THE GOOD THING IS THAT OUR COMPUTERS SEEM TO WORK TOGETHER.
MR. DOWNEY: QUITE WELL, ACTUALLY.
JUDGE DAVILA: THERE WAS A LITTLE GLITCH, BUT WE'RE GRATEFUL FOR ALL OF THE EFFORTS OUR I.T. PEOPLE GAVE TO THAT. ALL RIGHT. THANK YOU THEN. THERE'S AGREEMENT ON THIS SCHEDULE THEN I THINK FROM THE DEFENSE; IS THAT RIGHT?
MR. DOWNEY: THERE IS AGREEMENT ON OUR FULFILLING JENCKS OBLIGATIONS, MAKING THE DISCLOSURE, AND WE'LL RECEIVE THE DISCLOSURE.
JUDGE DAVILA: ALL RIGHT. THANK YOU VERY MUCH. HAVE A GOOD WEEKEND.
COURT CLERK: COURT IS ADJOURNED.
(COURT ADJOURNED AT 4:05 P.M.)