Sunny Balwani Prior Testimony and Exhibit 14259 Motions
260 linesSAN JOSE, CALIFORNIA NOVEMBER 29, 2021 P R O C E E D I N G S
(COURT CONVENED AT 9:04 A.M.)
(JURY OUT AT 9:04 A.M.)
JUDGE DAVILA: I HOPE EVERYONE HAD A GOOD HOLIDAY. WELCOME BACK. WE'RE ON THE RECORD IN THE HOLMES MATTER. ALL COUNSEL ARE PRESENT. MS. HOLMES IS PRESENT. WE'RE OUTSIDE OF THE PRESENCE OF THE JURY. WE'RE HERE TO TAKE UP A COUPLE OF MATTERS REGARDING FILINGS. LET ME FIRST INDICATE, PROBABLY COUNSEL ARE AWARE, THAT WE'RE HAVING ANOTHER TECHNICAL PROBLEM TODAY. I'M INFORMED THAT THE JURY MONITORS ARE NOT OPERATIONAL AT THE MOMENT AND THERE'S WORK BEING DONE BEHIND THE SCENES TO MAKE THOSE AVAILABLE. SO HOPEFULLY THAT WILL GET RESOLVED. LET'S TAKE UP A COUPLE OF MATTERS THAT WERE FILED BY THE DEFENSE LAST WEEK I BELIEVE. AND THESE ARE DOCKET 1165, WHICH IS MS. HOLMES'S RENEWED MOTION TO ADMIT EXHIBIT 14259, AND DOCKET 1163, WHICH IS MS. HOLMES'S MOTION TO ADMIT PRIOR TESTIMONY OF SUNNY BALWANI. AND I HAVE READ 1166, WHICH IS THE GOVERNMENT'S OPPOSITION TO ADMIT PRIOR TESTIMONY. AND WE'LL TALK ABOUT THOSE THIS MORNING. BEFORE WE MOVE INTO THOSE, ARE THERE ANY OTHER THRESHOLD ISSUES THAT COUNSEL WANT TO RAISE ABOUT ANYTHING? IF NOT, WE'LL, WE'LL -- LET'S DISCUSS THESE THEN. LET'S TAKE UP THE PRIOR TESTIMONY OF MR. BALWANI, WHICH IS 1163. THAT ONE I HAVE OPPOSITION ON FROM THE GOVERNMENT. GOOD MORNING. AND WHO APPEARS TO ADVANCE THE MOTION ON MS. HOLMES'S BEHALF?
MR. FLEURMONT: GOOD MORNING, YOUR HONOR. J.R. FLEURMONT ON BEHALF OF MS. HOLMES. SHE IS PRESENT.
JUDGE DAVILA: GOOD MORNING. IT'S NICE TO SEE YOU AGAIN. AND WHO APPEARS ON BEHALF OF THE GOVERNMENT?
MS. VOLKAR: GOOD MORNING. KELLY VOLKAR FOR THE UNITED STATES.
JUDGE DAVILA: GOOD MORNING. THANK YOU. IT'S NICE TO SEE YOU AS WELL. COUNSEL, IF YOU WOULD LIKE TO TAKE YOUR MASKS OFF, YOU CAN TAKE YOUR MASKS OFF. THAT MIGHT BE BENEFICIAL FOR OUR COURT REPORTERS.
MS. VOLKAR: THANK YOU, YOUR HONOR.
MR. FLEURMONT: THANK YOU, YOUR HONOR.
JUDGE DAVILA: I GUESS THE ISSUE I HAVE, MR. FLEURMONT, IS THE TIMING OF THESE, THE MOTION VIS-A-VIS YOUR CLIENT'S TESTIMONY AND WHERE THIS MIGHT FIT IN, THAT IS, YOUR TWO MOTIONS, WHERE THIS EVIDENCE MIGHT FIT IN AND THE TIMELINE OF THAT, IF YOU KNOW THAT, IF YOU'RE ABLE TO ANSWER THAT.
MR. FLEURMONT: YES, YOUR HONOR. I THINK I UNDERSTAND THE COURT'S QUESTION TO BE, IF THE MOTION WERE GRANTED, WHERE THE TESTIMONY WOULD FIT IN OR WHERE THE EXHIBIT WOULD FIT IN.
JUDGE DAVILA: RIGHT. RIGHT.
MR. FLEURMONT: WELL, YOUR HONOR, I CAN SAY THAT I THINK I WOULD HAVE TO DISCUSS IT WITH MY TEAM EXACTLY WHEN WE WOULD WANT TO ADMIT THIS TESTIMONY AND WHEN WE WOULD WANT TO ADMIT THIS EXHIBIT.
JUDGE DAVILA: SURE.
MR. FLEURMONT: AND I THINK THAT'S ALL I CAN SAY ABOUT THAT POINT.
JUDGE DAVILA: I ASK THAT FOR SELFISH REASONS, BECAUSE YOUR ANSWER WILL INFORM NECESSITY AS TO WHEN YOU GET AN ANSWER FROM ME.
MR. FLEURMONT: UNDERSTOOD. IF I COULD, AFTER THE ARGUMENTS, CONFER WITH THE HIGHER-UPS, I THINK I CAN SEE IF I COULD DO BETTER THAN WHAT I'M DOING RIGHT NOW.
JUDGE DAVILA: WELL, YOU'RE DOING FINE. THAT'S GENEROUS FOR YOU TO CALL THEM YOUR HIGHER-UPS. THEY'RE YOUR COLLEAGUES.
MR. FLEURMONT: FAIR ENOUGH.
JUDGE DAVILA: SO WHAT SHOULD I KNOW ABOUT THIS?
MR. FLEURMONT: SURE. STARTING WITH THE MOTION TO ADMIT PRIOR TESTIMONY OF SUNNY BALWANI, WE SUBMIT IT SHOULD BE GRANTED UNDER 804. THERE ARE TWO PROVISIONS AT PLAY HERE, 804(B), WHICH IS A STATEMENT AGAINST INTEREST, AND 804(B)(1), WHICH IS TESTIMONY. SO THE COURT KNOWS, THE FIRST ISSUE OR THE FIRST QUESTION UNDER AN --
JUDGE DAVILA: THAT'S EASIER.
MR. FLEURMONT: AS THE COURT KNOWS, THE FIRST QUESTION UNDER THE 804 RULE ANALYSIS IS WHERE THE DECLARANT IS UNAVAILABLE, SO I'D LIKE TO BRIEFLY START THERE. UNDER RULE 804(A)(1), THE DECLARANT IS UNAVAILABLE IF THE COURT FINDS THAT A PRIVILEGE APPLIES. IN THIS CASE WE HAVE A SWORN DECLARATION FROM LANCE WADE EXPLAINING THAT HE REACHED OUT TO MR. BALWANI'S ATTORNEY AND ASKED ABOUT AVAILABILITY AND WAS TOLD, THROUGH THE PROFFER OF THE ATTORNEY, THAT MR. BALWANI, IF CALLED IN THIS CASE, WOULD EXERCISE HIS RIGHT UNDER THE FIFTH AMENDMENT NOT TO ANSWER ANY RELEVANT QUESTION. WE ALSO HAVE A PRIOR DEPOSITION IN THIS CASE THAT THE COURT IS VERY FAMILIAR WITH, BECAUSE I UNDERSTAND THE COURT PRESIDED OVER THE S.E.C. CASE IN WHICH MR. BALWANI, THROUGH HIS COUNSEL, INVOKED THE FIFTH AMENDMENT UNDER A RELEVANT QUESTION. AND OF COURSE WE HAVE SEVERAL PROCEEDINGS IN THIS CASE WHERE THE COURT HAS HAD THE BENEFIT OF SEEING THE GOVERNMENT'S THEORY OF THE DEFENSE AGAINST MR. BALWANI THROUGH RECENT MOTION IN LIMINES FILED IN THE BALWANI CASE THAT EXPLAIN THEIR THEORY OF CULPABILITY. THAT GIVES THE COURT THE SPECIAL INFORMATION OR SPECIAL UNDERSTANDING OF THIS CASE, WHICH WOULD ALLOW THE COURT TO FIND THAT HE IS UNAVAILABLE BECAUSE HE WOULD INVOKE HIS FIFTH AMENDMENT RIGHT. SO WE BELIEVE HE'S UNAVAILABLE FOR THOSE REASONS. IF THERE ARE NO QUESTIONS ON UNAVAILABILITY, I CAN MOVE TO THE FIRST EXCEPTION.
JUDGE DAVILA: WELL, I DO HAVE SOME. DO WE NEED TO -- IS THERE SUFFICIENT -- IS THERE A SUFFICIENT SHOWING FOR UNAVAILABILITY NOW? NOW, OF COURSE, EVERYONE KNOWS I SEVERED THE CASES FOR THE REASONS INDICATED IN THE COURT'S ORDER.
MR. FLEURMONT: CORRECT.
JUDGE DAVILA: HE HAS A TRIAL, HE, MR. BALWANI, HAS A TRIAL PENDING NEXT MONTH -- EXCUSE ME, IN JANUARY.
MR. FLEURMONT: UH-HUH.
JUDGE DAVILA: BUT DO I NEED TO KNOW -- I UNDERSTAND THAT MR. WADE REACHED OUT TO HIM, BUT DO I NEED TO HAVE EITHER HIS COUNSEL, MR. COOPERSMITH, OR MR. BALWANI COME INTO COURT AND INDICATE TO ME, PERHAPS OUTSIDE OF THE PRESENCE OF THE JURY, BUT NONETHELESS INFORM THE COURT THAT IF CALLED TO TESTIFY, HE WOULD INVOKE HIS PRIVILEGE? DO I NEED TO DO THAT? IS THAT A THRESHOLD THAT NEEDS TO BE MET?
MR. FLEURMONT: NO, YOUR HONOR, YOU DON'T NEED TO TAKE THAT STEP. THAT'S NOT A REQUIREMENT UNDER (THE LAW. THE GOVERNMENT IS CORRECT THAT TYPICALLY THE COURT SHOULD UNDERSTAND OR HAVE THE DEFENDANT ENTER THE -- THE PERSON IN RESPONSE TO SPECIFIC QUESTIONS. BUT THERE'S AN EXCEPTION TO THAT RULE, AS I'M SURE THE COURT IS VERY FAMILIAR WITH, AND THE COURT IS IN A POSITION TO SAY THAT THE DEFENDANT, OR THE DECLARANT I SHOULD SAY, WOULD RESPOND TO ANY QUESTION WITH AN INVOCATION OF THE FIFTH AMENDMENT, AND BASED ON THE FACTS AND CIRCUMSTANCES OF THIS CASE, WE BELIEVE THE COURT HAS EVERYTHING THAT IT NEEDS TO MAKE THAT DETERMINATION NOW.
JUDGE DAVILA: THANK YOU. AND THE SECOND PART OF THAT IS, DO I NEED TO KNOW WHAT QUESTIONS WOULD BE POSED? IN YOUR MOTION, YOU HAVE SAID IN YOUR EXHIBITS A THROUGH C, I THINK THEY ARE --
MR. FLEURMONT: CORRECT.
JUDGE DAVILA: -- YOU SAID THIS IS WHAT WE WANT TO --
MR. FLEURMONT: ADMIT.
JUDGE DAVILA: -- INTRODUCE AND ADMIT IN FRONT OF THE JURY. AND I SEE THE -- I GUESS WHAT I'M SAYING IS THAT I SEE THE ANSWERS, BUT I DON'T SEE THE QUESTIONS. DO I NEED TO KNOW THE QUESTIONS THAT WOULD BE POSED TO THE WITNESS BEFORE THE COURT CAN THEN DECIDE THAT, YES, THERE WOULD BE A PROPER INVOCATION OF PRIVILEGE? DON'T I NEED TO KNOW WHAT THOSE QUESTIONS WOULD BE?
MR. FLEURMONT: NO, YOUR HONOR, FOR TWO REASONS. GENERALLY THE COURT DOES NOT NEED TO KNOW THE QUESTIONS IF THERE'S SUFFICIENT INFORMATION TO FIND THAT IN RESPONSE TO ANY QUESTION, THE PERSON, THE DECLARANT WOULD INVOKE THE FIFTH AMENDMENT, AND THAT IS THE CASE HERE. BUT SECOND, JUST SEEING THE CONTEXT OF THIS CASE AND IN THE DEPOSITION PORTIONS THAT WE PROVIDED, THERE'S QUESTIONS THERE AND THERE ARE ANSWERS THERE. WE THINK THE QUESTIONS ARE VERY CLEAR. AS THE COURT KNOWS, THERE ARE FOUR CATEGORIES OF INFORMATION THAT WE WOULD SEEK TO ADMIT. THE FIRST IS RELATED TO RESPONSIBILITY IN THE CLIA LAB; THE SECOND IS HIS ROLE IN THE NULL PROTOCOL; THE THIRD IS HIS RESPONSIBILITY OF THE FINANCIAL PROJECTIONS, OR THE FINANCIAL MODEL I SHOULD SAY; AND THE FOURTH HAS TO DO WITH HIS ROLE AND RESPONSIBILITY IN THE SAFEWAY AND THE WALGREENS RELATIONSHIP. SO JUST TO REITERATE, GENERALLY THE COURT DOES NOT NEED TO DO THAT, BUT IN THIS CASE THE COURT DOES NOT NEED TO DO THAT BECAUSE WE UNDERSTAND EXACTLY THE ISSUES IT WOULD RAISE.
JUDGE DAVILA: OKAY. AND WE'LL GET INTO THE (B)(3) ANALYSIS AS WELL.
MR. FLEURMONT: YES.
JUDGE DAVILA: I THINK I HAVE SOME QUESTIONS UNDER THAT ANALYSIS AS WELL. SO AS TO UNAVAILABILITY, YOU'RE SAYING THAT HE'S UNAVAILABLE BECAUSE HE'S A CODEFENDANT IN THIS CASE. THE COURT IS AWARE OF THE ISSUES SURROUNDING AND THE COURT SHOULD FIND HIM UNAVAILABLE FOR PURPOSES OF ADMISSION OF THE STATEMENTS?
MR. FLEURMONT: YES, FOR THOSE REASONS, BUT ALSO WE HAVE A DECLARATION, AND IT'S A SWORN DECLARATION UNDER PERJURY, FROM MR. WADE BECAUSE OF THE PRIOR CONDUCT IN THE S.E.C. CASE AND THE LAST DEPOSITION, AND THE COURT PRESIDED OVER THAT CASE AS WELL. SO IT'S NOT JUST -- AND THE CASE LAW SAYS THAT IF A COURT HAS SPECIAL FAMILIARITY WITH THE CASE, IT CAN MAKE A DETERMINATION. BUT IN THIS CASE YOU HAVE FAMILIARITY WITH BOTH CASES, THE S.E.C. CASE AND THE CRIMINAL OFFENSE.
JUDGE DAVILA: SO NO OFFENSE TO MR. WADE, HE PUT HIMSELF AT PERIL OF THE RISK OF PERJURY BY FINDING AND SIGNING THE DECLARATION AND SUBMITTING IT TO THE COURT. BUT IF THE COURT WERE TO HAVE MR. COOPERSMITH COME IN AND INFORM US, THAT IS, INFORM ALL OF US WHAT HIS INTENTION WOULD BE, I'M SURE MR. WADE WOULD NOT TAKE ANY SLIGHT AT THAT.
MR. FLEURMONT: YOUR HONOR, I DON'T MEAN TO IMPLY THAT WE WOULD TAKE A SLIGHT AT THAT. IF THE COURT FEELS THAT THAT'S WHAT THE COURT NEEDS TO DO, WE WOULDN'T OPPOSE THAT. WE'RE JUST SAYING THAT THERE'S NO REASON TO DO THAT BASED ON THE CIRCUMSTANCES OF THIS CASE.
JUDGE DAVILA: OKAY. OKAY.
MR. FLEURMONT: OKAY. ALL RIGHT. NEXT I'LL MOVE TO THE FIRST EXCEPTION I WANT TO DISCUSS TODAY, 804(B)(3), WHICH IS A STATEMENT AGAINST INTEREST. SO 804(B)(3) DEFINES A STATEMENT OF INTEREST AS ONE, QUOTE, A REASONABLE PERSON IN THE DECLARANT'S POSITION WOULD HAVE MADE ONLY IF THE PERSON BELIEVED IT TO BE TRUE BECAUSE, WHEN MADE, IT HAD SO GREAT A TENDENCY TO DISPOSE A DECLARANT TO CIVIL OR CRIMINAL LIABILITY. SUCH STATEMENTS ARE ADMISSIBLE IN A CRIMINAL CASE IF SUPPORTED BY CORROBORATING CIRCUMSTANCES. THE NINTH CIRCUIT HAS FURTHER EXPLAINED THAT WHETHER A STATEMENT IS, IN FACT, AGAINST INTEREST MUST BE DETERMINED FROM THE CIRCUMSTANCES OF EACH CASE AND CAN ONLY BE DETERMINED BY VIEWING IT IN CONTEXT. THAT'S UNITED STATES VERSUS PAGUIO, P-A-G-U-I-O. WHEN VIEWED IN CONTEXT OF THIS CASE, WE BELIEVE THE FOUR CATEGORIES OF INFORMATION THAT WE DISCUSS ARE STATEMENTS AGAINST INTEREST FOR THREE REASONS: FIRST, MR. BALWANI WAS DEPOSED IN THE S.E.C. INVESTIGATION AND EXPOSED TO AN INVESTIGATION FOR CIVIL DAMAGES. THAT GOES TO WHETHER THE DECLARANT BELIEVED THAT THERE WOULD BE A CIVIL PENALTY. THERANOS HAD RECEIVED FOUR SUBPOENAS FROM THE S.E.C. REQUESTING DOCUMENTS CONCERNING MANY OF THE ISSUES WE'RE DISCUSSING TODAY, SO THE ISSUE ABOUT HIS CONTROL OVER THE LAB, THE FINANCIALS, AS WELL AS THE WALGREENS AND SAFEWAY RELATIONSHIP. IT'S CLEAR AT THE TIME OF THE DEPOSITION THAT MR. BALWANI WAS A TARGET OF THE ENFORCEMENT ACTION. I SHOULD SAY THAT THESE DEPOSITIONS TOOK PLACE ON AUGUST 9TH, 2017, AUGUST 10TH, 2017, AND SEPTEMBER 7TH, 2017.
JUDGE DAVILA: AND THE TIME IN THIS CASE WAS?
MR. FLEURMONT: JANUARY 11TH, 2016, YOUR HONOR, SO WELL OVER A YEAR BEFORE THAT. OKAY. AS THE CEO OF THE COMPANY, THERE IS NO QUESTION THAT A REASONABLE PERSON IN HIS POSITION GOING INTO THIS S.E.C. DEPOSITION FACING CIVIL ENFORCEMENT ACTION WITH CIVIL PENALTIES WOULD BELIEVE, AND AFTER REVIEWING THE SUBPOENAS -- AT THAT POINT THERE WERE FIVE -- LET ME MAKE SURE I HAVE THIS RIGHT. AT THAT POINT THERE WERE FOUR SUBPOENAS FROM THE S.E.C. AND TWO FROM THE DOJ, ALL RELATING TO THE CATEGORIES OF INFORMATION THAT WE SEEK TO ADMIT. A REASONABLE PERSON IN THAT POSITION WOULD BELIEVE THAT THE STATEMENTS RELATED TO THOSE REQUESTS COULD PUT THEM IN CIVIL LIABILITY. SO THAT'S THE FIRST REASON. THE SECOND REASON IS RELATED. SO DURING THE TIME THAT MR. BALWANI WAS DEPOSED, HE WAS ALSO FACING GRAND JURY INVESTIGATION. THE FIRST -- YOUR HONOR, LET ME JUST CORRECT SOMETHING I JUST SAID. SO THE FIRST GRAND JURY SUBPOENA WAS ISSUED JANUARY 11TH, 2016. THE COURT ASKED ABOUT THE INDICTMENT, WHICH WAS IN JANUARY -- IT WAS 2018, JUNE 2018, BELIEVE. SO I JUST WANT TO CORRECT THAT.
JUDGE DAVILA: RIGHT. RIGHT.
MR. FLEURMONT: OKAY. SO AS I WAS SAYING, THE SECOND REASON RELATED TO THE INVESTIGATION BY THE DOJ. THERANOS HAD RECEIVED TWO SUBPOENAS FROM THE GRAND JURY BEFORE MR. BALWANI WAS DEPOSED. THE THIRD GRAND JURY SUBPOENA WAS ACTUALLY ISSUED THE DAY BEFORE HIS LAST DAY OF DEPOSITION TESTIMONY. THE GRAND JURY SUBPOENA COVERED MANY OF THE TOPICS ON WHICH HE WAS QUESTIONED DURING THE DEPOSITION, AND INDEED, THE S.E.C. SUBPOENAS, TWO OF THEM THAT WERE ISSUED AFTER THE GRAND JURY SUBPOENA CONTAINED A PROVISION THAT SAID THAT THE S.E.C. WOULD -- COULD SHARE THE INFORMATION WITH THE DOJ, WHICH IS EXACTLY WHAT HAPPENED IN THIS CASE. THAT'S AT EXHIBIT G AND H TO THE DECLARATION OF AMY SAHARIA. SO FACED WITH THE GRAND JURY SUBPOENAS AND EXPLANATION, WE BELIEVE THAT A REASONABLE PERSON WOULD NOT TAKE OWNERSHIP OVER THE CATEGORIES THAT MR. BALWANI DID KNOWING THAT HE WAS FACED ALSO WITH CRIMINAL LIABILITY AS WELL. SO THAT'S THE SECOND REASON. THE THIRD IS THE NATURE OF MR. BALWANI'S STATEMENTS. THESE ARE NOT JUST STATEMENTS ABOUT SOME PARTICIPATION WITH SOME OF THE AREAS THAT WE'RE TALKING ABOUT. HE DESCRIBES A LEADERSHIP ROLE IN THEM. AS THE NINTH CIRCUIT HAS EXPLAINED, LEADERSHIP AND ALLEGED WRONGDOING CAN BE PARTICULARLY INCULPATORY AND THAT'S THE PAGUIO CASE.
JUDGE DAVILA: SO DO WE NEED TO LOOK AT THE STATEMENTS TO SEE WHETHER OR NOT THERE'S A DISTINCTION BETWEEN EXCULPATORY AND INCULPATORY? DO WE NEED TO LOOK AT THAT?
MR. FLEURMONT: SO THERE'S NOT A SIMPLE YES OR NO ANSWER TO THAT, YOUR HONOR. SO TYPICALLY IT REALLY DEPENDS ON THE STATEMENT. SO, FOR EXAMPLE, IN THE PAGUIO CASE, THAT CASE INVOLVED -- IT WAS -- THE DEFENDANT WAS CHARGED WITH MISSTATEMENTS IN A LOAN APPLICATION, BUT IT WAS A FATHER WHO ACTUALLY SUBMITTED THE APPLICATION, THE FATHER THAT SUBMITTED THE W-2'S THAT WERE FALSIFIED, AND IT WAS THE FATHER THAT SIGNED THE APPLICATION. SO THE DEFENDANT WAS CHARGED, AND IN HIS SECOND TRIAL, THE FATHER WAS A FUGITIVE SO HE WAS UNAVAILABLE, BUT HE SAID TO THE DEFENDANT, THE DEFENDANT'S ATTORNEY, THAT THE SCHEME WAS MINE. MY SON HAD NOTHING TO DO WITH IT. AND IN THAT CASE THE ISSUE WAS NOT, THE SCHEME WAS MINE. THE ISSUE WAS, MY SON HAD NOTHING TO DO WITH IT. AND THE COURT HELD THAT WHEN SOMEONE TAKES SOLE RESPONSIBILITY OVER A CERTAIN ISSUE, THAT CAN BE INCULPATORY AS WELL, EVEN THOUGH IT'S INCULPATORY AS TO SOMEONE ELSE.
JUDGE DAVILA: IN THAT CASE, I THINK THE INITIAL TRIAL JUDGE PARSED OUT THE SENTENCE, RIGHT, AND ONLY ALLOWED PART OF IT.
MR. FLEURMONT: RIGHT, AND HE WAS REVERSED, YOUR HONOR.
JUDGE DAVILA: THANK YOU FOR TELLING ME THAT.
(LAUGHTER.)
MR. FLEURMONT: WELL, BUT THAT WAS --
JUDGE DAVILA: HE WAS REVERSED. AND WHAT THE APPELLATE COURT SAID WAS IN THAT INSTANCE THE ENTIRETY OF THE STATEMENT WAS INFORMATIVE AND IT SHOULDN'T HAVE BEEN PARSED OUT.
MR. FLEURMONT: CORRECT, YOUR HONOR. SO THAT'S WHAT I'M SAYING. IT'S NOT REALLY A YES OR NO ANSWER. YOU REALLY HAVE TO LOOK AT THE STATEMENT. THE STATEMENT THAT WE HAVE HERE, AND I SHOULD SAY, I KNOW THE GOVERNMENT HAS MADE A POINT THAT SOME OF THE STATEMENTS HAVE EXTRANEOUS INFORMATION. OUR APPROACH WAS TO, WHENEVER THERE WAS AN INCULPATORY STATEMENT, WE INCLUDED THE FIRST QUESTION AND THE FULL ANSWER, AND AS YOU HAVE SEEN, THERE WERE OTHER REDACTIONS AND DIFFERENT QUESTIONS AND ANSWERS. SO WE JUST WANTED TO INCLUDE THE FULL QUESTION AND ANSWER.
JUDGE DAVILA: BUT THERE WERE SOME OTHER ISSUES THAT THE COURT TOUCHED ON IN THAT CASE, IT WAS THE RELATIONSHIP, THE LOVE RELATIONSHIP, IF YOU WILL, AND DIDN'T THE COURT LOOK AT TO DISCERN WHETHER OR NOT THAT SHOULD BE CONSIDERED?
MR. FLEURMONT: YES, YOUR HONOR. BUT I PUSH BACK A LITTLE BIT BECAUSE IT WASN'T THE LOVE RELATIONSHIP, IT WAS THE FAMILY RELATIONSHIP. IN THAT CASE IT WAS THE FATHER AND THE SON.
JUDGE DAVILA: OKAY. SOMETIMES THE FATHERS LOVE SONS.
MR. FLEURMONT: SOMETIMES THEY DON'T.
JUDGE DAVILA: YEAH, YEAH.
MR. FLEURMONT: IN THE GADSON CASE THAT THE GOVERNMENT CITES, THAT WAS THE RELATIONSHIP BETWEEN THE TWO BOTHERS AND THE COURT LOOKED THERE FOR A FAMILY RELATIONSHIP. AND THE REASON THE COURT WAS LOOKING AT THE RELATIONSHIP IN BOTH OF THOSE CASES -- BECAUSE AS YOU KNOW, WHEN AN ELEMENT UNDER THIS ANALYSIS IS COOPERATION, AND IN THE PAGUIO CASE THE COURT SAID THERE IS A LOT OF CORROBORATION HERE, WE HAVE THE LOAN OFFICER, WE HAVE THE ACCOUNTANT, WE HAVE THE ESCROW AGENT ALL SAYING THAT IT WAS THE FATHER WHO SUBMITTED THIS APPLICATION. BUT ON THE OTHER HAND, WE HAVE THE FACT THAT IT'S THE FATHER. THE COURT SAID BECAUSE OF THE CORROBORATION, THAT WAS SUFFICIENT FOR A FINDING THAT THE STATEMENT WAS ADMISSIBLE. SO IN THOSE CASES, YES, THE FAMILY RELATIONSHIP IS RELEVANT. BUT THAT JUST GOES TO CORROBORATION. THE COURT IS STILL REQUIRED TO LOOK AT CORROBORATION TO SEE IF THE STATEMENTS ARE INDEED RELIABLE.
JUDGE DAVILA: OKAY.
MR. FLEURMONT: BUT AS I WAS SAYING ABOUT THE PAGUIO CASE ORIGINALLY, THERE THE QUESTION WAS ABOUT PARSING OUT THE DIFFERENT STATEMENTS. SO HERE IF YOU LOOK AT THE FULL QUESTION AND ANSWER, IT'S VERY CLEAR WHICH STATEMENTS ARE INCULPATORY. THE FACT THAT SOME STATEMENTS MAY BE EXCULPATORY, I DON'T THINK THERE'S MANY IN THERE, BUT THE ONE STATEMENT AT ISSUE THAT I THINK THE GOVERNMENT IS POINTING AT IS THE NULL PROTOCOL SAYING SHE DID NOT KNOW ABOUT IT. BUT IN THAT CASE IT'S JUST THE TWO OF THEM. SO IT WOULD BE DIFFERENT IF THERE WAS -- IT WOULD BE DIFFERENT IF THERE WAS A STATEMENT IN WHICH HE TOOK NO RESPONSIBILITY FOR THE STATEMENT AND JUST PUSHES IT ON SOMEBODY ELSE. IN THAT CASE, YES, YOUR HONOR, WE WOULD SAY THAT STATEMENT WOULD NOT COME IN. BUT THAT'S NOT WHAT WE HAVE HERE.
JUDGE DAVILA: SO SOME OF THE STATEMENTS I'M LOOKING AT, LET'S SEE, I THINK IT'S ON PAGE 4 OF YOUR MOTION AT LINE 15. I THINK YOU START THE BULLET POINTS OF THE --
MR. FLEURMONT: SURE.
JUDGE DAVILA: -- OF THE STATEMENTS. AND I SUPPOSE IN THE COURSE OF OUR CONVERSATION, MS. VOLKAR WILL HELP US WITH THOSE AND WE'LL GO THROUGH THESE TO SEE -- ARE THESE -- SOME OF THESE, CANDIDLY, I HAD SOME QUESTIONS WHETHER OR NOT THEY WERE MORE EXCULPATORY, OR ACTUALLY SOME OF THEM ACTUALLY JUST LOOKED LIKE STATEMENTS OF FACT, LIKE A FACT WITNESS.
MR. FLEURMONT: OKAY.
JUDGE DAVILA: AND THERE'S NO BASIS TO ADMIT THEM OTHER THAN AS A FACT WITNESS. SO THAT'S SOME OF THE ISSUES THAT I HAD. MR. BALWANI'S PRIOR TESTIMONY ABOUT HIS ROLE IN THE SAFEWAY RELATIONSHIP, THE WALGREENS RELATIONSHIP, HE WAS RESPONSIBLE FOR THE CLIA LAB. BUT WE KNOW THAT HE DIDN'T TELL THEM WHAT TO DO. I THINK THAT'S -- YOU KNOW, HE SAID YES, THEY DID WHAT THEY WERE GOING TO DO, BUT I COULDN'T TELL THEM WHAT TO DO, ET CETERA. MS. VOLKAR WILL HELP US IN A MOMENT WITH THOSE DISTINCTIONS.
MR. FLEURMONT: SURE.
JUDGE DAVILA: BUT THAT'S SOMETHING THAT I'M FOCUSSED ON IN LOOKING AT IT.
MR. FLEURMONT: UNDERSTOOD.
JUDGE DAVILA: OKAY.
MR. FLEURMONT: BUT I'M PREPARED TO ANSWER THOSE QUESTIONS, YOUR HONOR. I'M SORRY. LET ME JUST GET BACK ON TRACK. WE'VE DISCUSSED CORROBORATION. SO IN TERMS OF EACH CATEGORY OF STATEMENT, WE HAVE EVIDENCE IN THE TRIAL RECORD THAT IT'S CORROBORATED BY TESTIMONY OF CERTAIN WITNESSES, AND THAT GOES TO THE CORROBORATION THAT WE JUST DISCUSSED, FOR EXAMPLE, THAT HAPPENED IN PAGUIO. AND THEN WE'LL -- AS THE COURT SAYS, WE CAN TALK ABOUT EACH STATEMENT AND ABOUT EXACTLY WHAT IT SAYS. OKAY. I'D LIKE TO MOVE TO THE NEXT EXCEPTION. OKAY. SO THIS EXCEPTION IS UNDER 804(B)(1), WHICH PROVIDES THAT PRIOR TESTIMONY FROM AN UNAVAILABLE WITNESS IS ADMISSIBLE WHEN GIVEN AT A LAWFUL DEPOSITION AND IF OFFERED AGAINST A PARTY WHO HAD AN OPPORTUNITY AND SIMILAR MOTIVE TO DEVELOP THAT TESTIMONY BY DIRECT, CROSS, OR REDIRECT. SO THE FIRST QUESTION IS WHETHER THE S.E.C. AND THE DOJ ARE THE SAME PARTY. WE SUBMIT THEY ARE IN THIS CASE, YOUR HONOR. IT WAS -- ALTHOUGH IT WAS THE S.E.C. WHO DEPOSED MR.
BALWANI, BECAUSE OF THE COORDINATION BETWEEN THE UNITED STATES AND THE S.E.C., WE BELIEVE THAT FOR THE PURPOSES OF THIS RULE THAT THEY'RE THE SAME PARTY. AND ADMITTEDLY, THERE'S NOT MUCH CASE LAW IN THE NINTH CIRCUIT ON THIS ISSUE, BUT WHAT THE CASES THAT WE HAVE REVIEWED SAY OR GUIDE THE COURT IS THAT WHAT THE COURT IS REALLY LOOKING FOR IS COORDINATION BETWEEN THE TWO PARTIES, BOTH COORDINATION OF LAW AND COORDINATION IN FACT. SO I'D LIKE TO START WITH COORDINATION IN FACT IN THIS CASE. IN THIS CASE THE S.E.C. AND THE DOJ HAVE INVESTIGATED THIS CASE JOINTLY. THE S.E.C. AND THE DOJ HAVE JOINTLY INTERVIEWED OVER 50 WITNESSES. THE DOJ RECEIVED ACCESS TO THE INVESTIGATIVE AND NONPUBLIC FILES RELATED TO THERANOS. THE GOVERNMENT HAS REVIEWED MILLIONS OF PAGES OF THE S.E.C. AND LASTLY, AS I MADE A POINT OF BEFORE, THERE WAS A PROVISION IN THE S.E.C. SUBPOENAS THAT SAY THAT THEY COULD SHARE THE INFORMATION WITH THE DOJ, WHICH IS EXACTLY WHAT HAPPENED IN THIS CASE.
THAT'S COORDINATION IN FACT. THAT SEPARATES THIS CASE FROM SOME OF THE OTHER CASES THAT, BOTH THE DEFENSE SIDE AND THE GOVERNMENT SIDE, THE BAKER CASE, B-A-K-E-R, THE MARTOVA CASE, M-A-R-T-O-V-A. COORDINATION IN LAW. SO THE NINTH CIRCUIT HAS RECOGNIZED THAT FEDERAL SECURITIES LAWS AUTHORIZE THE S.E.C. TO TRANSMIT EVIDENCE THAT IS GATHERED TO THE UNITED STATES ATTORNEY'S OFFICE TO FACILITATE CRIMINAL INVESTIGATION FOR THE UNITED STATES ATTORNEY. THAT MAKES SENSE, RIGHT? BECAUSE THE S.E.C. DOESN'T HAVE CRIMINAL ENFORCEMENT ACTION, SO AS THEY GATHER FACTS THAT RELATE TO A CRIMINAL INVESTIGATION, THEY TYPICALLY WILL SEND THOSE FACTS TO THE UNITED STATES ATTORNEY'S OFFICE TO ENFORCE THEM CRIMINALLY. SO THEY BOTH HAVE A ROLE IN THE CRIMINAL ENFORCEMENT OF ALLEGED FACTS THAT SUPPORT A CRIMINAL ACTION. OKAY. BASED ON THAT COORDINATION, WE BELIEVE THE FACTS OF THIS CASE MAKE CLEAR THAT THE S.E.C. AND THE DOJ ARE THE SAME PARTY FOR THE PURPOSES OF THE RULE.
JUDGE DAVILA: WAS THE -- AT THE DEPOSITION, THE S.E.C. DEPOSITIONS, WAS THERE A UNITED STATES ATTORNEY REPRESENTING DOJ OR THE PROSECUTION PRESENT?
MR. FLEURMONT: YOUR HONOR, WE DON'T BELIEVE SO. I HAVE REVIEWED THE TRANSCRIPTS, AND I TOOK ANOTHER LOOK AT THEM LAST NIGHT AND I ACTUALLY LOOKED AT THE COVER PAGE TO LOOK AT THAT EXACT QUESTION. THEIR APPEARANCES WEREN'T THERE. AND ALSO IN THE GOVERNMENT'S BRIEF, IT MAKES A VERY LIMITED STATEMENT SAYING THAT, ONE, IT PHYSICALLY WASN'T PRESENT THERE; AND, TWO, IT DID NOT HAVE ANY INPUT INTO THE QUESTIONS, WHICH WE KNOW IS A VERY LIMITED STATEMENT. IT DOESN'T SAY ANYTHING ABOUT BEING INVOLVED WITH THE STRATEGY, BEING INVOLVED IN THE TOPICS OF WHAT IS GOING ON, AND, YOU KNOW --
JUDGE DAVILA: THAT WAS MY QUESTION: IS THERE ANY EVIDENCE, ANYTHING IN THE RECORD THAT SUGGESTS THAT THE GOVERNMENT PROVIDED QUESTIONS, GAVE STRATEGY TO THE S.E.C.? WE KNOW THAT IN THE COURSE OF, OF COURSE, DOJ INVESTIGATIONS AND ANCILLARY S.E.C. INVESTIGATIONS, SOMETIMES THOSE ARE CONCURRENT, AND THEY JUST HAPPEN OF FACT, IT'S A CONCURRENCE THAT HAPPENS, AND SOMETIMES THERE'S A SHARING OF INFORMATION, SOMETIMES THERE'S NOT. SOMETIMES THE INFORMATION SHARED IS, CAN WE TALK TO YOU? NO, I'M GOING TO BE IN A DEPOSITION. OKAY. WELL, GET BACK TO ME WHEN YOU'RE DONE. SOMETIMES IT'S RICHER AND DEEPER THAN THAT. WOULD YOU MIND ASKING THE WITNESS THESE QUESTIONS? THAT WOULD BE HELPFUL. THAT'S WHAT I'M TRYING TO DISCERN WHERE THAT IS HERE. FIRST OF ALL, WE KNOW THERE WAS NO, AT LEAST FROM WHAT I UNDERSTAND, THERE WAS NO -- NONE OF THE ATTORNEYS INVOLVED IN THIS PROSECUTION WERE AT THAT DEPOSITION IN THIS COURTHOUSE IS MY UNDERSTANDING.
MR. FLEURMONT: THAT'S OUR -- THAT'S OUR UNDERSTANDING. THE GOVERNMENT REPRESENTED THAT'S THE CASE AND WE TAKE THEM AT THEIR REPRESENTATION.
JUDGE DAVILA: AND I DON'T SEE ANY EVIDENCE THAT SUGGESTS THAT THEY PROVIDED QUESTIONS TO THE S.E.C. TO GUIDE THEIR INVESTIGATION. AND AS YOU POINTED OUT, THE S.E.C. INVESTIGATION, THEIR DEPOSITION WAS AT LEAST A YEAR, PERHAPS MORE, EARLIER THAN THE ULTIMATE INDICTMENT.
MR. FLEURMONT: CORRECT, YOUR HONOR. BUT IT WAS OVER A YEAR AND A HALF AFTER THE GRAND JURY SUBPOENA. SO THE GRAND JURY -- THE CRIMINAL INVESTIGATION WAS WELL UNDERWAY AT THE TIME OF THE DEPOSITION, ALTHOUGH THE COURT IS CORRECT THAT THE FORMAL INDICTMENT DID NOT HAPPEN UNTIL LATER.
JUDGE DAVILA: AND IS THERE ALSO AN ISSUE ABOUT SIMILAR MOTIVE?
MR. FLEURMONT: YES, YES, YOUR HONOR, THERE IS. SO -- WHICH IS KIND OF THE LAST ISSUE THAT RELATES TO THIS PROVISION. OKAY. SO THE NINTH CIRCUIT HAS EXPLAINED THAT THE QUESTION OF WHETHER A PARTY HAS A SIMILAR MOTIVE IS, QUOTE, "INHERENTLY A FACTUAL INQUIRY BASED ON THE SIMILARITY OF THE UNDERLYING ISSUES AND ON THE CONTEXT OF THE QUESTIONS." IDENTICAL -- I'M SORRY. THAT IS UNITED STATES V. DUENAS, D-U-E-N-E-S, AT 691 F.3D 1089, NINTH CIRCUIT, 2012.
JUDGE DAVILA: IS DUENAS THE CASE IN GUAM?
MR. FLEURMONT: YOUR HONOR, I STUDIED EVERYTHING ABOUT THAT CASE EXCEPT FOR EXACTLY WHERE IT WAS, SO I DON'T HAVE THE ANSWER TO THAT QUESTION.
JUDGE DAVILA: IS THAT THE CASE IN GUAM WHERE THERE WAS AN INVESTIGATION OF STOLEN PROPERTY AND METHAMPHETAMINE?
MR. FLEURMONT: YES, YES, YES, YOUR HONOR. THAT IS A DRUG CASE. I KNOW THAT MUCH.
JUDGE DAVILA: AND THE ISSUE WAS THE -- I THINK THE JUDGE, THE COURT WAS CRITICAL OF THE INVESTIGATION IN THAT CASE. IT SEEMED LIKE DURING THE SEARCH, ITEMS WERE PUT OUT ON THE FRONT LAWN, THE PRESS WAS GIVEN ACCESS TO THE GROUNDS, THEY WERE GIVEN TREATMENT, THERE WAS REALLY A DEARTH OF RECORD OF WHO WAS IN CHARGE IN THE INVESTIGATION. AND THEN MR. DUENAS WANTED TO TALK TO A COLLEAGUE OF HIS, FORMER FRIEND OF HIS, WHO WAS PART OF LAW ENFORCEMENT, AND THAT'S REALLY WHERE THE ISSUE WAS, THAT CONVERSATION BETWEEN MR. DUENAS AND THE LAW ENFORCEMENT OFFICER.
MR. FLEURMONT: THAT'S CORRECT. SO THE LAW ENFORCEMENT OFFICER TESTIFIED AT A SUPPRESSION HEARING. BETWEEN THE SUPPRESSION HEARING AND THE ACTUAL TRIAL, UNFORTUNATELY HE DIED, AND SO THE GOVERNMENT WANTED TO USE SOME OF THE STATEMENTS THAT HE OBTAINED FROM MR. DUENAS IN THE TRIAL.
JUDGE DAVILA: HE WAS KILLED BY A DRUNK DRIVER AS I RECALL.
MR. FLEURMONT: YES, THAT'S RIGHT.
JUDGE DAVILA: AND THEN THE QUESTION OF WHETHER OR NOT THAT TESTIMONY WOULD BE ADMISSIBLE AT THE SUBSEQUENT EVENT, AND THE ISSUE WAS ABOUT, IS TRIAL THE SAME AS SUPPRESSION? IS THAT WHAT IT WAS?
MR. FLEURMONT: EXACTLY, YOUR HONOR. SO THE COURT HELD THAT THE STATEMENTS -- FIRST OFF, THE NINTH CIRCUIT SAID THE LOWER COURT DID NOT DO THE APPROPRIATE ANALYSIS. THE APPROPRIATE ANALYSIS THERE IS WHETHER --
JUDGE DAVILA: ARE YOU TELLING ME HE GOT REVERSED AGAIN?
MR. FLEURMONT: WE CHOOSE OUR CASES WISELY. SO THE COURT SAYS THE ANALYSIS IS THIS: WHETHER THE FUNDAMENTAL OBJECTIVE WAS THE SAME IN BOTH PROCEEDINGS, AND IN THE SUPPRESSION IN DUENAS, THE SUPPRESSION HEARING, THE FUNDAMENTAL OBJECTION WAS TWO-FOLD BY THE DEFENSE ATTORNEY: ONE TO SEE IF THE STATEMENT WAS VOLUNTARY; AND, TWO, TO REVIEW THE PROTOCOL TO SEE IF THE STATEMENT WAS APPROPRIATE UNDER MIRANDA. THE DEFENSE ATTORNEY DIDN'T ACTUALLY GO INTO THE SUBSTANCE OF THE STATEMENT AND DIDN'T REALLY PROBE THE STATEMENT FOR THINGS THAT A DEFENSE ATTORNEY WOULD PROBE, WHERE DID IT HAPPEN? WAS IT RELIABLE? SO ALTHOUGH THE COURT ALLOWED THE STATEMENT IN, THE LOWER COURT ALLOWED THE STATEMENT IN, THE NINTH CIRCUIT SAID, NO, THE OBJECTIVES WERE DIFFERENT. AND SO THAT'S THE ANALYSIS THAT WE'RE ASKING FOR THE COURT TO APPLY HERE, TO SEE IF THE FUNDAMENTAL OBJECTIVE BETWEEN THE S.E.C. AND THE DOJ WERE SIMILAR IN BOTH PROCEEDINGS. AND HERE THE MOTIVATIONS WE BELIEVE WERE.
SO -- AND THAT WAS -- THE FUNDAMENTAL OBJECTIVE WAS DEVELOP INCRIMINATING EVIDENCE AGAINST MR. BALWANI AND MS. HOLMES. THE UNDERLYING ISSUES IN THE S.E.C. ACTION ARE THE SAME IN THIS CASE. MR. BALWANI AND MS. HOLMES WERE TARGETS OF BOTH INVESTIGATIONS. THIS IS CRITICAL. THIS POINT IS CRITICAL. THE S.E.C. AND THE DOJ WERE INVESTIGATING THE SAME UNDERLYING CONDUCT. IF YOU LOOK AT THE S.E.C. COMPLAINT, THIS IS AT PARAGRAPH 91B OF THE COMPLAINT, THIS IS HOW THEY DESCRIBE THE SECOND CLAIM, THAT MS. HOLMES AND MR. BALWANI EMPLOYED A SCHEME TO DEFRAUD, TO, QUOTE, OBTAIN MONEY OR PROPERTY BY MEANS OF UNTRUE STATEMENTS OF MATERIAL FACT. AND THROUGHOUT THE COMPLAINT, THE S.E.C. COMPLAINT, THE ALLEGATIONS RELATED TO THE ALLEGED FACT THAT THE RETAIL PARTNERSHIP RELATIONSHIP STALLED, WHICH WAS THE EXACT SAME WORD USED IN PARAGRAPH 12 OF THE INDICTMENT IN THIS CASE; IT DISCUSSES ALLEGED MISSTATEMENTS ABOUT THERANOS TECHNOLOGY; AND ALSO MISREPRESENTATIONS CONCERNING FINANCIAL NUMBERS.
YOU CAN LINE UP PARAGRAPH 12 OF THE INDICTMENT WITH THE COMPLAINT IN THE S.E.C. AND THE VEN DIAGRAM IS PRETTY MUCH ONE. AND THAT'S IMPORTANT IN THIS CASE. THE GOVERNMENT HAS REPRESENTED IN ITS OPPOSITION THAT, QUOTE, CRITICALLY THE S.E.C. FOCUSSED ON SECURITIES FRAUD, WHEREAS THE INDICTMENT ALSO ALLEGES A CONSPIRACY TO DEFRAUD PATIENTS. THAT TOTALLY IGNORES THE FIRST CONSPIRACY, WHICH WE SUBMIT THERE'S A LOT OF OVERLAP. SO THAT GOES TO THE ELEMENT OF THE SIMILARITY OF THE UNDERLYING ISSUES. THE SECOND ELEMENT IS THE CONTEXT OF THE QUESTIONING. IN THIS CASE, AS THE COURT PROBABLY NOTICED FROM THE DEPOSITION CLIPS THAT WE PROVIDED, THESE ARE LEADING QUESTIONS ABOUT STATEMENTS MADE BY MR. BALWANI. THEY'RE ALSO LEADING QUESTIONS ABOUT INFORMATION KNOWN BY MS. HOLMES. ON THE FINANCIAL MODEL ISSUE, THE S.E.C. ATTORNEYS SAID, WELL, MS. HOLMES KNEW ABOUT THE ASSUMPTIONS. MS. HOLMES KNEW ABOUT THE FINANCIAL MODEL. WHAT DID SHE EVER HAVE? DID SHE EVER ACTUALLY HAVE THE FINANCIAL MODEL? AND HE SAID NO. SO THE TYPES OF QUESTIONING ALSO SUPPORTS THAT THERE WAS A FUNDAMENTAL OBJECTIVE FOR THIS. SO IF I COULD QUICKLY JUST TALK ABOUT THE S.E.C. VERSUS JASPER CASE, WHICH WAS AN OPTIONS BACKDATING CASE. IN THAT CASE, THE COURT AND THE NINTH CIRCUIT DID FIND THAT THERE WAS NOT A SIMILAR MOTIVE, AND THE COURT SAID --
JUDGE DAVILA: THAT THERE WAS NOT A SIMILAR MOTIVE?
MR. FLEURMONT: THERE WAS NOT A SIMILAR MOTIVE BETWEEN THE S.E.C. AND THE DOJ. AND IN THAT CASE, THE COURTS SAY THAT THERE ARE INHERENTLY DIFFERENT MOTIVES INVOLVED IN AN EARLIER INVESTIGATION IN WHICH OPEN-ENDED QUESTIONS ARE TYPICALLY ASKED WITHOUT EXPECTATION THAT THE WITNESS WILL BE NEEDED AT TRIAL. THAT IS NOTHING LIKE THE DEPOSITION THAT OCCURRED IN THIS CASE. MR. BALWANI WAS A TARGET. THERE WERE NOT OPEN-ENDED QUESTIONS. AND THE QUESTIONS THAT WERE ASKED WERE, AS YOU CAN SEE IN THE COMPLAINT, AIMED AT FINDING ABOUT WHETHER THERE WERE MISSTATEMENTS, AIMED AT THE CATEGORIES THAT WE CITED IN OUR BRIEF.
JUDGE DAVILA: ALL RIGHT. THANK YOU. LET ME TURN TO YOUR COLLEAGUE OPPOSITE, MS. VOLKAR. MS. VOLKAR, DO YOU HAVE ANYTHING TO SAY OR CAN YOU HELP US ON SOME OF THESE ISSUES?
MS. VOLKAR: ABSOLUTELY, YOUR HONOR. THANK YOU. FIRST I WANT TO START WITH THE TIMELINE BECAUSE I DO THINK THAT IS REALLY CRITICAL, ESPECIALLY WHERE MY COLLEAGUE JUST ENDED IN TALKING ABOUT THE S.E.C. VERSUS JASPER CASE. IN THIS CASE, IN 2016 THERE WERE CONCURRENT INVESTIGATIONS ONGOING, INCLUDING BY THE S.E.C., INCLUDING BY THE GRAND JURY SUBPOENAS, BUT THERE WERE NO CRIMINAL OR, AS FAR AS I KNOW, CIVIL ENFORCEMENT CHARGES BY THE S.E.C. AT THAT TIME. THEN THE INVESTIGATIVE TESTIMONY BY MR. BALWANI THAT'S AT ISSUE HERE OCCURS IN AUGUST AND SEPTEMBER OF 2017. THE FIRST TIME ANY ENFORCEMENT PROCEEDINGS ARE BROUGHT IS MARCH 2018 WHEN THE S.E.C. FILES ITS COMPLAINT. AND, OF COURSE YOUR HONOR IS VERY FAMILIAR WITH THAT CASE. IT IS PENDING BEFORE YOU. BUT THAT COMPLAINT WAS NOT FILED UNTIL MARCH OF 2018, AND THAT CHANGES WHAT S.E.C. VERSUS JASPER TALKS ABOUT, THE S.E.C. PROCEEDINGS FROM THE INVESTIGATORY STAGE TO THE ENFORCEMENT ACTION STAGE. SO THAT'S THE S.E.C.
NOW, FOR THE DOJ'S PART, THE CRIMINAL INDICTMENT IN THIS CASE WAS ENTERED BY THE -- OR ISSUED BY THE GRAND JURY I BELIEVE JUNE 2018. SO AGAIN, CRITICALLY AFTER THE TESTIMONY IN THIS CASE. AND AS THE DEFENSE POINTED OUT IN THEIR MOTION, WHEN MR. BALWANI WAS BROUGHT BACK IN 2019, HE OF COURSE INVOKED HIS FIFTH AMENDMENT RIGHTS BECAUSE NOW HE WAS UNDER THESE ENFORCEMENT PROCEEDINGS, BOTH THE S.E.C. ENFORCEMENT PROCEEDING AND THE CRIMINAL INDICTMENT BY THE DOJ. SO I THINK THAT TIMELINE IS VERY CRITICAL. AND THEN WITH THAT IN MIND, I WANTED TO TALK ABOUT HOW ALL THE CATEGORIES OF STATEMENTS THAT THEY'RE SEEKING TO ADMIT IN THE TESTIMONY REALLY FALL INTO THREE BUCKETS WHICH AT THE END OF THE DAY MAKE NONE OF THEM ADMISSIBLE. AND THOSE THREE BUCKETS ARE -- MOST OF THEM ARE NOT NECESSARILY SELF-INCULPATORY BECAUSE THEY'RE SHARING BLAME OR DEFLECTING BLAME, AND THE NINTH CIRCUIT HAS TOLD US THAT THOSE ARE NOT THE TYPE OF STATEMENTS THAT 804(B)(3) INTENDS TO PERMIT.
THEY ARE ALSO NOT CORROBORATED OR UNTRUSTWORTHY, AND I'LL COME BACK TO THAT IN JUST A MOMENT. AND THEN TO THE EXTENT THAT ANY OF THEM ARE CORROBORATED, THEY'RE REALLY CUMULATIVE AND THEY'RE FACT WITNESS TESTIMONY, AS YOUR HONOR POINTED OUT, THAT ESSENTIALLY IS JUST ANOTHER WAY OF TRYING TO REINFORCE TESTIMONY OF PRIOR WITNESSES WITHOUT CALLING THE PERSON HERE TO TALK ABOUT IT. NOW, ONE EXAMPLE, OR ONE VERY CLEAR EXAMPLE THAT I THINK HIGHLIGHTS THE ISSUES IN WHAT DEFENSE IS TRYING TO SEEK TO ADMIT HERE IS EXHIBIT C, DOCKET 1163-4. THE TWO PAGES THAT THEY WANT TO ADMIT ARE ALL ABOUT WHO RAN THE LAB. THAT'S THEIR CATEGORY. AND THE QUESTION FROM THE S.E.C. IS, WHO AT THERANOS MADE THE DETERMINATION OF WHAT DEVICE TO USE FOR PATIENT TESTING IN THE CLIA LAB? THAT WOULD BE AN IMPORTANT QUESTION, I THINK, IN OUR CASE WHERE WE HAVE THE PATIENT CONSPIRACY. MR. BALWANI DOES NOT SAY, IT WAS ME, I DID IT, MS. HOLMES HAD NOTHING TO DO WITH IT.
IF THAT WAS THE STATEMENT WE WERE LOOKING AT, WE WOULD BE HAVING A VERY DIFFERENT CONVERSATION. WHAT HE SAYS IN SUBSTANCES IN HIS ANSWER WAS IT WAS THE LAB DIRECTOR AND THE SCIENTISTS AND THE ENGINEERS MADE ALL OF THE TECHNICAL DECISIONS, AND THE TSPU WAS MODIFIED, AND WHETHER OR NOT IT WAS USED, THAT WAS UP TO THE LAB DIRECTOR. AND WAS THAT TRUE THROUGHOUT YOUR TIME AT THERANOS? YES. THERE'S NOTHING IN THIS STATEMENT THAT SAYS ANYTHING OTHER THAN WHAT THE DEFENSE HAS BEEN PRESENTING IN THIS CASE THUS FAR, WHICH IS IT WAS THE LAB DIRECTOR WHO WAS INVOLVED IN PATIENT TESTING. SO AS FAR AS 804(B)(3) GOES, THERE'S NOTHING IN EXHIBIT C THAT MOVES INTO THE REALM THAT 804(B)(3) IS MEANT TO COVER.
JUDGE DAVILA: MS. VOLKAR, LET ME ALSO INTERRUPT YOU FOR JUST A MOMENT TO SUGGEST THAT AS I READ THROUGH THIS, I WAS REMINDED OF ALL OLD FRIEND, FEDERAL RULE OF EVIDENCE 106, AND WHETHER OR NOT THAT WAS GOING TO COME INTO PLAY HERE AS TO ANY OF THESE STATEMENTS. AND, YOU KNOW, COUNSEL, FEEL FREE TO RAISE THAT ISSUE. I NOTE THE EXHIBITS, THEY'RE REDACTED. AND I LOOKED AT THAT AND THOUGHT, WELL, WE'VE BEEN THROUGH THIS BEFORE, AND SOMETIMES THE REDACTIONS ARE UNREDACTED TO PROVIDE CONTEXT I THINK IS HOW WE'VE CALLED IT THROUGHOUT THIS TRIAL. SO I'M BEARING THAT IN MIND, TOO. SO PLEASE CONTINUE. THANK YOU.
MS. TREFZ: YES. THANK YOU, YOUR HONOR. I DO WANT TO, FOR THE RECORD, STATE THAT WE RECEIVED THIS MOTION SHORTLY BEFORE THE THANKSGIVING HOLIDAY. WE WERE NOT GIVEN ANY ADVANCE WARNING BY DEFENSE COUNSEL, NOR WERE WE GIVEN ANY INDICATION OF WHAT PORTIONS THEY WERE GOING TO SEEK TO ADMIT SUCH THAT WE COULD GIVE OUR RULE 106 SUGGESTIONS. SO BASED ON HOW THE COURT RULES, WE WOULD ASK THE OPPORTUNITY TO DO THAT. AND CANDIDLY, THERE'S A LOT GOING ON DURING THE TRIAL, BUT, OF COURSE, IF YOUR HONOR IS INCLINED TO ADMIT ANY PORTIONS, WE WOULD LIKE THE OPPORTUNITY TO REVIEW FOR 106 PURPOSES.
JUDGE DAVILA: SURE. AND THIS CIRCLES BACK TO MY INITIAL QUESTION ABOUT TIMING OF WHERE WE ARE, AND YOU NEED TO TALK TO YOUR COLLEAGUES ABOUT THAT AS YOU SAID, RIGHT?
MS. VOLKAR: YOUR HONOR, WITHOUT GOING TOO FAR WITH MS. HOLMES ON THE STAND, I'M NOT ENTIRELY CLEAR WHY THE MOTION HAD TO BE HEARD TODAY, BUT I BELIEVE MY -- I'M SURE MY COLLEAGUES HAD GOOD REASON FOR IT. NOW, THE OTHER PART THAT I WANT TO MENTION IS REALLY THE CASES. AND I THINK WE HAVE PRETTY GOOD NINTH CIRCUIT -- OR INDICATION FROM THE NINTH CIRCUIT OF WHERE WE SHOULD LAND, OR WHERE THE COURT SHOULD LAND IN THIS CASE. AND ALTHOUGH MY COLLEAGUES, I RESPECT THEM FOR LOOKING FOR CASES WHERE THE COURT WAS REVERSED OR OVERTURNED, IN DOING SO, THEY OVERLOOKED OR PUSHED TO THE SIDE CASES THAT ARE MUCH MORE FACTUALLY SIMILAR TO WHAT WE HAVE HERE. AND ENDING WHERE MY COLLEAGUE BEGAN, WITH S.E.C. V. JASPER, I THINK THAT'S A RIGHT ON POINT EXAMPLE OF WHAT I MEAN. SO IN S.E.C. V. JASPER, WE HAVE ALMOST THE EXACT SAME SCENARIO AS WE DO HERE WHERE THERE WAS AN S.E.C. INVESTIGATORY PROCEEDING AND THEN THERE WAS THE S.E.C. ENFORCEMENT ACTION.
AND THIS WAS A CASE WHERE THE DEFENSE WANTED TO USE TESTIMONY GATHERED DURING THE S.E.C.'S INVESTIGATORY FUNCTION AGAINST THE S.E.C. IN THE ENFORCEMENT ACTION THAT IT HAD AT TRIAL LATER IN THE SAME CASE. SO THIS WAS, AS I SAID, AS FAR AS I COULD TELL, PRETTY MUCH ON ALL FOURS WITH WHAT WE HAVE HERE BUT FOR WE'RE NOT THE S.E.C. WE'RE APPEARING BEFORE YOUR HONOR ON BEHALF OF THE DOJ, SO WE'RE ONE STEP REMOVED. IN FACT, AS I ARGUED IN MY BRIEF, I THINK THE S.E.C. AND THE DOJ ARE NOT PROPERLY CONSIDERED TO BE THE SAME PARTY, AND THAT COULD BE A THRESHOLD ISSUE. BUT EVEN IF YOUR HONOR WANTS TO DO, AS MANY COURTS HAVE, AND SKIP THAT QUESTION, MOVING TO THE SIMILAR MOTIVE, I DON'T SEE HOW THIS CASE IS DIFFERENT AND NOT ON ALL FOURS WITH S.E.C. V. JASPER WHERE THE COURT SAID THAT THE INVESTIGATORY TESTIMONY COULD NOT BE USED AGAINST THE S.E.C. IN THE LATER ENFORCEMENT ACTION, AND WE ASK THAT THE S.E.C.
TESTIMONY NOT BE PERMITTED TO BE USED AGAINST THE DOJ IN ITS CRIMINAL ACTION WITHOUT THE BENEFIT OF CROSS-EXAMINATION. SO THAT'S 804(B)(1). AND THEN JUST TO CIRCLE BACK TO 804(B)(3), THERE IS THE GADSON CASE, AND ALTHOUGH MY COLLEAGUE IS CORRECT THAT THE CASES WITH LOVE AND RELATIONSHIPS FREQUENTLY ARE FAMILY RELATIONSHIPS, I THINK THAT THE UNDERLYING POINT THAT THE COURT IS MAKING CAN BE APPLICABLE TO A ROMANTIC RELATIONSHIP, PARTICULARLY A ROMANTIC RELATIONSHIP THAT SPANNED MORE THAN A DECADE. AND THE DEFENDANTS TALK IN THEIR TEXT MESSAGES ABOUT HOW WE'VE HAD A RELATIONSHIP FOR LONGER THAN MOST MARRIAGES SURVIVE AND ISN'T THAT REALLY WONDERFUL? AND THEY CLEARLY HAVE THIS LOVING RELATIONSHIP, AND MAYBE THERE WERE NON-LOVING PARTS OF IT, I'M NOT GETTING INTO THAT RIGHT NOW, BUT THEY DID HAVE A LOVING RELATIONSHIP TO WHERE LESS THAN A YEAR -- OR, I'M SORRY, APPROXIMATELY A YEAR BEFORE MR.
BALWANI IS GIVING THIS TESTIMONY BEFORE THE S.E.C., HE IS SAYING THAT I WANT, I WANT TO, YOU KNOW, DEVOTE MYSELF TO YOU, I WANT TO HELP YOU IN ANY WAY, SHAPE, OR FORM THAT I CAN. NOW, IF THE COURT IS NOT -- DOESN'T FEEL THAT THE RECORD IS SUFFICIENTLY DEVELOPED TO QUESTION THE TRUSTWORTHINESS OF THE STATEMENTS BASED ON LOVE, WE CAN ALSO JUST LOOK AT THE FACTS, AND THE FACTS DON'T NECESSARILY CORROBORATE WHAT I WOULD ASSUME ARE THE KEY PIECES THAT THE DEFENSE COUNSEL WANT IN. AND WHAT DO I MEAN BY THAT? THERE ARE TWO INSTANCES WHERE MR. BALWANI ACTUALLY SAYS THAT MS. HOLMES WASN'T INVOLVED, AND I BELIEVE MY COUNSEL CORRECTLY IDENTIFIED THEM. SHE WASN'T INVOLVED IN THE FINANCIAL MODELS, AND SHE WASN'T AWARE OF THE NULL PROTOCOL. THOSE ARE THE ONLY TWO TIMES THAT I COULD FIND WHERE HE DIRECTLY SAYS THAT, AND AS MY COLLEAGUE WAS TALKING ABOUT THE PAGUIO CASE, THAT'S THE CRITICAL SECOND HALF OF THE SENTENCE THAT THE COURT SAID, IT WAS ME AND NOT MY SON.
SO WHEN WE'RE JUST LOOKING AT THESE TWO INSTANCES OF PRESUMABLY BALWANI SAYING IT WAS ME AND NOT MS. HOLMES, AND THEN LET'S LOOK AT WHAT EVIDENCE THERE IS TO CORROBORATE THAT OTHER THAN THE LOVE OR LOVING RELATIONSHIP THAT MIGHT HAVE LED HIM TO SAY THAT. IF WE LOOK AT THE EVIDENCE IN THE TRIAL ON THE NULL PROTOCOL, WE HAVE DANIEL EDLIN SAYING, YEAH, I KNEW WHAT THE NULL PROTOCOL WAS, LET ME EXPLAIN IT FOR YOU, EVEN THOUGH MR. BALWANI SAID ONLY THE ENGINEERS CAN UNDERSTAND THIS CONCEPT, SO THE IMPLICATION BEING THERE'S NO WAY MS. HOLMES COULD HAVE UNDERSTOOD THIS CONCEPT.
MS. VOLKAR: AND THEN THE SECOND THING IS WE HAVE TRIAL TRANSCRIPTS IN THIS CASE THAT ARE FORWARDED FROM MR. BALWANI TO MS. HOLMES, OR FROM MR. EDLIN TO MS. HOLMES DISCUSSING WHETHER OR NOT THEY SHOULD USE THE NULL PROTOCOL DURING SPECIFIC DEMOS OR DEMONSTRATIONS.
JUDGE DAVILA: THAT WAS -- I WAS CURIOUS ABOUT THAT AND I WANTED TO ASK ABOUT THAT. I HAVEN'T PORED THROUGH THE TRANSCRIPT TO THAT POINT, BUT IT DID STICK IN MY MIND AND MY NOTES SEEM TO SUGGEST THAT DURING MR. EDLIN'S I BELIEVE TESTIMONY, HE SPOKE ABOUT THE NULL PROTOCOL AND I THINK HE SPOKE SPECIFICALLY ABOUT A VIP VISIT AND WHETHER OR NOT, I THINK IT WAS WHETHER, THEY WERE GOING TO AND HOW THEY WERE GOING TO INVOKE THE NULL PROTOCOL FOR THAT VISIT. AND I CAN'T REMEMBER EXACTLY WHETHER OR NOT THAT WENT UP THE CHAIN SUCH THAT IT WAS CONNECTED TO MS. HOLMES OR TO MR. BALWANI. PERHAPS YOU KNOW THAT ANSWER THIS MORNING. I'M HAPPY TO HEAR IF YOU DO.
MS. VOLKAR: I DO, YOUR HONOR. I CAN THINK OF TWO DOCUMENTS, AND WITH THE COURT'S INDULGENCE I CAN COME UP WITH THE TRIAL EXHIBIT NUMBERS FOR THOSE DOCUMENTS. I APOLOGIZE, I DON'T HAVE THEM RIGHT IN FRONT OF ME. BUT I'M THINKING OF TWO DOCUMENTS, BOTH FROM MR. EDLIN, AND AT LEAST IN ONE HE'S DISCUSSING THE DOCUMENT IN THE PORTION OF THE TRANSCRIPT THAT I CITED FOR THE COURT.
JUDGE DAVILA: RIGHT.
MS. VOLKAR: THE FIRST ONE IS A DISCUSSION AMONG EDLIN AND I BELIEVE SOFTWARE ENGINEERS, SO ENGINEERS AT THE COMPANY, ABOUT WHETHER TO USE THE DEMO APP OR THE NULL PROTOCOL AND WHICH DEVICE TO USE, THE 4.0 OR THE 3S, ET CETERA. AND I BELIEVE IT'S DANIEL YOUNG RESPONDS AND SAYS THAT ONE OF THE OPTIONS IS NOT AVAILABLE, AND MR. BALWANI IS ON THE CHAIN THE ENTIRE TIME, I BELIEVE, AND HE FORWARDS THAT CHAIN TO MS. HOLMES AND SAYS VERY FRUSTRATING. NOW, AS WE KNOW, UNLESS MS. HOLMES TESTIFIES TO IT, WE DON'T KNOW WHETHER SHE FULLY UNDERSTOOD THE CONTEXT OF THAT OR WHAT HAVE YOU, BUT SHE AT LEAST WAS BEING LOOPED IN BY MR. BALWANI INTO THE DISCUSSION. SIMILARLY, THERE'S A SECOND DOCUMENT WHERE MR. EDLIN, IF MY MEMORY SERVES, IS SENDING IT DIRECTLY TO MS. HOLMES AND MR. BALWANI AND TALKING ABOUT HERE ARE THE DIFFERENT OPTIONS THAT WE CAN USE, INCLUDING THE NULL PROTOCOL AND ONE OF THE DEVICES, AND I BELIEVE MS. HOLMES RESPONDS TO THE SUGGESTION OF USE THE 3.0 OR SOMETHING LIKE THAT.
NOW, AGAIN, IS THAT SHOWING THAT SHE HAS A DETAILED KNOWLEDGE OF THE NULL PROTOCOL? I'M NOT SURE. BUT, AGAIN, WHEN IT COMES TO WHETHER THERE'S CORROBORATION FOR MR. BALWANI'S TESTIMONY, MR. EDLIN DID NOT SAY ON CROSS-EXAMINATION THAT MS. HOLMES DID NOT KNOW WHAT THE NULL PROTOCOL WAS. THAT WAS AT LEAST THE INDICATION THAT I GOT FROM THE BRIEFING, AND WHEN I LOOKED AT THAT CITE, THAT'S NOT THERE. AND, IN FACT, IT'S THE OPPOSITE. MR. EDLIN TALKS ABOUT WHAT THE NULL PROTOCOL IS, EVEN THOUGH HE'S NOT AN ENGINEER, AND HE'S ON A NUMBER OF THESE DOCUMENTS THAT ARE SHARED WITH MS. HOLMES. I THINK IT'S AT LEAST A FAIR INFERENCE THAT MS. HOLMES MIGHT HAVE KNOWN WHAT THE NULL PROTOCOL WAS, AND EVEN IF WE DON'T HAVE TO GET INTO THAT REALM, THERE'S CERTAINLY NO CORROBORATION YET IN THE EVIDENCE THAT SHE DID NOT KNOW WHAT THE NULL PROTOCOL WAS, AND THIS TESTIMONY WOULD BE THE FIRST, AND AS FAR AS I'M AWARE THE ONLY, SUCH TESTIMONY OR EVIDENCE IN THE CASE TO BRING IN THAT PIECE. NOW, I WANT TO GO TO THE SECOND POINT, WHICH IS -- IF IT'S OKAY, YOUR HONOR?
JUDGE DAVILA: YES.
MS. VOLKAR: -- WHICH IS THE FINANCIAL MODELS, AND THAT'S ANOTHER INSTANCE WHERE I BELIEVE IT'S AT THE END OF EXHIBIT B IF MY MEMORY IS SERVING. IT IS. THE VERY LAST PAGE OF EXHIBIT B WHERE HE EXPLICITLY -- THE S.E.C. IS ASKING MR. BALWANI WHETHER OR NOT MS. HOLMES HAD KNOWLEDGE OF THE FINANCIAL MODELS, AND HIS LAST ANSWER IS, TO THE BEST OF MY KNOWLEDGE NO. NOW, AGAIN, I'M PUTTING THESE CATEGORIES OF STATEMENTS INTO THE PAGUIO LAND, WHICH IS THE NOT ME -- OR IT WAS ME, NOT MY SON. NOW, HERE HE SAYS, TO THE BEST OF MY KNOWLEDGE, NO, SHE DID NOT EDIT THE MODEL OR SHE WAS NOT FAMILIAR WITH THE MODEL. BUT WE ALSO HAVE IN -- WE ALSO HAVE IN EVIDENCE, I BELIEVE IT'S IN THE PART THAT WAS ADMITTED, THE TEXT MESSAGES WHERE RIGHT BEFORE THE 2013 INVESTMENTS AND THE 2013 PERIOD WHEN THEY'RE TALKING TO POTENTIAL INVESTORS, BALWANI IS -- MR. BALWANI IS IN INDIA, AND HE'S TEXTING MS.
HOLMES PRESUMABLY TO SAY I CAN'T BE THERE FOR THIS PHONE CALL OR I CAN'T BE THERE FOR THIS MEETING, AND HE SAYS, CAN YOU GET COMFORTABLE WITH THE FINANCIAL MODEL OR DO YOU WANT ME TO COVER IT WITH PRESUMABLY AN INVESTOR LATER IN TIME? AND SHE RESPONDS, I CAN GET COMFORTABLE WITH IT. NOW, ALTHOUGH THAT MAY AGAIN NOT DIRECTLY CONTRADICT WHAT IS HERE, IT'S CERTAINLY NOT CORROBORATING IT. AND I GO BACK TO IT LEAVES OPEN ROOM FOR MULTIPLE INFERENCES, AND THIS PIECE WOULD BE THE FIRST PIECE OF EVIDENCE TO BRING IN SOMETHING DIFFERENT THAT IS NOT NECESSARILY DIRECTLY CORROBORATED BY ANYTHING IN THE RECORD. AND THAT'S WHERE I GO TO IT DOES MATTER THE TRUSTWORTHINESS OF THESE STATEMENTS IF WE'RE TALKING ABOUT 804(B)(3), AND THE KEY POINTS THAT THEY WOULD WANT TO BRING IN FROM THIS TESTIMONY THAT SAYS NO, NOT MS. HOLMES, THERE'S NOT A SUFFICIENT INDICATION OF TRUSTWORTHINESS. AND A LOT OF THE OTHER STATEMENTS, IT WAS THE LAB DIRECTOR, MS. HOLMES HAD THE CLOSER RELATIONSHIP WITH STEVE BURD AND SAFEWAY, I WAS INVOLVED WITH WALGREENS, BUT WE WERE BOTH INVOLVED AT THE START, A LOT OF THOSE STATEMENTS HAVE BEEN BROUGHT IN THROUGH OTHER FACT WITNESSES AND DON'T REALLY MOVE THE BALL FORWARD AND THAT'S WHY WE MADE THE CUMULATIVE ARGUMENT. BUT I REALLY WANTED TO FOCUS THE COURT ON WHAT I THINK ARE THE KEY DECISION POINTS HERE, AND I THINK THOSE TWO ARE IT, AND I THINK THEY DON'T HAVE THE SUFFICIENT INDICIA OF TRUSTWORTHINESS FOR 804(B)(3).
JUDGE DAVILA: OKAY. THANK YOU.
MR. FLEURMONT: SURE, YOUR HONOR. A COUPLE OF POINTS. I THINK I SHOULD START WITH KIND OF EXPLAINING WHAT -- MY UNDERSTANDING OF WHAT CORROBORATION MEANS. CORROBORATION DOES NOT MEAN YOU HAVE ANOTHER WITNESS OR ANOTHER DOCUMENT THAT SAYS EXACTLY WHAT THE PERSON SAYS. CORROBORATION MEANS THAT THERE ARE EXHIBITS OR EVIDENCE THAT SUPPORT THAT WHAT THE PERSON SAID IS RELIABLE. IN THE PAGUIO CASE THERE WAS NOT -- THERE WAS CORROBORATION IN THAT CASE, BUT IT WASN'T THAT THE LOAN OFFICERS OR THE ESCROW AGENT OR THE ACCOUNTANT SAYS THIS MAN TOLD ME IT WAS ONLY HIS SCHEME. IT WAS, NO, I ONLY SAW HIM DO THIS, I NEVER SAW HIS SON. SO CORROBORATION DOES NOT MEAN THAT THERE WAS EVIDENCE OR AN EXHIBIT THAT SAYS EXACTLY WHAT THE PERSON SAYS. SO I JUST WANT TO START THERE. IN TERMS OF THE CORROBORATION THAT WE DO HAVE IN THIS CASE, FIRST MY COLLEAGUE MENTIONED THAT SHE BELIEVED THAT SOME OF THE EVIDENCE IS CUMULATIVE OF SOME OF HIS STATEMENTS. WELL, IT CANNOT BE THAT THE EVIDENCE IS CUMULATIVE OF THE STATEMENTS AND THEN THERE IS ALSO NO CORROBORATION. EITHER THE CORROBORATION IS SUPPORTED SUCH THAT THE PROVISION APPLIES OR THERE'S NOTHING IN THE RECORD THAT SUPPORTS IT.
JUDGE DAVILA: SO YOUR ARGUMENT IS THAT, WELL, IF IT'S IN, AS MS. VOLKAR SUGGESTS, THEN WHAT'S THE HARM OF BRINGING IT IN AGAIN I THINK IS THE CUMULATIVE ARGUMENT.
MR. FLEURMONT: NOT QUITE, YOUR HONOR. THE ARGUMENT IS THAT IF IT'S IN, THEN IT'S CORROBORATED, NOT THAT THERE'S NO HARM. IF IT'S IN, IT'S CORROBORATED, AND THEREFORE THE EXCEPTION APPLIES. SO THAT'S ON THE CUMULATIVE POINT. AND ON THE -- IF I CAN, I WOULD LIKE TO DISCUSS THE PORTIONS OF THE DEPOSITIONS THAT WE PUT IN.
JUDGE DAVILA: SURE.
MR. FLEURMONT: OKAY. ON THE LAB. SO I FEEL LIKE THE FRAMEWORK HAS BEEN -- I THINK THE QUESTION THAT WE'RE ALL TALKING ABOUT IS, ARE THERE STATEMENTS THAT SAID, ONE, I HAD RESPONSIBILITY FOR THIS PARTICULAR PORTION; AND, TWO, ARE THERE ALSO STATEMENTS -- WELL, THREE STATEMENTS. ONE IS A STATEMENT THAT SAYS I TOOK RESPONSIBILITY; TWO, IS THERE A STATEMENT THAT SAYS I TOOK RESPONSIBILITY AND SHE DIDN'T; AND THREE ARE THE STATEMENTS THAT SAY SOMEONE ELSE TOOK RESPONSIBILITY. WE ARGUE THAT THE FIRST TWO CATEGORIES OF STATEMENTS ARE CLEARLY ADMISSIBLE, AND WE AGREE THAT THE THIRD, SOMEONE ELSE TOOK RESPONSIBILITY, WOULD NOT. IN TERMS OF THE CLIA LAB, THE STATEMENTS THAT WE POINTED OUT ARE ALL STATEMENTS WHERE HE SAYS THESE PEOPLE REPORTED TO ME, EVEN IF THERE WAS A DECISION MADE BY THE LAB DIRECTOR. FROM A BUSINESS PERSPECTIVE, FOR A BUSINESS MODEL, I WAS THE PERSON THAT THEY HAD TO REPORT TO. SO ALTHOUGH HE MENTIONS PARTICULAR INSTANCES IN WHICH THERE WAS A LAB DIRECTOR'S DECISION, HE ULTIMATELY CLAIMS RESPONSIBILITY OVER THE LAB BY SAYING THAT THEY REPORTED TO HIM. AND I CAN POINT THE COURT TO PLACES IN THE DEPOSITION THAT WE HAVE THAT.
JUDGE DAVILA: AND SO THIS RELATES TO THE WHETHER OR NOT THE STATEMENT IS EXCULPATORY OR NOT?
MR. FLEURMONT: I THINK THAT'S WHERE MY COLLEAGUE IS GOING, WHETHER OR NOT IT'S SUFFICIENT -- NOT REALLY EXCULPATORY, BUT SUFFICIENTLY --
JUDGE DAVILA: OR INCULPATORY.
MR. FLEURMONT: -- INCULPATORY SUCH THAT THE PROVISION WOULD APPLY.
JUDGE DAVILA: RIGHT. THAT'S WHERE WE'RE LOOKING AT. THAT'S WHAT I HAVE TO SEE, RIGHT?
MR. FLEURMONT: YES, YOUR HONOR.
JUDGE DAVILA: TO DISCERN WHETHER OR NOT, DOES IT REALLY INVOKE A FIFTH AMENDMENT PRIVILEGE OR IS IT REALLY, AS MS. VOLKAR SAID, AND I MADE REFERENCE TO EARLIER, IS IT JUST FACT TESTIMONY?
MR. FLEURMONT: CORRECT, YOUR HONOR. AND I JUST WANTED TO SEPARATE TWO CONCEPTS. YOU'RE CORRECT THAT AN INCULPATORY STATEMENT WOULD INVOKE THE FIFTH AMENDMENT PRIVILEGE, BUT THAT'S A SEPARATE ANALYSIS THAT IS MET FOR THE REASONS I SAID. WHAT WE'RE TALKING ABOUT HERE ARE THE STATEMENTS BEING WOULD THEY EXPOSE HIM TO CRIMINAL OR CIVIL LIABILITY SUCH THAT THEY'RE ADMISSIBLE UNDER PROVISION 804(B)(3)? SO IF I COULD JUST POINT THE COURT TO FIRST -- IF I COULD USE THE ELMO, IT'S PROBABLY BEST. I'M NOT SURE IF IT WORKS RIGHT NOW.
JUDGE DAVILA: I DON'T KNOW EITHER.
COURT CLERK: JUST ONE MOMENT, COUNSEL.
(PAUSE IN PROCEEDINGS.)
MR. FLEURMONT: SO WHAT I HAVE IS EXHIBIT A THAT IS DOCKET 1163-2 AT PAGE 6. I'M JUST GOING TO PUT THIS ON THE ELMO.
(DISCUSSION OFF THE RECORD.)
JUDGE DAVILA: I SEE. ALL RIGHT. THANK YOU. SO I UNDERSTAND THAT THEY'RE WORKING ON OUR SYSTEM, SO THE AUDIENCE IS NOT GOING TO BE ABLE TO SEE THIS AS WELL.
MR. FLEURMONT: OKAY. CAN THE COURT SEE IT?
JUDGE DAVILA: I CAN, YES. THANK YOU. THAT'S THE MOST IMPORTANT THING YOU SAID, RIGHT?
MR. FLEURMONT: OKAY. AND SO WHAT WE'RE LOOKING AT HERE IS A QUESTION AND ANSWER RELATED TO THE FINANCIAL MODEL. AND AS I'VE MENTIONED BEFORE, WE'VE INCLUDED, WHENEVER THERE WAS AN INCULPATORY STATEMENT, THE FULL QUESTION AND ANSWER. SO THE QUESTION STARTS, WHAT WERE YOUR RESPONSIBILITIES WITH RESPECT TO THE COMPANY'S FINANCIALS WHEN YOU EARLY ON IN THAT PRESIDENT AND CEO THE ROLE? AND HE DISCUSSES HIS RESPONSIBILITIES ABOUT FINANCIAL INFORMATION, BUT THE KEY STATEMENT TOWARDS THE BOTTOM IS THAT HE HELPED -- I'M SORRY, THAT HE STARTED BUILDING A FINANCIAL MODEL WITH HELP INITIALLY. BUT THEN HE SAYS THAT, I OWNED. AND THEN THE S.E.C. ATTORNEY ASKS, BY SAYING YOU OWNED, YOU MEAN YOU WERE RESPONSIBLE FOR THE COMPANY'S FINANCIAL PROJECTIONS THAT YOU JUST DESCRIBED? AND HE SAYS, THE FINANCIAL MODEL. AND WE'VE HEARD A LOT OF TESTIMONY FROM MR. GROSSMAN AND OTHERS ABOUT THE FINANCIAL MODEL. AND SO HE WAS SAYING THAT HE OWNED THE FINANCIAL MODEL. THE OTHER STATEMENTS THAT WE PUT IN RELATE TO IF ANYONE HAD ANY INPUT IN THAT MODEL, IF ANYONE HAD ANY EDITS IN THAT MODEL, AND HE ALWAYS COMES BACK AND SAYS, YOU KNOW, IT'S MY FINANCIAL MODEL, I OWN THE MODEL. AND SO THAT'S THE REASON THAT WE PUT THAT STATEMENT IN.
JUDGE DAVILA: SO HOW DOES THAT COMPLY WITH 804(B)(3)? WHAT IS IT ABOUT THAT THAT GIVES IT THAT CHARACTERISTIC?
MR. FLEURMONT: OF AN INCULPATORY STATEMENT?
JUDGE DAVILA: RIGHT. OR ADVERSE TO HIS PENAL INTEREST?
MR. FLEURMONT: WELL, FOR A FEW REASONS, YOUR HONOR. ONE, IN THE -- SEVERAL OF THE SUBPOENAS ISSUED TO THERANOS HAD QUESTIONS ABOUT FINANCIAL, THE QUESTIONS ABOUT THE FINANCIAL MODEL. AND, YOU KNOW, IT'S A CASE ABOUT -- THE S.E.C. CASE IS ABOUT CIVIL ENFORCEMENT. THE FINANCIALS ARE OBVIOUSLY A BIG PART OF THE COMPANY. HE WAS THE CEO AND HE WAS RESPONSIBLE FOR IT. AND SOMEONE IN THAT POSITION REASONABLY WOULD NOT SAY THAT THEY OWNED THE FINANCIALS AND THE FINANCIAL MODEL WITHOUT UNDERSTANDING THEY WERE SUBJECT TO CIVIL LIABILITY. AND THAT'S BORNE OUT BY THE ALLEGATIONS BOTH IN THE COMPLAINT AND IN THIS CASE IN THE INDICTMENT.
JUDGE DAVILA: WELL, WHAT RELATIONSHIP DOES THAT HAVE, HIS ANSWER HAVE TO THIS CASE?
MR. FLEURMONT: YOUR HONOR, THE ALLEGATIONS ARE THAT THERANOS HAS MISREPRESENTED THEIR FINANCIAL NUMBERS, AND WE'VE HEARD TESTIMONY THAT THE FINANCIAL MODEL, HOW IT WAS IMPORTANT TO OTHER PEOPLE. YOU HEARD TESTIMONY ABOUT THE ASSUMPTIONS IN THE FINANCIAL MODEL AND HOW THAT DROVE THE VALUATION OF THERANOS. THAT WAS ALL CONTROLLED BY MR. BALWANI.
JUDGE DAVILA: OKAY. THAT'S ONE THING I WANT TO ASK ABOUT AND WHETHER WE NEED TO DRILL DOWN TO MODEL AS OPPOSED TO --
MR. FLEURMONT: PROJECTIONS.
JUDGE DAVILA: -- STATEMENTS AND PROJECTIONS AND THINGS. I THINK THEY'RE TWO DIFFERENT THINGS. MAYBE NOT. BUT YOU'LL HELP ME WITH THAT.
MR. FLEURMONT: SURE, YOUR HONOR. WELL, IN THE MODEL, INHERENT IN THE MODEL ARE FOUND STATEMENTS AND SOME OTHER PROJECTIONS, AND THE QUESTION OF, YOU KNOW, WHO RECEIVED THE MODEL, IF IT WAS IMPORTANT TO THEM, WHAT WAS IN THE MODEL ALL RELATES -- I THINK IT'S ONE OF THE CORE ALLEGATIONS OF THE GOVERNMENT'S CASE -- ALL RELATES TO THE MODEL AND THAT'S SOMETHING THAT MR. BALWANI SAID THAT HE DID.
JUDGE DAVILA: CAN I TURN TO YOUR COLLEAGUE OPPOSITE WHILE WE'RE ON THIS SO WE DON'T LOSE IT?
MR. FLEURMONT: SURE.
JUDGE DAVILA: MS. VOLKAR.
MS. VOLKAR: THANK YOU. I THINK THAT IS THE KEY ISSUE, THE MODEL VERSUS PROJECTIONS. AND I WOULD ACTUALLY ARGUE THAT THAT'S PART OF WHAT TAKES THIS STATEMENT THAT MY COLLEAGUE JUST POINTED US TO AND MOVES US TO THE LAND THAT GADSON WAS TALKING ABOUT, THE NINTH CIRCUIT CASE GADSON, WHERE THE PERSON IS DEFLECTING OR SHARING BLAME, AND IT'S NOT NECESSARILY A TRUE INCULPATORY STATEMENT. WHAT DO I MEAN BY THAT? HE SAYS, I OWNED THE MODEL THAT HE SAYS HE BUILT WITH SAFEWAY AND WALGREENS, SO HE'S STILL NOT TAKING FULL OWNERSHIP. HE'S SHARING BLAME FOR THIS MODEL, ASSUMING THAT THE MODEL IS SOMETHING AT ISSUE IN THE CASE, WHICH I'M GOING TO CIRCLE BACK TO IN JUST A MOMENT. AND THEN WHEN THE S.E.C. TRIES TO BRING IT BACK TO PROJECTS, HE SAYS -- HE CORRECTS THEM AND HE SAYS FINANCIAL MODEL. AND THEN THE NEXT PAGE, PAGE 7 OF EXHIBIT A THAT WE WERE JUST LOOKING AT IS TALKING ABOUT, OKAY, WELL, WHO DECIDED TO CALL IT PROJECTIONS?
BECAUSE AT THE TOP OF THE SHEET, AND WHAT WE HAVE HEARD A LOT OF TESTIMONY FROM THE INVESTOR VICTIMS ABOUT WAS SEEING A PAGE -- A DOCUMENT THAT HAD FINANCIAL PROJECTS AT THE TOP OF IT, AND THEY BELIEVED THEY WERE PROJECTIONS. AND WE'VE HEARD A LOT ON CROSS-EXAMINATION ABOUT IN THE STOCK PURCHASE AGREEMENT, YOU SEE HOW IT SAYS PROJECTIONS ARE INHERENTLY SPECULATIVE, ET CETERA. A LOT OF THE TESTIMONY IN THIS CASE HAS BEEN ABOUT PROJECTIONS, NOT ABOUT A MODEL. SO HERE IN THE KEY QUESTION, WHO LABELLED IT PROJECTIONS? MR. BALWANI NEVER SAYS, I DID. HE SAYS THAT THERE WERE A LOT OF PEOPLE THAT EDITED THIS DOCUMENT. DANISE YAM WAS IN CHARGE OF THE FINANCES; BDT EDITED IT A LOT; THEY CLEANED UP A LOT OF TYPOS. HE DOESN'T SAY HERE WHAT WOULD BE SORT OF THE CRITICAL ANSWER THAT I MADE THE, I MADE THE DECISION TO MAKE FINANCIAL PROJECTIONS AND MS. HOLMES DIDN'T HAVE ANYTHING TO DO WITH THAT.
HE'S TALKING ABOUT OWNING A FINANCIAL MODEL AND WHY HE THOUGHT THAT CERTAIN ASSUMPTIONS WERE IMPORTANT FOR THE MODEL. SO THIS IS STILL A DEFLECTING OR A SHARING OF BLAME SITUATION THAT GADSON TALKS ABOUT. AND I DO THINK THAT THE MODEL VERSUS PROJECTIONS MATTER BECAUSE A FINANCIAL MODEL -- AND THE S.E.C. PICKED UP ON THIS LOOKING FOR INVESTMENT FRAUD -- A FINANCIAL MODEL IS TALKING ABOUT, THIS IS WHAT THE BUSINESS COULD LIKE, COULD BE LIKE IF CERTAIN ASSUMPTIONS ARE MET AND YOU CAN, YOU CAN ESSENTIALLY ADD DIFFERENT THINGS INTO IT TO SAY THAT THERE ARE THIS MANY PATIENTS THAT COME INTO A LAB. MR. BALWANI TALKS ABOUT SOME OF THAT IN HIS INVESTIGATIVE TESTIMONY.
WHEREAS PROJECTIONS, AND ESPECIALLY WHEN PROJECTIONS ARE BEING PRESENTED TO INVESTORS, AND WE HEARD INVESTORS TESTIFY ABOUT THIS, THIS IS WHAT WE EXPECT THE COMPANY WILL BE ABLE TO MAKE IN TERMS OF REVENUE, AND WE'VE HEARD SEVERAL INVESTORS TALK ABOUT HOW BEING CASH FLOW POSITIVE OR CASH FLOW NEUTRAL IN THE EARLIER YEARS WAS IMPORTANT TO THEM BECAUSE IT MEANT THAT THIS COMPANY WASN'T JUST A STARTUP THAT WAS STILL STRUGGLING FOR CASH. IT WASN'T A COMPANY THAT NEEDED CAPITAL IN ORDER TO SURVIVE. THIS WAS A COMPANY THAT WAS PROJECTING REVENUES AND INCOME OF ALMOST A BILLION DOLLARS IN A YEAR FROM THEN AND PROJECTING REVENUES OF -- I'M WORRIED I'M GOING TO MESS UP THE NUMBER -- BUT SEVERAL HUNDRED MILLION DOLLARS BY THE END OF 2014 WHEN IT WAS PRESENTED TO RDV IN OCTOBER OF 2014, AND THEY THOUGHT THAT THAT MEANT THAT THE COMPANY COULD HIT THOSE PROJECTIONS. SO --
JUDGE DAVILA: WERE FINANCIAL MODELS EVER USED? IS THERE EVIDENCE THAT FINANCIAL MODELS WERE USED TO -- IN CONVERSATIONS WITH INVESTORS? WAS IT FINANCIAL MODELS THAT WERE SENT? WAS IT PROJECTIONS? WAS IT SOMETHING ELSE?
MS. VOLKAR: I WOULD SAY FOR THE LARGE PART IT WAS PROJECTIONS, AND THE EXHIBIT THAT I HAVE IN MIND WAS PROJECTIONS, THE ONE THAT TALKS ABOUT THE PROJECTED REVENUE FOR 2014, 2015. MY COLLEAGUE DID SAY BRIAN GROSSMAN DID TALK ABOUT A FINANCIAL MODEL, AND HE ACTUALLY SPECIFICALLY TALKED ABOUT HAVING A SPREADSHEET WORKING WITH MR. BALWANI, TALKING ABOUT VARIOUS ASSUMPTIONS, AND PFM BUILT THEIR OWN MODEL BASED ON INFORMATION THAT THEY GOT FROM MR. BALWANI, BUT MR. GROSSMAN HAS ALREADY TESTIFIED TO THAT. SO I GUESS THAT GOES BACK TO, WOULD THIS INFORMATION BE CORROBORATED OR CONSISTENT WITH THAT? I DON'T THINK THAT THIS TESTIMONY PER SE IS INCONSISTENT. BUT I DO GO BACK TO THE INHERENT UNTRUSTWORTHINESS NOT NECESSARILY BECAUSE OF LACK OF CORROBORATION, BUT POINTING THE FINGER AND DEFLECTING THE BLAME, AND IT'S NOT NECESSARILY MR. BALWANI SAYING IT WAS ALL ME WHO BUILT THIS. AND THAT IS STILL CONSISTENT -- YOU KNOW, MR. GROSSMAN ALSO SAID THAT THEY WORKED WITH HIM IN TERMS OF PUTTING THE MODELS TOGETHER. BUT I WANT TO NOT LOSE SIGHT OF THE FACT THAT THE PROJECTIONS IS WHAT MOST INVESTORS TALKED ABOUT AND WHAT MOST INVESTORS WERE RELYING UPON, AND HE SPECIFICALLY DISCLAIMS HAVING ANY ROLE IN LABELLING THE PROJECTIONS.
JUDGE DAVILA: MR. GROSSMAN SOUGHT FINANCIAL INFORMATION FROM MR. BALWANI AND RECEIVED THAT, AND THEN DID HIS FIRM -- HIS FIRM DID THEIR OWN FINANCIAL ANALYSIS BEFORE THEY MADE THEIR INVESTMENT DECISION.
MS. VOLKAR: THAT'S MY UNDERSTANDING OF HIS TESTIMONY, YOUR HONOR, YES.
JUDGE DAVILA: OKAY. THANK YOU. MR. FLEURMONT?
MR. FLEURMONT: SURE, YOUR HONOR. ON THE MODEL, HE'S ASKED ABOUT THE FINANCIAL MODEL, HE SAYS HE OWNS IT AT EXHIBIT B AT PAGE 5. SO THIS IS DOCKET 1163-3. HE ASKS IF ANYONE ELSE -- EXCUSE ME. HE ASKS IF ANYONE ELSE FROM THERANOS IS WORKING ON THE MODEL AND HE SAYS HE DOESN'T THINK SO. HE ASKS IF ANYONE ELSE HAD DIRECT ACCESS TO THE MODEL, HE DIDN'T THINK ANYONE MODIFIED IT. SO I THINK IT'S CLEAR FROM THE PORTIONS THAT WE POINTED OUT THAT HE WAS IN CONTROL AND HE PERSONALLY HAD ACCESS TO THE MODEL. AS I SAID BEFORE, WE INCLUDED THE FULL QUESTION AND ANSWER. IF THE COURT HAS ISSUE WITH SOME OF THE FACTS, WE CAN REVISIT SOME OF THE KIND OF BACKGROUND FACTS OR THE CONTEXT AROUND IT. BUT WE JUST WANT TO MAKE SURE THAT THE COURT HAD THE FULL CONTEXT OF THE QUESTION AND THE ANSWER.
JUDGE DAVILA: OKAY.
MS. VOLKAR: AND, YOUR HONOR, IF I MAY ON THAT POINT? SO WHEN MY COLLEAGUE SWITCHED TO EXHIBIT B IN THE LAST PAGE, THAT WAS THE ONE THAT I WAS REFERRING TO BEFORE THAT DOESN'T HAVE ANY CORROBORATION. SO I JUST WANT TO BE CLEAR ABOUT THAT. WE WERE TALKING ABOUT EXHIBIT A AND THOSE PORTIONS.
JUDGE DAVILA: RIGHT.
MS. VOLKAR: AND THE MODEL VERSUS PROJECTIONS. WHEN WE SWITCH TO PAGE 6 OF EXHIBIT B, THAT'S THE PORTION THAT I WAS SAYING DOES NOT HAVE ANY CORROBORATION. IN FACT, IN THE TEXT MESSAGES, THERE'S MR. BALWANI SHARING THE MODEL WITH MS. HOLMES. SO I JUST WANTED TO MAKE SURE THAT I WAS CLEAR ON THE RECORD.
JUDGE DAVILA: OKAY. MR. FLEURMONT?
MR. FLEURMONT: JUST ON THAT POINT, WE DIDN'T INCLUDE THIS PORTION OF THE DEPOSITION BECAUSE WE DIDN'T THINK IT FELL INTO THE REQUIREMENTS OF 804(B)(3). BUT THERE'S -- HE'S ASKED ABOUT THAT QUESTION, AND THERE'S A BACK AND FORTH, AND WHAT HE SAYS IS THAT I THOUGHT THAT I WOULD NOT BE AVAILABLE FOR THIS INTERVIEW, AND IT TURNS OUT THAT I WAS AVAILABLE FOR THE INTERVIEW. SO IT'S NOT INCLUDED BECAUSE WE DON'T THINK IT FALLS UNDER WHAT THEY MEANT HERE.
MS. VOLKAR: YOUR HONOR, JUST ONE POINT I FORGOT TO MAKE EARLIER AND I WANT TO MAKE SURE IT'S ON THE RECORD. I DO THINK THE UNAVAILABILITY IS A THRESHOLD. I'M NOT SAYING IT'S A THRESHOLD THAT THE OTHER SIDE CAN'T OVERCOME, THEY CERTAINLY CAN. BUT IF YOU LOOK AT THE CASE LAW, IT IS CLEAR THAT THERE SHOULD BE A SUBPOENA OR THE DEFENSE SHOULD CALL THE PERSON TO TESTIFY, AND THE COURT SHOULD NOT SPECULATE WHETHER OR NOT THE PERSON WOULD INVOKE THE FIFTH AMENDMENT. AND I WOULD AGAIN GO BACK TO MY FIRST EXAMPLE. I THINK THERE ARE SOME QUESTIONS WHERE IT'S AT LEAST FEASIBLE THAT MR. BALWANI WOULD NOT PLEAD THE FIFTH. FOR EXAMPLE, IF THE QUESTION WAS, IS THE LAB DIRECTOR THE PERSON RESPONSIBLE FOR ALL PATIENT TESTING IN THE CLIA LAB? HE MAY VERY WELL ANSWER YES. AND EARLIER WE HEARD, WELL, HE SAID HE'S THE BUSINESS PERSON ON TOP OF THAT. WELL, MS. HOLMES WAS THE BUSINESS PERSON WHO HE DIRECTLY REPORTED TO, SO, OF COURSE, THERE WAS A CHAIN OF COMMAND, AND I DO THINK THOSE DISTINCTIONS MATTER SO I WANTED TO RAISE THAT UNAVAILABILITY IS A THRESHOLD.
JUDGE DAVILA: I THINK THAT'S RIGHT, AND I THINK YOU AGREED WITH THAT AS WELL. AND I'M CURIOUS, THE REMEDY FOR THAT, SHOULD WE -- AS I SAID EARLIER, SHOULD WE ASK YOU TO PRESENT THE QUESTIONS THAT -- AT LEAST SOME THRESHOLD QUESTIONS SUCH THAT -- LET ME JUST THROW A HYPOTHETICAL OUT. LET'S ASSUME THAT CODEFENDANT'S COUNSEL, FOR SOME REASON, HAS AN INTEREST IN THIS CASE AND IS ATTENDING THIS CASE. IS IT POSSIBLE THAT WE COULD REACH OUT TO THE AUDIENCE AND BRING HIS COUNSEL FORWARD? IS IT APPROPRIATE TO DO THAT AND SAY, TELL US WHAT YOUR CLIENT WOULD SAY? TELL US WHAT YOUR CLIENT WOULD DO. SOMEONE MIGHT BE BENDING DOWN AND TYING THEIR SHOES RIGHT NOW IN THE AUDIENCE.
MR. FLEURMONT: YOUR HONOR, I WANT TO RESPOND TO YOUR QUESTION DIRECTLY. YOU DON'T NEED TO DO THAT IN THIS CASE BECAUSE OF THE INFORMATION THAT WE HAVE HERE. TO MY COLLEAGUE'S SUGGESTION THAT THERE WERE CERTAIN QUESTIONS THAT HE MIGHT ANSWER TO, I WOULD JUST POINT THE COURT TO HIS LATEST DEPOSITION AT EXHIBIT D, AND ON PAGE 4 THERE'S A QUESTION AND ANSWER. MR. BALWANI, YOU JOINED THERANOS IN 2009? ANSWER TO THAT QUESTION: I INSTRUCT MR. BALWANI NOT TO ANSWER THAT QUESTION BASED UPON FIFTH AMENDMENT RIGHTS. THE QUESTION IS, DID YOU EVEN JOIN AT A CERTAIN TIME PERIOD, AND THAT QUESTION WASN'T EVEN ANSWERED. AND BASED ON THAT AND BASED ON THE COURT'S FAMILIARITY WITH THE CASE, AND BASED ON THE DECLARATION THAT WE HAVE FROM MR. WADE, THAT'S ALL THE COURT NEEDS. WE'RE NOT OPPOSED TO GETTING A DECLARATION FROM MR. COOPERSMITH. WE JUST DON'T FEEL LIKE IT'S NECESSARY IN THIS CASE, BUT WE'RE NOT OPPOSED TO IT.
JUDGE DAVILA: OKAY. MS. VOLKAR, SHOULD WE HAIL MR. COOPERSMITH FORWARD AND ASK HIM SOME QUESTIONS? IS THIS THE RIGHT TIME TO DO THAT, OR SHOULD THAT BE DONE AT A DIFFERENT TIME?
MS. VOLKAR: YOUR HONOR, JUST LOOKING AT THE TIME, THE GOVERNMENT'S POSITION WOULD BE THAT WE SHOULD MOVE FORWARD WITH THE EVIDENCE. WE WANT TO BE RESPECTFUL OF THE JURY'S TIME, AND WE'RE NOT SURE IF THE JURY IS HERE, BUT WE KNOW IT'S A POSSIBILITY, AND I THINK THERE IS STILL OTHER ISSUES TO BE ARGUED FROM MS. HOLMES. THAT BEING SAID, I DO THINK IT'S APPROPRIATE. MY UNDERSTANDING IS THAT MR. COOPERSMITH OR REPRESENTATIVES FROM MR. BALWANI HAVE ATTENDED LARGE PORTIONS, IF NOT ALL, OF THIS TRIAL, AND I DO THINK IT WOULD NOT NECESSARILY BE A BIG BURDEN, IF THE DEFENSE IS ACTUALLY SERIOUS ABOUT CALLING MR. BALWANI, TO DO SO AND HAVE HIS COUNSEL REPRESENT TO THE COURT WHAT HAS BEEN REPRESENTED. AND AGAIN, I GO BACK TO NOT ANY DISBELIEF OF MR. WADE'S DECLARATION.
JUDGE DAVILA: OH, RIGHT.
MS. VOLKAR: THAT'S NOT WHERE THIS IS COMING FROM. I'M READING THE CASE LAW, AND I HAVEN'T FOUND A CASE WHERE THAT HASN'T BEEN THE PROCEEDING, WHERE IT HASN'T BEEN THE DEFENSE CALLING A WITNESS AND SUBPOENAING THE WITNESS, AND WE HAVE NEITHER OF THOSE IN THIS CASE.
JUDGE DAVILA: IT MAKES FOR A FULSOME RECORD WHERE THAT HAS ACTUALLY OCCURRED AND THAT HAS HAPPENED. AND YOUR SUGGESTION IS THAT, WELL, WE'RE GETTING CLOSE TO SUMMONING THE JURY IN. PERHAPS YOU'VE HEARD MR. COOPERSMITH ANSWER A QUESTION BEFORE, AND IT MIGHT BE -- IT MIGHT TAKE SOME TIME, BUT --
MS. VOLKAR: I'M HONESTLY NOT SURE ABOUT THAT, YOUR HONOR. I AM JUST THOUGHTFUL OF THE TIME. AND ALSO IF IT WERE, FOR EXAMPLE, THE NORMAL COURSE OF THE TRIAL, JUST ME PLAYING IT OUT IN A HYPOTHETICAL, MS. HOLMES CAN WRAP UP HER TESTIMONY AND THE DEFENSE COULD STAND UP AND SAY, THE DEFENSE WOULD LIKE TO CALL MR. BALWANI. NOW, I ALSO UNDERSTAND IF THEY WANT TO DO IT OUTSIDE OF THE PRESENCE OF THE JURY, THAT SEEMS TO BE SUPPORTED BY THE CASE LAW AS WELL. BUT MY POINT IS THAT THERE IS TIME TO MAKE THE ACTUAL RECORD AT LEAST THAT I'VE SEEN THAT IS TYPICALLY BEFORE THE NINTH CIRCUIT.
JUDGE DAVILA: OKAY. THANK YOU. AND WE STILL -- IT'S ABOUT TEN AFTER 10:00 NOW. WE PROMISED OUR JURY WE WOULD START AT 10:30. I DON'T KNOW IF -- ARE THEY HERE?
(DISCUSSION OFF THE RECORD.)
JUDGE DAVILA: RIGHT. I'M INFORMED THAT OUR JURY IS HERE NOW, SO THEY'RE READY TO GO. REGRETTABLY OUR EQUIPMENT ISN'T. SO I'D LIKE TO FINISH OUR DISCUSSION -- I DON'T WANT TO PRECLUDE ANYONE FROM PRESENTING ANYTHING THEY FEEL IS NECESSARY.
MR. FLEURMONT: SURE.
JUDGE DAVILA: BECAUSE I WANT TO TALK A LITTLE BIT ABOUT THE OTHER MOTION. I DON'T THINK, MS. VOLKAR, YOUR TEAM HAS HAD OCCASION TO FILE ANY OBJECTION TO THAT YET.
MS. VOLKAR: WE DID NOT HAVE TIME, YOUR HONOR. MY COLLEAGUE, MR. BOSTIC, WHO IS RESPONSIBLE FOR THE RELEVANT WITNESS, WILL BE ADDRESSING THAT MOTION, AND WE'RE HAPPY TO DO THAT NOW, OR IF THERE IS ANY FURTHER DISCUSSION ON THIS THAT WOULD BE HELPFUL.
JUDGE DAVILA: ALL RIGHT. WELL, LET ME GIVE -- LET ME TURN TO THE DEFENSE.
MR. FLEURMONT: JUST A COUPLE OF POINTS. I WANT TO BE RESPECTFUL OF THE JURY'S TIME. I'LL BE QUICK. FIRST, ON CALLING MR. BALWANI TO HAVE HIM INVOKE THE FIFTH AMENDMENT, THE CASE LAW MAKES CLEAR AND IT IS CLEARLY ESTABLISHED THAT THE DEFENSE IS NOT PERMITTED TO CALL A WITNESS JUST FOR THE PURPOSE OF HAVING THEM INVOKE.
JUDGE DAVILA: RIGHT, RIGHT.
MR. FLEURMONT: SO WE THINK THAT'S NOT THE APPROPRIATE COURSE OF ACTION. IF I COULD JUST -- IN TERMS OF THE STATEMENT OR THE PORTIONS THAT WE SEEK TO ADMIT DURING DEPOSITION, I CAN JUST POINT THE COURT. SO IN EXHIBIT A WE HAVE THE STATEMENT RELATED TO A LEADERSHIP ROLE OF THE CONTRACT NEGOTIATIONS WITH WALGREENS AND SAFEWAY, PARTICULAR AT PAGE 4. IN EXHIBIT A, WE HAVE STATEMENTS RELATED TO THE FINANCIAL MODEL AT PAGES 6 TO 7. EXHIBIT A, WE HAVE STATEMENTS RELATED TO THE CLIA LAB AND HOW THE LAB DIRECTORS REPORTED TO HIM, MR. BALWANI, PAGES 9 THROUGH 10. IN EXHIBIT A, WE HAVE STATEMENTS ABOUT THE NULL PROTOCOL AT PAGES 10. IN EXHIBIT B WE HAVE STATEMENTS ABOUT THE FINANCIAL MODEL THAT NO ONE ELSE EDITED, PAGES 3 TO 6. AND EXHIBIT C -- THIS IS THE LAST ONE -- THERE ARE STATEMENTS ABOUT THE CLIA LAB AND THAT HE TOOK AN ACTIVE ROLE IN THE CLIA LAB AT PAGES 3 TO 4. AND I PROVIDE THOSE EXCERPTS SO THE COURT CAN TAKE A LOOK AND SEE ABOUT THE STATEMENTS HE MAKES ABOUT A LEADERSHIP ROLE AND TAKE RESPONSIBILITY ABOUT CERTAIN OF THOSE TOPICS. AND THOSE ARE THE STATEMENTS, THOSE ARE THE STATEMENTS THAT WE'RE FOCUSSED ON. THE STATEMENTS AROUND PROVIDE CONTEXT, BUT WE'RE FOCUSSED ON THOSE STATEMENTS. WE SUBMIT THAT WE SHOULD NOT REDACT THE CONTEXT AROUND THEM BECAUSE THEY DON'T HAVE MUCH EVIDENTIARY VALUE, AND THE JURY NEEDS TO UNDERSTAND WHAT THE STATEMENTS MEAN IN CONTEXT. BUT THOSE ARE THE STATEMENTS.
JUDGE DAVILA: OKAY. GETTING BACK TO THE THRESHOLD ISSUE, THE UNAVAILABILITY, THAT'S YOUR BURDEN, RIGHT?
MR. FLEURMONT: YES, YOUR HONOR, I BELIEVE THAT'S CORRECT.
JUDGE DAVILA: IT'S YOUR BURDEN TO SHOW THAT THE WITNESS WAS UNAVAILABLE?
MR. FLEURMONT: YES.
JUDGE DAVILA: AND TO THAT EXTENT, AS WE WERE TALKING ABOUT, WHAT DO YOU DO TO FULFILL THAT BURDEN? DO YOU CALL THE WITNESS AND HAVE HE OR SHE, HE IN THIS CASE, TESTIFY? I DON'T THINK THAT'S NECESSARY AS YOU POINT OUT. I THINK MS. VOLKAR RECOGNIZES THAT. BUT I THINK WHAT MS. VOLKAR SUGGESTS AND WHAT I'M PROBING IS MAYBE WE NEED MORE THAN A DECLARATION SAYING, "I TALKED TO THE LAWYER, THE LAWYER TOLD ME HE'LL TAKE THE FIFTH." YOU'VE PROBABLY BEEN IN CASES, TOO, WHERE THE LAWYER IS CALLED FORWARD AND YOU SAY, LOOK, WE WANT TO ASK YOUR CLIENT THESE QUESTIONS, WE WANT TO ASK THESE QUESTIONS, MAYBE NOT THE SPECIFIC QUESTIONS, BUT WE'D LIKE TO ASK YOUR CLIENT QUESTIONS ABOUT A CLIA LAB, ABOUT HIS PREPARATION OF FINANCIAL MODELS. WE'D LIKE TO ASK HIM A QUESTION ABOUT WHAT HE WAS RESPONSIBLE FOR. WHEN CAN HE BE AVAILABLE?
MR. FLEURMONT: YOUR HONOR, UNDER THE NINTH CIRCUIT, WE DON'T BELIEVE THAT'S NECESSARY. BUT WE UNDERSTAND IF THAT'S THE DIRECTION THAT THE COURT WANTS US TO TAKE, WE CAN MOVE APPROPRIATELY.
JUDGE DAVILA: OKAY. ALL RIGHT. MS. VOLKAR, ANYTHING FURTHER?
MS. VOLKAR: JUST THE CATEGORY OF STATEMENTS THAT MY COLLEAGUE MENTIONED, WE THINK WE ADEQUATELY RESPOND TO THEM ON PAGES 3 TO 4 OF OUR BRIEF. AND I JUST WANT TO REITERATE ONE OF THE POINTS DRIVING THE NINTH CIRCUIT'S DECISION IN S.E.C. VERSUS JASPER, WHICH IS GIVEN THE CATEGORY OF STATEMENTS AND THE PERSON'S INVOLVEMENT IN THE CASE, IT'S UNFAIR TO PRESENT THIS TYPE OF TESTIMONY WITHOUT GIVING THE GOVERNMENT THE OPPORTUNITY TO CROSS-EXAMINE. SO I THINK ALL OF THAT IS COVERED IN MY BRIEF, BUT I WANTED TO END ON THAT POINT.
JUDGE DAVILA: OKAY. GREAT.
MR. FLEURMONT: YOUR HONOR, I'M SORRY, JUST ON THAT JASPER CASE. IN THAT CASE, THE FACTS OF THAT CASE ARE VERY IMPORTANT TO THE POINT THAT MS. VOLKAR JUST MADE. THE PERSON WAS AVAILABLE IN A PRIOR PROCEEDING AND A DEPOSITION -- THE DECLARANT WAS AVAILABLE IN A PRIOR PROCEEDING, AND THEN A DEPOSITION OCCURRED IN WHICH THE PERSON TOOK THE FIFTH, AND IT WAS THAT. SO THE PROPONENT WANTED THE INFORMATION FROM THE FIRST PROCEEDING, BUT OBVIOUSLY THE OPPONENT WAS NOT ABLE TO CROSS-EXAMINE THE PERSON. SO THAT IS A LITTLE DIFFERENT THAN WHAT WE HAVE HERE. THE PORTIONS THAT WE SEEK TO ADMIT, WE'RE DOING AN INVESTIGATION AND A DEPOSITION OF THE S.E.C. IN WHICH THEY WERE THE PEOPLE WHO ASKED THE QUESTIONS AND THEY WERE LEADING QUESTIONS AS THE COURT KNOWS. SO I DON'T WANT TO PROLONG THIS, BUT I JUST WANTED TO RESPOND.
JUDGE DAVILA: NO. THAT'S FINE. MS. VOLKAR?
MS. VOLKAR: AS WE SAID, I DON'T THINK THIS IS IN DISPUTE, BUT NO ONE ON OUR PROSECUTION TEAM WAS THERE, AND SO I THINK THAT IS WHERE IT COMES TO A POINT WHERE IT REALLY DOES MATTER THAT THE DOJ WAS NOT INVOLVED IN THE QUESTIONS THAT WERE ASKED, SO THE DOJ, AND SPECIFICALLY THE U.S. ATTORNEY'S OFFICE, DID NOT GET THE OPPORTUNITY TO ASK QUESTIONS OR FOLLOW-UP QUESTIONS, AND AS I SAID IN THE BRIEF, PARTICULARLY ABOUT THE PATIENT SIDE FOR EXAMPLE.
JUDGE DAVILA: OKAY. THANK YOU. ARE YOU HANDLING THE NEXT MOTION AS WELL?
MR. FLEURMONT: I AM, YOUR HONOR.
JUDGE DAVILA: OKAY. AND MR. BOSTIC -- THANK YOU, MS. VOLKAR.
MS. VOLKAR: THANK YOU.
JUDGE DAVILA: I THOUGHT, MR. FLEURMONT, YOU WOULD HAVE AN OPPORTUNITY IN THIS BREAK TO CHAT WITH YOUR TEAM ABOUT THE TIMING QUESTION, BUT YOU'LL HAVE AN OPPORTUNITY TO DO THAT I THINK.
MR. FLEURMONT: YES, YOUR HONOR.
JUDGE DAVILA: SO WHAT ABOUT THIS? THIS IS A RENEWED MOTION TO ADMIT SOME DOCUMENTS.
MR. FLEURMONT: THAT'S CORRECT, RENEWED MOTION TO ADMIT EXHIBIT TX 14259, A MAY 2015 EMAIL ABOUT THE TEST RESULTS OF E.T. PATIENT IN COUNT TEN. AS THE COURT RECALLS, WE ATTEMPTED TO INTRODUCE THIS DOCUMENT THROUGH OUR SUMMARY WITNESS. THE GOVERNMENT OBJECTED. THE COURT SUSTAINED THE OBJECTION. AT THE TIME WE WERE IN THE PRESENCE OF THE JURY AND WE SAID AND WE EXPLAINED THAT WE WOULD LIKE TO DRAW THE COURT'S ATTENTION TO A SIMILAR EXHIBIT THAT WAS ADMITTED AND MAKE A COMPARISON OUTSIDE OF THE PRESENCE OF THE JURY. THAT'S AT TRANSCRIPT 71 -- PAGE 7160 OF THE TRIAL TRANSCRIPT, THAT'S 7160, NOVEMBER 19TH, '21, WHERE WE EXPLAINED WE WOULD LIKE AN OPPORTUNITY TO DRAW A COMPARISON. SO WE WANTED TO PUT BOTH DOCUMENTS IN FRONT OF THE COURT AND ALLOW YOU TO REVIEW BOTH DOCUMENTS, THE SECOND ONE BEING TX 4415, AND TO EXPLAIN IN WRITING WHY WE THINK THAT THE COURT'S RULING ON TX 4415 SIMILARLY APPLIES TO TX 14259. I DON'T WANT TO TAKE TOO MUCH TIME BECAUSE I KNOW THE JURY'S TIME IS PRECIOUS.
I WOULD JUST SAY IN COMPARISON OF THE TWO EXHIBITS, IT'S CLEAR THAT THEY'RE FROM THE SAME TIMEFRAME. ONE WAS SENT WITHIN A MONTH OF THE OTHER, AND BOTH CONTAIN THE SAME DISTRIBUTION GROUP. THAT'S LAB ESCALATE. AND THEY CONTAINING OVERLAPPING RECIPIENTS, AND THAT'S MR. BALWANI AND DAN FLOREY, AND FUNDAMENTALLY, BOTH EMAILS PROVIDE CONTEXT OR AN EXPLANATION FOR THE UNDERLYING RESULTS THAT THE EMAILS DISCUSS. IN THE CASE OF EXHIBIT 4415, THAT'S THE RESULTS OF M.E., AND IN THE CASE OF TX 14259, RESULTS OF E.T. THE GOVERNMENT, WHEN WE MOVED -- WE OBJECTED WHEN THE GOVERNMENT ATTEMPTED TO ADMIT TX 4415, THAT WAS THROUGH DR. BURNES, WHO HAD NOT SEEN THE DOCUMENT AND NEVER READ IT AND DIDN'T KNOW ANYTHING ABOUT IT. THE GOVERNMENT SAID THAT PRIOR FOUNDATION HAD BEEN LAID THROUGH DR. DAS, DR. ROSENDORFF, MS. CHEUNG, AND I BELIEVE MR. EDLIN THAT WOULD ALLOW THE DOCUMENT TO COME IN. AND THE GOVERNMENT HEARD THE EXPERT AND WE REVIEWED THE TRANSCRIPTS. IN THAT TRANSCRIPT THERE ARE CERTAIN TESTIMONY ABOUT CERTAIN EMAIL GROUPS AND THERE'S TESTIMONY ABOUT CERTAIN EMAILS.
JUDGE DAVILA: THIS IS 803(6).
MR. FLEURMONT: 803(6) WAS THE PROVISION THAT THE COURT ALLOWED.
JUDGE DAVILA: RIGHT. I THINK THE COURT FOUND THERE WAS FOUNDATION FOR A BUSINESS RECORD, IF YOU WILL.
MR. FLEURMONT: CORRECT, YOUR HONOR, THROUGH THE PRIOR TESTIMONY OF THE PEOPLE THAT I JUST MENTIONED, EVEN THOUGH THE WITNESS ON THE STAND HAD NEVER SEEN THE DOCUMENT BEFORE.
JUDGE DAVILA: RIGHT.
MR. FLEURMONT: SO WE SUBMIT THE SITUATIONS ARE ANALOGOUS. WE HAVE A DOCUMENT WITH -- I'M NOT GOING TO REPEAT. I DON'T WANT TO WASTE THE COURT'S TIME.
JUDGE DAVILA: YOU'RE NOT WASTING MY TIME. THIS IS IMPORTANT.
MR. FLEURMONT: OKAY. SO THE SITUATIONS ARE ANALOGOUS. IT'S -- THE DOCUMENT IS CLOSE IN TIME ABOUT RESULTS OF SOMEONE WHO HAS AN ACCOUNT IN THIS CASE WITH THE SAME LAB GROUPS DESCRIBING SOME OF THE SAME THINGS, WHICH IS KIND OF AN EXPLANATION OF WHAT IS GOING ON. WE THINK THAT IT'S PARTICULARLY IMPORTANT IN THIS EXHIBIT. AS THE COURT KNOWS, THIS IS A VERY IMPORTANT EXHIBIT BECAUSE THE PATIENT COUNT E.T. DID NOT HAVE A DOCTOR COME IN TO EXPLAIN HER TEST RESULTS, AND THIS DOCUMENT PROVIDES SOME CONTEXT AND EXPLANATION FOR THOSE RESULTS THAT WE DO NOT HAVE IN THIS CASE BECAUSE WE WERE NOT PROVIDED AN OPPORTUNITY TO CROSS-EXAMINE THE DOCTORS PRESUMABLY, BECAUSE AS THE EMAIL SHOWS, THE DOCTOR AGREED WITH THERANOS OR UNDERSTOOD THERANOS'S PROTOCOL TO BE MORE PRECISE. SO WE'RE JUST -- WE JUST WANTED TO PUT THIS INFORMATION IN FRONT OF THE COURT AS WE SAID WE WOULD WHEN WE FIRST TRIED TO ADMIT THE EXHIBIT AND GIVE THE COURT AN OPPORTUNITY TO REVIEW BOTH EXHIBITS AND UNDERSTAND EXACTLY THE POINTS THAT WE WANTED TO MAKE.
JUDGE DAVILA: OKAY. THANK YOU. SO, MR. BOSTIC, HASN'T THE FOUNDATION BEEN LAID, AND WHAT IS THE HARM IN ALLOWING THESE TO COME IN?
MR. BOSTIC: YES, YOUR HONOR. I THINK THERE ARE SOME DIFFERENCES BETWEEN THESE TWO EXHIBITS, BOTH IN THE SUBSTANCE AND THE CONTENT OF THE EXHIBITS THEMSELVES, BUT ALSO HOW THE PARTIES INTEND TO USE THEM, AND I THINK ILLUSTRATED BY THE COMMENTS OF DEFENSE COUNSEL JUST NOW. SO FIRST, EXHIBIT 4415, WHICH WAS ADMITTED, WAS ADMITTED WITH DR. BURNES ON THE STAND. ALTHOUGH HE WAS NOT A PARTY TO THAT EMAIL, THE EMAIL INCLUDED A REFERENCE TO AND A DESCRIPTION OF A CONVERSATION THAT HE WAS A PART OF. IN CONTRAST, 14259, WHICH THE DEFENSE IS SEEKING TO ADMIT NOW, WAS DISCUSSED WITH MS. TOMPKINS ON THE STAND, BUT WAS NOT MOVED INTO EVIDENCE, AND I DON'T BELIEVE THE DEFENSE OFFERED IT INTO EVIDENCE WHEN SHE WAS ON THE STAND. 14259 DISCUSSES CONVERSATIONS WITH MS. TOMPKINS, BUT ALSO WITH DR. ASIN, WHO IS NOT A TESTIFYING WITNESS IN THIS CASE.
SO THAT'S THE DIFFERENCE THERE IN TERMS OF THE CONTENT OF THOSE EXHIBITS AND THE NEXUS BETWEEN ACTUALLY WHAT IS HAPPENING AT TRIAL AND WHETHER THERE'S A WITNESS COMPETENT TO TESTIFY ABOUT THE CONTENT OF THOSE EXHIBITS. MAYBE MORE IMPORTANTLY, THOUGH, WHEN IT COMES TO THE RELEVANCE OF THESE TWO EXHIBITS, THERE IS A DIFFERENCE, AND THAT'S THAT 4415 INCLUDES INTERNAL DISCUSSION ABOUT THE POSSIBLE REASONS FOR THE ERRONEOUS THERANOS LAB RESULT. THERE'S A DISCUSSION OF POTENTIAL HEMOLYSIS OR SAMPLE INTEGRITY ISSUES. THERE'S A DISCUSSION ABOUT A POSSIBLE MIXUP BETWEEN TWO SAMPLES. SO THAT BASIS, THE BASIS FOR THAT KIND OF CONTENT AS A BUSINESS RECORD HAD BEEN LAID PREVIOUSLY IN THE TRIAL. THE COURT HAS SEEN AND THE JURY HAS SEEN NUMEROUS EXAMPLES OF INSTANCES WHERE BAD TEST RESULTS CAME IN AND THERE WAS AN INTERNAL DISCUSSION AT THERANOS ABOUT WHAT THE POSSIBLE CAUSE OR EXPLANATION MIGHT BE. TO MY EYES, 14259 CONTAINS NONE OF THAT. IT DOESN'T SERVE THE SAME PURPOSE INTERNALLY AT THERANOS.
INSTEAD, IT SEEMS TO RELATE SOLELY TO THE SUBSTANCE OF THESE COMMUNICATIONS BETWEEN THERANOS CUSTOMER SERVICE PERSONNEL AND DR. ASIN AND ERIN TOMPKINS, THE PATIENT. THAT'S WHAT MAKES ONE USEFUL FOR THE JURY AND RELEVANT TO THIS CASE AS A BUSINESS RECORD AND THE OTHER ONE NOT. I THINK THAT'S WHY THE COURT'S DECISION ON THESE TWO EXHIBITS WAS RIGHT IN THE FIRST INSTANCE. I THINK WHEN IT COMES TO THE DESCRIPTION IN 14259 OF THERANOS'S CONVERSATION WITH DR. ASIN, I THINK THAT MAKES 14259 ESPECIALLY CONCERNING FROM A HEARSAY STANDPOINT. EVEN IF IT WERE ADMISSIBLE AS A RECORD OF A CONVERSATION WITH MS. TOMPKINS, WHO TESTIFIED, IT IS CONCERNING THAT IT ALSO INCLUDES A LINE PURPORTING TO EXPRESS A VIEW THAT DR. ASIN CONVEYED DURING A CONVERSATION THAT WAS, OF COURSE, HEARSAY, A CONVERSATION THAT WAS NOT HAD BY A TESTIFYING WITNESS, AND THE COMMENTS BY MR. FLEURMONT ILLUSTRATE THE PROBLEMS WITH THAT. I THINK THE DEFENSE WANTS TO GET THIS IN AS A SUBSTITUTE FOR DR.
ASIN TAKING THE STAND BECAUSE THEY WANT THE JURY TO KNOW HOW DR. ASIN VIEWED THESE TEST RESULTS. NOW, THERE ARE A COUPLE OF PROBLEMS WITH THAT. FIRST, THE LANGUAGE IN THE EMAIL IS ACTUALLY VAGUE ON THAT POINT. I THINK IT SAYS THAT THE DOCTOR UNDERSTOOD THEIR PROCESS AND WAS FINE WITH IT. THAT'S A SECONDHAND REPORT OF AN OUT-OF-COURT CONVERSATION. I'M NOT SURE WHAT SIGNIFICANCE THAT CARRIES OR WHAT IT ACTUALLY MEANS. EVEN IF IT WERE A RELIABLE INDICATOR OF HOW THE DOCTOR FELT ABOUT THAT TEST RESULT, WELL, THEN THAT'S A HEARSAY STATEMENT THAT'S COMING IN AS AN OPINION OF A NONTESTIFYING WITNESS WHO HASN'T BEEN QUALIFIED TO GIVE AN EXPERT OPINION ON THAT TOPIC. SO I THINK THAT LINE IN THAT EMAIL IS OF SPECIAL CONCERN, AND I THINK THE EXACT PURPOSE FOR WHICH THE DEFENSE TRIES TO ADMIT IT SHOWS WHY IT CAN'T COME IN. AND THEN THE FINAL POINT IS A MINOR ONE, WHICH IS THE 4415 ALSO INCLUDED MS. HOLMES ON THAT EMAIL, SO IT WAS ADMISSIBLE, IF FOR NOTHING ELSE, TO SHOW NOTICE TO HER. THE SAME IS NOT TRUE FOR 14259.
JUDGE DAVILA: THANK YOU. I WAS WONDERING ABOUT YOUR COMMENTS ABOUT DR. ASIN ON THIS EMAIL, AND THE THOUGHT OCCURRED TO ME, WELL, DO WE REDACT THAT? CAN WE DO THAT? IS THAT SOMETHING THAT WE CAN DO? IF IT'S ADMITTED FOUNDATIONALLY, DOES THE WHOLE THING HAVE TO COME IN OR CAN THE COURT LOOK AT IT AND SAY, BUT NOT FOR THAT PURPOSE? THAT'S A QUESTION FOR BOTH OF YOU, BUT IT'S YOUR TURN, MR. FLEURMONT.
MR. FLEURMONT: SURE, YOUR HONOR. FIRST, WE BELIEVE A FOUNDATION HAS BEEN LAID. IT'S ADMISSIBLE AS A BUSINESS RECORD. AND WE THINK THAT TYPICALLY IF THERE'S -- IF A DOCUMENT COMES IN THROUGH BUSINESS RECORDS AND THERE'S SOMETHING THAT THE COURT THINKS, UNDER 403, SHOULD NOT BE INCLUDED, THE TYPICAL PROTOCOL IS TO REDACT IT. WE DON'T THINK THAT THIS STATEMENT FALLS UNDER THAT. I CAN READ YOU THE EXACT STATEMENT, "DR. ASIN COMPLETELY UNDERSTOOD OUR TESTING PROTOCOL AND HAD NO ISSUES." THAT'S NOT AN EXPERT STATEMENT. IT'S JUST A STATEMENT OF FACT THAT THEY UNDERSTOOD WHAT THE PROTOCOL WAS. I THINK I BELIEVE HIS ISSUE IS -- ONE OF HIS ISSUES IS THAT IT'S MORE OF A SPECIALIZED EXPERT STATEMENT, AND WE DON'T THINK THAT'S THE CASE. IN TERMS OF MR. BOSTIC'S COMMENTS ABOUT NOT HAVING A TESTIFYING WITNESS, I THINK WE ALL KNOW WHY DR. ASIN WASN'T CALLED IN THIS CASE. BUT ALSO, THE EMAIL TALKS ABOUT NOT JUST WHAT DR. ASIN SAYS, BUT THE INFORMATION THAT WAS RELAYED TO E.T. MR. BOSTIC JUST EXPLAINED THAT 4415, THAT INFORMATION THAT WAS RELAYED TO DR. BURNES AND SO IN THAT CASE THERE'S ANOTHER SIMILARITY BETWEEN THE TWO DOCUMENTS.
JUDGE DAVILA: OKAY. MR. BOSTIC?
MR. BOSTIC: SO, YOUR HONOR, ON THE STATEMENT ABOUT DR. ASIN, I'M NOT SURE WHAT THE VALUE OR THE SIGNIFICANCE OF THAT STATEMENT IS IF IT'S NOT PRESENTED BY THE DEFENSE TO THE JURY IN AN EFFORT TO CONVEY THE IMPRESSION THAT THE DOCTOR WAS OKAY WITH THE THERANOS TEST RESULTS OR THAT HE SOMEHOW BLESSED THEM OR THAT HE DIDN'T VIEW THEM AS INACCURATE. AND JUST SO IT'S CLEAR FOR THE RECORD, MY UNDERSTANDING FROM CONVERSATIONS WITH DR. ASIN IS THAT HE DOES VIEW THE THERANOS RESULT AS AN INACCURATE RESULT. IT INDICATED THE PRESENCE OF HIV ANTIBODIES IN A PATIENT'S BLOODSTREAM WHERE THERE WAS NO REASON FOR THOSE ANTIBODIES TO EXIST AND WHERE A SUBSEQUENT TEST INDICATED THEY WERE NOT PRESENT. SO I DON'T BELIEVE THERE'S ANYTHING THAT WOULD BE IN DR. ASIN'S TESTIMONY THAT WOULD BE INCONSISTENT WITH WHAT HAS BEEN PRESENTED TO THE JURY. THAT ASIDE THOUGH, A HEARSAY STATEMENT IS NOT A WAY TO CORRECT THE RECORD EVEN IF THE RECORD WERE IMBALANCED AS IT STANDS TODAY.
JUDGE DAVILA: OKAY.
MR. FLEURMONT: WE'RE NOT TRYING TO CORRECT THE RECORD. WE'RE TRYING TO ADMIT A DOCUMENT THAT WE BELIEVE IS ADMISSIBLE UNDER 803(6) BECAUSE OF THE COURT'S PAST RULING. THERE'S SEVERAL PARALLELS TO THIS DOCUMENT, 4415. I'VE HEARD SOME DISTINCTIONS, BUT WE BELIEVE THOSE DISTINCTIONS DON'T MAKE A DIFFERENCE WHEN IT COMES TO THE ADMISSIBILITY OF THIS DOCUMENT.
JUDGE DAVILA: ALL RIGHT. THANK YOU. THANK YOU VERY MUCH.
MR. FLEURMONT: THANK YOU.
JUDGE DAVILA: NOW I NEED TO ASK THE DEFENSE ABOUT TIMING TO THE EXTENT THAT YOU CAN INFORM ME. SHOULD WE TAKE A BREAK AND LET ME CHECK UP AND SEE HOW WE'RE DOING ON THE MONITORS, AND THEN MAYBE I'LL COME BACK AND WE CAN HAVE ANOTHER DISCUSSION BEFORE WE BRING THE JURY IN. OKAY. WE'LL BE IN RECESS. THANK YOU.
COURT CLERK: COURT IS IN RECESS.
(RECESS FROM 10:29 A.M. UNTIL 11:11 A.M.)
JUDGE DAVILA: THANK YOU. PLEASE BE SEATED. WE'RE BACK ON THE RECORD. ALL PARTIES PREVIOUSLY PRESENT ARE PRESENT ONCE AGAIN. WE ARE OUTSIDE OF THE PRESENCE OF THE JURY. I JUST WANTED TO ASK COUNSEL ABOUT TIMING FOR TODAY. WE'LL GET STARTED HERE IN ABOUT FIVE MINUTES. MR. DOWNEY?
MR. DOWNEY: YOUR HONOR, I EXPECT THAT MS. HOLMES'S DIRECT EXAMINATION WILL CONCLUDE TODAY. I'VE SPOKEN TO MR. LEACH. OBVIOUSLY I HAVEN'T CONCLUDED THE DIRECT EXAMINATION --
JUDGE DAVILA: SURE.
MR. DOWNEY: -- BUT HE THOUGHT CROSS-EXAMINATION WAS GOING TO GO AT LEAST SUBSTANTIALLY INTO TOMORROW, AND PERHAPS CONSUME TOMORROW. SO IT LOOKS LIKE PERHAPS THERE WOULD BE EITHER REDIRECT AT THE END OF THE DAY TOMORROW, OR IF THERE'S A TAIL TO CROSS-EXAMINATION, THAT MIGHT HAPPEN ON THE FIRST DAY OF COURT NEXT WEEK, WHICH I THINK IS TUESDAY.
JUDGE DAVILA: RIGHT. ALL RIGHT. THANK YOU FOR THAT. I ASK THAT QUESTION PRIMARILY TO GET AN UNDERSTANDING OF WHEN YOU SHOULD -- WHEN YOU WANT AN ORDER, A DECISION BASED ON THIS MORNING'S MOTIONS, AND WHETHER OR NOT THAT IMPACTS YOUR CASE, I EXPECT IT DOES, AND THE PRESENTATION OF YOUR EVIDENCE.
MR. DOWNEY: YOUR HONOR, I THINK IT DOES. I THINK IDEALLY IF WE COULD BE IN A POSITION TO READ THAT, IF THE COURT WERE TO GRANT AT LEAST PART OF THE RELIEF WE'RE ASKING FOR, IF WE CAN DO IT AT THE CONCLUSION OF MS. HOLMES'S TESTIMONY, THAT MIGHT BE SOMETHING THAT WE WOULD CHOOSE TO DO. I DON'T THINK THAT REALISTICALLY WOULD BE TOMORROW. SO MONDAY OR TUESDAY OF NEXT WEEK IS WHEN I WOULD EXPECT.
JUDGE DAVILA: I SEE. CONCLUSION OF HER TESTIMONY, INCLUDING CROSS YOU MEAN?
MR. DOWNEY: INCLUDING CROSS-EXAMINATION, YES.
JUDGE DAVILA: ALL RIGHT.
MR. DOWNEY: AND ANY REDIRECT OR RECROSS?
JUDGE DAVILA: SURE. I ALSO WANTED TO ASK THE GOVERNMENT ABOUT, I WAS TALKING ABOUT -- I KNOW MS. VOLKAR IS STILL HERE, I WAS ASKING ABOUT A 106 OPPORTUNITY, I THINK MS. VOLKAR SAID SHE WOULD APPRECIATE A 106 -- OR EXCUSE ME, AN OPPORTUNITY TO REVIEW SOME TRANSCRIPTS. AND I DON'T KNOW WHAT THE GOVERNMENT'S POSITION IS ON THAT. MR. BOSTIC, IS THAT SOMETHING THAT YOU WANT TO TALK TO MS. VOLKAR ABOUT, OR IS THERE STILL A DESIRE TO REVIEW ANY RECORD FOR THAT PURPOSE?
MR. BOSTIC: YES, YOUR HONOR, I THINK THERE WOULD BE. I THINK THE GOVERNMENT'S CENTRAL POSITION IS THAT THE OFFERED MATERIAL IS NOT ADMISSIBLE, OF COURSE.
JUDGE DAVILA: SURE.
MR. BOSTIC: BUT IF THE COURT IS INCLINED TO ADMIT ANY, YES, I UNDERSTAND WE WOULD LIKE A BRIEF OPPORTUNITY TO GO THROUGH AND MAKE ANY 106 DESIGNATIONS.
JUDGE DAVILA: WELL, I THINK JUST TO PROVIDE BOTH SIDES AN OPPORTUNITY TO HAVE A FULL PRESENTATION, I WOULD BE INCLINED TO DO THAT. I JUST WANT TO FIGURE OUT THE TIMING OF THAT. AND I'M NOT SUGGESTING I'M GRANTING/DENYING, BUT I JUST WANT TO GIVE THE PARTIES AN OPPORTUNITY TO DO WHAT YOU NEED TO DO TO RESPOND TO THE COURT. SO LET'S -- LET ME TELL YOU, I'M NOT GOING TO GET AN ORDER OUT TODAY.
MR. DOWNEY: YES.
JUDGE DAVILA: BUT LET'S REVISIT THINGS TOMORROW MORNING AND SEE WHERE WE ARE, AND MAYBE THAT GIVES YOUR TEAM, MR. BOSTIC, AN OPPORTUNITY TO REVIEW AS WELL. SO LET'S TOUCH BASE TOMORROW MORNING THEN ON THIS. IS THAT ALL RIGHT?
MR. DOWNEY: THAT'S FINE.
MR. BOSTIC: UNDERSTOOD.
MR. DOWNEY: WE'LL TALK IN THE INTERIM.
JUDGE DAVILA: THAT SOUNDS GOOD. ANYTHING ELSE BEFORE WE BRING THE JURY IN?
MR. DOWNEY: NOTHING FROM US, YOUR HONOR.
JUDGE DAVILA: OKAY. ALL RIGHT. THANK YOU. LET'S BRING THEM IN.
MR. DOWNEY: YOUR HONOR, I THOUGHT WE MIGHT BREAK AROUND 1:15.
JUDGE DAVILA: THAT SOUNDS GOOD. MR. DOWNEY, ARE WE STAYING WITH VOLUME 3?
MR. DOWNEY: YOU ARE, YOUR HONOR, AND BECAUSE OF THE SMALL --
JUDGE DAVILA: YES.
(PAUSE IN PROCEEDINGS.)
(JURY IN AT 11:17 A.M.)
JUDGE DAVILA: ALL RIGHT. THANK YOU. PLEASE BE SEATED. THANK YOU. WE ARE BACK ON THE RECORD IN THE HOLMES MATTER. ALL COUNSEL AND MS. HOLMES ARE PRESENT. OUR JURY IS PRESENT. GOOD MORNING, LADIES AND GENTLEMEN. IT'S NICE TO SEE YOU ALL AGAIN. I HOPE YOU ALL HAD A GOOD HOLIDAY, ENJOYED TIME WITH FAMILY AND FRIENDS, AND THAT YOU'RE ALL HEALTHY. IT'S GOOD TO SEE YOU HERE. LET ME ASK THAT QUESTION AGAIN. DURING OUR BREAK, DURING THE BREAK IN THE PROCEEDINGS, DID ANY OF YOU HAVE CAUSE TO HAVE BROUGHT TO YOUR ATTENTION ANY MEDIA, ANY READING, DISCUSSION, OR ANY REVIEW OR KNOWLEDGE ABOUT ANYTHING TO DO WITH THIS CASE? IF SO, PLEASE RAISE YOUR HAND. I SEE NO HANDS. THANK YOU VERY MUCH FOR YOUR CONTINUED FIDELITY TO THE ADMONITION. I APPRECIATE THAT, AS DO COUNSEL HERE. WE ARE -- I THINK WE'RE GOING UNTIL 4:00 TODAY. I APOLOGIZE FOR THE LATE START. I KNOW THIS WILL SURPRISE YOU AND SHOCK YOU, BUT WE HAD SOME MECHANICAL PROBLEMS WITH YOUR SCREENS. AND I THINK THERE IS SOME TAPE DOWN THAT IS ON THE FLOOR. I'M TOLD THAT THE I.T. PEOPLE DID A BYPASS THAT WILL WORK FOR OUR PURPOSES TODAY. AFTER TODAY, THIS EVENING THEY WILL CORRECT THE PROBLEM. AGAIN, I APOLOGIZE FOR THESE CONTINUED DISRUPTIONS, BUT I THINK WE CAN GO FORWARD. MS. HOLMES, MAY I ASK YOU TO RESUME THE STAND, PLEASE.
(PAUSE IN PROCEEDINGS.)
JUDGE DAVILA: THANK YOU. MAKE YOURSELF COMFORTABLE AGAIN.
ELIZABETH A. HOLMES: THANK YOU.
JUDGE DAVILA: YOU'RE WELCOME. WHEN YOU ARE COMFORTABLE, WOULD YOU JUST STATE YOUR NAME, PLEASE.
ELIZABETH A. HOLMES: YES. MY NAME IS ELIZABETH HOLMES.
JUDGE DAVILA: THANK YOU. I'LL REMIND YOU THAT YOU ARE STILL UNDER OATH.
ELIZABETH A. HOLMES: THANK YOU.
(DEFENDANT'S WITNESS, ELIZABETH HOLMES, WAS PREVIOUSLY SWORN.)
JUDGE DAVILA: AND YOU CAN REMOVE YOUR MASK IF YOU WISH.
ELIZABETH A. HOLMES: THANK YOU.
JUDGE DAVILA: YOU'RE WELCOME. MR. DOWNEY.