Opening Statement by the Prosecution

MR. LEACH: THANK YOU, YOUR HONOR. MAY IT PLEASE THE COURT, LADIES AND GENTLEMEN OF THE JURY. THE DEFENDANT, ELIZABETH HOLMES, WAS THE FOUNDER, CEO, AND CHAIRMAN OF THERANOS INC., A SILICON VALLEY BLOOD TESTING COMPANY. THE EVIDENCE WILL SHOW THAT THE DEFENDANT AGREED WITH HER CO-CONSPIRATOR, RAMESH BALWANI, TO EXECUTE A SCHEME TO DEFRAUD THERANOS INVESTORS AND A SCHEME TO DEFRAUD THERANOS PATIENTS WHO PURCHASED THERANOS BLOOD TESTS IN ORDER TO MAKE IMPORTANT MEDICAL DECISIONS. THE DEFENDANT AND BALWANI EXECUTED THIS SCHEME THROUGH A NUMBER OF FALSE AND MISLEADING CLAIMS.

THOSE CLAIMS INCLUDE REPRESENTATIONS THAT THERANOS HAD DEVELOPED A MINIATURE BLOOD ANALYZER THAT COULD ACCURATELY AND RELIABLY DO VIRTUALLY ANY BLOOD TEST ON PATIENTS FROM A FINGERSTICK AT A LOW COST; THAT THE UNITED STATES MILITARY WAS USING THE MINIATURE BLOOD ANALYZER ON HELICOPTERS IN REMOTE AREAS OF THE WORLD; THAT MAJOR PHARMACEUTICAL COMPANIES HAD ENDORSED THE MINIATURE BLOOD ANALYZER; AND, THAT THERANOS HAD ACHIEVED AND WAS ON THE CUSP OF ACHIEVING HUNDREDS OF MILLIONS OF DOLLARS IN REVENUE. THIS IS A CASE ABOUT FRAUD, ABOUT LYING AND CHEATING TO GET MONEY. WE START IN 2009 WHEN THE DEFENDANT WAS OUT OF TIME AND OUT OF MONEY. SHE HAD DROPPED OUT OF STANFORD SIX YEARS BEFORE. AROUND THIS TIME SHE STARTED THERANOS AS A BLOOD TESTING COMPANY AND BECAME ITS CEO, IT'S CHIEF EXECUTIVE OFFICER. SHE ATTRACTED SOME INITIAL INVESTMENTS.

SHE STARTED DEVELOPING A DEVICE -- A MINIATURE BLOOD ANALYZER -- THAT SHE HOPED COULD BE USED TO TEST SMALL AMOUNTS OF BLOOD FROM A FINGER IN CLINICAL TRIALS BY PHARMACEUTICAL COMPANIES THAT WERE DEVELOPING NEW DRUGS. AND BY 2009, SHE HAD A FEW CONTRACTS WITH A FEW PHARMACEUTICAL COMPANIES THAT WERE GENERATING A SMALL AMOUNT OF REVENUE. BUT THAT WORK WITH THE PHARMACEUTICAL COMPANIES WAS DRYING UP AND IT WAS NOT GOING WELL, AND ELIZABETH HOLMES KNEW IT. ONE PHARMACEUTICAL COMPANY THE DEFENDANT WAS WORKING WITH, PFIZER, AFTER REVIEWING A REPORT THAT THERANOS HAD PREPARED, CONCLUDED THAT PFIZER HAD NO INTEREST IN THERANOS'S TECHNOLOGY AND SHOULD DEVOTE NO FURTHER RESOURCES TO THERANOS. ANOTHER PHARMACEUTICAL COMPANY CALLED SCHERING PLOUGH WAS ALSO DECLINING FURTHER WORK WITH THERANOS. THINGS WERE SO BAD IN 2009 THAT THERANOS WAS STRUGGLING TO MAKE PAYROLL.

YOU WILL HEAR AT ONE POINT THAT THE DEFENDANT AND HER TOP FINANCE OFFICER WERE ON THE PHONE WITH THE BANK TO MAKE SURE A CHECK HAD CASHED IN ORDER FOR THEM TO MAKE -- TO PAY THEIR EMPLOYEES. OUT OF TIME AND OUT OF MONEY, ELIZABETH HOLMES DECIDED TO LIE. HER FIRST LIES WERE TO WALGREENS AND SAFEWAY. WALGREENS IS THE PHARMACY CHAIN. SAFEWAY IS THE GROCERY COMPANY THAT MANY OF YOU MAY HAVE HEARD OF. YOU WILL SEE THAT IN 2010, THE DEFENDANT AND HER COCONSPIRATOR, RAMESH BALWANI, THE CHIEF OPERATING OFFICER OF THERANOS, STARTED SEEKING INVESTMENTS FROM WALGREENS AND SAFEWAY AND OTHERS. THEY DID SO WITH GRANDIOSE CLAIMS THAT THERANOS HAD REVOLUTIONIZED BLOOD TESTING WITH A DEVICE, A MINIATURE BLOOD ANALYZER, THAT COULD RUN BLOOD SAMPLES DRAWN FROM A FINGER, NOT A VEIN. THEY HOPED TO GET FROM WALGREENS AND SAFEWAY AND OTHER INVESTORS THE MONEY THAT THEY DESPERATELY NEEDED.

THEY STATED TO WALGREENS AND SAFEWAY THAT "THERANOS HAD DEVELOPED GENERATIONS OF MINILAB DEVICES THAT CAN RUN ANY BLOOD TEST IN REALTIME FOR LESS THAN THE TRADITIONAL COST OF CENTRAL LABORATORIES." THAT WAS UNTRUE. THERANOS'S MINIATURE BLOOD ANALYZERS COULD NOT RUN ANY BLOOD TESTING IN REAL TIME FOR LESS THAN THE TRADITIONAL COST OF CENTRAL LABS. THEY NEVER COULD. THE DEFENDANT PROVIDED REVENUE PROJECTIONS TO SAFEWAY THAT VASTLY OVERSTATED WHAT THERANOS WOULD ACHIEVE IN 2011 OR ANY FUTURE PERIOD, AND REINFORCED THE FALSE IMPRESSION THAT THERANOS WAS BREAKING EVEN. ALTHOUGH PFIZER AND SCHERING PLOUGH WERE SAYING NO TO THERANOS AND THE DEFENDANT, THE DEFENDANT AND BALWANI TOLD WALGREENS THAT THERANOS HAD BEEN COMPREHENSIVELY VALIDATED BY 10 OF THE TOP 15 PHARMACEUTICAL COMPANIES. AND THE DEFENDANT EVEN GAVE WALGREENS A REPORT THAT THERANOS HAD SECRETLY DRAFTED, WHICH THE DEFENDANT PASSED OFF AS THE CONCLUSIONS AND STATEMENTS OF PFIZER AND SCHERING PLOUGH AND FALSELY SUGGESTED THAT THOSE FIRMS HAD ENDORSED THERANOS'S TECHNOLOGY. HOLMES DAZZLED WALGREENS AND SAFEWAY WITH THESE AND OTHER FALSE AND MISLEADING CLAIMS. WALGREENS AND SAFEWAY COMMITTED TO INVESTING MILLIONS, AS DID OTHER INVESTORS IN 2010.

MR. LEACH: THE IDEA, AT LEAST INITIALLY, WAS TO PUT THE THERANOS DEVICE -- THE MINIATURE BLOOD ANALYZER -- I HAVE AN IMAGINE HERE ON THE SLIDE -- IN WALGREENS PHARMACIES AND SAFEWAY STORES AND TEST BLOOD DRAWN FROM THE FINGER. THE HOPE WAS THAT PATIENTS WOULD GET THEIR RESULTS IN MINUTES, AFTER THEY DID THEIR GROCERY SHOPPING OR PICKED UP THEIR PRESCRIPTION. BUT BY SEPTEMBER OF 2013, THREE YEARS LATER, THE DEFENDANT AGAIN WAS OUT OF TIME AND OUT OF MONEY. THERE WERE NO MINIATURE BLOOD ANALYZERS IN SAFEWAY. THERE WERE NO MINIATURE BLOOD ANALYZERS IN WALGREENS. THE U.S. FOOD AND DRUG ADMINISTRATION, OR THE FDA, WHICH REGULATES THE DISTRIBUTION OF MEDICAL DEVICES, WAS NOWHERE NEAR APPROVING DISTRIBUTION OF THE MINIATURE BLOOD ANALYZER. THERANOS HAD OPENED UP A LABORATORY IN PALO ALTO IN 2011.

BUT THERANOS WAS USING IN THAT LABORATORY ONLY ORDINARY FDA APPROVED BLOOD TESTS AND ORDINARY FDA APPROVED DEVICES MADE BY OTHER COMPANIES, NOT THE MINIATURE BLOOD ANALYZER IT HAD SHOWN TO WALGREENS OR SAFEWAY OR OTHER INVESTORS. IT WAS NOT USING THE DEVICE YOU SEE HERE. IT WAS NOT TESTING BLOOD FROM A FINGERSTICK ON PATIENTS. IT WAS NOT DOING ANYTHING THAT COULD NOT BE DONE IN AN ORDINARY CENTRAL BLOOD TESTING LABORATORY. INSTEAD, THERANOS WAS USING DEVICES MADE BY OTHERS LIKE THE ONE YOU SEE HERE. THIS DEVICE IS CALLED ADVIA 1800. IT IS MADE BY A COMPANY CALLED SIEMENS AG, NOT THERANOS. AND IT CAN COST HUNDREDS OF THOUSANDS OF DOLLARS. THIS IS ONE OF THE BIG BULKY LAB MACHINES, AS MS. HOLMES VIEWED THEM, TYPICALLY USED IN ORDINARY CENTRAL BLOOD TESTING LABORATORIES. NOW, YOU'RE GOING TO HEAR A LITTLE BIT ABOUT THOSE CENTRAL BLOOD TESTING LABORATORIES. SOME OF YOU I'M SURE HAVE GONE TO THEM. THE TWO MOST NOTABLE ONES ARE LAB CORP. AND QUEST DIAGNOSTICS.

THE DEFENDANT WAS CONSTANTLY COMPARING HERSELF TO THESE TWO COMPETITORS AND CLAIMING THAT THERANOS WAS USING REVOLUTIONARY TECHNOLOGY THAT ECLIPSED THE OLD, BULKY MACHINES USED BY HER COMPETITORS. IN THE SUMMER OF 2013, THE DEFENDANT'S TOP FINANCE OFFICER WAS TELLING HER AND BALWANI THAT THERANOS WAS DOWN TO ABOUT $15 MILLION IN CASH WITH A BURN RATE OR A WEEKLY SPEND OF $1- TO $2 MILLION PER WEEK. IN A MATTER OF MONTHS, THERANOS WOULD BE OUT OF MONEY. BUT EVEN WORSE, THE DEFENDANT'S SCIENTISTS WERE TELLING HER THAT THERANOS WAS NOT READY TO LAUNCH ITS PRODUCT AND SERVICES, THAT THE MINIATURE BLOOD ANALYZERS THERANOS MANUFACTURED WERE NOT WORKING AT THE LEVEL THEY NEEDED TO. THEY URGED THE DEFENDANT AND BALWANI TO DELAY THE LAUNCH OR GOING LIVE WITH PATIENTS AS WALGREENS WAS EXPECTING THEM TO DO IN SEPTEMBER OF 2013 AND HAD BEEN WAITING TO DO FOR YEARS. OUT OF TIME AND OUT OF MONEY, THE DEFENDANT DECIDED TO MISLEAD.

TO GET OUT OF THE HOLE THAT THEY HAD DUG, THE DEFENDANT AND BALWANI DID THREE THINGS: FIRST, ALTHOUGH THEY HAD PROMISED THE THERANOS DEVICE, THE MINIATURE BLOOD ANALYZER, WOULD BE USED FOR THE WALGREENS AND SAFEWAY LAUNCHES, THEY DECIDED TO HAVE THERANOS USE MACHINES MADE BY THIRD PARTIES, NOT THERANOS, TO DO THE VAST BULK OF PATIENT TESTING. IN THE SUMMER OF 2013 IN WHAT YOU WILL HEAR WAS A RUSH, A SCRAMBLE, THE DEFENDANT ORDERED HER SUBORDINATES TO MODIFY THIRD PARTY MACHINES MADE BY OTHERS SO THAT THERANOS COULD RUN BLOOD TESTS FROM TINY BLOOD SAMPLES. THIS WAS NOT THE MINILAB THAT SHE HAD PROMISED. THIS WAS NOT MINIATURIZING THE LAB AS SHE HAD PROMISED. THIS WAS A WAY TO DECEIVE WALGREENS AND SAFEWAY AND TO STALL AND TO BUY TIME.

THE SECOND THING THAT THE DEFENDANT DID WAS TO INDUCE A NEWS REPORTER NAMED JOE RAGO FROM "THE WALL STREET JOURNAL" TO WRITE A NEWS STORY ABOUT THERANOS, FALSELY SUGGESTING THERANOS HAD REVOLUTIONIZED BLOOD TESTING WITH A BLOOD ANALYZER THAT COULD DO ANY BLOOD TESTING FROM A FINGERSTICK. THE DEFENDANT WORKED CLOSELY WITH JOE RAGO AND REVIEWED AND APPROVED HIS ARTICLE BEFORE IT WAS PUBLISHED. HERE ARE SOME OF THE EXCERPTS FROM THE ARTICLE, WHICH YOU WILL SEE, AND THE EVIDENCE WILL SHOW WERE FALSE AND MISLEADING AT THE TIME. THE SECRET THAT HUNDREDS OF EMPLOYEES ARE NOW REFINING INVOLVES DEVICES THAT AUTOMATE AND MINIATURIZE MORE THAN 1,000 LABORATORY TESTS FROM ROUTINE BLOOD WORK TO ADVANCED GENETIC ANALYSES. THERANOS'S PROCESSES ARE FASTER, CHEAPER, AND MORE ACCURATE THAN CONVENTIONAL METHODS AND REQUIRE ONLY MICROSCOPIC BLOOD VOLUMES, NOT VIAL AFTER VIAL OF THE STUFF.

MR. LEACH: 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. THERANOS CAN CONDUCT A BATTERY OF TESTS FOR TENS OF DOLLARS, A PHRASE THAT DOES NOT EXIST IN U.S. HEALTH CARE. THE DEFENDANT TIMED THIS "WALL STREET JOURNAL" ARTICLE WITH A PRESS RELEASE, WHICH YOU SEE HERE, WHERE SHE ANNOUNCED THERANOS BLOOD TESTS WOULD BE AVAILABLE IN WALGREENS, AND BOLDLY ASSERTED, "WITH THE FIRST LOCATION LAUNCHING THIS MONTH IN SILICON VALLEY, CONSUMERS CAN NOW COMPLETE ANY CLINICIAN-DIRECTED LAB TEST WITH AS LITTLE AS A FEW DROPS OF BLOOD AND RESULTS AVAILABLE IN A MATTER OF HOURS." THIS, LIKE HER CLAIMS IN THE "WALL STREET JOURNAL" ARTICLE, WAS FALSE AND MISLEADING, AS THE EVIDENCE WILL SHOW. AT THE TIME OF THIS PRESS RELEASE, THERANOS WAS NOT ABLE TO DO ANY OF ITS BLOOD TESTS ON THE MINIATURE BLOOD ANALYZER IN THE PALO ALTO LAB.

THE THIRD THING THAT THE DEFENDANT DID WAS TO RAISE MONEY. WITH THE MEDIA SPLASH FROM THE RAGO ARTICLE AND THE PRESS RELEASE, THE DEFENDANT AND BALWANI STARTED TO RAISE MORE MONEY FROM INVESTORS. AND BETWEEN THE END OF 2013 AND 2015, THEY RAISED HUNDREDS OF MILLIONS OF DOLLARS BASED ON FALSE AND MISLEADING REPRESENTATIONS. SOME OF THE FALSE AND MISLEADING REPRESENTATIONS WERE MADE ORALLY, IN MEETINGS WITH INVESTORS. SOME WERE MADE IN POWERPOINTS THAT SHE OR HER DIRECT SUBORDINATES PROVIDED TO PROSPECTIVE INVESTORS. SOME WERE IN NEWS ARTICLES THAT SHE ENGINEERED AND DIRECTED TO PROSPECTIVE INVESTORS. THE FALSE AND MISLEADING REPRESENTATIONS YOU WILL HEAR ABOUT FALL INTO A COUPLE OF DIFFERENT CATEGORIES: FIRST, THE DEFENDANT DECEIVED INVESTORS ABOUT THE CAPABILITIES AND READINESS OF THE THERANOS MINIATURE BLOOD ANALYZER. THERANOS'S BLOOD ANALYZERS WENT BY MANY NAMES: EDISON, 3.5, 4.0, 4S, MINILAB, AND THERANOS SAMPLE PROCESSING UNIT, OR TSPU.

THOSE CAN BE A MOUTHFUL, SO LET ME REPEAT THEM. EDISON, 3.5, 4.0, 4S, MINILAB, OR TSPU, THERANOS SAMPLE PROCESSING UNIT. WHEN WE ARE USING THESE TERMS, THEY GENERALLY REFER TO A VERSION OF THERANOS MINIATURE BLOOD ANALYZER. THE DEFENDANT LED INVESTORS INTO BELIEVING THAT THERANOS HAD BEEN USING ITS MINIATURE BLOOD ANALYZER IN ITS CLINICAL LABORATORY FOR YEARS AND THAT ITS MINIATURE BLOOD ANALYZER COULD ACCURATELY AND RELIABLY RUN ALL OR NEARLY ALL OF THE BLOOD TESTS FROM A FINGERSTICK ON PATIENTS IN RECORD TIME AND AT LOW COST.

HERE ARE SOME OF THE CLAIMS FROM A PRESENTATION TO ONE OF THE INVESTORS: HOMES AND BALWANI EVOKED THE IMAGE OF A THERANOS SYSTEM WITH THERANOS ANALYZERS; THEY DESCRIBED CARTRIDGES ON WHICH YOU WOULD DROP THE BLOOD DRAWN FROM A FINGERSTICK AND INSERT INTO THE ANALYZER; THEY DESCRIBED MOBILE APPLICATIONS WHERE YOU WOULD GET YOUR BLOOD TESTING IN A MATTER OF HOURS; AND THEY EVOKED HIGH END, BACK END ANALYTICAL SYSTEMS THAT MIGHT BE ABLE TO PRODUCE OR PREDICT THE ONSET OF DISEASE. THE DEFENDANT AND BALWANI CLAIMED WITH THIS SYSTEM, THERANOS RUNS ANY TEST AVAILABLE IN CENTRAL LABORATORIES AND PROCESSES ALL SAMPLE TYPES. THEY CLAIMED THERANOS PROVIDES THE HIGHEST LEVEL OF OVERSIGHT, AUTOMATION, AND STANDARDIZATION IN OUR PRE- AND POST-ANALYTICAL PROCESSES, ENSURING THE HIGHEST LEVELS OF ACCURACY AND PRECISION. THEY CLAIMED THAT THERANOS PROVIDED THE HIGHEST LEVELS OF ACCURACY.

THEY CLAIMED THEY PROVIDED A NEW STANDARD IN QUALITY AND THAT THEIR ANALYZERS WERE DESIGNED TO HELP MONITOR CHRONIC DISEASE STATES, PROVIDING ACCURACY AND PRECISION OVER TIME THROUGH THE STANDARDIZATION OF THEIR SYSTEMS. IN TRUTH, YOU WILL HEAR FROM INSIDERS THAT THE THERANOS MINIATURE BLOOD ANALYZER, WHEN IT WAS ACTUALLY USED BY THERANOS, WAS PLAGUED BY ISSUES AND REPEATEDLY FAILING QUALITY CONTROL. I'LL TELL YOU A LITTLE BIT ABOUT THE SIGNIFICANCE OF QUALITY CONTROL IN A MINUTE. IN FACT, YOU WILL HEAR THAT THERANOS NEVER USED ITS MINIATURE BLOOD ANALYZER IN ITS CLINICAL LAB FOR MORE THAN 12 ASSAYS OR TESTS. ASSAYS ARE A FANCY WORD FOR A TEST, AND YOU'RE GOING TO HEAR A LOT ABOUT ASSAYS IN THIS CASE. AND BY SEPTEMBER OF 2015 WHEN THERANOS STARTED TO COME UNDER SCRUTINY BY REGULATORS AND THE MEDIA, IT WAS NOT USING ITS MINIATURE BLOOD ANALYZER IN ITS CLINICAL LAB AT ALL. THERANOS WAS USING ORDINARY THIRD PARTY MACHINES MADE BY OTHERS, NOT THERANOS, TO DO THE VAST MAJORITY OF ITS BLOOD TESTS, AND IT WAS DOING THEM BADLY.

MR. LEACH: THE SECOND CATEGORY OF MISREPRESENTATIONS THAT YOU WILL HEAR ABOUT IS THAT THE DEFENDANT MISLED INVESTORS ABOUT THERANOS'S TECHNOLOGY AND ITS USE BY THE UNITED STATES MILITARY. AROUND 2010, THERANOS HAD A SMALL, ROUGHLY $250,000, CONTRACT WITH THE U.S. ARMY BURN CENTER IN TEXAS FOR A RESEARCH STUDY IN THE UNITED STATES THAT WAS SUFFERING FROM LOW PATIENT ENROLLMENT. AFTER THAT, THE DEFENDANT WAS ALSO TRYING TO USE HER CONTACTS, INCLUDING CONTACTS ON HER BOARD, TO GET DIFFERENT BRANCHES OF THE MILITARY TO USE THE MINIATURE BLOOD ANALYZER. BUT THE DEFENDANT'S EFFORTS NEVER WENT ANYWHERE AS YOU WILL HEAR FROM A THERANOS INSIDER AND FROM OTHERS. THE DEFENDANT, HOWEVER, LED INVESTORS TO BELIEVE THAT THE MINIATURE BLOOD ANALYZER HAD BEEN DEPLOYED IN REMOTE AREAS OF THE WORLD; THAT IT WAS USED ON MILITARY HELICOPTERS, OR MEDIVACS, AND THAT IT WAS ACTUALLY SAVING THE LIVES OF SOLDIERS IN THE FIELD.

THE THIRD CATEGORY OF MISREPRESENTATION THAT YOU WILL HEAR ABOUT IS THAT THE DEFENDANT MISLED INVESTORS INTO BELIEVING THAT PHARMACEUTICAL COMPANIES ENDORSED AND APPROVED THE MINIATURE BLOOD ANALYZER. AND LET ME GIVE YOU ONE EXAMPLE OF HOW THE DEFENDANT DID THAT. AS I MENTIONED EARLY ON, THERANOS DID DO SOME WORK WITH PHARMACEUTICAL COMPANIES. ONE OF THEM WAS PFIZER. SOME OF YOU MAY HAVE HEARD OF PFIZER, AND WE'RE ALL GRATEFUL TO PFIZER FOR THE ABILITY TO BE HERE TODAY. PRIOR TO 2009, PFIZER HAD A $900,000 CONTRACT WITH THERANOS. IN OCTOBER OF 2008, THE DEFENDANT EMAILED A FINAL REPORT TO PFIZER ON ITS WORK. THE REPORT, AS YOU SEE HERE, HAD THE OLD THERANOS LOGO ON IT, AND IT SET FORTH A NUMBER OF CONCLUSIONS THAT THERANOS HAD REACHED FROM ITS WORK. HOLMES CLAIMED THE ANALYZER PERFORMED WITH SUPERIOR PERFORMANCE, SHE CLAIMED IT DEMONSTRATED GOOD CORRELATIONS, AND SHE CLAIMED THAT IT HAD ROBUST FUNCTIONALITY. PFIZER, YOU WILL LEARN, READ THIS REPORT AND WAS NOT IMPRESSED.

PFIZER CONCLUDED IT WAS UNCONVINCING AND THAT THERANOS'S DEFENSE WAS NON-INFORMATIVE AND EVASIVE. PFIZER TOLD THE DEFENDANT SHORTLY AFTER RECEIVING THE REPORT THAT IT HAD NO USE FOR THERANOS'S TECHNOLOGY. AND AFTER DOING SO, PFIZER NEVER DID BUSINESS WITH THERANOS AGAIN. BUT THE DEFENDANT GAVE AN ENTIRELY DIFFERENT AND FALSE STORY TO HER INVESTORS. IN MULTIPLE PRESENTATIONS, THE DEFENDANT TOLD INVESTORS THAT THERANOS SYSTEMS HAVE BEEN COMPREHENSIVELY VALIDATED BY 10 OF THE 15 LARGEST PHARMACEUTICAL COMPANIES. AND TO PROVE THIS, SHE PROVIDED TO INVESTORS EXEMPLARY REPORTS FROM PHARMACEUTICAL PARTNERS. ONE OF THE SO-CALLED EXEMPLARY REPORTS THAT SHE GAVE TO INVESTORS IS THE ONE THAT I'M SHOWING YOU NOW. THIS IS PURPORTEDLY FROM PFIZER. IT HAS THE PFIZER LOGO. AND THE DEFENDANT HELD THIS OUT AS DEMONSTRATING THAT PFIZER CONCLUDED THAT THE ANALYZER HAD SUPERIOR PERFORMANCE, GOOD CORRELATIONS, AND ROBUST FUNCTIONALITY. BUT AS YOU WILL HEAR, PFIZER DID NOT WRITE THIS.

PFIZER DID NOT PUT ITS LOGO ON THIS. PFIZER DID NOT GIVE ITS PERMISSION TO PUT ITS LOGO ON THIS. PFIZER DID NOT MAKE THE CONCLUSIONS IN THIS REPORT. IN FACT, IT CAME TO THE OPPOSITE CONCLUSIONS. YET, THE DEFENDANT GAVE THIS TO INVESTORS TO GIVE THE FALSE IMPRESSION THAT PFIZER ENDORSED THERANOS'S MINIATURE BLOOD ANALYZER. LET ME NOW TELL YOU ABOUT THE FOURTH CATEGORY OF MISREPRESENTATION THAT YOU WILL HEAR ABOUT. THE DEFENDANT MISLED POTENTIAL INVESTORS WITH FALSE AND MISLEADING INFORMATION ABOUT THERANOS'S FINANCIAL POSITION AND PROJECTIONS. YOU WILL HEAR FROM THERANOS'S TOP FINANCE OFFICER, WHO WILL TELL YOU THAT THERANOS HAD APPROXIMATELY $500,000 IN REVENUE IN 2011, ZERO IN 2012, ZERO IN 2013, AND ABOUT $150,000 IN 2014.

THE DEFENDANT, HOWEVER, WAS TELLING HER INVESTORS THAT THERANOS COULD PERFORM ALL OF THE BLOOD TESTS AT A FRACTION OF THE COST, AND SHE WAS TELLING THEM AS LATE AS OCTOBER OF 2014 THAT THERANOS WOULD HAVE $140 MILLION IN REVENUE, AND $40 MILLION FROM PHARMACEUTICAL COMPANIES BY THE END OF 2014. BUT THERANOS HAD LOST ANY SIGNIFICANT PHARMACEUTICAL BUSINESS, AND IT WAS NOWHERE ACHIEVING THE REVENUE PROJECTIONS THAT THE DEFENDANT WAS PEDDLING. A FIFTH CATEGORY THAT YOU WILL HEAR ABOUT IS THAT THE DEFENDANT LIED TO INVESTORS ABOUT THE STATUS OF THE WALGREENS ROLLOUT. REMEMBER, IN SEPTEMBER OF 2013, THERANOS ANNOUNCED TO THE PUBLIC THAT IT WOULD BE OFFERING BLOOD TESTS IN WALGREENS STORES. WALGREENS BELIEVED THAT THERANOS WOULD BE DRAWING BLOOD FROM A FINGERSTICK AND USING ITS MINIATURE BLOOD ANALYZER TO TEST THE BLOOD.

MR. LEACH: BUT THERANOS NEVER USED THE MINIATURE BLOOD ANALYZER FOR MORE THAN 12 TESTS. AND UNBEKNOWNST TO WALGREENS OFFICIALS, THERANOS WAS SECRETLY USING THE BIG CLUNKY THIRD PARTY MACHINES MADE BY OTHERS TO DO THE VAST MAJORITY OF ITS TESTING. AS A RESULT, WHEN PATIENTS CAME INTO WALGREENS, MANY OF THEM HAD TO GET THEIR BLOOD DRAWN FROM A VEIN, NOT BY A FINGERSTICK. WALGREENS, YOU WILL HEAR, WAS SHOCKED BY THE HIGH NUMBER OF VEIN DRAWS THAT THERANOS WAS PERFORMING, AND BY AUGUST OF 2014, WAS DOUBTING THERANOS'S ABILITY TO DO WHAT THE DEFENDANT AND BALWANI SAID THAT THEY COULD DO. WALGREENS WAS TELLING THERANOS THAT THERE WOULD BE NO FURTHER ROLLOUT BEYOND THE 40 STORES THAT HAD ALREADY BEEN OPENED UNTIL THERANOS WAS ABLE TO DO MORE TESTS VIA FINGERSTICK AS OPPOSED TO THE VEIN. DESPITE THE FACT THAT THE WALGREENS ROLLOUT WAS STALLING AND WOULD NEVER RECOVER, THE DEFENDANT WAS TELLING HER INVESTORS THAT THERANOS WOULD BE IN HUNDREDS OF WALGREENS BY THE END OF 2015.

THESE ARE SOME OF THE CATEGORIES OF MISREPRESENTATIONS THAT YOU WILL HEAR ABOUT. SOME OF THE MISREPRESENTATIONS THAT I'VE DESCRIBED WERE ALSO MADE TO A NEWS REPORTER NAMED ROGER PARLOFF OF "FORTUNE" MAGAZINE WHO WROTE AN ARGUE TITLED "THIS CEO IS OUT FOR BLOOD." THIS WAS PUBLISHED IN JUNE OF 2014 BEFORE A NUMBER OF THE INVESTMENTS THAT YOU WILL HEAR ABOUT. AFTER LENGTHY RECORDED INTERVIEWS WITH THE DEFENDANT, PARLOFF REPORTED: "IMPORTANTLY, IT'S NOT JUST THE BLOOD DRAWS THAT ARE TINY. IT'S ALSO THE ANALYTICAL SYSTEMS THAT THERANOS USES TO PERFORM THE TESTS. THEY TAKE UP A SMALL FRACTION OF THE FOOTPRINT REQUIRED BY A CONVENTIONAL LAB TODAY." THIS WAS FALSE. PARLOFF ALSO REPORTED: "THERANOS, WHICH DOES NOT BUY ANY ANALYZERS FROM THIRD PARTIES, IS THEREFORE, IN A UNIQUE POSITION." THIS WAS FALSE. THE DEFENDANT USED THE PARLOFF ARTICLE TO OBTAIN FURTHER INVESTMENTS, AND HER DECEIT OF REPORTERS WAS AN IMPORTANT WAY THAT SHE EXECUTED HER FRAUD.

THE DEFENDANT'S FALSE AND MISLEADING STATEMENTS WERE ENORMOUSLY SUCCESSFUL. BETWEEN SEPTEMBER OF 2013, WHEN THE DEFENDANT ISSUED THE FALSE AND MISLEADING PRESS RELEASE ABOUT THE WALGREENS LAUNCH, AND THE END OF 2015, HOLMES AND BALWANI RAISED HUNDREDS OF MILLIONS OF DOLLARS FROM INVESTORS. THE DEFENDANT'S FRAUDULENT SCHEME MADE HER A BILLIONAIRE. AT ONE POINT HER STOCK IN THERANOS WAS WORTH BILLIONS. THE SCHEME BROUGHT HER FAME. IT BROUGHT HER HONOR. AND IT BROUGHT HER ADORATION. SHE WAS ON THE COVER OF "FORTUNE" MAGAZINE. SHE WAS PROFILED ON NUMEROUS T.V. PROGRAMS. SHE WAS HAILED AS THE NEXT STEVE JOBS, WHOM SHE GREATLY ADMIRED. SHE WAS TOUTED AS ONE OF THE MOST POWERFUL WOMEN IN BUSINESS. AND SHE HAD BECOME, AS SHE HAD SOUGHT, ONE OF THE MOST CELEBRATED CEO'S IN SILICON VALLEY AND THE WORLD. BUT UNDER THE FACADE OF THERANOS'S SUCCESS, THERE WERE SIGNIFICANT PROBLEMS BREWING.

FIRST, INSIDERS AT THERANOS, WHO KNEW WHAT ITS MINIATURE BLOOD ANALYZER COULD DO AND COULD NOT DO, AND WHO KNEW WHAT WAS REALLY GOING ON IN THERANOS'S CLINICAL LABORATORY, WERE TROUBLED BY WHAT WAS GOING ON AND THEY STARTED TO BLOW THE WHISTLE. I ANTICIPATE THAT YOU WILL HEAR FROM DR. ADAM ROSENDORFF, WHO WAS THERANOS'S LAB DIRECTOR IN 2013 AND 2014. I EXPECT THAT YOU WILL HEAR FROM HIM THAT THE DEFENDANT WAS IGNORING HIS ADVICE ABOUT HOW TO DO WHAT IS CALLED PROFICIENCY TESTING, WHICH IS AN IMPORTANT SAFEGUARD IN RUNNING A LABORATORY PROPERLY. YOU'RE GOING TO HEAR ABOUT PROFICIENCY TESTING. IT'S ONE OF THE WAYS THAT LABORATORIES MAKE SURE THAT THE TESTS THAT THEY'RE PERFORMING MATCH THOSE OF OTHERS. IT'S LIKE TAKING A STANDARDIZED TEST TO SEE HOW YOU MEASURE UP. AND YOU WILL HEAR FROM DR. ROSENDORFF THAT THE DEFENDANT IGNORED HIS ADVICE ON HOW TO DO PROFICIENCY TESTING FOR THE MINIATURE BLOOD ANALYZER. YOU ALSO WILL HEAR FROM DR.

ROSENDORFF THAT HE WAS INCREASINGLY DEVELOPING CONCERNS ABOUT THE ACCURACY AND RELIABILITY OF THERANOS'S BLOOD TESTS, YET THE DEFENDANT DID NOTHING. YOU WILL HEAR THAT IN NOVEMBER OF 2014, HE REPORTED THAT ONE THERANOS TEST WAS SO UNRELIABLE THAT THERANOS WAS UNABLE TO TELL IF THE VALUE WAS CRITICAL, MEANING THAT YOU NEEDED TO CALL A DOCTOR RIGHT AWAY. WHEN DR. ROSENDORFF REPORTED HIS CONCERNS, THE DEFENDANT AND BALWANI TOOK STEPS TO FIRE HIM. DR. ROSENDORFF ULTIMATELY LEFT THERANOS IN LATE 2014 AND AFTERWARD BEGAN SHARING HIS CONCERNS WITH A REPORTER WHO WAS INVESTIGATING.

MR. LEACH: YOU WILL ALSO HEAR FROM ERIKA CHEUNG, WHO WORKED INSIDE OF THERANOS'S CLINICAL LABORATORY, AND OBSERVED FIRSTHAND HOW THE MINIATURE BLOOD ANALYZER WAS WORKING, OR BETTER, NOT WORKING IN THE CLINICAL LAB. SHE WILL TELL YOU THAT THE MINIATURE BLOOD ANALYZER WAS REPEATEDLY FAILING QUALITY CONTROL. YOU WILL LEARN THAT LABORATORIES RUN QUALITY CONTROL EVERY DAY, OR ON A REGULAR BASIS, TO ENSURE THAT THEIR DEVICES ARE RUNNING THE WAY THEY'RE SUPPOSED TO. IT'S LIKE CHECKING THE SPEED ON A RADAR GUN FOR A BASEBALL GAME, OR CHECKING A SCALE BEFORE YOU USE IT. SHE WILL TELL YOU THAT THE THERANOS BLOOD ANALYZER WAS FAILING REPEATEDLY. THERANOS, SHE WILL TELL YOU, TURNED A BLIND EYE WHEN SHE REPORTED HER CONCERNS. SHE TELL YOU WHAT SHE SAW WAS SO CONCERNING THAT SHE ULTIMATELY REPORTED IT TO THE CENTERS FOR MEDICARE AND MEDICAID SERVICES. AT THIS POINT I SHOULD TELL YOU A LITTLE BIT ABOUT CMS. CMS IS ANOTHER FEDERAL AGENCY. IT REGULATES LABORATORIES.

I TALKED A LITTLE BIT EARLIER ABOUT THE FDA. THEY REGULATE THE DISTRIBUTION OF MEDICAL DEVICES. THERE'S A LITTLE BIT OF OVERLAP BETWEEN THE TWO. I EXPECT THAT YOU'LL HEAR SOMETHING ABOUT THAT. BUT THE IMPORTANT POINT FOR NOW IS THIS: IN SEPTEMBER OF 2015, CMS CONDUCTED AN INSPECTION OF THERANOS'S CLINICAL LABORATORY AND SAW FIRSTHAND THE PROBLEMS THAT ERIKA CHEUNG WAS RAISING AND THAT DR. ROSENDORFF HAD BEEN RAISING TO THE DEFENDANT AND BALWANI ALL ALONG. THE WHISTLEBLOWERS WERE THE FIRST PROBLEM, BUT THERE WAS A SECOND PROBLEM, AND THAT IS THERANOS WAS PRODUCING DANGEROUSLY INACCURATE RESULTS TO PATIENTS WHO HAD BOUGHT THERANOS'S BLOOD TESTS THINKING THAT THEY WERE ACCURATE AND RELIABLE. YOU WILL HEAR FROM SOME OF THOSE PATIENTS. YOU WILL HEAR FROM A PATIENT WHO BOUGHT A THERANOS TEST BELIEVING IT TO BE ACCURATE AND RELIABLE, AND WAS WRONGLY TOLD THAT HE HAD RESULTS CONSISTENT WITH PROSTATE CANCER.

YOU WILL HEAR ABOUT WOMEN WHO RECEIVED THE WRONG INFORMATION ABOUT WHETHER THEY WERE OR WERE NOT PREGNANT. YOU WILL ALSO HEAR THAT ELIZABETH HOLMES WAS WELL AWARE OF THESE PROBLEMS. YOU WILL SEE EMAIL AFTER EMAIL WHERE ISSUES ARE BROUGHT TO HER ATTENTION. FOR EXAMPLE, WITH RESPECT TO THERANOS'S PREGNANCY TEST, YOU WILL LEARN THAT HOLMES'S OWN BROTHER, WHO HOLMES HIRED TO WORK AT THE COMPANY, TOLD HER THAT THE TESTS WERE CAUSING SERIOUS ISSUES AND PATIENT COMPLAINTS. MONTHS LATER, HOLMES WAS TOLD OF A PREGNANT WOMAN WHO WAS ADVISED TO CHANGE HER MEDICATION REGIME BASED ON A THERANOS TEST THAT FALSELY INDICATED SHE WAS NO LONGER CARRYING A BABY. THERANOS, THE EVIDENCE WILL SHOW, OFFERED THAT TEST FOR MONTHS AFTER. BY MAKING FALSE AND MISLEADING REPRESENTATIONS TO INVESTORS AND PATIENTS, ELIZABETH HOLMES BECAME A BILLIONAIRE. BUT IN OCTOBER OF 2015, THAT FACADE BEGAN TO CRUMBLE.

AROUND THAT TIME, AFTER SOME SKEPTICAL REPORTING, INVESTORS STARTED TO ASK DIFFICULT QUESTIONS OF THE DEFENDANT: HOW MANY TESTS CAN YOU REALLY RUN ON YOUR MINIATURE BLOOD ANALYZER? HOW MUCH REVENUE DO YOU REALLY HAVE? ARE YOUR TESTS AS ACCURATE AS YOU SAY THEY ARE? OUT OF OPENINGS, ELIZABETH HOLMES AGAIN DECIDED TO MISLEAD. WHEN A NATIONAL NEWS SHOW ASKED HER WHETHER THE THERANOS BLOOD ANALYZER COULD DO MORE THAN 15 TESTS, SHE FALSELY STATED THAT EVERY TEST OFFERED IN THE THERANOS LAB CAN RUN ON ITS PROPRIETARY DEVICES. WHEN QUESTIONED AT ANOTHER PUBLIC EVENT, SHE SAID THERANOS NEVER USED COMMERCIALLY AVAILABLE LAB EQUIPMENT FOR FINGERSTICK TESTS. AFTER THE CMS INSPECTION, THERANOS SHUTTERED ITS CLINICAL LABORATORY. IT WAS NEVER ABLE TO GET THE MINIATURE BLOOD ANALYZER ACCURATE ENOUGH FOR PATIENTS TO USE RELIABLY, AND IT WENT BANKRUPT, LEAVING INVESTORS WITH HUNDREDS OF MILLIONS OF DOLLARS IN LOSSES.

THE FRAUD THAT I HAVE JUST DESCRIBED GIVES RISE TO A NUMBER OF DIFFERENT CHARGES: FIRST, WIRE FRAUD. THE DEFENDANT USED INTERSTATE WIRES TO EXECUTE A SCHEME TO DEFRAUD THERANOS INVESTORS AND THERANOS PATIENTS. AND CONSPIRACY. THE DEFENDANT AND BALWANI ENTERED INTO AN AGREEMENT, A CRIMINAL PARTNERSHIP, TO COMMIT THE CRIME OF WIRE FRAUD, TO DECEIVE AND TO CHEAT INVESTORS AND PATIENTS OUT OF MONEY. IN THE NEXT FEW MINUTES, I WANT TO GIVE YOU A BRIEF OVERVIEW OF THERANOS AND THE DIFFERENT TYPES OF WITNESSES THAT YOU WILL HEAR FROM WHO WILL PROVE THAT ELIZABETH HOLMES, THE DEFENDANT, DEFRAUDED INVESTORS AND DEFRAUDED PATIENTS. LET ME START WITH THERANOS.

MR. LEACH: HOLMES FORMED THERANOS IN 2003. SHE WAS ITS FOUNDER, CHIEF EXECUTIVE OFFICER, AND CHAIRMAN OF ITS BOARD OF DIRECTORS. SHE OWNED IT. SHE CONTROLLED IT. THE BUCK STOPPED WITH HER. AND AS YOU WILL HEAR FROM INSIDERS WHO WORKED WITH HER CLOSELY, SHE WAS NOT AN ABSENTEE CEO. SHE WAS THERE ALL OF THE TIME. SHE SWEATED THE DETAILS. SHE WAS IN CHARGE. FROM 2009 UNTIL 2016, HER NUMBER 2 WAS RAMESH BALWANI. HE ALSO WENT BY THE NAME SUNNY BALWANI. HE HAD A SOFTWARE BACKGROUND, NOT A LABORATORY BACKGROUND. YOU WILL HEAR THAT IN 2009 WHEN THERANOS WAS DESPERATE FOR CASH, AS I DESCRIBED EARLIER, HE LOANED MONEY TO THERANOS SO IT COULD GET BY. HE BECAME ITS COO AND ITS PRESIDENT. AND HE RAN THE COMPANY WITH THE DEFENDANT. ELIZABETH HOLMES AND SUNNY BALWANI WERE MORE THAN BUSINESS PARTNERS. THEY WERE ALSO ROMANTIC PARTNERS. THE DEFENDANT AND BALWANI HAD BEEN ROMANTICALLY INVOLVED FOR MANY YEARS BEFORE HE OFFICIALLY JOINED THERANOS AND THEY WERE ROMANTICALLY INVOLVED AFTER.

THE DEFENDANT AND BALWANI CONTROLLED THERANOS AS EQUALS AND MADE SIGNIFICANT DECISIONS IN CONSULTATION WITH EACH OTHER AS PARTNERS DO. BUT I DON'T WANT TO LEAVE YOU WITH THE IMPRESSION THAT THERANOS WAS JUST A SHELL. IT WAS A REAL COMPANY. IT HAD MANY EMPLOYEES. IT HAD MANY SCIENTISTS AND MANY PROFESSIONALS WHO BELIEVED IN SOME OF THE LOFTY CONCEPTS AND ASPIRATIONS THAT THE DEFENDANT ARTICULATED, BUT WHO LACKED THE EXPOSURE TO THE FALSE AND MISLEADING STATEMENTS TO INVESTORS OR THE ABILITY TO QUESTION THEM. I'VE PUT ON THE SCREEN HERE SOME OF THE INSIDERS THAT YOU WILL HEAR ABOUT. THEY FALL INTO TWO GROUPS: ON THE LEFT, AS YOU WILL SEE, ARE FOLKS IN THERANOS WHOSE PRINCIPAL ROLE WAS RESEARCH AND DEVELOPMENT. SOME SCIENTISTS WERE RESPONSIBLE FOR WHAT ARE CALLED ASSAYS. ASSAYS IS A FANCY WORD FOR BLOOD TESTS. YOU CAN PERFORM AN ASSAY ON A BENCH OR A TABLE OR ON A BLOOD ANALYZER OR A DEVICE.

I HAVE HERE ON THE SCREEN TWO FOLKS WHO YOU WILL HEAR ABOUT: DANIEL YOUNG, WHO JOINED IN 2009 AND BECAME A VICE PRESIDENT; AND ANOTHER IS SUREKHA GANGAKHEDKAR, WHO MANAGED ASSAY DEVELOPMENT AND WHO RESIGNED TO ELIZABETH HOLMES JUST BEFORE THE WALGREENS LAUNCH. ON THE RIGHT OF THE SCREEN YOU HAVE WHAT IS CALLED THE CLIA LAB, OR THE CLINICAL LAB. CLIA, C-L-I-A, IS AN ACRONYM THAT YOU'RE GOING TO HEAR A LOT ABOUT. IT STANDS FOR CLINICAL LABORATORY IMPROVEMENT AMENDMENTS ACT. IT'S NOT IMPORTANT THAT YOU REMEMBER THAT. WHAT IS IMPORTANT IS THIS: IF YOU WANT TO BE IN THE BLOOD TESTING BUSINESS, IF YOU WANT TO REPORT BLOOD TESTS TO PATIENTS ON A COMMERCIAL BASIS, YOU NEED A CLIA LAB. THAT'S ESSENTIALLY HOW BLOOD TESTING SERVICES ARE BROUGHT TO THE PUBLIC FOR USE ON PATIENTS. RESEARCH AND DEVELOPMENT IS WHERE YOU ASPIRE. THE CLIA LAB IS WHERE YOU DELIVER RESULTS TO REAL PATIENTS. YOU'LL SEE ON THE SLIDE HERE THAT THERE ARE THREE PEOPLE THAT I WANT YOU TO REMEMBER FROM THERANOS'S CLIA LAB.

THESE ARE THE LAB DIRECTORS. THESE ARE THE MEDICAL DOCTORS WHO, ALONG WITH THE DEFENDANT AND BALWANI, WERE IN CHARGE OF THE RESULTS THAT WENT TO PATIENTS: FIRST ON THE LEFT, FROM 2013 TO THE END OF 2014, YOU HAVE DR. ADAM ROSENDORFF. THOSE DATES ARE IMPORTANT. REMEMBER, IN SEPTEMBER OF 2013 THERANOS FIRST ANNOUNCED ITS COMMERCIAL BLOOD TESTING SERVICES WITH WALGREENS. AND YOU WILL HEAR THAT BETWEEN SEPTEMBER OF 2013 AND JUNE OF 2015, THERANOS USED ITS MINIATURE BLOOD ANALYZER IN THE CLIA LAB FOR ONLY 12 TESTS OUT OF THE HUNDREDS THAT WERE OFFERED. YOU WILL ALSO LEARN THAT THERANOS USED THIRD PARTY MACHINES MADE BY OTHERS TO DO THE REMAINDER OF THE TESTING, SOME USING FINGERSTICK SAMPLES, AND OTHERS USING VEIN DRAWS. DR. ROSENDORFF WILL TELL YOU THAT THERANOS WAS DOING THAT TESTING BADLY. HE WILL TELL YOU ABOUT THE PROBLEMS THAT THEY WERE HAVING WITH CHOLESTEROL TESTS, ABOUT THE PROBLEMS THAT THEY WERE HAVING WITH POTASSIUM TESTS AND SODIUM TESTS. YOU WILL LEARN THAT DR.

ROSENDORFF BECAME PARTICULARLY VOCAL IN RAISING CONCERNS ABOUT PROBLEMS IN THE CLIA LAB AND HOW THERANOS WAS NOT DOING ITS TESTING THE RIGHT WAY, AND WHEN HE DID SO, THE DEFENDANT AND BALWANI TOOK STEPS TO FORCE HIM OUT. WITH DR. ROSENDORFF GONE, WITH ALL OF THE ISSUES THAT HE SPOTTED, WITH ONLY 12 TESTS BEING DONE ON THE MINIATURE BLOOD ANALYZER, THE DEFENDANT AND BALWANI CHOSE TO HIRE BALWANI'S DERMATOLOGIST TO RUN THIS REVOLUTIONARY CLIA LAB. HIS NAME IS DR. SUNIL DHAWAN. HE WAS MR. BALWANI'S DERMATOLOGIST. A DERMATOLOGIST SPECIALIZES IN SKIN CONDITIONS.

MR. LEACH: THE DEFENDANT AND BALWANI PUT HIM IN CHARGE OF ASSESSING WHETHER WOMEN ARE PREGNANT, WHETHER PATIENTS HAD CANCER OR WHETHER THEY HAD OTHER DISEASES. DR. DHAWAN HAD NEVER RUN A LAB OUTSIDE OF HIS DERMATOLOGY PRACTICE. HE HAD NEVER SEEN OR USED A MINIATURE BLOOD ANALYZER. HE HAD NEVER SEEN OR USED THE FINGERSTICK TEST THAT THERANOS WAS DOING. AND HE PERFORMED NO MEANINGFUL WORK IN THE CLIA LAB UNTIL SEPTEMBER OF 2015 WHEN CMS INSPECTORS STARTING ASKING HARD QUESTIONS ABOUT WHAT WAS GOING ON IN THE LAB. TO DR. DHAWAN'S RIGHT YOU HAVE DR. KINGSHUK DAS. AFTER INVESTORS STARTED ASKING QUESTIONS AND AFTER THE CMS INSPECTION, THE DEFENDANT HIRED DR. DAS TO RUN THE LAB. AND HE WILL TELL, I EXPECT, ABOUT WHAT HE SAW OF THE MINIATURE BLOOD ANALYZER AND WHAT HE TOLD THE DEFENDANT. THESE ARE SOME OF THE INSIDERS WITHIN THE COMPANY THAT YOU WILL HEAR FROM AND ABOUT IN THIS TRIAL. IN ADDITION TO HEARING FROM INSIDERS, YOU WILL ALSO HEAR FROM SOME OF THE OUTSIDERS.

I EXPECT YOU WILL HEAR FROM PFIZER, FROM SCHERING PLOUGH, FROM WALGREENS, FROM INDIVIDUALS WITH KNOWLEDGE OF THE MILITARY'S USE OF THE MINIATURE BLOOD ANALYZER. THESE FOLKS WILL TELL YOU EXACTLY WHAT THEY WERE DOING AT THERANOS, AND YOU WILL BE ABLE TO MEASURE UP THOSE FACTS WITH WHAT THE DEFENDANT TOLD INVESTORS. A THIRD CATEGORY THAT YOU WILL HEAR FROM AND ABOUT ARE THE INVESTORS THEMSELVES. THESE INCLUDE, I EXPECT, LISA PETERSON, WHO HELPED MAKE INVESTMENT FOR A FIRM CALLED RDV. THESE INCLUDE, I EXPECT, BRIAN GROSSMAN WHO RAN AN INVESTMENT FUND WHICH WE CALL PFM. THEY AND OTHER INVESTORS WILL TELL YOU WHAT THE DEFENDANT SAID REPEATEDLY TO MAKE THEM BELIEVE AND TO INVEST THEIR MONEY. FINALLY, YOU WILL HEAR FROM PATIENTS AND FROM DOCTORS FOR PATIENTS WHO PAID FOR OR RECEIVED FAULTY THERANOS BLOOD TESTS WHEN THEY NEEDED THE RIGHT RESULTS TO MAKE THE RIGHT MEDICAL DECISIONS.

OVER THE NEXT FEW WEEKS YOU'RE GOING TO HEAR A LOT ABOUT ASSAYS, ABOUT QUALITY CONTROL, ABOUT THE FDA AND CMS AND THE DIFFERENCE. BUT THIS IS A CASE ABOUT FRAUD, ABOUT LYING AND CHEATING TO GET MONEY. IT'S A CRIME ON MAIN STREET, AND THAT'S A CRIME IN SILICON VALLEY. THE EVIDENCE WILL SHOW THAT THE DEFENDANT TOLD HER INVESTORS THAT SHE HAD DEVELOPED A MINIATURE BLOOD ANALYZER THAT COULD VIRTUALLY DO ANY TEST. IT COULD NOT. IT NEVER DID MORE THAN 12 TESTS IN THE CLINICAL LABORATORY, AND IT DID THEM BADLY. THE EVIDENCE WILL SHOW THAT THE DEFENDANT TOLD HER INVESTORS THE MILITARY WAS USING THE DEVICE IN THE FIELD. IT WAS NOT. THE EVIDENCE WILL SHOW THAT THE DEFENDANT TOLD THE INVESTORS, PFIZER AND SCHERING PLOUGH AND OTHER PHARMACEUTICAL COMPANIES, HAD COMPREHENSIVELY VALIDATED HER TECHNOLOGY. THEY HAD NOT. THE EVIDENCE WILL SHOW THAT THE DEFENDANT GAVE INVESTORS FINANCIAL PROJECTIONS PURPORTEDLY REPRESENTING THE TRUE PROSPECT OF THE COMPANY. THEY DID NOT.

THE EVIDENCE WILL SHOW THAT THE DEFENDANT INDUCED WALGREENS OR INDUCED INVESTMENTS ON THE PROMISE OF A WALGREENS ROLLOUT. IT WAS A SPECTACULAR SUCCESS. IT WAS NOT. FINALLY, THE EVIDENCE WILL SHOW THAT THE DEFENDANT TOLD PATIENTS HER TESTS WERE ACCURATE AND RELIABLE. THEY WERE NOT. AND IN THE COURSE OF DOING SO, SHE SKEWED THE MEDICAL DECISIONS OF PATIENTS AND PUT THEM AT RISK. THANK YOU VERY MUCH FOR YOUR ATTENTION, LADIES AND GENTLEMEN. AT THE END OF THE CASE THE GOVERNMENT WILL HAVE ANOTHER OPPORTUNITY TO SPEAK WITH YOU. UNTIL THEN, LISTEN CAREFULLY TO THE EVIDENCE, FOLLOW THE EVIDENCE CLOSELY. WE TRY TO PRESENT FACTS IN A COHERENT ORDER, BUT THAT'S NOT ALWAYS POSSIBLE, SO WITNESSES WITHIN THOSE BUCKETS MIGHT COME AT DIFFERENT TIMES. BUT PLEASE PAY CLOSE ATTENTION, AND AT THE END OF THE CASE THE GOVERNMENT WILL STAND UP HERE AGAIN AND URGE YOU TO RETURN THE ONLY VERDICT THAT IS SUPPORTED BY THE EVIDENCE, AND THAT IS THAT THE DEFENDANT IS GUILTY OF CONSPIRACY AND WIRE FRAUD AS CHARGED IN THE INDICTMENT. THANK YOU. THANK YOU, YOUR HONOR.