Closing Argument by the Defense

MR. DOWNEY: MAY IT PLEASE THE COURT, LADIES AND GENTLEMEN. ELIZABETH HOLMES WAS BUILDING A BUSINESS AND NOT A CRIMINAL ENTERPRISE. THE GOVERNMENT WOULD HAVE YOU BELIEVE THAT THE ENTITY THAT SHE PRESIDED OVER AS CEO WAS BUILT BY LIES, BY SWINDLING, BY HALF-TRUTHS, BY MISREPRESENTATIONS THAT WERE CARRIED OUT OVER YEARS AND YEARS AND YEARS. IN FACT, THERANOS WAS BUILT AND ITS BUSINESS WAS CONDUCTED BY A LARGE GROUP OF PEOPLE WHO SHARED MANY CHARACTERISTICS. THEY WERE BRIGHT, THEY WERE INTELLIGENT, THEY WERE CREATIVE. THEY BELIEVED IN THE MISSION THAT THERANOS BELIEVED IN. THEY WANTED TO INVENT AND THEN TO MAKE A PRODUCT OF TECHNOLOGY THAT COULD BE USED TO MAKE BLOOD TESTING SERVICES MORE CONVENIENT, MORE AFFORDABLE, CHEAPER, AND AT THE END OF THE DAY, MAKE PEOPLE HEALTHIER. NOW, I RECALL AT THE BEGINNING OF THE CASE, AS MR. SCHENK DID, THAT MR.

WADE TOLD YOU TO UNDERSTAND THE CASE YOU HAD TO UNDERSTAND THE PERSPECTIVE THAT THERE ARE TWO SIDES AND THAT THE GOVERNMENT MIGHT BE LOOKING AT EVENTS THROUGH A DIRTY LENS, AND HE ASKED YOU TO BE PATIENT AND LISTEN UNTIL ALL OF THE EVIDENCE CAME IN BECAUSE YOU MIGHT HAVE A DIFFERENT VIEW. MR. SCHENK JUST SAID TO YOU THAT WE CAN'T MEET THAT CHALLENGE BECAUSE THIS IS NOT THAT KIND OF CASE. I ACCEPT THAT CHALLENGE, LADIES AND GENTLEMEN, BECAUSE I THINK WHEN I GO THROUGH ALL OF THE EVIDENCE WITH YOU AND ASK YOU TO REVIEW THE EVIDENCE AS PART OF YOUR DELIBERATIONS, I THINK YOU WILL SEE THAT THE FULL PICTURE REVEALS SOMETHING VERY DIFFERENT FROM WHAT THE GOVERNMENT HAS BEEN PRESENTING TO YOU FOR THREE MONTHS AND, INDEED, FOR THE LAST THREE HOURS. LET ME BEGIN BY TAKING ONE EXAMPLE, AND THIS IS ONLY ONE EXAMPLE OF THE EVIDENCE THAT THE GOVERNMENT PRESENTED TO YOU, MR.

SCHENK DISCUSSED JUST NOW, AND THIS IS THE ISSUE THAT HAS BEEN DISCUSSED THROUGHOUT THE CASE OF THERANOS'S PARTNERSHIP WITH PHARMACEUTICAL COMPANIES. YOU'LL RECALL THAT THERANOS HAD PARTNERSHIPS WITH COMPANIES THAT ARE HOUSEHOLD NAMES NOW, PFIZER AND OTHERS, AND THAT HAS BEEN DISCUSSED THROUGHOUT THE CASE. BUT WHAT IS THERANOS CHARGED WITH -- WHAT IS MS. HOLMES CHARGED WITH IN CONNECTION WITH PHARMACEUTICAL COMPANIES? WELL, SHE'S NOT CHARGED WITH DEFRAUDING THEM. SHE'S NOT CHARGED WITH DOING ANYTHING WITH PATIENTS IN CONNECTION WITH CLINICAL TRIALS THAT IS UNTOWARD. WHAT MS. HOLMES IS CHARGED WITH IS, SHE'S CHARGED WITH MAKING FALSE REPRESENTATIONS TO SUBSEQUENT INVESTORS ABOUT WHETHER THERANOS HAD PARTNERSHIPS WITH PHARMACEUTICAL COMPANIES AND WHETHER THOSE PHARMACEUTICAL COMPANIES DURING THE COURSE OF THAT PARTNERSHIP EXAMINED, USED, AND VALIDATED THERANOS'S TECHNOLOGY. NOW, WHERE DOES THAT THEORY COME FROM? WELL, MR.

SCHENK JUST SHOWED IT TO YOU DURING THE COURSE OF HIS OPENING TO YOU, AND I'LL SHOW IT TO YOU AGAIN. THIS IS A SLIDE THAT WAS SHOWN AS PART OF A PRESENTATION TO WALGREENS IN MARCH OF 2010, AND THE GOVERNMENT'S THEORY AS JUST EXPRESSED BY MR. SCHENK AND THROUGHOUT THE CASE IS THAT THIS IS THE POINT AT WHICH THE CONSPIRACY TO DEFRAUD PEOPLE REALLY BEGAN. THE REPRESENTATION WAS THAT THERANOS SYSTEMS HAD BEEN COMPREHENSIVELY VALIDATED OVER THE COURSE OF THE LAST SEVEN YEARS BY 10 OF THE 15 LARGEST PHARMACEUTICAL COMPANIES. NOW, IN THE GOVERNMENT'S CASE YOU HEARD ABOUT ONLY THREE OF -- I'LL TAKE THIS.

MR. DOWNEY: IS THAT A LITTLE BETTER? THROUGHOUT THE COURSE OF THE GOVERNMENT'S CASE, YOU HEARD ABOUT THREE PHARMACEUTICAL COMPANIES: PFIZER, GLAXOSMITHKLINE, AND SCHERING-PLOUGH. YOU MIGHT HAVE THOUGHT AS A RESULT OF THAT PRESENTATION THAT THOSE WERE THE ONLY PARTNERSHIPS WITH PHARMACEUTICAL COMPANIES THAT THERANOS EVER HAD. AND FROM THE EVIDENCE THAT WAS PRESENTED, YOU MIGHT HAVE THOUGHT THAT ALL THREE OF THOSE PARTNERSHIPS WENT VERY POORLY. WHAT DOES THE EVIDENCE, IN FACT, SHOW? THE EVIDENCE SHOWS THAT IN THE YEARS BETWEEN 2005 AND 2010, THERANOS HAD A NUMBER OF SUCCESSFUL PARTNERSHIPS WITH PHARMACEUTICAL COMPANIES, AND THAT INDIVIDUALS WITHIN THERANOS BELIEVED THAT, TALKED ABOUT IT, REPRESENTED IT TO EACH OTHER, AND TALKED ABOUT IT EXTERNALLY. EXHIBIT 7742, WHICH IS IN FRONT OF YOU, IS A SLIDE PREPARED BY STEFAN HRISTU, WHO WAS AN INDIVIDUAL WHO WORKED FULL TIME ON PHARMACEUTICAL PRODUCTS WITHIN THERANOS.

YOU'LL SEE THAT WITHIN THIS SLIDE THERE ARE REPRESENTATIONS ABOUT 11 DIFFERENT PROGRAMS THAT WERE COMPLETED SUCCESSES. ON THE NEXT PAGE THERE ARE A LIST OF ADDITIONAL PROGRAMS THAT WERE ONGOING. IF YOU LOOK THEN TO THE NEXT SLIDE, WHAT I'LL SHOW YOU IS THAT DURING THE COURSE OF MS. HOLMES'S TESTIMONY, YOU LEARNED A LOT ABOUT THESE PARTNERSHIPS THAT YOU DIDN'T KNOW AS A RESULT OF THE GOVERNMENT'S CASE. IN FACT, THERE WERE 12 CONTRACTS BETWEEN THERANOS AND PHARMACEUTICAL COMPANIES IN WHICH THOSE PHARMACEUTICAL COMPANIES WERE IN SOME FORM OR ANOTHER EXAMINING, USING, OR TRYING TO VALIDATE THERANOS'S TECHNOLOGY. WHAT WAS THE RESULT OF THESE 12 CONTRACTS? WELL, LET'S TAKE A LOOK. THERE ARE A NUMBER OF PARTNERSHIPS AND A NUMBER OF THE CONTRACTS THAT I JUST SHOWED YOU WHERE IT'S NOT AT ALL DISPUTED THAT THOSE COMPANIES EXAMINED, USED, AND VALIDATED THERANOS'S TECHNOLOGY. YOU HEARD NOTHING OF THIS IN THE GOVERNMENT'S CASE.

THOSE ARE SEVEN COMPANIES: ASTRAZENECA, NOVARTIS, GLAXOSMITHKLINE, DIICHI, CENTOCOR, MERCK, AND BRISTOL MYERS, LARGE NATIONAL OR MULTINATIONAL PHARMACEUTICAL COMPANIES. MS. HOLMES TALKED ABOUT THAT DURING HER DIRECT EXAM RECENTLY. DURING ITS TWO DAY CROSS-EXAMINATION, THE GOVERNMENT DIDN'T ASK HER A QUESTION ABOUT THOSE PROGRAMS. NEXT, THERE WERE PARTNERS WHERE THE GOVERNMENT WITNESSES CONCEDED THAT ALTHOUGH THE GOVERNMENT WITNESSES HAVE NEGATIVE THINGS TO SAY ABOUT THERANOS'S TECHNOLOGY, THAT THOSE WITNESSES DID NOT SAY THAT THEY HAD CONVEYED ANY OF THAT NEGATIVE FEEDBACK TO MS. HOLMES, AND THAT'S PFIZER AND SCHERING-PLOUGH WHO WE WILL TALK ABOUT IN A MINUTE. THEN WE'LL TALK ALSO ABOUT CELGENE, WHICH WAS THE THIRD COMPANY THAT THE GOVERNMENT MENTIONED DURING ITS CASE, AND THAT'S THE CASE WHERE DR. SUNG TESTIFIED ABOUT A PARTNERSHIP. IN THAT INSTANCE, THERE WAS -- THE SELECTION OF DR.

SUNG AS A WITNESS, I WOULD SUGGEST TO YOU, VERY MUCH OBSCURED THE FULL PICTURE AS TO WHAT WAS OCCURRING IN THOSE PARTNERSHIPS. NOW, LET'S LOOK AT THE TWO COMPANIES THAT WERE A PART OF THE GOVERNMENT'S PRESENTATION ABOUT LOGOS. FIRST, THIS IS THE CONTRACT WITH PFIZER. NOW, THERE'S A SUGGESTION IN THE GOVERNMENT'S CASE, THROUGH QUESTIONING OF WITNESSES, THAT IT IS SUSPICIOUS THAT THERANOS DRAFTED THIS REPORT RATHER THAN PFIZER, AND THAT, IN FACT, THE IMPLICATION WAS CREATED THAT IT WAS EVIDENCE OF BAD FAITH ON THERANOS'S PART, THAT IT WAS A FRAUD AND THEY WERE USING IT TO TELL PEOPLE THAT THEY HAD PARTNERED WITH PFIZER AND HAD HAD SUCCESS. IN FACT, THE CONTRACT BETWEEN PFIZER AND THERANOS SPECIFIED THAT THERANOS SHOULD PREPARE THE REPORT AND IT SHOULD SUBMIT THE REPORT AT THE END OF THE PROGRAM FOR AN ASSESSMENT BY PFIZER. THIS IS THE WAY A NUMBER OF CONTRACTS BETWEEN PHARMACEUTICAL COMPANIES AND THERANOS WORKED.

WE'VE PLACED THEM ALL IN EXHIBITS, AND YOU'LL BE ABLE TO SEE THEM AT 7753 AND ELSEWHERE. WITH RESPECT TO CELGENE, THE GOVERNMENT FOCUSSED ON ONLY ONE OF SEVERAL CONTRACTS THAT THERANOS HAD WITH CELGENE. FIRST OF ALL, THEY DIDN'T EVEN MENTION A 3.25 MILLION BIO MATHEMATICAL MODELING CONTRACT THAT TOOK PLACE. DR. SUNG WAS NOT INVOLVED WITH THAT PROJECT AND KNEW NOTHING ABOUT IT. AS TO THE PK ASSAY THAT DR. SUNG TOUCHED ON, THAT CONTRACT WAS, IN FACT, A SUCCESS. CELGENE ACCEPTED THE REPORT THAT THERANOS PREPARED DEMONSTRATING VALIDATION. THE CONTRACT TERMS PROVIDED IF IT ACCEPTED IT, IT WAS OBLIGATED TO PAY THERANOS. IT ACCEPTED IT AS A VALIDATION, AND IT PAID THERANOS.

MR. DOWNEY: DR. SUNG TESTIFIED REALLY FOR A VERY SIMPLE REASON. SHE WASN'T INVOLVED AT ALL IN CONNECTION WITH ANY OF THE MANY UNDERLYING PROJECTS THAT TOOK PLACE BETWEEN CELGENE AND THERANOS. BUT SHE HAD WITNESSED ON A COUPLE OF OCCASIONS, IN CONNECTION WITH A PROJECT THAT THERANOS WORKED ON OF DEVELOPMENT OF AN ASSAY, SOME NEGATIVE COMMENTARY FROM ANOTHER CELGENE EMPLOYEE. SHE DID NOT KNOW ABOUT THE PROGRAM, WHETHER THERE WAS A VALIDATION IN CONNECTION WITH THE BIO MODELING CONTRACT, AND SHE DID NOT KNOW ABOUT ANY WORK ON THE ORIGINAL PK ASSAY. SIMILARLY WITH RESPECT TO PFIZER WHERE I JUST SHOWED YOU THE CONTRACT. THIS WAS NO ERROR THAT DR. WEBER COULD -- HAD NO KNOWLEDGE. HE WASN'T THAT INVOLVED WITH RESPECT TO THIS CONTRACT. THIS WAS A CONTRACT THAT WAS SIGNED IN 2006. THE AGREEMENT WAS THAT THERANOS WOULD DEPLOY DEVICES IN REMOTE AREAS OF TENNESSEE AND THAT THAT WOULD TAKE PLACE OVER THE COURSE OF MORE THAN A YEAR. ALL THAT WAS DONE.

DEVICES WERE PLACED IN PATIENTS' HOMES, AND THE DRUG THAT WAS BEING EVALUATED BY PFIZER RELATED TO CANCER PATIENTS, DATA WAS GENERATED, THE DATA THAT THERANOS GENERATED WAS COMPARED TO THE DATA FROM A REFERENCE MODEL OR FROM A STANDARD BLOOD TESTING RESULT, AND THERANOS PREPARED THE REPORT THAT YOU'VE SEEN MANY TIMES IN THE CASE STATING THAT THE COMPARISON WAS FAVORABLE. WITH THIS CONTRACT, AS WITH THE OTHER CONTRACTS, THERE IS NO DEMONSTRATION BY DR. WEBER THAT HE EVER CONVEYED TO THERANOS THE NEGATIVE FEEDBACK OR THE NEGATIVE VIEW THAT HE TESTIFIED ABOUT ON THE STAND. HE ADMITTED THAT HE HADN'T. SO WHAT IS THE SUM TOTAL OF WHAT YOU SAW IN THE GOVERNMENT'S CASE? YOU SAW A 14-MONTH PARTNERSHIP BETWEEN THERANOS AND PFIZER WHICH, DURING THE FIRST 14 MONTHS OF THAT PARTNERSHIP, DR. WEBER HAD NO INVOLVEMENT AT ALL. HE WAS THEN INVOLVED FOR A PERIOD OF THREE MONTHS TO REVIEW THE REPORT. HE HAD A NEGATIVE REACTION TO THAT, AND HE REPORTED IT UP. HIS INVOLVEMENT CEASED THREE MONTHS LATER.

WHAT DO WE KNOW ABOUT ACTUALLY THE ENTIRETY OF THE RELATIONSHIP BETWEEN THERANOS AND PFIZER? WELL, AS I MENTIONED, IT BEGINS IN DECEMBER OF 2006. IN 2007 TO 2008, THE STUDY RUNS FOR 16 MONTHS. FROM NOVEMBER 2008 TO JANUARY 2009 IS THE WINDOW DURING WHICH DR. WEBER WAS INVOLVED. NOW, DR. WEBER SAID HE WASN'T AWARE OF CONTACT BETWEEN THERANOS AND PFIZER AFTER THAT DAY. HE WAS NOT AWARE OF THERANOS EVER BEING IN DISCUSSIONS OF ANY KIND WITH PFIZER AFTER JANUARY OF 2009. WELL, OTHERS AT THERANOS -- OTHERS AT PFIZER KNEW ABOUT CONTACT WITH THERANOS. TWO OF THE PRINCIPAL PERSONS WHO HAD BEEN INVOLVED IN THE STUDY PROJECT BETWEEN PFIZER AND THERANOS REMAINED IN CONTACT WITH THERANOS FOR THE FOLLOWING SIX YEARS. THEY HAD CONTACT IN AS CLOSE A PROXIMITY TO THIS JANUARY '09 DATE WHEN DR. WEBER SAID CONTACT HAD CEASED AS AUGUST OF 2009. AND WHY DID THEY CONTACT THERANOS? BECAUSE THEY WANTED THEM TO DO A CLINICAL TRIAL.

NOW, THAT DOES NOT SUGGEST SKEPTICISM OR A NEGATIVE VIEW OF THERANOS'S TECHNOLOGY AS DR. WEBER'S TESTIMONY WOULD HAVE CONVEYED. MAKE NO MISTAKE ABOUT IT. I'M NOT CRITICIZING DR. WEBER. BUT DR. WEBER HAD A VERY LIMITED VIEW OF THE RELATIONSHIP BETWEEN PFIZER AND THERANOS. WE SEE, GOING FORWARD FOR A PERIOD OF SEVERAL YEARS, DR. LIPSET AND DR. SAKUL, WHO WERE THE INDIVIDUALS INVOLVED, TO CONTINUE TO HAVE CONTACT WITH THERANOS, INCLUDING AFTER THERANOS ENGAGED IN ITS RETAIL LAUNCH, AND THEY CONTINUED TO STATE THAT THEY HAD AN INTEREST IN WORKING WITH THERANOS. LOOK AT THIS COMMUNICATION IN FEBRUARY OF 2015. AND THEY'RE TALKING ABOUT THERANOS'S RETAIL STORES BEING USED -- THE THERANOS SERVICE CENTERS IN RETAIL STORES BEING USED AS A BASIS TO CONDUCT CLINICAL STUDIES. THE IMPLICATION FROM THE GOVERNMENT IS THE RELATIONSHIP WITH PFIZER WENT POORLY. THEY DID NOT EXAMINE, USE, AND VALIDATE THERANOS'S TECHNOLOGY. THE FULL FACTS AS TO THIS SUGGEST OTHERWISE.

NOW, LET'S LOOK AT THE SCHERING-PLOUGH EXAMPLE. AS YOU KNOW, DR. CULLEN FROM SCHERING-PLOUGH TESTIFIED. AND SHE TESTIFIED THAT THERE WAS A CONTRACT FOR A COMPREHENSIVE VALIDATION OF A MULTIPLEX, SO-CALLED MULTIPLEX ASSAY. NOW, UNDER THAT CONTRACT, AS UNDER THE PFIZER CONTRACT, THERANOS WAS TO PREPARE A REPORT, SUBMIT IT TO SCHERING-PLOUGH, AND IF SCHERING-PLOUGH AGREED THAT THERE WAS A VALIDATION, THEY WERE TO PAY THERANOS. WHAT HAPPENED? THERANOS COMPLETED THE STUDY, THEY COMPLETED THE REPORT, SUBMITTED IT TO SCHERING-PLOUGH, AND THEY WERE PAID.

MR. DOWNEY: THERE WAS NO NEGATIVE FEEDBACK CONVEYED FROM DR. CULLEN TO THERANOS, AND SHE CONCEDED THAT THE VIEWS THAT SHE EXPRESSED HERE ON THE STAND AS TO THE TECHNOLOGY WERE NEVER CONVEYED TO MS. HOLMES. NOW, I WANT TO REALLY FOCUS ON WHAT THE GOVERNMENT HAS FOCUSSED ON WITH RESPECT TO THE LOGOS. BUT WHAT DOES WHAT HAVE I JUST SHOWN YOU IMPLY WITH REGARD TO THE EVIDENCE THAT THE GOVERNMENT HAS PRESENTED TO YOU IN THIS CASE? IF THERE HAD NOT BEEN A DEFENSE CASE, YOU WOULD NOT HAVE KNOWN ABOUT MANY, MANY PHARMACEUTICAL PROJECTS THAT THERANOS HAD AND COMPLETED SUCCESSFULLY. YOU WOULD NOT KNOW THAT WITNESSES LIKE DR. WEBER HAD A VERY LIMITED VIEW OF WHAT HAPPENED BECAUSE THEY WERE ONLY INVOLVED FOR A BRIEF PERIOD OF TIME. AND YOU WOULD NOT KNOW THAT FOR MANY YEARS IN THE RELATIONSHIP BETWEEN PFIZER AND CELGENE, THERE WAS A GREAT DEAL OF SUCCESS. YOU WOULD KNOW NONE OF THAT. YOU ONLY KNOW THAT BECAUSE THERE WAS A PRESENTATION ON THAT FROM THE DEFENSE.

SO WHEN I ASK YOU TO WAIT AND HEAR THE FULL STORY AND TO GO THROUGH THE EVIDENCE WITH ME, AND TO GO THROUGH THE EVIDENCE WHEN YOU GO BACK TO DELIBERATE IN THE JURY ROOM, REMEMBER THAT EXAMPLE WHERE THE PICTURE CAN CHANGE QUITE A GOOD DEAL AS THE RESULT OF WAITING FOR THE FULL STORY AND LOOKING THROUGH THE FULL MATERIAL. NOW, LET ME TALK ABOUT THIS LOGO ISSUE. YOU HAVE HEARD ABOUT IT THROUGHOUT THE CASE, THAT MS. HOLMES ADDED LOGOS TO THREE PHARMACEUTICAL REPORTS, AND THIS WAS DONE FOR THE PURPOSE OF DECEIVING A VARIETY OF PEOPLE. BUT THE FIRST GROUP THAT IT WAS SUPPOSEDLY DESIGNED TO FOOL AND DEFRAUD WAS WALGREENS. NOW, MS. HOLMES ADMITTED TO YOU THAT SHE ADDED THE LOGOS AND DID IT WITHOUT THINKING THERE WAS ANYTHING WRONG WITH IT. WELL, WHY WOULD THAT BE HER STATE OF MIND? WELL, LET'S CONSIDER HOW MS. HOLMES COMMUNICATED WITH INVESTORS ABOUT THESE PHARMACEUTICAL RELATIONSHIPS.

IF INVESTORS WANTED TO KNOW ABOUT PARTICULAR PHARMACEUTICAL PROJECTS, YOU WOULD THINK, TO LISTEN TO THE GOVERNMENT'S CASE, THAT SHE WOULD SAY, OH, NO, YOU CAN'T TALK TO THE PHARMACEUTICAL COMPANY. BUT, IN FACT, SHE PUTS INVESTORS IN TOUCH WITH PFIZER WHEN THEY ASK FOR THAT INFORMATION, AS IN THIS EXHIBIT 15016 WHERE AN INVESTOR EXPRESSES CURIOSITY ABOUT WHAT IS GOING ON BETWEEN PFIZER AND THERANOS, AND THEY'RE GIVING CONTACT INFORMATION FOR SOMEBODY AT PFIZER TO TALK TO. OR IN THIS INSTANCE WHERE ANOTHER POTENTIAL INVESTOR EXPRESSES INTEREST IN TALKING TO SEVERAL PHARMACEUTICAL PARTNERS, MS. HOLMES NOT ONLY SAYS THAT'S FINE WITH HER, SHE GIVES THE CONTACT INFORMATION, WHICH IS REDACTED HERE, FOR A LARGE GROUP OF PHARMACEUTICAL COMPANIES: PFIZER, GLAXOSMITHKLINE, BRISTOL MYERS, NOVARTIS. MS. HOLMES HAS NO INTENT TO DECEIVE PEOPLE OR HIDE FROM PEOPLE THINGS THAT ARE GOING ON IN THOSE RELATIONSHIPS, CONTRARY TO THE GOVERNMENT'S ASSERTIONS.

NOW, I WANT TO TALK VERY SPECIFICALLY AND VERY -- I'LL ASK YOU TO LOOK VERY MUCH AT THE RELATIONSHIP BETWEEN GLAXOSMITHKLINE AND THERANOS BECAUSE THAT IS THE COMPANY, ONE OF THE THREE COMPANIES, ON WHICH A LOGO FROM THERANOS WAS ADDED. NOW, WE DIDN'T HEAR MUCH ABOUT THE GLAXOSMITHKLINE/THERANOS -- THE ACTUAL RELATIONSHIP DURING THE GOVERNMENT'S CASE. BUT, IN FACT, IT'S FAIRLY IMPORTANT TO UNDERSTAND WHAT IS GOING ON WHEN MS. HOLMES INTERACTS WITH INVESTORS AND WHAT SHE UNDERSTANDS WHEN SHE'S PARTICIPATING IN DISCUSSIONS WITH WALGREENS IN 2010. FIRST OF ALL, IN 2008, THERANOS SENT ITS DEVICES TO GLAXOSMITHKLINE AND SAID, WE WANT YOU TO EVALUATE OUR TECHNOLOGY TO SEE IF THAT TECHNOLOGY CAN BE VALIDATED. SO THEY SENT THE TECHNOLOGY TO GLAXOSMITHKLINE TO EXAMINE AND ASK, IS THIS A TECHNOLOGY THAT YOU THINK WOULD BE USEFUL IN CONNECTION WITH CONDUCTING BLOOD TESTING SERVICES? THAT REPORT WAS SENT BACK BY GSK. THAT REPORT DID NOT HAVE LOGOS OF EITHER THERANOS OR GSK ON IT.

THEN AT SOME DATE IN BETWEEN JUNE 2008 AND MARCH 2009, THERANOS ADDED THE LOGOS OF BOTH THERANOS AND GSK. MIND YOU, THIS IS A YEAR, AT LEAST A YEAR BEFORE THE GOVERNMENT SAYS SHE ADDED LOGOS TO DEFRAUD WALGREENS IN THEIR NEGOTIATION. AT SOME POINT THOSE LOGOS ARE ADDED TO THE REPORT. WE DON'T KNOW FROM THE EVIDENCE WHEN THAT HAPPENED. NOW, DOES MS. HOLMES FEEL LIKE SHE'S COMMITTING A FRAUD IN CONNECTION WITH ADDING GSK'S LOGO TO THE REPORT? WELL, APPARENTLY NOT, BECAUSE IN MARCH OF 2009, ONE FULL YEAR BEFORE SHE SENDS THAT REPORT, SHE'S ADDED THE LOGO TO WALGREENS, SHE SENDS IT TO GSK WITH BOTH THE THERANOS LOGO AND THE GSK LOGO ON IT. AND YOU CAN SEE THAT IN EXHIBIT 15066.

MR. DOWNEY: THAT'S A YEAR BEFORE THE LOGOS ARE TRANSMITTED TO WALGREENS AND THE GOVERNMENT SAYS THAT THE FRAUD BEGAN. THEN IN DECEMBER OF 2009, SHE SENDS IT AGAIN. AND YOU CAN LOOK AT EXHIBIT 15058 TO SEE THAT. AND THEN IN MARCH OF 2010, BECAUSE YOU ALREADY KNOW AND WHAT WAS PRESENTED IN THE GOVERNMENT'S CASE, IS THAT SHE SENDS A COPY OF THAT REPORT WITH BOTH LOGOS TO WALGREENS AS PART OF THEIR DISCUSSIONS ABOUT WHETHER OR NOT THEY'LL HAVE A PARTNERSHIP. AGAIN, JUST LIKE PUTTING PEOPLE IN TOUCH WITH THE PHARMACEUTICAL COMPANIES TO TALK ABOUT THE WORK THAT THERANOS WAS DOING, SHE FEELS NO SELF-CONSCIOUSNESS ABOUT EXPRESSING THAT IN THESE JOINT PROJECTS, THEY ARE JOINT PROJECTS OF BOTH THERANOS AND THE PHARMACEUTICAL COMPANY. THAT'S GSK. NOW, I SHOULD MENTION WITH RESPECT TO GSK, MR. SCHENK MENTIONED IN PASSING, HE TALKS ABOUT THE WORDS COMPREHENSIVE VALIDATION.

IN CONNECTION WITH GSK, THERANOS HAD THE OPPORTUNITY TO GIVE A PRESENTATION TO GSK ABOUT WHAT IT UNDERSTOOD GSK HAD DONE AS PART OF THE RELATIONSHIP BETWEEN GSK AND THERANOS. AND WHAT DID SHE CONVEY IN EXHIBIT 15058? SHE SAID THAT GSK HAD COMPLETED A COMPREHENSIVE VALIDATION OF THERANOS SYSTEMS IN 2008, EXACTLY THE CLAIM THAT SHE MAKES IN CONNECTION WITH SOME OF THE CONVERSATIONS THAT THE GOVERNMENT IS FOCUSSED ON. DOES GSK DISAGREE WITH THAT? DOES GSK SAY, WE'RE SHOCKED TO SEE THAT? DOES GSK SAY, WE'RE SHOCKED TO SEE THAT AND WE'RE SHOCKED TO SEE OUR LOGO ON THIS? NOT AT ALL. NOT AT ALL. THEY RECEIVED ALL OF THAT INFORMATION AND TREATED IT AS PERFECTLY NORMAL. NOW, LET'S MOVE ON TO THE PFIZER SITUATION. VERY SIMILARLY. I SHOWED YOU THAT MS. HOLMES WAS NOT SELF-CONSCIOUS ABOUT PUTTING INVESTORS IN TOUCH WITH PFIZER. BUT SPECIFICALLY WITH RESPECT TO THE LOGOS, WE KNOW THAT MS.

HOLMES APPLIED THE PFIZER LOGO AND SENT THE DOCUMENT WITH BOTH THE PFIZER LOGO AND THE THERANOS LOGO BACK TO PFIZER. NOW, WE DON'T KNOW IF PFIZER WAS NOT SURPRISED BY THAT BECAUSE THEY KNEW IT WAS A JOINT PROJECT OR BECAUSE THEY HAD READ THE REPORT MANY TIMES AND THOUGHT OF IT AS THEIR JOINT WORK. WE DON'T KNOW. BUT WHAT WE DO KNOW IS THAT PFIZER CERTAINLY DIDN'T REACT AS IF ANYTHING UNTOWARD HAD HAPPENED. THEY RECEIVED THE REPORT WITH BOTH LOGOS ON IT, AND AS I SHOWED YOU A MOMENT AGO, CONVERSATIONS CONTINUED BETWEEN PFIZER AND THERANOS ABOUT WORKING TOGETHER INTO 2015 ON LARGE PROJECTS. PFIZER AS WELL SAW NOTHING UNTOWARD IN THE ADDING OF ITS LOGO TO THE REPORT. WHAT ABOUT SCHERING-PLOUGH? NOW, WE KNOW THAT WITH RESPECT TO SCHERING-PLOUGH, DR. CULLEN TESTIFIED THAT SHE HAD A NEGATIVE VIEW OF THE WORK THAT THERANOS HAD DONE. WE ALSO KNOW THAT SHE TESTIFIED THAT SHE DIDN'T ACTUALLY CONCEDE THAT -- OR SHE DIDN'T CONVEY THAT TO MS. HOLMES. BUT WHAT DID MS.

HOLMES UNDERSTAND WAS DR. CULLEN'S REACTION TO THE THERANOS VALIDATION PROJECT? WHAT IS THE EVIDENCE WHICH WOULD TEACH US, HERE'S WHAT MS. HOLMES THOUGHT AS PART OF HER STATE OF MIND AS TO WHAT HAPPENED IN THAT PROJECT AND HOW IT WAS VIEWED BY SCHERING-PLOUGH? WELL, YOU CAN SEE THAT IN EXHIBIT 15045 WHERE AN EMPLOYEE OF THERANOS WHO ALSO WORKED ALMOST FULL TIME ON PHARMACEUTICAL PROJECTS REPORTS TO MS. HOLMES THAT SHE HAS HAD A CONVERSATION WITH DR. CULLEN, AND IT WAS A GREAT CALL. AND DURING THE COURSE OF THE CALL SHE SUGGESTS THAT DR. CULLEN HAS READ THE REPORT AND SHE'S PLANNING TO PASS IT AROUND IN HER NEW COMPANY, MERCK, AND IT MAY BE USEFUL IN GENERATING FURTHER WORK FOR THERANOS. THERE'S NO SUGGESTION THAT MS. HOLMES THOUGHT OR BELIEVED THAT SCHERING-PLOUGH HAD INVALIDATED ITS TECHNOLOGY UNDER THE TERMS OF THAT CONTRACT. SO WHAT DO WE HAVE?

WE HAVE THE GOVERNMENT PRESENTING THREE WITNESSES WHO CONVEY A VIEW OF THE WORLD ABOUT THERANOS AND ITS PARTNERSHIPS WITH PHARMACEUTICAL COMPANIES. THAT VIEW IS THERANOS'S TECHNOLOGY IS NO GOOD, MS. HOLMES KNEW IT, AND SHE HAD NO BASIS FOR MAKING THOSE STATEMENTS. WHAT DO WE, IN FACT, KNOW? THERANOS HAD AT LEAST 11 PARTNERSHIPS WITH PHARMACEUTICAL COMPANIES THEY BELIEVED WERE SUCCESSFUL, THAT FOR MANY OF THOSE PARTNERSHIPS THE GOVERNMENT HAS NOT DISPUTED THAT THOSE PARTNERSHIPS WERE SUCCESSFUL. AND WITH REGARD TO THE THREE COMPANIES WHERE THE COMPANY HAS -- WHERE THE GOVERNMENT HAS RAISED AN ISSUE, WITH THE EXCEPTION OF DR. CULLEN, THE WITNESSES AREN'T EVEN THE PEOPLE WHO WERE PRIMARILY INVOLVED IN THE RELATIONSHIP.

MR. DOWNEY: THAT SHOULD CAUSE YOU TO BEGIN TO QUESTION AND TAKE ON A WILLINGNESS AS YOU EXAMINE THE EVIDENCE AS PART OF YOUR JURY DELIBERATIONS TO LOOK AT BOTH SIDES OF THE STORY, BECAUSE IT'S EASY TO MAKE THAT ACCUSATION. IT COULD TAKE SOME EFFORT AND TIME TO UNPACK IT. NOW, THAT'S ONE EXAMPLE. ONE EXAMPLE. BUT THAT PATTERN WILL RUN THROUGHOUT THE CASE. THE GOVERNMENT IS SHOWING AN EVENT LOOKS BAD, BUT AT THE END OF THE DAY WHEN ALL OF THE EVIDENCE FLOWS TOGETHER, IT ISN'T SO BAD. I WILL SAY TO YOU THAT YOU ARE GOING TO SEE THAT WITH REGARD TO SEVERAL ISSUES AS I CONTINUE TO GO THROUGH THE EVIDENCE WITH YOU TODAY. BUT I WANT TO TALK FIRST ABOUT THE ROLE THAT YOU ULTIMATELY PLAY WHEN YOU GO BACK TO THE JURY ROOM, AND THEN I WANT TO TALK ABOUT WHAT I THINK IS THE CRITICAL ISSUE IN THE CASE AND EXAMINE THE EVIDENCE IN LIGHT OF IT, AND THAT IS MS. HOLMES'S INTENT, WHAT SHE UNDERSTOOD AND BELIEVED WHY SHE DID WHAT SHE DID.

AND I'LL GO THROUGH THAT SYSTEMATICALLY BECAUSE I THINK I WILL BE HELPFUL TO YOU IF I COMPARE THAT, THE ELEMENTS OF WHAT THE OFFENSES ARE, AND EXPLAIN HOW THEY RELATE TO WHAT THE EVIDENCE IS. AND I'LL ASK YOU THAT YOU REMEMBER FROM OUR ORIGINAL JURY INSTRUCTIONS THAT YOU HAD AN OBLIGATION, WHICH YOU ALL UNDERTOOK AND WHICH YOU'VE ALL DONE, TO MAINTAIN A PRESUMPTION OF INNOCENCE THROUGHOUT THIS CASE. AS YOU KNOW, MS. HOLMES IS PRESUMED INNOCENT UNTIL EACH AND EVERY ONE OF YOU DETERMINES BEYOND A REASONABLE DOUBT THAT SHE HAS COMMITTED EVERY ELEMENT OF THE OFFENSES WITH WHICH SHE IS CHARGED. SHE NEVER HAS TO PROVE HER INNOCENCE. SHE NEVER HAS TO EVEN OFFER A DEFENSE, ALTHOUGH THAT WAS DONE IN THIS CASE. IF YOU HAVE A REASONABLE DOUBT AS TO WHETHER MS. HOLMES COMMITTED ANY ELEMENT OF THE OFFENSE, YOU SHOULD FIND HER NOT GUILTY. NOW, MR. SCHENK MENTIONED IT IN PASSING, BUT I WANT TO TALK ABOUT IT A LITTLE MORE AND IN A LITTLE MORE DEPTH, AND THAT IS THE CONCEPT OF REASONABLE DOUBT.

WE HEAR THAT PHRASE ALL OF THE TIME. WHAT DOES REASONABLE DOUBT MEAN? WELL, I THINK YOU CAN THINK OF REASONABLE DOUBT AS A -- REALLY AS A STANDARD. IF YOU THINK ABOUT THE DIFFERENT ELEMENTS OF PROOF OR THE DIFFERENT BURDENS OF PROOF THAT APPLY IN THE LAW, I JUST WANT TO EXPLAIN HOW THE CONCEPT OF THE REASONABLE DOUBT FITS WITHIN THAT. IF YOU LOOK AT THE EVIDENCE AS AN ASCENDING STAIRCASE, THIS IS WHAT IT WOULD LOOK LIKE AS COMPARED TO THE BURDENS THAT SOMEONE FACES IN CONNECTION WITH A CASE. AT THE BOTTOM YOU HAVE NO EVIDENCE, SO THERE IS NOTHING TO DO. ABOVE THAT WE HAVE WHAT IS CALLED A SCINTILLA OF EVIDENCE, WHICH IS JUST A TINY BIT OF EVIDENCE WHICH MIGHT RAISE WITH SOMEONE A CONCERN, BUT IT'S NOT MUCH EVIDENCE. NOW, ABOVE THAT IS REASONABLE SUSPICION. REASONABLE SUSPICION IS EVIDENCE FROM WHICH A REASONABLE PERSON COULD CONCLUDE THAT A CRIME HAS BEEN COMMITTED.

NOT EVERY PERSON WOULD HAVE TO CONCLUDE THAT, BUT A REASONABLE PERSON COULD CONCLUDE FROM THE EVIDENCE THAT IS PRESENTED. PROBABLE CAUSE IS NEXT ABOVE THAT, AND THAT TAKES US TO THE POINT WHERE PEOPLE -- WHERE A COURT MAKES A DETERMINATION THAT THERE'S ENOUGH EVIDENCE OF AN OFFENSE THAT CERTAIN ACTIONS MIGHT BE JUSTIFIED, FOR EXAMPLE, A SEARCH OF SOMEONE'S HOME. BUT IT IS NOT, IT IS NOT REQUIRED THAT THERE BE A HIGHER LEVEL OF PROOF. NOW, WHAT IS ABOVE THAT? WHAT IS ABOVE THAT IS A CONCEPT THAT SOME OF YOU ARE FAMILIAR WITH BECAUSE I KNOW YOU'VE SERVED ON CIVIL JURIES IN CONNECTION WITH OTHER TRIALS, AND THAT'S A PREPONDERANCE OF THE EVIDENCE. IF SOMEONE IS FOUND TO HAVE PROVEN BY A PREPONDERANCE OF THE EVIDENCE SOMETHING, THEY'VE PROVEN THAT WHEN EVIDENCE IS WEIGHED, IT'S A LITTLE MORE LIKELY THAT SOMETHING IS TRUE THAN FALSE. THAT'S A PREPONDERANCE OF EVIDENCE. ABOVE THAT IS THE CLEAR AND CONVINCING STANDARD.

NOW, YOU MEET THE CLEAR AND CONVINCING STANDARD IF YOU ARE FIRMLY CONVINCED THAT SOMETHING HAPPENS, YOU ARE FIRMLY CONVINCED THAT SOMETHING HAPPENS. THAT DOESN'T MEAN IT HAS TO BE BEYOND A REASONABLE DOUBT THAT IT HAPPENED, BUT YOU ARE FIRMLY CONVINCED OF IT. REASONABLE DOUBT IS ABOVE THAT. IT'S A HIGHER STANDARD OF PROOF. AND REASONABLE DOUBT MEANS NOT BEYOND SPECULATION, BUT BEYOND ANY REASONABLE DOUBT THAT A PERSON WOULD HAVE, THEY DETERMINED THAT THE EVIDENCE DOES NOT ALLOW FOR A DETERMINATION THAT THE PERSON DID NOT COMMIT AN OFFENSE. THAT IS THE HIGHEST BURDEN IN THE LAW. THAT IS THE BURDEN WHICH THE GOVERNMENT BEARS IN THIS CASE AND THEY ACCEPT. YOU SHOULD EXAMINE THE EVIDENCE WITH THAT BURDEN IN MIND.

MR. DOWNEY: THIS IS NOT A CASE WHERE YOU'RE EVALUATING, DO I THINK IT IS MORE LIKELY THAN NOT THAT MS. HOLMES HAS COMMITTED AN OFFENSE? AM I FIRMLY CONVINCED THAT MS. HOLMES HAS COMMITTED AN OFFENSE? THIS IS A CASE IN WHICH YOU ARE QUESTIONING, IS IT BEYOND A REASONABLE DOUBT THAT MS. HOLMES HAS COMMITTED THE OFFENSES OF WHICH SHE IS ACCUSED? NOW, I WANT TO TALK A LITTLE BIT, AND I WON'T GO INTO THEM IN DEPTH BECAUSE I THINK MR. SCHENK HOPEFULLY SPUN OUT FOR YOU THE ELEMENTS THAT ARE AT ISSUE HERE, BUT I WANT TO PAY ATTENTION TO A FEW OF THE ELEMENTS. AS MR. SCHENK TOLD YOU, WIRE FRAUD REQUIRES THAT THE GOVERNMENT PROVE THAT SOMEONE HAS KNOWINGLY DEVISED A SCHEME TO DEFRAUD; AND THEY'VE MADE MATERIAL FALSE STATEMENTS AS PART OF THAT; AND THAT THEY ACTED WITH THE INTENT TO DEFRAUD, I'LL RETURN TO THAT; AND AS MR. SCHENK SAID, THEY USED INTERSTATE WIRES TO CARRY OUT AN ESSENTIAL PART OF THAT SCHEME. LET'S FOCUS ON THE INTENT AND WHAT THAT MEANS IN THIS CONTEXT.

INTENT TO DEFRAUD MEANS THE INTENT TO DEPRIVE SOMEONE OF MONEY OR PROPERTY BY MEANS OF A DECEPTION. IF SOMEONE IS ACTING IN GOOD FAITH OR SOMEONE DOES NOT BELIEVE THAT WHAT THEY ARE DOING ACTUALLY IS PART OF A SCHEME TO DEFRAUD, THEN THE CORRECT VERDICT IS A NOT GUILTY VERDICT. LET'S TALK BRIEFLY ABOUT CONSPIRACY, AND THEN WE'LL TAKE OUR BREAK. CONSPIRACY REQUIRES THAT YOU FIND THAT SOMEONE AGREED WITH SOMEONE ELSE TO COMMIT WIRE FRAUD AND THAT THE PERSON BECAME A MEMBER OF THAT CONSPIRACY BY WILLFULLY PARTICIPATING IN AN UNLAWFUL PLAN WITH INTENT TO COMMIT WIRE FRAUD. LET'S FOCUS ON THAT WORD "WILLFULLY." WILLFULLY MEANS THAT SOMEONE IS ACTING WITH THE KNOWLEDGE THAT THEIR CONDUCT IS ILLEGAL. THEY'RE DOING SOMETHING WITH THE INTENT TO DO SOMETHING THAT THE LAW FORBIDS. IF SOMEONE IS ACTING IN GOOD FAITH, YOU HAVE NO REASON TO FIND THEM GUILTY, EVEN IF THE OTHER ELEMENTS OF AN OFFENSE ARE FOUND. I THINK, LADIES AND GENTLEMEN, THAT THE CONCEPTS OF INTENT AND WILLFULNESS ARE GOING TO INFORM YOUR EVALUATION OF A LOT OF THE EVIDENCE IN THIS CASE, AND WHEN WE COME BACK, I WILL GO THROUGH SOME OF THAT EVIDENCE WITH YOU.

MR. DOWNEY: YES, SIR. GOOD AFTERNOON. I TOLD YOU BEFORE WE BROKE THAT I WAS GOING TO START TO TALK ABOUT EVIDENCE OF INTENT, AND I AM GOING TO DO THAT, BUT I WANTED TO TAKE A MOMENT BEFORE WE RESUMED TO THANK ALL OF YOU FOR SERVING IN THE ROLE THAT YOU HAVE SERVED FOR THE LAST THREE AND A HALF, ALMOST FOUR MONTHS. I KNOW THAT AT THE 4TH OF JULY, IF SOMEONE ASKED YOU, HOW ARE YOU GOING TO SPEND THE SECOND HALF OF THE YEAR, YOU WOULDN'T SAY, I'M GOING TO BE SPENDING THREE OR FOUR OR FIVE DAYS A WEEK IN A COURTHOUSE IN DOWNTOWN SAN JOSE. BUT YOU'VE DONE IT. YOU'VE PAID CLOSE ATTENTION, YOU'VE LISTENED, AND I KNOW YOU WILL FULFILL THE RESPONSIBILITIES OF YOUR OATH WITH PROPER APPROACH. AND I SAY TO YOU, BEFORE I GET BACK INTO THE EVIDENCE, I KNOW, BECAUSE THERE HAVE BEEN SOME EXTRAORDINARY PROCEEDINGS IN CONNECTION WITH THIS MATTER, THAT YOU'RE ALL AWARE THERE HAS BEEN A LOT OF ATTENTION TO THE CASE. WE DISCUSSED SOME OF THAT IN VOIR DIRE.

BUT YOU HAVE A PARTICULARLY IMPORTANT ROLE BECAUSE ALL OF YOU HAVE SEEN IN THE CONTEXT OF THIS CASE THE EVIDENCE, THE FULL EVIDENCE. AND YOU WILL BE IN A POSITION TO DECIDE WHETHER MS. HOLMES IS GUILTY OF AN OFFENSE OR NOT. IT'S NOT A LIGHT RESPONSIBILITY, BUT I KNOW YOU'VE UNDERTAKEN IT WITH A LOT OF SERIOUSNESS AND I AM GRATEFUL TO YOU, AND I KNOW MR. SCHENK JOINS ME IN THAT. LET ME RETURN TO THE SUBJECT OF MS. HOLMES'S INTENT, WHICH I WAS DISCUSSING BEFORE THE BREAK. AND I WOULD SAY TO YOU THAT IN ORDER TO UNDERSTAND MS. HOLMES'S INTENT, THERE ARE REALLY FIVE BODIES OF EVIDENCE THAT HAVE BEEN INTRODUCED IN CONNECTION WITH THE CASE THAT GIVE YOU THE CLOSEST AND THE CLEAREST PICTURE OF WHAT MS. HOLMES WAS THINKING DURING THE YEARS FROM 2010 TO 2016, AND THEY ARE FIRST THE INTERACTIONS THAT SHE AND THERANOS HAD WITH THE FOOD AND DRUG ADMINISTRATION AND THE PURSUIT OF APPROVAL FOR THE TECHNOLOGY AT THE FOOD AND DRUG ADMINISTRATION.

SECOND, THE FEEDBACK WHICH SHE GOT OVER MANY YEARS FROM THE PEOPLE WHO WORKED INSIDE THERANOS WITH HER, HOW DID THEY FEEL ABOUT THE TECHNOLOGY THAT THE COMPANY WAS INVENTING, AND HOW DID THEY TALK WITH MS. HOLMES ABOUT IT? THIRD IS THE FEEDBACK THAT THE COMPANY GOT FROM OUTSIDERS, WHAT TYPES OF INSTITUTIONS LOOKED AT THERANOS'S TECHNOLOGY, AND WHAT DID THEY CONCLUDE? FOURTH, I THINK YOU SHOULD TAKE INTO ACCOUNT MS. HOLMES'S REPEATED WILLINGNESS TO EXPOSE THERANOS'S TECHNOLOGY TO OUTSIDE REVIEW, WHAT THIRD PARTIES SHE TALKED TO, WHAT THIRD PARTIES ACTUALLY LOOKED AT THERANOS'S TECHNOLOGY, WHAT FEEDBACK DID THEY GIVE? AND LAST, I WANT TO TALK ABOUT MS. HOLMES'S REACTION TO THE DETERMINATION THAT THERE WERE ISSUES WITH RESPECT TO THE PERFORMANCE OF THERANOS'S LAB AND THE ACTIONS SHE TOOK THEREAFTER THROUGHOUT BEGINNING IN 2016. SO LET'S START FIRST WITH HER INTERACTIONS WITH THE FDA AND THE PURSUIT OF FDA APPROVAL FOR SOME OF THERANOS'S TECHNOLOGY.

YOU KNOW THAT THE FDA HAS BEEN A SUBJECT OF SOME DISCUSSION IN CONNECTION WITH THE CASE. BUT MS. HOLMES'S INTERACTIONS WITH IT PROFOUNDLY INFORMED HER BELIEF ABOUT WHERE THERANOS WAS AS A COMPANY, AND THE CLEAREST MEASURE OF WHAT SHE BELIEVED IS BY MATCHING UP HOW SHE WAS INTERACTING WITH THE FOOD AND DRUG ADMINISTRATION AND THE STATEMENTS THAT SHE WAS MAKING WHICH MR. SCHENK READ TO YOU IN GREAT LENGTH DURING HIS SUMMATION THIS MORNING. MS. HOLMES WORKED PROACTIVELY BETWEEN 2013 AND 2015 TO GET THERANOS'S SYSTEM 4.0 APPROVED BY THE FOOD AND DRUG ADMINISTRATION. IF YOU LOOK AT SLIDE 29, YOU SEE THE REFERENCE TO EXHIBIT NUMBERS WHICH REFLECT THAT IN THE FALL OF 2013, THERANOS'S 4.0 SYSTEM OF TECHNOLOGY HAD REACHED A POINT WHERE THE COMPANY WAS WILLING TO GO TO THE FOOD AND DRUG ADMINISTRATION AND SAY, WE WANT TO BEGIN THE PROCESS OF BRINGING THIS TECHNOLOGY TO MARKET, AND WE WANT TO HAVE A DIALOGUE WITH YOU.

AND THEY DID THAT IN CONNECTION WITH ALL OF THE DIFFERENT METHODS OF ASSAYS, WHICH WE'LL DISCUSS IN A BIT. THEN IN NOVEMBER OF 2014, THERANOS ACTUALLY SUBMITTED WHAT IS CALLED A PREMARKET NOTIFICATION, WHICH YOU SAW DURING HER DIRECT TESTIMONY, SAYING WE'RE READY NOW TO BRING THIS MARKET -- THIS PROCESS, THIS TECHNOLOGY AND THIS SYSTEM TO MARKET, PLEASE GIVE US AN APPROVAL. AND OF COURSE THEN, AS YOU'VE HEARD A FEW TIMES IN THE CASE, IN JULY OF 2015, THE FDA DID APPROVE THERANOS'S TECHNOLOGY IN CONNECTION WITH THE HSV ASSAY. MS. HOLMES'S INTENT WAS PROFOUNDLY AFFECTED BY THAT. HOW DID SHE DEAL WITH THE FDA WHEN SHE TALKED TO THEM?

MR. DOWNEY: WELL, FIRST OF ALL, I WOULD SAY THAT SHE MADE VERY BROAD DISCLOSURES. SHE DISCLOSED WHAT WAS GOING ON IN CONNECTION WITH THERANOS'S BUSINESS IN GREAT DETAIL TO THE FDA. SHE EXPLAINED TO THEM THE CONCEPT THAT THERE WOULD BE TWO PHASES TO THE BUSINESS, PHASE I, THERANOS WOULD OPERATE A CENTRAL LAB; AND PHASE II, AFTER THERANOS HAD GAINED APPROVAL FROM THE FDA, THEY WOULD BEGIN TO ACTUALLY PLACE THEIR DEVICES AT LOCATIONS. BLOOD TESTS. SHE EXPLAINED THAT HERE IN THE FALL OF 2013. AND ALTHOUGH A LOT HAS BEEN MADE THROUGHOUT THE CASE AND A LOT WAS SUGGESTED THIS MORNING IN MR. SCHENK'S PRESENTATION, SHE WAS SENSITIVE ABOUT PEOPLE KNOWING THAT THE CLIA LAB AT THERANOS WAS USING THIRD PARTY DEVICES. IN FACT, WHEN SHE WENT TO THE FDA IN THE FALL OF 2013, SHE EXPLAINED THAT DURING THE PHASE I PROCESS, NOT ONLY WAS THAT GOING TO HAPPEN, BUT THAT WAS HAPPENING.

IF YOU LOOK AT EXHIBIT 15029, SHE LAYS OUT EVERY TEST THAT THE COMPANY WAS OFFERING, THE KIND OF DEVICE THAT TEST WAS OFFERED ON, AND THE TYPE OF ASSAY THAT WAS PERFORMED, WHETHER IT WAS A THERANOS ASSAY OR SOMEONE ELSE'S. SO SHE WAS VERY CLEAR CUT IN THESE DISCUSSIONS WITH THE FDA ABOUT WHAT WAS GOING ON. SECOND, AS I MENTIONED, SHE SUBMITTED -- SHE CAUSED THERANOS TO SUBMIT EVERY FORM OF ASSAY IT COULD DO TO THE FDA FOR APPROVAL IN THE FALL OF 2013, AROUND THE TIME THAT THERANOS LAUNCHED ITS SERVICE CENTERS IN WALGREENS STORES. SO THEY WERE COMPREHENSIVELY SAYING TO THE FDA, WE WANT TO BEGIN THE PROCESS WITH YOU OF GAINING APPROVAL FOR ALL OF OUR TECHNOLOGY. NEXT, THE 4.0 SYSTEM AS A WHOLE WAS SUBMITTED IN NOVEMBER OF 2014. WHY WAS THAT -- WHY IS THAT IMPORTANT? WHAT WE'VE HEARD THIS MORNING FROM MR. SCHENK AND THROUGHOUT THE CASE IS THAT REPRESENTATIONS WERE MADE DURING THE FALL OF 2014 THAT WERE FALSE AS TO THE CAPACITIES OF THERANOS'S TECHNOLOGY. AT THE TIME THAT MS.

HOLMES WAS HAVING THOSE CONVERSATIONS, SHE WAS SUBMITTING TO THE FDA AN APPLICATION FOR APPROVAL OF THE TECHNOLOGY THAT CONTAINED A FULL DESCRIPTION OF ITS CAPABILITIES AND THAT MADE THE ARGUMENT THAT THIS WAS TECHNOLOGY THAT WAS READY TO BE PLACED AT LOCAL LOCATIONS TO CONDUCT BLOOD TESTING SERVICES. THAT'S EXHIBIT 13288A. AND WE'LL TALK ABOUT SCIENTISTS AT THERANOS IN A MINUTE, BUT YOU WILL SEE THAT THAT WAS A VERY THOROUGH PRESENTATION TO THE FDA OF WHAT THERANOS THOUGHT ITS ABILITIES WERE, HOW THE SYSTEM WORKED, THE DATA THAT HAD BEEN GENERATED TO PROVE THAT THE TECHNOLOGY WORKED. EVERYTHING YOU WOULD EXPECT DONE IN A COMPREHENSIVE WAY. NOW, I THINK THERE'S A SUGGESTION GENERALLY AS PART OF THE GOVERNMENT'S CASE, AND I WANT TO DISPEL IT, WHICH IS THAT THERANOS WAS RELUCTANT TO SHOW ITS TECHNOLOGY TO REALLY ANYONE. YOU NOTICE THAT MR. SCHENK MENTIONED THIS MORNING THAT THERANOS DID NOT SEND DEVICES TO SCHERING-PLOUGH AS PART OF THE WORK THAT THEY DID TOGETHER.

I THINK YOU SHOULD NOT INFER FROM ANY PARTICULAR SITUATION SOME HESITATION ON MS. HOLMES'S PART TO EXPOSE THE TECHNOLOGY. IN FACT, WHEN SHE DEALT WITH THE FDA, SHE WENT TO THEM WITH A PRESENTATION WHICH GAVE THEM A VIDEO OF THE ENTIRE OPERATION OF THE INTERNAL PARTS OF THE SERIES 4.0 DEVICE SO THEY COULD WATCH, FROM SOUP TO NUTS, HOW DOES THIS DEVICE WORK? WHY WAS THERANOS CLAIMING THAT THE SYSTEM WAS READY FOR MARKET? NOW, THE DATE ON WHICH THE THERANOS 4.0 SYSTEM AND THE HSV-1 ASSAY WERE APPROVED WAS IN THE SUMMER OF 2015. I THINK YOU SAW DURING THE COURSE OF THE CASE THIS EMAIL FROM MS. HOLMES. YOU SEE HER REACTION AND THE PRIDE THAT SHE EXPRESSES THAT THE 4 SYSTEM HSV ASSAY BE APPROVED. THIS IS FOUR MONTHS BEFORE THE DIFFICULTIES THAT HAD AROSE DURING THE FALL THAT HAVE BEEN THE SUBJECT OF SO MUCH DISCUSSION. NOW, THAT'S WHAT IS REFLECTED IN HER DEALINGS WITH THE FDA, TRANSPARENCY, COMPREHENSIVENESS, THE PRESENTATION OF DATA.

THE ENTIRE SYSTEM IS PRESENTED TO THE FDA FOR APPROVAL. BUT I WANT TO LOOK NOW AT WHAT WAS HAPPENING INSIDE OF THERANOS, NOT WHAT WAS HAPPENING EXTERNALLY WITH RESPECT TO THE FDA OR OTHER OUTSIDE PARTIES. AND I WANT TO DRAW TO YOUR ATTENTION A SIMPLE FACT IN CONNECTION WITH THIS CASE THAT MIGHT NOT BE AS NOTICEABLE WHEN YOU SIT THROUGH THE CASE DAY AFTER DAY AFTER DAY. BUT I THINK YOU KNOW, AND MS. HOLMES TESTIFIED TO THIS, THAT SHE BELIEVED, STARTING AS EARLY AS 2010, THAT THERANOS WAS GOING TO BE CAPABLE OF PUTTING IN PLACE THIS 4.0 TECHNOLOGY THAT WOULD BE CAPABLE OF PERFORMING ANY BLOOD TEST.

MR. DOWNEY: AND I THINK YOU ALSO SAW, AND I'LL SHOW YOU IN A MOMENT SOME EXAMPLES OF IT, THAT OVER THE COURSE OF THE NEXT THREE TO FIVE YEARS, SHE RECEIVED REGULAR UPDATES ABOUT WHERE THAT TECHNOLOGY WAS. THAT'S FUNDAMENTAL AND CENTRAL TO HER THINKING WHEN SHE GOES OUT AND MAKES PUBLIC STATEMENTS. NOW, ASK YOURSELF, DURING THE COURSE OF THE GOVERNMENT'S CASE, HOW MANY WITNESSES WHO ACTUALLY WORKED ON THE BUILDING OF THERANOS'S TECHNOLOGY TESTIFIED? WE WERE HERE FOR THREE AND A HALF MONTHS. HOW MANY WITNESSES? THE ANSWER IS ONE. THERE WAS NOT ONE SINGLE WITNESS THAT THE GOVERNMENT CALLED WHO TESTIFIED ABOUT THE DEVELOPMENT OF THE HARDWARE THAT YOU HAVE HEARD SO MUCH ABOUT DURING THE COURSE OF THE CASE. THERE WAS NOT A SINGLE WITNESS WHO WAS CALLED WHO WORKED ON THE BUILDING OF THE TECHNOLOGY THAT WENT INTO THE SOFTWARE THAT WAS PART OF THE 4.0 SYSTEM.

AND WITH RESPECT TO THE ASSAYS THAT WERE DISCUSSED A LOT DURING THE CASE, THE ONLY WITNESS WHO WAS CALLED WHO WORKED ON THE DEVELOPMENT OF ASSAYS WAS MS. GANGAKHEDKAR, WHO I WILL DISCUSS IN A LITTLE BIT. BUT THE OTHER SCIENTISTS WHO WORKED ON THE DEVELOPMENT OF THE ASSAYS, THEY DIDN'T COME AND TESTIFY AT ALL ABOUT WHAT THEY BELIEVED THE CAPABILITIES OF THERANOS'S TECHNOLOGY WAS. SO IT WAS NOT UNTIL DOCUMENTS WERE INTRODUCED DURING MS. HOLMES'S TESTIMONY THAT YOU REALLY BEGAN TO SEE WHAT THE BELIEFS WERE OF THE ENGINEERS AND THE SCIENTISTS WITHIN THERANOS AS TO WHAT THE COMPANY BELIEVED IT WAS CAPABLE OF TECHNOLOGICALLY. AND LET ME LOOK A LITTLE BIT AT THE TECHNOLOGY HERE, WHICH IS THE DRAWING OF THE 4.0 SYSTEM THAT I SHOWED YOU. LOOK AT ALL OF THE NAMES OF PEOPLE THAT YOU'VE SEEN ON DOCUMENTS THAT SURROUND THIS TECHNOLOGY. THESE ARE THE NAMES OF PEOPLE WHO APPEAR ON DOCUMENTS IN THE CASE AS CONTRIBUTING TO BUILDING THIS SYSTEM.

AND I THINK YOU WILL CONFIRM WHEN YOU REVIEW THAT THAT THE ONLY WITNESS WHO CAME AND TESTIFIED WAS MS. GANGAKHEDKAR. BUT THAT DOESN'T LEAVE US COMPLETELY IGNORANT AS TO WHAT THEY THOUGHT. AND LET ME SHOW YOU FROM 2008 FORWARD WHAT MS. HOLMES WAS TOLD. FIRST, AS YOU KNOW, THERE WAS A 3.0 SERIES BEFORE THERE WAS A 4.0 SERIES. AND THAT'S THE DEVICE THAT WAS USED IN CONNECTION WITH, FOR EXAMPLE, PHARMACEUTICAL COMPANIES. AND IN CONNECTION WITH THAT, YOU SEE HERE THE REPORTS BEGAN TO COME IN TO MS. HOLMES IN CONNECTION WITH THE PROJECTS THAT THE COMPANY WAS DOING, THAT THE PERFORMANCE DESIGN GOALS WERE BEING DEMONSTRATED IN THE WORK THAT THERANOS WAS DOING. THE SYSTEM WAS BEING EVALUATED AT SEVERAL SITES, AND THAT THE RESULTS WERE EXCELLENT. THAT'S WHAT MS. HOLMES WAS TOLD ABOUT THE 3.0 DEVICE AND ITS PERFORMANCE DURING THE COURSE OF THE YEARS 2008 TO 2013. AND THIS IS THE OUTSET. THAT'S THE 3.0 DEVICE. NOW, THAT 3.0 DEVICE ITSELF HAD A LOT OF CAPACITY.

IT COULDN'T DO EVERY BLOOD TEST. IT COULD ONLY DO SOME BLOOD TESTS. IT COULD DO THE CLASS OF BLOOD TESTS OR THE METHOD OF BLOOD TESTING CALLED THE IMMUNOASSAYS. AND YOU'VE HEARD THAT TERM THROUGHOUT THE COURSE OF THE CASE. I WANT YOU TO BEAR IN MIND THAT THE 3 SYSTEM WAS DOING IMMUNOASSAYS AS WE GO FORWARD AND LOOK AT SOME OF THE REPRESENTATIONS TO INVESTORS. BUT DESPITE ITS LIMITATIONS IN METHOD, IT PERFORMED VERY WELL. IT WAS PART OF -- IT WAS DEPLOYED AND USED AS PART OF CLINICAL STUDIES. YOU SAW EVIDENCE ABOUT THE ARMY BURN STUDY. YOU SAW THE EVIDENCE ABOUT THE PERFORMANCE WITH STANFORD UNIVERSITY CONDUCTED A STUDY. THE REPORTS THAT MS. HOLMES GOT DURING THAT WINDOW WAS THAT THIS TECHNOLOGY, ALTHOUGH IT'S LIMITED TO ONE CLASS, IS EFFECTIVE. AND THEN IN 2009, LADIES AND GENTLEMEN, WHAT THE EVIDENCE SHOWED YOU IS THAT THE ENGINEERS AND SCIENTISTS AT THERANOS BEGAN TO THINK, WE COULD DO MORE THAN THIS. WE COULD DO MULTIPLE METHODS OF BLOOD TESTING.

AND IF WE COULD COMBINE THE RIGHT METHODS OF BLOOD TESTING, THEN WE CAN PERFORM THE SAME KINDS OF TESTS THAT ARE PERFORMED BY A CONVENTIONAL LAB. BUT CONVENTIONAL LABS CAN'T PERFORM THOSE TESTS AT THE POINT OF CARE. THEY CAN'T DO THEM IN A RETAIL STORE. THEY CAN'T DO THEM IN A DOCTOR'S OFFICE WITHOUT BEING SENT TO A CENTRAL LABORATORY. AND IN EARLY 2010, AS MS. HOLMES TOLD YOU, AND THESE DOCUMENTS REFLECT, MS. HOLMES WAS TOLD THAT THE RESULTS OF THAT EFFORT TO DEVELOP THAT TECHNOLOGY HAD BEEN SUCCESSFUL. I'D LIKE TO ASK YOU TO FOCUS IN PARTICULAR ON THIS EXHIBIT, EXHIBIT 7098, WHICH IS THE REPORT THAT WAS WIDELY CIRCULATED AMONGST THE SCIENTIFIC AND ENGINEERING TEAMS AT THERANOS, AND SHARED WITH MS. HOLMES AS ATTACHED TO THIS EXHIBIT.

MR. DOWNEY: IN THIS DOCUMENT DR. GIBBONS, WHO WAS LEADING ASSAYS AT THAT TIME, REPORTS THAT THE 4.0 SYSTEM WILL BE CAPABLE OF PERFORMING ANY MEASUREMENT, ANY MEASUREMENT REQUIRED IN A DISTRIBUTED TEST SETTING. HE THEN GOES ON TO TALK ABOUT HOW THAT WILL BE DONE, DIFFERENT FORMS OF TECHNOLOGY ARE GOING TO BE USED, AND THAT THIS WILL BE OPEN ARCHITECTURE, MEANING THAT MORE ASSAYS CAN BE ADDED TO IT OVER TIME AS THE ASSAYS ARE DEVELOPED. MS. HOLMES WAS TOLD THAT ABOUT THE 4.0 SYSTEM AS EARLY AS 4.0 -- AS EARLY AS 2010. NOW, YOU HAVE TO BEAR IN MIND THOSE REPRESENTATIONS TO MS. HOLMES AS YOU ASK ABOUT WHY WAS SHE TALKING IN THE WAY THAT SHE WAS TALKING EXTERNALLY ABOUT THE CAPACITIES OF THERANOS'S TECHNOLOGY.

NOW, OVER THE COURSE OF TIME AFTER THE 4.0 SYSTEM WAS DEVELOPED, IT WASN'T JUST THAT THE TECHNOLOGIES WERE COMBINED TO ALLOW THEM TO DO THIS, TO GIVE THEM THE CAPABILITY TO DO EVERY BLOOD TEST, BUT ACTUALLY IN THE RESEARCH AND DEVELOPMENT LAB AT THERANOS, HUNDREDS AND HUNDREDS OF ASSAYS WERE VALIDATED. WHEN MS. GANGAKHEDKAR TESTIFIED BACK IN SEPTEMBER, SHE TOLD YOU THAT THEY HAD VALIDATED 300 PROPRIETARY ASSAYS WITHIN THE ASSAY TEAM IN THE RESEARCH AND DEVELOPMENT FUNCTION. SO THEY THOUGHT THEY HAD A SYSTEM. THEY THOUGHT THEY HAD 300 VALID ASSAYS THAT THEY COULD PERFORM. THEY ALSO CAME TO UNDERSTAND THAT NOT ONLY HAD THEY VALIDATED THEM FOR R&D PURPOSES, BUT THEY WOULD BE ABLE, WITH THESE 300 ASSAYS, TO VALIDATE THEM ON A VERY QUICK BASIS WHEN THEY TOOK THEM INTO THE CLIA LAB. NOW, YOU'VE HEARD THAT THAT DIDN'T HAPPEN AND THERE WERE DIFFICULTIES IN CONNECTION WITH THE 3 SYSTEM VALIDATING ASSAYS.

BUT THEY BELIEVED THAT WITH RESPECT TO THE ASSAYS THAT THEY HAD DEVELOPED FOR THE 4 SYSTEM, THEY COULD BE VALIDATED VERY QUICKLY. IN THIS REPORT AT EXHIBIT 7329, DR. PANGARKAR REPORTED TO MS. HOLMES THAT THEY -- IF YOU LOOK AT THE BULLET POINT, HE'S REPORTING ON THE NUMBERS OF ASSAYS THAT THEY HAVE VALIDATED. AND IN THE LAST BULLET POINT HE REPORTS TO MS. HOLMES, OUR ASSAYS GIVE RESULTS THAT AGREE WITH PREDICATE METHODS WITHIN CLIA PRESCRIBED LIMITS. YOU'VE HEARD A LOT OF DISCUSSION ABOUT THE FOUR DIFFERENT METHODS, AND I'M NOT GOING TO TAKE YOU THROUGH THIS, BUT I DO WANT YOU TO TAKE DOWN THE EXHIBIT NUMBERS BECAUSE I DID SHOW YOU, THROUGH MS. HOLMES'S TESTIMONY, REPORTS OF EVERY FORM OF TECHNOLOGY THAT MS. HOLMES WAS GETTING AS TO ITS PROGRESS AND HOW COMPLETE IT WAS. THESE ARE EXHIBITS 7239, 7286, 7297, 7222, AND 7315.

ACROSS THOSE IN THE YEARS 2011, '12, AND '13, SHE WAS RECEIVING REGULAR REPORTS THAT THESE ASSAYS ARE READY AND WILL BE CAPABLE OF PERFORMING BLOOD TESTS ON THE 4.0 SERIES. SHE WAS ALSO TOLD THAT BY THE TIME THE PROCESS WAS DONE, MORE THAN 3,000 -- MORE THAN 1,000 CPT CODES WOULD BE COVERED BY THE ASSAYS THAT WOULD BE VALIDATED. FROM ALL OF THIS, WHAT DID MS. HOLMES TAKE AWAY? WELL, SHE TOOK AWAY THAT THERANOS HAD A TECHNOLOGY. THAT THE TECHNOLOGY HAD THIS CAPACITY. AND WHEN SHE TALKED ABOUT IT TO WHATEVER AUDIENCE, SHE WAS REPRESENTING WHAT WAS HAPPENING INTERNALLY AT THERANOS. IT'S VERY DIFFICULT TO EVALUATE THAT WITHOUT HEARING FROM THE SCIENTISTS AND ENGINEERS WHO WORKED ON DEVELOPING IT WITH HER. AT THE TIME OF THE LAUNCH, MR. SCHENK SHOWED YOU THIS MORNING SOME DOCUMENTS THAT REFLECTED THAT CERTAIN NUMBERS OF ASSAYS HAD BEEN VALIDATED.

YOU'LL RECALL THAT THE POINT OF HIS PRESENTATION WAS THAT WHEN THERE WAS A LAUNCH IN 2013, THAT THE NUMBER OF ASSAYS IN VARIOUS GROUPS WAS EITHER ZERO OR A SMALL NUMBER THAT HAD BEEN VALIDATED. BUT AT THE SAME TIME THAT MS. HOLMES WAS TOLD THAT, SHE WAS TOLD THAT 200 PROPRIETARY TESTS WOULD BE VALIDATED AND WOULD BE PART OF THE LAUNCH MENU. SHE'S TOLD THAT HERE BY DR. YOUNG ON AUGUST 19TH, 2013, ALMOST AT THE SAME TIME THAT THEY'RE REPORTING ON THE STATUS OF THOSE CLINICAL VALIDATIONS. SO MS. HOLMES WAS LIVING PRINCIPALLY IN A WORLD WITHIN THERANOS FOCUSSED ON RESEARCH AND DEVELOPMENT, AND IN THAT RESEARCH AND DEVELOPMENT FUNCTION AT THERANOS, THEY THOUGHT THAT THEY HAD INVENTED A TECHNOLOGY WITH MASSIVE CAPABILITY, AND MS. HOLMES WAS TELLING THE WORLD ABOUT THAT. LET ME FOCUS ALSO ON THE FEEDBACK THAT THERANOS GOT FROM OUTSIDERS DURING THE TIME PERIOD THAT THE CONSPIRACY COVERS.

MR. DOWNEY: LET'S LOOK FIRST JUST VERY BASICALLY AT A HUMAN LEVEL, THE FEEDBACK THAT MS. HOLMES GETS FROM PEOPLE SHE REALLY RESPECTS ABOUT WHAT THERANOS'S TECHNOLOGY IS CAPABLE OF DOING, BUT LET'S NOT DO IT IN CONNECTION WITH HER TESTIMONY ABOUT CONVERSATIONS THAT SHE HAD, BUT IN CONNECTION WITH THE TESTIMONY OF OTHERS WHO INTERACTED WITH THE SAME PEOPLE SHE WAS INTERACTING WITH. YOU'LL RECALL THAT BRIAN GROSSMAN, WHO WAS THE PRINCIPAL OF PFM, ONE OF THE INVESTORS, TESTIFIED THAT HE WANTED TO UNDERSTAND THE TECHNOLOGY, AND THAT ACTUALLY, WITHOUT MS. HOLMES'S KNOWLEDGE, HE REACHED OUT TO HER MENTOR, CHANNING ROBERTSON. AND RECALL WHAT CHANNING ROBERTSON IS REPORTED TO HAVE SAID ABOUT THE TECHNOLOGY, THAT THERE WAS NOT ANY TECHNICAL RISK IN THEIR CORE TECHNOLOGY, AND THAT THERE WAS NOTHING THE TECHNOLOGY COULDN'T DO.

THAT TYPE OF REVIEW WAS SIMILAR, I MENTIONED TO YOU THIS MORNING, OR EARLIER TODAY, THEY SENT THE TECHNOLOGY TO GSK AND IT VALIDATED IT AND SAID IT WOULD ELIMINATE THE NEED FOR A LAB. THEY HAD POSITIVE FEEDBACK IN THEIR PARTNERSHIP WITH THE MAYO CLINIC WHERE DEVICES WERE DEPLOYED AT THE MAYO CLINIC AND USED AND COMMENTS OF THE PHYSICIANS PARTICIPATING IN THOSE PROGRAMS WERE VERY POSSIBLE. AND YOU'LL READ, AS PART OF THIS ARTICLE THAT THE GOVERNMENT HAS BEEN MENTIONING BY MR. PARLOFF, WHAT A NUMBER OF OTHER MEDICAL EXPERTS SAID ABOUT THERANOS'S TECHNOLOGY DURING THE PERIOD OF THE SUPPOSED CONSPIRACY. I THINK WHAT YOU WILL SEE UPON REVIEW OF THOSE, AND PARTICULARLY THE INTERNAL DOCUMENTS WRITTEN BY WITNESSES YOU DID NOT HEAR FROM, THAT THERE WAS A STRONG BELIEF THAT THIS TECHNOLOGY HAD THE CAPABILITY TO PERFORM A BROAD RANGE OF TESTING.

IT'S ALSO TRUE, AND YOU'LL LEARN IN CONNECTION WITH THE PARTNERSHIP BETWEEN THERANOS AND WALGREENS, YOU'VE LEARNED THAT WALGREENS ASKED JOHNS HOPKINS, MAYBE THE -- CERTAINLY ONE OF THE TOP TEN MEDICAL FACILITIES IN THE UNITED STATES, TO LOOK AT THE TECHNOLOGY. NOW, I VIEW THIS NOT SO MUCH THROUGH THE LENS OF WHAT DID JOHNS HOPKINS SAY ABOUT THE TECHNOLOGY. YOU KNOW IT WAS POSITIVE THINGS. BUT I ALSO WANT YOU TO THINK ABOUT IT FROM THE PERSPECTIVE OF WHAT DOES IT SAY ABOUT MS. HOLMES, THAT SHE WAS WILLING TO TAKE THE TECHNOLOGY TO AN INSTITUTION LIKE JOHNS HOPKINS AND HAVE IT EVALUATED? WE KNOW WHAT THE WRITTEN RECORD REFLECTS AS TO WHAT JOHNS HOPKINS'S IMPRESSIONS WERE. THEY SAID -- YOU KNOW, THEY WERE ASKED, AS PART OF WHAT THEY WERE BEING TASKED TO DO, TO COMMENT ON THE VALIDITY AND THE USEFULNESS OF THERANOS'S TECHNOLOGY, AND THEY CONCLUDED THAT THE TECHNOLOGY WAS NOVEL AND SOUND, THAT IT COULD REPLACE A CENTRAL LAB, AND THAT IT DIDN'T HAVE ANY MAJOR WEAKNESSES.

THAT SAYS A LOT ABOUT THE TECHNOLOGY, BUT WHAT DOES IT SAY ABOUT MS. HOLMES? SHE WASN'T AFRAID TO HAVE THIS TECHNOLOGY VALIDATED. SIMILARLY, IN CONNECTION WITH THE PARTNERSHIP WITH SAFEWAY, YOU LEARNED THAT SAFEWAY DID NOT WANT TO PROCEED WITH THE PARTNERSHIP WITH THERANOS UNLESS ONE OF THE LEADING CLINICAL RESEARCHERS OF THE LAST 50 YEARS HAD THE OPPORTUNITY TO LEAD A GROUP THAT EVALUATED THE TECHNOLOGY, DR. SUE DESMOND-HELLMANN. MS. HOLMES WASN'T AFRAID TO SUBMIT THE DATA THAT MS. HOLMES HAD PREPARED, OR TO SUBMIT THE TECHNOLOGY FOR REVIEW, INCLUDING DR. DESMOND-HELLMANN PERSONALLY. THAT SAYS THAT SHE THOUGHT THE TECHNOLOGY MATCHED WHAT SHE WAS SAYING ABOUT THE TECHNOLOGY CERTAINLY TO WALGREENS, SAFEWAY, BUT ALSO SUBSEQUENTLY TO OTHERS. NOW, I WANT TO TALK LAST, IN YOUR EVALUATION OF MS.

HOLMES'S INTENT, ABOUT WHAT HAPPENED AFTER PROBLEMS WERE IDENTIFIED BY CMS IN CONNECTION WITH THERANOS'S CLINICAL LABORATORY OPERATIONS AND HOW SHE REACTED, WHAT THOSE REACTIONS MEAN AND WHAT THEY SHOULD LEAD YOU TO CONCLUDE WITH RESPECT TO WHAT MS. HOLMES HAS BEEN CHARGED WITH HERE. WELL, ONE OF THE FIRST THINGS THAT MS. HOLMES DID, ONE OF THE FIRST THINGS WAS TO ASK A LARGE GROUP OF NATIONAL SCIENTISTS, INCLUDING CLINICAL LABORATORY EXPERTS, TO COME TO THERANOS AND EVALUATE THE TECHNOLOGY, THE DATA, THE TECHNOLOGY ITSELF. WHAT DID THEY THINK WAS WRONG WITH THE TECHNOLOGY? WHAT DID THEY THINK SHOULD BE DONE IN REACTION TO THE FINDINGS OF CMS? AND YOU SAW SOME OF THAT. THAT WAS IN CONNECTION WITH THE SCIENTIFIC AND MEDICAL ADVISORY BOARD. WE WENT THROUGH THAT AND WE LOOKED AT SOME OF THOSE EMAILS. BUT SHE WAS NOT JUST ASKING HER INTERNAL PEOPLE TO EVALUATE WHAT HAPPENED. SHE WANTED TO KNOW THE VIEWS OF PEOPLE LIKE THE JOHNS HOPKINS SCIENTISTS WHO HAD DONE THE ORIGINAL REVIEW.

MR. DOWNEY: AND SHE ASKED THE BOARD MEMBER WITH THE MOST KNOWLEDGE OF CLINICAL MEDICINE, DR. FOEGE, WHO WAS THE FORMER DIRECTOR OF THE CENTER OF DISEASE CONTROL, TO LEAD THESE EFFORTS TO EVALUATE WHAT THE RESPONSE SHOULD BE. IT'S HARD TO SEE HOW SOMEONE ACTING WITH BAD INTENT WOULD UNDERTAKE THOSE STEPS IN RESPONSE TO THE TYPE OF CRITICISM THAT SHE WAS SUFFERING. NOW, CONSIDER ALSO WITH RESPECT TO HER RESPONSE THE ROLE OF DR. DAS. YOU HEARD MR. SCHENK TALK ABOUT DR. DAS TODAY AND HIS CONCLUSIONS AND SO FORTH. AND HE SAID TO YOU THAT WHAT DR. DAS DID AND WHAT MS. HOLMES'S REACTION WAS TO WHAT DR. DAS DID, THAT THAT WAS EVIDENCE OF NOTICE TO MS. HOLMES OF AN ISSUE. AND THAT'S TRUE, DR. DAS DID COME TO MS. HOLMES IN MARCH OF 2016 AND SAY THAT, I THINK LAB RESULTS GENERATED IN CONNECTION WITH THE 3 SERIES DEVICE IN THE CLINICAL LAB AT THERANOS SHOULD BE VOIDED. AND WHAT DID MS. HOLMES DO IN RESPONSE TO THAT?

HOW LONG DID IT TAKE HER TO REACT TO THAT BY VOIDING ALL OF THE TESTS IN THE CLINICAL LAB THAT HAD BEEN RUN ON THE EDISON DEVICE? NO TIME AT ALL. SHE TURNED ON A DIME. AND YOU KNOW WHY SHE HAD DONE THAT? BECAUSE, AS WE'LL DISCUSS IN CONNECTION WITH THE LAB, SHE DIDN'T ASK DR. DAS TO COME IN AND TELL HER WHAT SHE WANTED TO HEAR. SHE ASKED DR. DAS TO COME IN, AND AS HE TESTIFIED, TURN OVER EVERY ROCK, TURN OVER EVERY ROCK. AND DR. DAS CONCLUDED, AS PART OF THAT PROCESS, THAT STEP SHOULD BE TAKEN, AND SHE REACTED BY DOING EXACTLY WHAT HE HAD ADVISED. RECALL ALSO THAT AFTER THAT TIME, THE COMPANY RESTRUCTURED ITSELF. YOU HEARD FROM DR. BONANNI, AND DR. BONANNI TESTIFIED THAT HE UNDERTOOK A WIDE RANGE OF REFORMS IN THE STRUCTURE OF THE COMPANY, THE COMPLIANCE PROCEDURES, THE SYSTEMS FOR EVALUATING TECHNOLOGY, AND HE DESCRIBED THOSE AS MAJOR EFFORTS. AND HE SAID THIS WAS MS. HOLMES'S FOCUS IN RESPONSE TO THE CRITICISM THAT THE COMPANY HAD SUFFERED.

NOW, WE ALSO HEARD, DURING THE COURSE OF THE GOVERNMENT'S CASE, A PRESENTATION THAT WOULD HAVE LED ME TO BELIEVE THAT THERANOS WAS TRYING TO HIDE FROM THIRD PARTY REVIEW OF ITS TECHNOLOGY IN CONNECTION WITH PEER REVIEW OR EVALUATION BY OTHERS, AND THAT IT WAS NEVER ABLE TO SUCCESSFULLY CONCLUDE AN EFFORT LIKE THAT, AND PERHAPS NEVER EVEN ABLE TO UNDERTAKE AN EFFORT LIKE THAT. WITNESSES WHO TESTIFIED ABOUT THAT -- GENERAL MATTIS ACTUALLY MENTIONED IT IN PASSING, AS DID MR. EDLIN. LADIES AND GENTLEMEN, THAT'S NOT TRUE. THOSE WITNESSES DON'T KNOW WHAT HAPPENED BECAUSE THEY WEREN'T THERE THE FOLLOWING YEAR WHEN, AS I SHOWED YOU DURING THE COURSE OF MS. HOLMES'S DIRECT, SEVERAL PEER REVIEW ARTICLES WERE PUBLISHED. THERE WAS DATA AND RESEARCH SUBMITTED FOR PEER REVIEW. AND THE EXHIBIT NUMBERS ARE REFLECTED THERE. NOW, AGAIN I SAY, WHAT IS THE QUALITY OF THE GOVERNMENT'S EVIDENCE ON THAT INTENT POINT?

YOU DID NOT HEAR IN THE GOVERNMENT'S CASE FROM THE INDIVIDUALS WHO PARTICIPATED WITH THE TECHNOLOGY IN SUBMITTING IT FOR THESE PEER REVIEWS FOR EVALUATION, ET CETERA. YOU HEARD FROM TWO WITNESSES WHO LEFT AND STOPPED THEIR INVOLVEMENT WITH THE COMPANY BEFORE THOSE PEER REVIEW ARTICLES WERE PUBLISHED. THOSE WERE THE WITNESSES WHO WERE ASKED BY THE GOVERNMENT ABOUT THE PROCESS OF GAINING PEER REVIEW FOR THERANOS TECHNOLOGY AFTERWARDS. CONSIDER THAT IN EVALUATING WHETHER YOU SHOULD HAVE A REASONABLE DOUBT AS TO THE EVIDENCE THAT THE GOVERNMENT HAS PROVIDED YOU WITH. NOW, WE TALKED A LITTLE BIT AGO ABOUT WHAT EFFECT DOES ALL OF THIS EVIDENCE HAVE IN YOUR PERCEPTION OF THE UNDERLYING OFFENSES? WELL, AT THE END OF THE DAY, THE QUESTION YOU'RE REALLY ASKING YOURSELF IS, WHAT WAS MS. HOLMES'S INTENT? WAS SHE TRYING TO DEFRAUD PEOPLE? DID SHE BELIEVE IN GOOD FAITH IN HER TECHNOLOGY? DID SHE RESPOND TO EVENTS IN A WAY THAT SUGGESTS SHE KNEW SHE HAD BEEN CAUGHT?

I WOULD SAY TO YOU, LADIES AND GENTLEMEN, THAT THIS EVIDENCE, TAKEN IN AGGREGATE, SAYS TO YOU THE FOLLOWING: SHE BELIEVED THAT SHE HAD INVENTED A VERY VALID FORM OF TECHNOLOGY THAT SHE WAS SUBMITTING TO THE FOOD AND DRUG ADMINISTRATION FOR APPROVAL TO TAKE TO THE MARKET. IT SAYS THAT SHE BELIEVED THAT OTHERS OUTSIDE OF THE COMPANY SHARED THAT VIEW, AND SHE HAD NO FEAR OF SHOWING THAT TECHNOLOGY TO PEOPLE OUTSIDE OF THE COMPANY. AND IT SAYS TO YOU THAT AS SOON AS SOMEONE SAID, NO, THERE ARE PROBLEMS HERE, HER REACTION WAS TO INVITE PEOPLE IN TO LOOK FOR THOSE PROBLEMS AND ROOT THOSE PROBLEMS OUT.

MR. DOWNEY: THE QUESTION YOU WILL BE ASKING YOURSELF ULTIMATELY AS PART OF DELIBERATION HERE IS, ARE THOSE THE ACTIONS OF SOMEONE WHO HAD BEEN ENGAGED IN A CONSPIRACY TO DEFRAUD PEOPLE? IF YOU FIND THAT THEY ARE NOT, THIS IS THE EFFECT ON YOUR VERDICT FORM. IF THE GOVERNMENT FAILS TO PROVE THAT ONE ELEMENT BEYOND A REASONABLE DOUBT, THEN WITH RESPECT TO THE COUNTS THAT ARE IN YOUR VERDICT FORM, YOU SHOULD RETURN A VERDICT OF NOT GUILTY. NOW, HAVING REVIEWED THE EVIDENCE THAT I THINK ACCURATELY REFLECTS WHAT MS. HOLMES'S INTENT WAS DURING THIS PERIOD, I WANT TO TAKE A MOMENT TO LOOK AT THE EVIDENCE THAT THE GOVERNMENT STRONGLY RELIED ON THROUGHOUT THE COURSE OF THE CASE AND REALLY AS PART OF MR. SCHENK'S PRESENTATION OF EVIDENCE THIS MORNING. AND I THINK IT'S FAIR TO SAY THAT THE GOVERNMENT HAS FIVE, SIX, SEVEN DIFFERENT AREAS THAT THEY'VE EMPHASIZED WHERE THEY SAY THERE WAS A NONDISCLOSURE, OR THEY SAY THAT THERE WAS AN OVERSTATEMENT, OR THEY SAY THAT THERE WAS SOME TYPE OF ACTIVITY ON MS.

HOLMES'S PART THAT WAS DESIGNED TO CONCEAL SOMETHING. SO I WANT TO TAKE THOSE ONE BY ONE. FIRST, YOU HEARD THIS MORNING FROM MR. SCHENK THAT THERANOS DID NOT HAVE THE TESTING CAPABILITIES THAT MS. HOLMES WAS PUBLICLY SAYING THAT IT HAD, AND HE PRESENTED THIS EVIDENCE ACROSS A WIDE RANGE OF EMAILS AND TESTIMONY AND SO FORTH. AND THE GIST OF IT WAS THAT MS. HOLMES FREQUENTLY SAID FORMULATIONS LIKE WE CAN DO MORE THAN 1,000 LABORATORY TESTS, WE CAN DO ANY LAB TEST, WE CAN DO ANY TEST AVAILABLE, ET CETERA. I HAVEN'T PUT EVERY ONE THAT MR. SCHENK MENTIONED, BUT I THINK YOU GET THE GIST OF IT. THAT IS THE STATEMENT THAT HE IS VERY FOCUSSED ON. NOW, HOW DO WE KNOW THAT MS. HOLMES ACTUALLY BELIEVED THAT STATEMENT TO BE TRUE? WELL, I'VE BEGUN TO TELL YOU THE STORY OF THE 4.0 SERIES, AND I'LL TELL YOU IT MORE IN CONNECTION WITH THE PARTNERSHIP WITH WALGREENS.

BUT YOU KNOW AS A BACKDROP THAT THERE WAS AN INVENTION AND DEVELOPMENT OF TECHNOLOGY IN THERANOS THAT, AS OF 2013, HAD BEEN GOING ON FOR YEARS WHERE PEOPLE IN THE COMPANY ARE WIDELY TALKING ABOUT THE TECHNOLOGY AS HAVING THE CAPABILITY TO PERFORM ANY BLOOD TEST. HOW DOES THE GOVERNMENT TRY TO AVOID FOCUSSING ON THAT AS PART OF ITS CASE? IT FOCUSES ON WHAT WAS GOING ON IN THE CLINICAL LAB DURING WHAT MS. HOLMES TOLD YOU SHE THOUGHT WOULD BE A VERY BRIEF PERIOD BEFORE APPROVAL OF THE TECHNOLOGY AND SAYS THAT THERE WERE DIFFICULTIES WITH THE 3.0 SERIES BECAUSE THE NUMBER OF TESTS APPROVED IN CONNECTION WITH THAT WAS INSUFFICIENT. NOW, IS THAT A PROBLEM THAT MS. HOLMES WAS NOT TRANSPARENT ABOUT WITH OUTSIDERS WHEN THE ISSUE CAME UP? WELL, LET'S LOOK AT WHAT HAPPENED IN HER EXCHANGES WITH ROGER PARLOFF, PARTS OF WHICH WERE SHOWN TO YOU BY MR. SCHENK THIS MORNING. HERE IS HER EXCHANGE WITH MR. PARLOFF WHERE MR.

PARLOFF IS TRYING TO UNDERSTAND WHAT IS GOING ON IN CONNECTION WITH HOW TESTS ARE OFFERED IN THERANOS SERVICE CENTERS AT THIS MOMENT. AND HE ASKS HER A QUESTION ABOUT THAT. AND SHE SAYS, WELL, WE HAVE VALIDATION REPORTS FOR THESE TESTS THAT GO BACK MANY YEARS. SHE'S REFERRING TO THE 300 VALIDATION REPORTS THAT YOU HAVE LEARNED ABOUT AS EVIDENCE IN MS. HOLMES'S TESTIMONY. AND THEN HE SAID ONE OF THE TESTS WE'RE GOING TO DO -- SHE SAID ONE OF THE TESTS -- I THINK THAT'S ONE OF THE TESTS THEY'RE GOING TO DO TODAY IS POTASSIUM, AND THE POTASSIUM REPORT IS FROM I THINK 2012. THAT'S TRUE FOR THE R&D VALIDATION REPORT. AND SHE SAYS, WE HAVE LOTS OF TESTS THAT WE HAVE VALIDATED ON OUR SYSTEMS A LONG TIME AGO. MR. PARLOFF SAYS, UH-HUH. MS. HOLMES RESPONDS, BUT WE HAVEN'T BROUGHT INTO THE LAB YET. WE'RE CONTINUALLY BRINGING INTO THE LAB. SHE SAYS, THESE TESTS ARE NOT PART OF OUR OFFERING IN THE CLINICAL LAB.

WE HAVE NOT YET BEEN ABLE, AS THE TERMINOLOGY IS USED BY ALL OF THE CLINICAL LAB PERSONNEL, WE HAVE NOT BROUGHT THEM UP IN THE LAB. AND THEN IF YOU GO TO THE NEXT PART, THE SYSTEMS CAN RUN ALL OF THESE TESTS, BUT THE SPEED WITH WHICH WE BRING UP NEW AND MORE FINGERSTICK TESTS IN OUR LAB IS SOMETHING THAT WE'RE CONSTANTLY WORKING TO PUT MORE AND MORE ON THE PLATFORM. THAT'S A PERFECT DEMONSTRATION OF HER UNDERSTANDING OF THE TECHNOLOGY. THE TECHNOLOGY HAS THE CAPABILITY, BUT OVER TIME THEY WILL ADD TO THAT BY VALIDATING INDIVIDUAL ASSAYS. NOW, IT'S ALSO THE CASE THAT THERE HAS BEEN SPECIFIC FOCUS ON A NUMBER OF THERANOS'S CAPABILITIES AS THEY RELATE TO CPT CODES, ET CETERA. THIS IS REALLY A VERY SIMPLE ISSUE. CPT CODES RELATE TO BILLING NUMBERS.

MR. DOWNEY: THERE'S NOT EVEN EVIDENCE REALLY OF HOW MANY BLOOD TESTS THERE ARE IN THE WORLD, BUT THERE HASN'T BEEN A LOT OF EVIDENCE SUGGESTING THAT THE THOUSAND ASSAYS WOULD BE WANTED OR NEEDED IN CONNECTION WITH OPERATING A STANDARD CLINICAL LAB. A THOUSAND CPT CODES WERE PLANNED TO BE COVERED. YOU SEE HERE DR. YOUNG REPORTED IN 2012 TO MS. HOLMES THAT MORE THAN A THOUSAND WOULD BE ON THE LIST THAT WOULD BE OFFERED. THERE WERE ABOUT 116 THAT WOULDN'T BE OFFERED. SO WHEN SHE USES THIS NUMBER A THOUSAND EXTERNALLY, SHE'S REFERRING BACK TO HER CONVERSATIONS WITH DR. YOUNG ABOUT THAT. THREE HUNDRED SAMPLES WERE VALIDATED. YOU KNOW THAT. SEVENTY ASSAYS, SMALL SAMPLE ASSAYS WERE USED IN THE CLIA LABORATORY. AND THEY THOUGHT, AS A RESULT OF REPORTING BY DR. YOUNG, THAT 43 TESTS WOULD COVER 90 PERCENT OF RETAIL ORDERS. YOU LOOK AT THE STATEMENTS THAT MS. HOLMES MADE OVER TIME, AND YOU SEE IF THEY'RE CONSISTENT WITH THAT.

AND I SUBMIT TO YOU THEY WILL BE BECAUSE SHE IS TALKING ABOUT THE 4.0 DEVICE, AND SHE IS TALKING ABOUT CAPACITIES THAT TIE BACK TO WHAT SHE WAS BEING TOLD IN THE CLINICAL LAB. NOW, THERE'S SOME SUGGESTION BY MR. SCHENK THAT, YOU KNOW, THE DIFFERENCE BETWEEN TESTS AND CPT CODES DOESN'T MATTER. I DON'T THINK THAT'S A FAIR CHARACTERIZATION. INVESTORS TESTIFIED IN THE CASE THAT THEY UNDERSTOOD THAT. MR. GROSSMAN SAID -- WAS ASKED THAT AND HE SAID HE KNEW THERE WAS A DIFFERENCE BETWEEN A CPT CODE AND A TEST. AND MR. PARLOFF, IN HIS REPORTING, REPORTS THAT A THOUSAND CPT CODES AS A THOUSAND TESTS, AND THAT'S BEEN FOCUSSED ON TO A GREAT DEGREE BY THE GOVERNMENT. BUT HOW DID THAT REALLY HAPPEN? WELL, IT HAPPENED, AS WE'LL SEE IN A BIT, THAT MS. HOLMES ACTUALLY TOLD MR. PARLOFF WE CAN DO A THOUSAND CPT CODES, BUT HE TRANSLATED THAT IN HIS REPORTING INTO A THOUSAND TESTS.

NOW, THE SECOND CATEGORY OF STATEMENTS THAT THE GOVERNMENT IS FOCUSSED ON IS STATEMENTS ABOUT ACCURACY AND AUTOMATION AND HOW ACCURATE THERANOS'S TESTS WERE, AND HOW AUTOMATED THERANOS'S TESTS WERE. AND YOU'VE HEARD THAT AND YOU'VE HEARD IT AGAIN THIS MORNING. I WANT TO GIVE YOU A VERY SIMPLE AND CLEAR EXPLANATION OF WHAT MS. HOLMES UNDERSTOOD ABOUT THE AUTOMATION OF THERANOS TECHNOLOGY, BECAUSE WITHOUT ARGUING ABOUT WHAT ACCURACY IS RETROSPECTIVELY, AS THE GOVERNMENT'S CASE DOES, WE KNOW WHAT MS. HOLMES BELIEVED SHE WAS SAYING WHEN SHE SAID THERANOS'S TECHNOLOGY WAS MORE ACCURATE. SHE SAID THERE WERE TWO ASPECTS TO IT. RECALL THIS. THIS WAS JUST INTRODUCED IN THE CASE DURING MS. HOLMES'S TESTIMONY LAST WEEK. A CLAIM IS BROUGHT UP BY TYLER SHULTZ AND HE SAYS, YOU'RE SAYING YOU'RE MORE ACCURATE, BUT I DON'T THINK YOU'RE MORE ACCURATE BASED ON MY ANALYSES. MS. HOLMES COMMENTS ON HIS COMMENT AND SHE USES SCIENTIFIC TERMINOLOGY IN RESPONSE TO THAT.

SHE SAID, "ADD PRE-ANALYTICAL ERROR AND VARIANCE POINT. THIS IS WHAT 'THE WALL STREET JOURNAL' AND EVERYONE ELSE IS TALKING ABOUT BY THE WORD 'ACCURACY.'" SECOND ASPECT OF WHAT THEY MEAN BY THAT IS VARIABILITY OVER TIME. NOW, WHAT DOES THAT MEAN? WELL, SHE'S LINKING THE IDEA OF AUTOMATION AND ACCURACY TO THE COMMENTS THAT SHE HAS MADE PUBLICLY. WHAT DO THOSE COMMENTS MEAN? WELL, WHEN SHE TALKS ABOUT AUTOMATION, WHAT SHE'S TALKING ABOUT IS THE CONCEPT THAT IN THE 4.0 SYSTEM, THERE WON'T BE, FOR EXAMPLE, THE TRANSPORT OF SAMPLES BACK TO A CENTRALIZED CLINICAL LAB. THE TEST WILL BE RUN ON SITE. THE ONLY HUMAN PARTICIPATION IN THOSE TESTS WILL BE INSERTING THE SAMPLE INTO THE 4.0 DEVICE. IN CONNECTION WITH THERANOS'S ACTIVITIES OVER TIME, THEY TALKED ABOUT THIS CONCEPT A LOT. YOU SEE HERE AN ARTICLE WAS SENT TO MS. HOLMES IN 2012 TALKING ABOUT THE HUMAN INTERVENTION WAS THE SOURCE OF ERROR. AND THIS NUMBER IS USED A LOT INSIDE OF THE DOCUMENTS THAT YOU SEE INSIDE OF THERANOS.

93 PERCENT OF TESTING ERRORS WERE BELIEVED TO COME FROM HUMAN PARTICIPATION IN THE PROCESS OF BLOOD TESTING. SO IF THE 4.0 SYSTEM WERE APPROVED AND PLACED AT THE SITE OF TESTING, THOSE ERRORS WOULD PRESUMABLY BE ELIMINATED. THAT IS WHAT MS. HOLMES WAS TALKING ABOUT WHEN SHE TALKED TO REPORTERS. HOW DO WE KNOW THAT? WELL, IF YOU LOOK AT THE BACK AND FORTH BETWEEN THERANOS AND "THE WALL STREET JOURNAL," BEFORE "THE WALL STREET JOURNAL" ARTICLE WAS PUBLISHED IN SEPTEMBER OF 2013, THEY'RE ASKED, THEY TRANSMIT THROUGH GROW MARKETING, WHICH AS YOU HEARD WAS MANAGING THERANOS'S RELATIONSHIP WITH THE REPORTER, THEY'RE ASKING ABOUT, WHY ARE YOU USING THE STATIC OF 93 PERCENT OF ERRORS, AND IS THERE A MORE RECENT STATIC?

MR. DOWNEY: MS. HOLMES'S BROTHER RESPONDS AND HE CITES THE 1993 ARTICLE, BUT HE THEN GOES ON TO CITE OTHER ARTICLES TALKING ABOUT THIS PRECISE CONCEPT. THAT'S WHAT MS. HOLMES CLEARLY WAS TALKING ABOUT WHEN SHE SPOKE, AND IT IS CLEAR FROM THE CONTEMPORANEOUS DOCUMENTS THAT'S WHAT SHE UNDERSTOOD SHE WAS SAYING. WHAT IS THE OTHER CONCEPT THAT SHE WAS TRYING TO CONVEY? WELL, SHE MENTIONED IT IN THAT OTHER LITTLE COMMENT IN RESPONSE TO TYLER SHULTZ. SHE'S TALKING ABOUT VARIABILITY OVER TIME. WHAT DOES THAT MEAN? WELL, WHAT THAT MEANS IS THAT THERANOS WAS DESIGNING A PROCESS FOR THE MANUFACTURE OF ITS 4.0 DEVICES WHERE THEY WOULD BE WHAT IS CALLED CALIBRATED TO EACH OTHER, SO THAT A DESIRE WOULD BE THAT EVERY 4.0 DEVICE WOULD GENERATE RESULTS THAT WERE SIMILAR AND MEASURED IN THE SAME RANGE AS EVERY OTHER DEVICE.

SO IF ONE WENT TO A THERANOS SERVICE CENTER OVER YEARS, IT WOULD BE ABLE TO KEEP VERY GOOD TRACK OF WHERE YOUR SODIUM LEVEL WAS AND OTHER NORMAL MEASUREMENTS THAT YOU TRY TO TAKE ACCOUNT FOR. IS THAT TRUE TODAY? AS MS. HOLMES TESTIFIED, YOU MAY BE SURPRISED TO LEARN THAT IT'S NOT. WHEN YOU GET ONE BLOOD TEST, IT MIGHT BE ON ONE FORM OF MACHINE. WHEN YOU GET THE SECOND BLOOD TEST, IT MIGHT BE ON A DIFFERENT FORM OF MACHINE, AND THE COMPARISON OF THOSE TWO RESULTS MAY NOT BE AS MEANINGFUL AS YOU THINK. WHEN SHE TALKED ABOUT ACCURACY, SHE WAS TALKING ABOUT THIS CONCEPT OF VARIATION AND THE VARIABILITY OF RESULTS OVER TIME. AND WE SEE HERE, LEST THERE BE ANY DOUBT ABOUT WHAT SHE WAS TALKING ABOUT, THIS CONCEPT WAS EXPLAINED IN THE SLIDE DECK SENT TO MANY OF THE INVESTORS. IT'S DONE THROUGH THE STANDARDIZATION OF A SYSTEM AS THEY EMERGE OVER TIME. LET'S TALK NEXT ABOUT SOME OF THE PARTICULAR ISSUES WHICH WERE FOCUSSED ON BY MR. SCHENK THIS MORNING THAT APPEARED ON THE WEBSITE. MR.

SCHENK QUESTIONS THE BASIS FOR THE REPRESENTATION THAT APPEARED ON THE WEBSITE ABOUT THE COEFFICIENT OF VARIATION, AND THE QUESTION IS, WHERE DID THIS COME FROM AND WHY DID MS. HOLMES BELIEVE THAT THAT SLIDE, WHICH APPEARED AS MR. EDLIN TESTIFIED AND AS APPEARS IN CERTAIN DECKS, WHY DID SHE BELIEVE THAT WAS A VALID STATEMENT TO MAKE? WELL, BECAUSE MR. EDLIN TALKED TO DR. YOUNG ABOUT IT, AND HE CONVEYED WHAT THE ACCURATE SCIENCE WAS IN RESPONSE. YOU SEE THAT HERE IN COMMENTARY BY DR. YOUNG IN RESPONSE TO QUESTIONS SPECIFICALLY ON THE COEFFICIENT OF VARIATION WITH RESPECT TO THE VITAMIN D RANGE. ALSO, THERE WAS A QUESTION ABOUT HOW CAN YOU SAY YOUR SAMPLES REMAIN FRESH AND YOU GET BETTER TESTS, THAT HAS BEEN QUESTIONED BY THE GOVERNMENT DURING THE COURSE OF THE CASE, AND THE EVIDENCE SHOWED YOU THAT FAR FROM BEING CAVALIER ABOUT ADVICE THAT MS. HOLMES RECEIVED AS TO WHAT WAS SAID ON THE WEBSITE, SHE REACTED TO IT IN A VERY PARTICULAR WAY.

SO LET'S LOOK AT THIS INTERACTION BETWEEN HER AND DR. YOUNG WHERE DR. YOUNG WAS MAKING A PARTICULAR CLAIM BASED ON A SET OF ASSUMPTIONS AS TO HOW LONG SAMPLES WERE STORED WITHIN THE THERANOS LAB DURING THE TIME THAT IT WAS PHASE I AND WHAT WAS THAT BEING COMPARED TO. DR. YOUNG GAVE A NUMBER. MS. HOLMES SAID, WELL, WHAT DOES THAT MEAN IN TERMS OF WHETHER IT'S REFRIGERATED OR NOT? DR. YOUNG RESPONDED, AND SHE CAME BACK AND SAID, WE SHOULD REFLECT THAT WE'RE MAKING AN ACCURATE CLAIM. SHE ACTUALLY WAS WITHIN THE COMPANY MONITORING WHAT THE SCIENTISTS SAID AND MAKING SURE THAT THE ADDITIONS REFLECTED ACCURATE INFORMATION. SIMILARLY, MR. SCHENK FOCUSSED TODAY ON STATEMENTS ABOUT SPEED. THAT'S BEEN FOCUSSED ON THROUGHOUT THE CASE. HOW CAN YOU MAKE THESE CLAIMS ABOUT SPEED? OF COURSE THOSE CLAIMS IN THE MAIN RELATED TO POINT OF CARE SERVICE AS OPPOSED TO SERVICE IN A CLINICAL LAB. THAT WAS NO MYSTERY TO THE INVESTORS WITH WHOM MS. HOLMES WAS TALKING. WE SEE -- WE SAW IN MR.

GROSSMAN'S TESTIMONY THAT HE KNEW THERANOS WASN'T DOING ITS TESTING WITHIN FOUR HOURS, EVEN THOUGH THAT WAS ON THE SLIDE DECK THAT WAS SENT TO HIM. SIMILARLY, MR. MIQUELON TESTIFIED THAT CONTEXT IS IMPORTANT FOR THESE KINDS OF REPRESENTATIONS. THE LAST ISSUE THAT MR. SCHENK MENTIONED WITH REGARD TO SCIENTIFIC CLAIMS ARE CLAIMS ABOUT THE CONCEPT OF REFLEX TESTING. WHY WAS THERANOS SAYING, WE CAN REACT, AS IT APPEARS IN MR. RAGO'S ARTICLE, WE CAN PERFORM FOLLOW-ON TESTS? WELL, ITS TEST MENU DID OFFER THESE KINDS OF TESTS. LOOK AT EXHIBIT 3741A. THIS IS THE TEST MENU THAT IS AVAILABLE TO ANYONE WHO LOOKS FOR IT ON A VISIT TO A THERANOS STORE, AND IT TELLS YOU WHICH TEST OFFERED REFLEX TESTING AND WHICH TESTS DIDN'T.

MR. DOWNEY: THE SUGGESTION THAT MS. HOLMES MADE A CLAIM THAT WAS BROADER IN "THE WALL STREET JOURNAL" ARTICLE IS TEMPERED BY THE FACT THAT THOSE WHO WENT TO GET TESTS KNEW EXACTLY WHAT TESTS WERE AVAILABLE AND THOSE WHERE IT WAS UNAVAILABLE. NOW, LET'S TALK A LITTLE MORE ABOUT SOME OF THE BIGGER CONCEPTS THAT I THINK ARE IMPORTANT IN THE CASE. IN ADDITION TO ALL OF THESE TECHNICAL AND SCIENTIFIC ISSUES, THERE'S A BASIC CLAIM MADE AGAIN THIS MORNING THAT MS. HOLMES DID NOT DISCLOSE TO INVESTORS THE EXISTENCE OF THE PHASE I CENTRAL LABORATORY MEASURE. MR. SCHENK SHOWED YOU AN EMAIL FROM MR. EISENMAN WHERE HE WAS SAYING, I DON'T KNOW WHETHER THE TESTING IS PERFORMED IN THE WALGREENS STORE OR WHETHER IT'S PERFORMED OFF SITE. I THOUGHT IT WAS IN THE WALGREENS STORE. WELL, THAT'S NOT FOR THE LACK OF PUBLIC INFORMATION ABOUT THAT FACT. IF YOU LOOK AT THE RAGO ARTICLE, MR. RAGO HIMSELF SAYS THE TESTING WAS DONE IN A THERANOS LABORATORY. WHEN MS. HOLMES SPOKE TO MR.

PARLOFF, SHE TALKED TO HIM ABOUT THE PHASE I, PHASE II MODEL. HE WAS AWARE THAT THE TESTING WAS DONE NOT IN THE STORES BUT IN A CENTRALIZED LAB LOCATION. INDIVIDUALS WHO WALKED INTO THE STORES KNEW THAT THE TESTING WAS NOT PERFORMED WITHIN THE STORES. MR. EISENMAN LIVES IN HOUSTON AND HAD NOT VISITED A WALGREENS STORE. NEXT, THERE WAS A LONG DISCUSSION TODAY ABOUT THE DISCLOSURE OF WHETHER OR NOT VENOUS TESTING WAS BEING PERFORMED AND WHY VENOUS TESTING WAS BEING PERFORMED, ET CETERA. LET ME FIRST DEAL WITH THE QUESTION OF WHETHER IT WAS KNOWN TO INVESTORS AND OTHERS THAT THERANOS WAS DOING VENOUS TESTING, AS WELL AS OTHER FORMS OF TESTING. THE ANSWER IS THAT IT'S CLEAR FROM THE RECORD THAT HAS BEEN PRESENTED, THIS WAS NO SECRET. THE FDA WAS TOLD IN THE SUBMISSION THAT WENT TO THE FDA IN THE FALL OF 2013 THAT VENOUS TESTING WAS BEING PERFORMED. AS I MENTIONED BEFORE, THE SPECIFIC MACHINES BEING USED WERE IDENTIFIED.

AGAIN, THE TEST MENU THAT WAS IN THERANOS STORES DISCLOSED AND OFFERED THE OPPORTUNITY FOR VENOUS TESTS AS INDICATED HERE WERE THOSE FORMS MARKED OFF TRADITIONAL PHLEBOTOMY SHOWING THAT WAS A TRADITIONAL FORM OF TESTING THAT THERANOS WAS DOING. IN THE PRESS RELEASE THAT WAS DONE JOINTLY BY THERANOS AND WALGREENS BEFORE TESTING BEGAN, IT SAID THAT TRADITIONAL METHODS, MEANING VENOUS METHODS, WILL BE USED IN CONNECTION WITH THE PROGRAM THAT IS BEING RUN IN WALGREENS STORES. THERE WAS A PRESS RELEASE ISSUED BY THERANOS IN NOVEMBER OF 2013, AND THEY SAID, WE SOMETIMES USE TRADITIONAL METHODS LIKE VENOUS TESTING. THE FACT THAT THERANOS WAS USING VENOUS TESTING WAS DISCLOSED ON ITS WEBSITE AS YOU SEE HERE. AND IN FACT, THE DISCLOSURE THAT WAS PROPOSED TO BE INCLUDED WAS A DISCLOSURE WHICH SAID, WHICH PUT IN A FOOTNOTE THE COMMENT THAT THERE WERE TRADITIONAL METHODS BEING USED. HOW DID MS. HOLMES REACT TO THAT SUGGESTION? THIS EMAIL REFLECTS HOW SHE REACTED.

SHE SAID, "IF WE ARE GOING TO SAY SOMETHING LIKE THIS WE NEED TO OWN IT. THIS COPY SHOULD BE UPDATED." WE SHOULD SAY THIS, AND WE SHOULD SAY IT IN THE TEXT. THAT IS CLEAR EVIDENCE OF WHAT MS. HOLMES'S INTENT WAS AS TO SUPPOSED NONCONCEALMENT OR NONDISCLOSURE OF A FACT IN CONNECTION WITH THERANOS'S OPERATIONS. ALSO, THE FACT THAT THERE WAS VENOUS TESTING, OF COURSE, IS PUBLISHED ELSEWHERE ON THE WEBSITE. AND IT WAS DISCLOSED SEPARATELY ON THE WALGREENS WEBSITE. IT'S JUST NOT CREDIBLE THAT INVESTORS WERE UNAWARE OF THE REVIEW, OF THE PROVISION OF THE VENOUS TESTING METHODS. THOSE WHO SAID SO, FOR EXAMPLE, MS. PETERSON ACKNOWLEDGED THAT SHE HAD READ THE WEBSITE, AND, OF COURSE, ON THE WEBSITE THERE'S A DISCLOSURE OF IT. OTHER INVESTORS WENT TO WALGREENS STORES AND HAD THEIR BLOOD TESTED, AND THEY HAD VENOUS TESTS ON SOME OCCASIONS. THAT WAS TRUE FOR MR. TOLBERT, MR. GROSSMAN, AND MR. LUCAS. ALSO IN CONNECTION WITH THE EVALUATION BY PFM OF ITS INVESTMENT IN THERANOS, THEY DISCUSSED WHAT SIGNIFICANCE DOES IT HAVE THAT THERE IS VENOUS TESTING? WILL THAT AFFECT OUR INVESTMENT? YOU KNOW WHY THEY DID THAT? BECAUSE THE FACT THAT THERE WAS VENOUS TESTING WAS DISCLOSED IN THE SLIDE DECK THAT WAS SENT TO THEM AS YOU SEE HERE WITH THE PICTURE IN THE LOWER RIGHT HAND CORNER SHOWING THE DRAWING OF A VENOUS SAMPLE.

MR. DOWNEY: MR. BURD, WHO WAS MENTIONED THIS MORNING, HE TESTIFIED THAT HE SPOKE WITH MS. HOLMES ABOUT THE FACT THAT THERANOS WAS GOING TO BE OPERATING WHAT WAS CALLED A DINOSAUR LAB, MEANING A LAB USING THE OLD METHODS, THE VENOUS METHODS, AND HOW HE WAS NOT INTERESTED IN OPERATING THAT KIND OF -- PARTICIPATING WITH THAT KIND OF A LAB. NOW, THE OTHER ISSUE WITH REGARD TO VENOUS, JUST TO BE CLEAR, IS THAT THERE'S A SUGGESTION THAT THERE WERE TOO MANY VENOUS TESTS, AND THAT WAS GOING TO AFFECT THE WALGREENS PARTNERSHIP BECAUSE, AS MR. JHAVERI SUGGESTED, THE NUMBER OF PATIENTS WHO RECEIVED THOSE TESTS NEEDED TO COME DOWN FOR THE PARTNERSHIP TO SUCCEED. I WANT TO EXPLAIN TO YOU WHY THE NUMBER OF VENOUS TESTS GREW TO BE WHAT IT WAS AS OPPOSED TO THE ISSUE THAT MR. JHAVERI DISCLOSED -- WITH MR. JHAVERI DISCLOSING IT. LET ME SHOW YOU THIS DIAGRAM.

THIS IS -- IF WE ASSUME THAT A PATIENT COMES IN FOR TEN DIFFERENT ASSAYS DURING A VISIT TO A WALGREENS STORE TO HAVE THEIR BLOOD TESTED, IF ALL TEN METHODS ARE AVAILABLE ON FINGERSTICK, THEN THE BLOOD OF THAT PATIENT IS DRAWN ON FINGERSTICK. BUT IF ONLY NINE OF THOSE TESTS ARE AVAILABLE WITH THE FINGERSTICK METHOD, OR TEN, BUT THE ELEVENTH IS VENOUS, THEN IT HAD TO BE DRAWN BY VENOUS BECAUSE YOU NEEDED THE VENOUS BLOOD DRAW TO PERFORM THE TESTS THAT REQUIRED A VENOUS DRAW. THAT HAD A MUCH MORE PROFOUND EFFECT, AS MS. HOLMES TESTIFIED, ON THE NUMBER OF TESTS THAT WERE BEING PERFORMED BY VENOUS DRAW THAN DID THE NUMBER OF ASSAYS THAT THERANOS COULD DO ON A SMALL SAMPLE. NOW, I THINK AS WELL, JUST TO CLEAR UP THE DISCUSSION WITH MR. PARLOFF, I THINK IT'S CLEAR AS WELL THAT MR. PARLOFF WAS WELL AWARE THAT THE CAPACITY OF THERANOS WAS BEING SUPPLEMENTED WITH VENIPUNCTURE.

I SHOWED YOU BEFORE THAT SHE HAD TOLD HIM SOME OF THE TESTS WEREN'T AVAILABLE IN THE CLIA LAB, AND SHE EXPLAINED TO YOU THAT SHE WAS SUPPLEMENTING THE CAPACITY IN THE CLIA LAB WITH VENIPUNCTURE. SO WHAT HAS THE GOVERNMENT DONE IN CONNECTION WITH MS. HOLMES'S INTENT HERE? THEY'VE COMBINED A LARGE BODY OF EVIDENCE THAT DOES TWO THINGS. THEY'VE TAKEN SOME PEOPLE WHO KNOW -- WHO SAY, I DIDN'T KNOW THAT THERE WAS VENOUS TESTING, EVEN THOUGH THERE WAS WIDESPREAD PUBLIC DISCLOSURE OF VENOUS TESTING BY THERANOS, AND OTHER PEOPLE WHO SAY, WELL, I DIDN'T WANT VENOUS TESTING, LIKE MR. JHAVERI. THE TRUTH IS THAT IN BOTH INSTANCES THE GOVERNMENT'S CLAIM REALLY DOESN'T HOLD EVIDENCE -- HOLD WATER AS TO MS. HOLMES'S INTENT. MS. HOLMES KNEW THAT THERE WERE DISCLOSURES OF VENOUS TESTING. SHE OBVIOUSLY WAS FAMILIAR WITH THE ONES THAT I'VE JUST MENTIONED TO YOU. BUT AS WELL, MS.

HOLMES KNEW THAT IF A SMALL NUMBER OF ADDITIONAL ASSAYS WERE FINALIZED BY THERANOS, AND AS SHE SAID, BROUGHT UP TO THE LAB, IT COULD HAVE A PROFOUND EFFECT ON THE AVAILABILITY OF FINGERSTICK TESTS WITHIN THE THERANOS SERVICE CENTERS. NOW, HAVING GONE THROUGH THE INTENT EVIDENCE FROM BOTH PARTIES, I WANT TO TAKE TIME NOW TO TAKE YOU THROUGH THE STORY NOT BY HURLING AT YOU A NUMBER OF EMAILS THAT ARE OUT OF CONTEXT, I WANT TO TELL YOU THE STORY OF WHAT ACTUALLY HAPPENED AT THERANOS AND HOW THE UNDERSTANDING OF PEOPLE AT THERANOS DEVELOPED. YOU ALREADY KNOW FROM MS. HOLMES'S TESTIMONY A LOT OF THIS STORY FROM THE EARLY YEARS, AND I WON'T REPEAT IT. YOU KNOW THAT SHE HAD AN IDEA AS A YOUNG PERSON THAT THEN BECAME A PATENT, AND THAT THAT PATENT ULTIMATELY BECAME A PRODUCT, AND THAT PRODUCT WAS PART OF A COMPANY THAT SHE STARTED AND WAS DEVELOPING. AND AFTER THAT BECAME A PRODUCT, MS.

HOLMES ORGANIZED THE COMPANY EARLY IN ITS LIFE AND FOREVER THEREAFTER TO FOCUS ON THREE DIFFERENT THINGS: THE ASSAYS, THE TESTS; THE HARDWARE; AND THE SOFTWARE. THERE WAS A LOT OF PROGRESS IN THE EARLY YEARS. AS YOU KNOW, THERE WAS THE 3 SERIES, THE 1, THE 2, AND THE 3, AND MS. HOLMES SHOWED YOU DURING THE COURSE OF HER TESTIMONY SOME EXCITING DEVELOPMENTS. YOU RECALL THAT I SHOWED YOU A PICTURE OF SOME DEMONSTRATION IN SWITZERLAND, BUT SHE ALSO TOLD YOU THAT THEY HAD A LOT OF MAJOR SETBACKS, INCLUDING IN CONNECTION WITH THEIR 1 SERIES DEVICE, WHERE THE CARTRIDGES COULDN'T MAINTAIN SEALANT, AND THEY HAD TO REINVENT THE DEVICES TO ACCOMMODATE THAT. THEN IN EARLY 2010, AS WE DISCUSSED A FEW MOMENTS AGO, THERE WAS THIS EXTRAORDINARY BREAKTHROUGH WHERE SCIENTISTS AND ENGINEERS IN A LARGE NUMBER BEGAN TO BELIEVE THAT THEY HAD INVENTED THE TECHNOLOGY THAT WOULD REALIZE THERANOS'S GOAL.

MR. DOWNEY: THAT, AS YOU KNOW, ULTIMATELY BECAME A REAL PRODUCT AS I DEMONSTRATED TO YOU IN THE PICTURE THAT WAS SHOWN TO YOU DURING MS. HOLMES'S TESTIMONY. NOW, THE POINT AT WHICH THAT EXCITEMENT ABOUT THAT INVENTION WAS CIRCULATING WITHIN THE COMPANY WHERE PEOPLE BELIEVED THAT THEY HAD ACTUALLY BROKEN THROUGH AND INVENTED THE METHODOLOGY TO DO ANY BLOOD TEST, THAT IS THE MOMENT AT WHICH THE GOVERNMENT SAYS A CRIMINAL CONSPIRACY BEGAN WITHIN THERANOS. THE GOVERNMENT FOCUSES ON THE PARTNERSHIP THAT THERANOS HAD WITH WALGREENS AND SAYS THAT WALGREENS WAS MISLED IN MATERIAL WAYS BY THERANOS IN ENTERING INTO THAT RELATIONSHIP. AND YOU'LL RECALL MR. MIQUELON TESTIFIED, WHO WAS THE CFO OF WALGREENS. WE DIDN'T HEAR DURING THE COURSE OF THE GOVERNMENT'S PRESENTATION FROM DR. JAY ROSAN, WHO WAS ACTUALLY THE PRINCIPAL PERSON AT WALGREENS WHO MANAGED THE RELATIONSHIP WITH THERANOS, HAD A LOT OF MEDICAL EXPERTISE. HE BOTH INITIATED THE RELATIONSHIP AND HAD THE MOST CONTACT WITH THE COMPANY OVER TIME.

HE PARTICIPATED IN LOOKING AT ALL OF THE TECHNOLOGY, UNDERSTANDING THE TECHNOLOGY IN ITS CAPACITIES, AND HE INTERACTED WITH MS. HOLMES FOR YEARS THEREAFTER. BUT THE PROPOSITION IS THAT THERANOS IN 2010 DEFRAUDED WALGREENS. BEFORE I GET INTO THE DETAILS OF WHAT HAPPENED BETWEEN THE COMPANIES, LET ME JUST ASK YOU ABOUT YOUR THOUGHTS ABOUT THE PLAUSIBILITY OF THAT ALLEGATION. WALGREENS, AS YOU ALL KNOW, IS A BIG PUBLICLY TRADED COMPANY. IT'S GOT A LOT OF STORES. IT OPERATES IN RETAIL ACROSS THE COUNTRY. IT'S AVAILABLE UNDER DIFFERENT BRAND NAMES OVERSEAS. THERANOS AT THIS TIME WAS A 6 YEAR OLD COMPANY WITH A 26 YEAR OLD CEO, HAD NO PUBLIC PRESENCE, AND NO RETAIL EXPERIENCE. BUT THE GOVERNMENT SAYS THERANOS CAME TO NEGOTIATE, AND DURING THE COURSE OF THOSE NEGOTIATIONS, DEFRAUDED WALGREENS. HOW? WELL, THE GOVERNMENT FOCUSES ON TWO THINGS THAT WERE SAID DURING THE COURSE OF THOSE NEGOTIATIONS.

I ALREADY TALKED TO YOU EARLIER ABOUT THE REPRESENTATION THAT IS THE THIRD ITEM ON THIS SLIDE, ABOUT THE 10 TO 15 PHARMACEUTICAL COMPANIES AND WHY THAT REPRESENTATION IS NOT ONLY MADE IN GOOD FAITH, BUT THE EVIDENCE IS CONSISTENT WITH IT BEING ACCURATE. THE OTHER CLAIM IS THAT THE FIRST BULLET POINT HERE IS FALSE, THAT THERANOS COULD RUN COMPREHENSIVE BLOOD TESTS ACROSS A WIDE RANGE OF TECHNOLOGIES. NOW, YOU KNOW WHERE THAT STATEMENT CAME FROM? IT'S FROM THE DISCUSSIONS WITH DR. GIBBONS AND OTHERS IN THE EARLY PART OF 2010. NOW, THE GOVERNMENT SAYS, WELL, YOU SHOULD NOW NOT HAVE MADE THIS REPRESENTATION, BECAUSE AT THAT TIME THE ONLY DEVICE THAT YOU ACTUALLY OPERATIONALIZED WAS THE 3 DEVICE, AND THE 3 DEVICE COULD ONLY DO IMMUNOASSAYS, NOT ALL FORMS OF ASSAYS. SO HOW DID WALGREENS TESTIFY THROUGH MR. MIQUELON WHEN THEY CAME TO COURT IN THIS PROCEEDING TO EXPLAIN WHAT THEY UNDERSTOOD THERANOS'S TECHNICAL CAPACITY WAS? MR.

MIQUELON WAS ASKED, "WHAT DID YOU UNDERSTAND 'RUNS COMPREHENSIVE BLOOD TESTS' TO MEAN? HE SAYS, "MY UNDERSTANDING WAS A PRETTY BROAD RANGE OF IMMUNOASSAY TESTS, YOU KNOW, BLOOD TESTS, THAT EXACTLY." IN OTHER WORDS, MR. MIQUELON UNDERSTOOD AND COULD ARTICULATE 11 YEARS LATER THAT THERANOS'S CAPACITY IN 2010 WHEN HE TALKED WITH THEM WAS TO PERFORM IMMUNOASSAYS, WHICH IS CONSISTENT WITH EXACTLY WHERE THERANOS'S 3.0 SYSTEM WAS AT THAT TIME. HE WAS ALSO ASKED, WELL, DID YOU UNDERSTAND THE TECHNOLOGY WAS GOING TO DEVELOP FURTHER INTO FURTHER GENERATIONS OF A MINILAB? HE SAID HE WAS. THE TECHNOLOGY IS ALWAYS AN EVOLUTION. HARD TO SEE THAT SERIES OF REPRESENTATIONS TO HIM AS FALSE IN LIGHT OF WHAT YOU KNOW ABOUT THE DEVELOPMENT OF TECHNOLOGY WITHIN THERANOS. NOW, I THINK IT'S ALSO TRUE, IF WE LOOK AT WHAT MS. HOLMES WAS DOING DURING THIS PERIOD, THAT SHE WAS ACTUALLY CLEAR IN OTHER PARTS OF THE POWERPOINT AS TO EXACTLY WHAT THERANOS WAS PROPOSING. IN THAT SAME DOCUMENT, SHE DIDN'T PROPOSE AS OF 2010, LET'S LAUNCH A BLOOD TESTING SERVICE WHERE WE'RE DOING ALL FORMS OF BLOOD TESTING OR ALL TESTS. SHE PROPOSED THAT A LIMITED NUMBER OF TESTS BE DONE, GENERAL CHEMISTRY, INFLUENZA, AND FERTILITY, AND THAT THEY BE OFFERED LATER THAT YEAR, AND SHE ALSO EXPLAINED THAT THE TECHNOLOGY WOULD HAVE TO BE CUSTOMIZED TO GET THERE.

MR. DOWNEY: THAT'S WHERE HER HEAD WAS, AND THAT REMAINED THE CASE THROUGHOUT AS WHEN SHE WAS COMMENTING ON THE DRAFT AGREEMENT IN CONNECTION WITH THE TECHNOLOGY AND SHE WAS VERY DIRECT IN SAYING THIS IS A NEW PRODUCT THAT IS GOING TO BE DEPLOYED IN CONNECTION. WE DON'T KNOW AND CAN'T MAKE COMMITMENTS WHERE THE CAPACITIES OF THE TECHNOLOGY HAVEN'T EVEN YET BEEN, AS SHE SAID, CHARACTERIZED. NOW, THE IDEA IS THAT WALGREENS WOULD NEVER HAVE ENTERED INTO ITS JULY 2010 AGREEMENT IF IT HAD KNOWN ACCURATELY WHAT THERANOS'S TECHNOLOGY WAS AT THAT TIME. I THINK IT'S FAIRLY CLEAR THE EVIDENCE SHOWS IT DID KNOW. BUT IN ANY EVENT, WHEN THAT AGREEMENT WAS NEGOTIATED, IT'S HARD TO SEE HOW WALGREENS WAS DEFRAUDED. I THINK IT'S FAIRLY CLEAR THAT THEY GOT THE BETTER END OF THE DEAL, THAT WALGREENS MADE A NUMBER OF COMMITMENTS TO IT, TO DEMONSTRATE THE EFFECTIVENESS OF ITS TECHNOLOGY, TO OBTAIN REGULATORY APPROVALS, OTHER THINGS THAT THERANOS HAD TO DO AS PART OF ITS OBLIGATIONS UNDER THE CONTRACT.

AND IF, IF THERANOS COULD NOT PERFORM THAT, THEN WALGREENS WOULD GET ITS MONEY BACK UNDER THE CONTRACT. HARD TO SEE THAT AS A PROCESS OF DEFRAUDING WALGREENS. NOW, AS YOU KNOW, THE RELATIONSHIP WENT FORWARD FROM THERE. THE PARTIES WORKED ON GETTING READY TO LAUNCH IN A RETAIL SYSTEM UNTIL EARLY 2012 WHEN WALGREENS BEGAN TO BECOME UNCOMFORTABLE WITH THE PROSPECT THAT DEVICES MIGHT BE LAUNCHED IN ITS STORES WITHOUT YET HAVING FDA APPROVAL. THE PARTIES DECIDED TO GO TO THE PHASE I, PHASE II MODEL, WHICH THEY -- WHICH THERANOS DISCLOSED TO THE FDA, THE CONCEPT BEING PHASE I IS TESTING IN THE CENTRAL LAB AFTER THE BLOOD IS DRAWN IN THE STORES, PHASE II BEING BLOOD IS DRAWN IN THE STORES AND THAT TESTING IS PERFORMED ON SITE AT THE STORES. THAT CHANGE, LADIES AND GENTLEMEN, WAS FOUNDATIONAL, I THINK, TO A LOT OF THE CONFUSION THAT HAS PERVADED THIS CASE, BECAUSE IT'S CLEAR THAT WHEN MS.

HOLMES WAS TALKING ABOUT THERANOS TECHNOLOGY, SHE WAS TALKING ABOUT THE 4.0 SYSTEM AND ITS FULL IMPLEMENTATION AND ITS FULL CAPACITY. NOW, AFTER THE CONTRACT WAS ENTERED AND AFTER THESE MODIFICATIONS TO THE CONTRACT WERE NEGOTIATED, THE LONG PROCESS OF DEVELOPING THAT TECHNOLOGY, YOU SAW THAT IN LATE 2010 MS. HOLMES REPORTED TO THE BOARD THAT THIS NEW TECHNOLOGY WAS BEING DEVELOPED, ALL OF THE CAPACITIES OF THE TECHNOLOGY, WHAT IT WOULD TAKE, YOU SAW THAT THE RESEARCH AND DEVELOPMENT TEAM AT THERANOS WAS RESTRUCTURED, THAT A HUGE AMOUNT OF EMPLOYEES WERE ADDED TO DEVELOP THIS TECHNOLOGY. AND YOU SAW THAT BY THE TIME THAT PROCESS WAS IN FULL GEAR, MS. HOLMES WAS RELYING ON A LARGE NUMBER OF VERY HIGHLY QUALIFIED SCIENTISTS TO LEAD THAT R&D EFFORT, MOSLEY PH.D.'S, BUT OTHERS WITH SKILLS IN OTHER AREAS. I'VE GIVEN YOU THE EXHIBIT NUMBERS FOR SOME OF THE IMPORTANT DOCUMENTS AS TO WHAT THEY REPORTED DURING THAT PERIOD.

BUT WHAT INDIVIDUAL WOULD BE THE MOST KNOWLEDGEABLE ON THIS LIST OF INDIVIDUALS AS TO WHAT HAPPENED WITH RESPECT TO THERANOS'S TECHNOLOGY, WELL, THAT WOULD BE DANIEL YOUNG. YOU'VE HEARD HIS NAME THROUGHOUT THE COURSE OF THE CASE. HE APPEARS ON SOMETHING LIKE 200 EXHIBITS DURING THE COURSE OF THE CASE. HE WAS EFFECTIVELY THE CHIEF TECHNOLOGY OFFICER OF THERANOS DURING THIS PERIOD. AND HE OVERSAW AND DEVELOPED AND REPORTED TO MS. HOLMES REPEATEDLY AS TO WHAT THERANOS'S TECHNOLOGY WAS CAPABLE OF. YOU DID NOT HEAR FROM DR. YOUNG DURING THE COURSE OF THE CASE EXCEPT THROUGH THOSE EMAILS IN WHICH HE REPORTED TO MS. HOLMES THAT 200 ASSAYS WOULD BE AVAILABLE IN THE CLIA LAB ON THE FINGERSTICK, FOR EXAMPLE; ABOUT DEVELOPMENTS WITH RESPECT TO THE HARDWARE DEVICE. HE WAS NOT CALLED, AND SO YOU DON'T KNOW WHAT HIS TESTIMONY WOULD BE WITH RESPECT TO THERANOS'S TECHNOLOGY. BUT YOU KNOW WHAT HE SAID IN REALTIME, AND YOU KNOW WHAT MS. HOLMES TESTIFIED TO AS TO HER UNDERSTANDING OF THOSE CAPACITIES. NOW, I MENTIONED TO YOU A FEW MOMENTS AGO, WHY DID THE VENOUS DRAW PERCENTAGE BECOME HIGHER THAN WHAT WAS EXPECTED? AND I THINK THAT REALLY RESULTS FROM ANALYTICAL ERROR, ALTHOUGH I THINK THE PEOPLE AT THERANOS WERE VERY SMART. SOMETIMES YOU CAN MAKE AN ERROR THAT IS VERY BASIC.

MR. DOWNEY: I THINK WHEN THERANOS WENT TO BUILD THE MENU FOR THE TESTS IT WOULD OFFER IN ITS STORES, IT TRIED TO ANALYZE WHAT TESTS THE PEOPLE ACTUALLY ORDER, AND DR. YOUNG PERFORMED THAT ANALYSIS AND HE SAID, WELL, IF WE VALIDATE ABOUT 43 TESTS, WE'LL BE OFFERING ABOUT 90 PERCENT OF THE TESTS THAT ARE ORDERED, AND IF WE DO 102, WE'LL BE COVERING ABOUT 96 PERCENT OF THE RETAIL TESTS THAT ARE ACTUALLY OFFERED. AND THERANOS WENT TO WORK ON THAT. AS IT TURNED OUT, THAT ASSUMPTION AS TO HOW THE PROCESS WOULD WORK WAS WRONG, BUT I THINK THAT WAS BELIEVED IN GOOD FAITH AND ANALYZED BY DR. YOUNG IN GREAT DETAIL. SO THERANOS WENT ABOUT DEVELOPING THOSE ASSAYS IN THE PERIOD BEFORE THE LAUNCH. AS YOU HEARD BOTH FROM DR. -- FROM MS. GANGAKHEDKAR AND SAW IN THE DOCUMENTS, THERANOS HAD A VERY RIGOROUS PROCESS FOR DEVELOPING AND VALIDATING ITS ASSAYS IN RESEARCH AND DEVELOPMENT. MS. HOLMES WAS RECEIVING REGULAR UPDATES ABOUT WHAT HAPPENED DURING THE COURSE OF THOSE VALIDATIONS.

YOU'LL RECALL SHE RECEIVED A NUMBER OF EXCEL SPREADSHEETS. WE VALIDATED THIS NUMBER, WE VALIDATED THIS NUMBER, THIS NUMBER IS READY, TO THE POINT WHERE ULTIMATELY ALMOST ALL OF THE ASSAYS WERE REPORTED AS BEING VALIDATED. IMPORTANTLY ALSO, THERANOS DECIDED TO ACTUALLY BUILD A MANUFACTURING UNIT WHERE THEY WOULD DO THEIR MANUFACTURING FOR THEIR OWN DEVICE IN HOUSE, AND THAT HAPPENED DURING THIS PERIOD. ALL OF THAT WAS A HUGE AMOUNT OF ACTIVITY. THE REPORTING TO MS. HOLMES DURING THIS PERIOD WAS ITERATIVELY, AS MR. SCHENK SAYS, CERTAINLY THERE WERE ISSUES, BUT THE REPORTING WAS THAT THE COMPANY WAS HEADED TOWARDS FINALIZATION OF A 4.0 SERIES DEVICE. AND BECAUSE OF THAT, THE PLAN THAT WAS DEVELOPED ORIGINALLY WHEN THERANOS WAS GOING TO OPERATE A CENTRAL LAB WAS WE'LL JUST TAKE ALL OF THE INDIVIDUAL DEVICES THAT WE MANUFACTURE AND WE WILL PUT THEM IN THE CENTRAL LAB, AND WE WILL RUN THE TESTS ON THOSE INDIVIDUAL DEVICES WITHIN THE CENTRAL LAB.

NOW, AS THIS DIAGRAM, EXHIBIT 7272, SHOWS, THEY BEGAN TO WORK ON THAT PLAN. AND WHAT HAPPENED AS A RESULT OF THEIR WORK ON THAT PLAN? WELL, A NUMBER OF THINGS HAPPENED IN TERMS OF THEIR REALIZATION OF HOW USING INDIVIDUAL SERIES 4 DEVICES IN A CENTRAL LAB WAS NOT SENSIBLE OR THE BEST WAY TO OPERATE THAT LAB. WHY? THE 4 SERIES DEVICE WORKS GREAT WHEN IT'S AT A POINT OF CARE. SOMEBODY COULD HAVE THEIR BLOOD DRAWN, AND THEIR BLOOD IS PUT RIGHT IN THE DEVICE, THE TEST RUNS, THE RESULTS ARE GENERATED. BUT THE DEVICE TAKES A WHILE TO RUN. SO IT'S FINE AT THE POINT OF CARE WHERE TEN CUSTOMERS MIGHT COME IN ONE DAY AND ONE PATIENT GETS TESTED AND ANOTHER PATIENT GETS TESTED AT A DIFFERENT TIME, ET CETERA. BUT AT A CENTRAL LAB, THE SAMPLES WOULD ALL ARRIVE AT THE SAME TIME, AND LITERALLY A PROCESS WOULD BE REQUIRED WHERE THOSE INDIVIDUAL SAMPLES WERE MOVED, SOMETIMES TENS OF THOUSANDS OF SAMPLES WERE EXPECTED, AND THEY WERE EXPECTED TO MOVE THEM ACROSS A LAB AND PERFORM TESTING.

THAT BECAME IMPRACTICAL AND THEY STARTED TO LOOK FOR, IS THERE A WAY, WHILE WE'RE OPERATING A CENTRAL LAB, THAT WE CAN DO THIS IN A MORE EFFICIENT WAY? AND WHAT DID THAT RESULT IN? LADIES AND GENTLEMEN, YOU'VE HEARD FROM MS. HOLMES THAT THEY BEGAN TO LOOK AT COMMERCIAL MACHINES AND ASK, CAN WE MODIFY THESE IN SOME WAY SO THAT WE CAN RUN SMALL SAMPLES ON THEM? AND THEY WERE ABLE TO DESIGN THOSE MODIFICATIONS. DR. ROSENDORFF TESTIFIED HE WAS AWARE OF THAT. MANY OTHERS WITHIN THERANOS WERE AWARE OF IT. IN FACT, NO ONE WITHIN THERANOS TESTIFIED THAT THEY HAD ANY DISCOMFORT ABOUT THAT PROCESS BEING USED. AND MS. HOLMES AND MR. BALWANI CAME TO BELIEVE THAT WHILE THIS WAS AN INGENIOUS INVENTION THAT THERANOS HAD COME UP WITH, IT WAS ALSO AN INVENTION THAT WAS AN INCREDIBLY IMPORTANT TRADE SECRET. WHY?

WELL, MODIFIED MACHINES WERE BASED ON COMMERCIAL MACHINES THAT ANYONE ELSE COULD BUY, AND IF A COMPETITOR KNEW THAT THOSE DEVICES COULD BE MODIFIED TO RUN THE TYPES OF SMALL SAMPLES THAT THERANOS WAS RUNNING, THEN THEY COULD TAKE THE FINGERSTICK BUSINESS, WHETHER IT BE QUEST OR LABCORP, WHICH ALREADY HAD ALL OF THE INFRASTRUCTURE TO RUN A LAB BUSINESS, OR INDEED WHETHER IT EVEN BE WALGREENS ITSELF, WHICH MIGHT SAY, WHY DO WE NEED TO HAVE THERANOS WHEN WE CAN USE A CENTRAL LAB WITH THIS NEW FORM OF TECHNOLOGY. CONTRARY TO WHAT MR. SCHENK TOLD YOU THIS MORNING, THE EVIDENCE IN THE CASE IS CLEAR THAT INSIDE THERANOS THEY THOUGHT THIS WAS AN INCREDIBLY IMPORTANT AND INCREDIBLY VALUABLE TRADE SECRET THAT NEEDED PROTECTION.

MR. DOWNEY: LOOK AT THIS EMAIL FROM MR. BALWANI IN MAY OF 2014 JUST TALKING ABOUT THE MODIFIED DEVICES. HE SAYS THIS IS A BIG COMPETITIVE ADVANTAGE. HE TALKS ABOUT KEEPING EVERYTHING AS A TRADE SECRET. HE SAYS THERE'S NO ONE IN THE INDUSTRY WHO CAN DO THAT BECAUSE WE'VE HAD MASSIVE TRIAL AND ERROR AND WE NEED TO PROTECT IT. AND HE WANTED FURTHER SIGNATURES ON TRADE SECRET DOCUMENTS. NOW, ONCE YOU BEGIN TO TREAT SOMETHING LIKE THIS AS A TRADE SECRET, HOW DO YOU HAVE TO BEHAVE? WELL, MS. HOLMES HAD RECEIVED GUIDANCE IN CONNECTION WITH THAT WHEN SHE ASKED THAT A POLICY BE PREPARED FOR THE COMPANY, AND THERE WAS -- WITHIN THE DRAFT POLICY THAT WAS SENT TO HER, SHE GOT A BASIC OUTLINE OF WHAT THE COMPANY HAD TO DO TO PREPARE -- TO PRESERVE ITS TRADE SECRETS. YOU SAW THAT IN EXHIBIT 15055. AND MR.

DOYLE, WHO WAS AN ATTORNEY AT THE COMPANY WHO WAS WORKING ON THIS POLICY, REPORTED AS PART OF THE DRAFT THAT IN CASES WHERE OUR PATENTS ARE PENDING, TRADE SECRETS PROVIDE ANOTHER CRITICAL LAYER OF PROTECTION. AND HE CHARACTERIZED, WHY IS SOMETHING A TRADE SECRET? SOMETHING IS A TRADE SECRET BECAUSE THE OWNER HAS TO KEEP IT SECRET AND BECAUSE IT'S REALLY VALUABLE. IT'S CLEAR THAT THE MODIFIED MACHINES WERE REALLY VALUABLE, AND SO THERANOS DETERMINED THAT IT HAD TO KEEP IT SECRET. THE QUESTION IS, TO WHOM CAN YOU DISCLOSE THIS? YOU HEARD MR. LEACH IMAGINE THAT THERE WERE A LOT OF THIRD PARTIES YOU COULD DISCLOSE IT TO IF THEY JUST SIGNED AN AGREEMENT. BUT WHAT THIS MEMO FROM MR. DOYLE SAYS IS THAT THE DEFINING CHARACTERISTIC OF A TRADE SECRET IN FACT IS THAT IT IS NEVER DISCLOSED PUBLICLY. THAT'S HOW ZEALOUS THERANOS THOUGHT IT HAD TO BE WITH RESPECT TO THESE MODIFIED MACHINE DEVICES.

AND THEN YOU HEARD DURING THE COURSE OF THE CASE, YOU KNOW, SOME CRITICISM OF SOME OF THE INTERNAL SECURITY PROCEDURES AND SO FORTH AT THERANOS. YOU KNOW AS A RESULT OF SEEING MR. DOYLE'S COMMUNICATIONS TO MS. HOLMES THAT THAT DIDN'T COME FROM SOME DESIRE ON MS. HOLMES'S PART TO KEEP SOME CRIMINAL SECRET. IT CAME FROM THE FACT THAT THEIR TRADE SECRET POLICY REQUIRED THEM TO PRESERVE THIS AND OTHER TRADE SECRETS. NOW, I THINK THAT THE ONLY ANSWER THAT THE GOVERNMENT HAS TO THIS IS THAT THEY SAY, WELL, YOU COULD HAVE GOTTEN PEOPLE TO SIGN NONDISCLOSURE AGREEMENTS, AND YOU COULD HAVE ASKED THEM TO BE BOUND BY THE SAME PROTECTIONS YOU ARE. I DON'T THINK THERE'S MUCH EVIDENCE FOR THAT EVEN AS A PRACTICAL MATTER IN THE REAL WORLD. I DON'T THINK IF YOU LOOK AT THE DISCUSSION THAT MS. HOLMES DESCRIBED IN THE BOARD MEETING WHEN THIS ISSUE CAME UP, SENATOR NUNN, WHO WAS A BOARD MEMBER AND SERVED ON THE COCA-COLA BOARD, AND HE SAID THIS IS JUST LIKE THE SECRET FORMULA FOR COCA-COLA.

I DON'T THINK COCA-COLA IS SIGNING NONDISCLOSURE AGREEMENTS WITH BURGER KING AND MCDONALDS AND THE OTHER PLACES THAT IT HAS PARTNERSHIPS TO SELL ITS PRODUCT CONTENT TO KEEP THAT TRADE SECRET MERELY BY THE FACT THAT THEY AS AN OUTSIDER HAVE SIGNED A CONFIDENTIALITY AGREEMENT. NOW, WHERE DID MS. HOLMES DISCLOSE THIS? DID SHE TRY TO KEEP IT A SECRET TO HERSELF? THAT'S WHAT THE GOVERNMENT'S PRESENTATION TO YOU WOULD SUGGEST, THAT BECAUSE THIS WAS A CRIME, SHE DIDN'T WANT ANYONE TO KNOW. WELL, THE EVIDENCE SUGGESTS THAT SHE DID DISCLOSE IT IN THREE PLACES, AND THOSE THREE PLACES HAD A COMMON CHARACTERISTIC. THE FIRST PLACE SHE TALKED ABOUT IT IS IN CONNECTION WITH THE BOARD MEETING THAT FOLLOWED THE LAUNCH WITH WALGREENS. AND YOU WERE SHOWN THE MINUTES OF THAT MEETING IN WHICH IT'S RECORDED THAT MS. HOLMES TALKED TO THE BOARD ABOUT TRADE SECRET ELEMENTS OF THE COMPANY'S WORK AND CERTAIN MATTERS THAT WERE DISCUSSED NEEDED TO BE PROTECTED FROM DISCLOSURE FOR COMPETITIVE REASONS.

WE THEN LOOKED AT THE ATTACHMENT TO THAT AND AMONGST THOSE TRADE SECRETS DISCUSSED AT THAT TIME WAS THE INVENTION ASSOCIATED WITH THE MODIFIED DEVICE. THE GOVERNMENT'S ANSWER TO THAT IS THAT IT SUGGESTS THAT GENERAL MATTIS DIDN'T RECALL THAT, AND I DON'T QUESTION THAT. I THINK GENERAL MATTIS'S TESTIMONY WAS THAT THIS WAS HIS FIRST BOARD MEETING AT THERANOS; THAT HE HAD TAKEN AN ALL-NIGHT FLIGHT TO PARTICIPATE IN THAT BOARD MEETING; AND HE TESTIFIED IT WAS ACTUALLY POSSIBLE EVEN THAT HE WASN'T AT THAT BOARD MEETING. SO I DON'T THINK THAT GENERAL MATTIS'S LACK OF RECOLLECTION IS IN CONTRAST WITH WHAT MS. HOLMES SAID. I THINK IT REFLECTS WHERE HE WAS IN HIS SERVICE AT THERANOS AT THAT TIME. YOU KNOW THAT THE MODIFIED DEVICES WERE DISCLOSED TO THE FOOD AND DRUG ADMINISTRATION.

MR. DOWNEY: WHY? THAT'S A LEGAL REQUIREMENT IMPOSED IN THAT CIRCUMSTANCE. YOU CAN'T BE DISHONEST IF THE FDA ASKS YOU TO REVEAL DEVICES WHICH YOU'RE USING. AND YOU ALSO SAW WITH CMS THAT THERANOS DISCLOSED THAT THEY WERE PERFORMING BLOOD TESTS ON THIS FORM OF TECHNOLOGY. NOW, THE, THE PROPOSAL OF THE GOVERNMENT IS THAT, WELL, EVEN THOUGH THIS WAS A TRADE SECRET, YOU SHOULD HAVE FOUND SOME WAY TO DISCLOSE IT TO YOUR INVESTORS. BUT THE EVIDENCE SUGGESTS AT THE TIME THAT THE INVESTORS WERE VERY WELL AWARE THAT THERANOS HAD TRADE SECRETS OF WHICH THEY DID NOT HAVE KNOWLEDGE. LET'S LOOK AT THIS EMAIL FROM MR. MOSLEY REACTING TO AN ARTICLE ABOUT MS. HOLMES IN "THE NEW YORKER." HE SAYS, YOU KNOW, I THOUGHT THE PIECE WAS POSITIVE, BUT THEY SPENT TOO MUCH TIME SPECULATING AS TO WHY YOUR TECHNOLOGY IS CONFIDENTIAL, WHICH SHOULD BE OBVIOUS TO ANYONE. THAT'S A COMMENT FROM MR. MOSLEY, WHO IS ONE OF THE INVESTORS YOU SAW TESTIFY HERE.

NOW, AFTER THE DECISION WAS MADE TO USE THESE MODIFIED MACHINES, THE SHIFT IN FOCUS CAME IN CONNECTION WITH THE 4 SERIES. I TALKED ABOUT THAT WITH YOU A LITTLE EARLIER IN MY PRESENTATION. AT THAT POINT THERANOS'S FOCUS WAS NOT TO GET THE 4.0 DEVICE INTO THE LAB. IT WASN'T READY AT THE TIME OF THE LAUNCH WITH WALGREENS, AS MS. HOLMES TOLD YOU. AND THERANOS DECIDED THAT THE PATH THAT IT WOULD PURSUE WITH THE 4.0 DEVICE WAS TO GET APPROVAL FROM THE FDA AS SOON AS AND AS BROADLY AS IT COULD BECAUSE WHEN IT ACHIEVED THAT, IT COULD TAKE THOSE DEVICES AND THEN DEPLOY THEM IN THE STORE. NOW, WALGREENS DID LAUNCH IN SEPTEMBER OF 2013. THERE WAS A LOT OF FOCUS ON DATES IN CONNECTION WITH THIS LAUNCH. I THINK IT'S FAIR TO SAY, WITHOUT CHARACTERIZING THINGS, THAT THE LAUNCH OF SERVICES IN SEPTEMBER WAS A SOFT LAUNCH OR A LIMITED LAUNCH WHERE IT WAS FRIENDS AND FAMILY WHO WERE ABLE TO USE THE SERVICES. YOU SAW THAT VERY FEW PEOPLE WERE ACTUALLY BEING TESTED AT THAT TIME.

THERANOS WORKED ON A MARKETING PITCH WITH CHIAT/DAY, YOU HEARD TESTIMONY ABOUT THAT, AND THEIR ADVICE WAS THAT THERANOS OUGHT TO HAVE PUBLICITY WHICH EXPLAINED WHAT THERANOS WAS. WHY? WELL, THERANOS WAS LAUNCHING AS PART OF ANOTHER RETAIL STORE. THERANOS WAS IN WALGREENS. AND IF YOU WALK INTO A WALGREENS AND YOU GET A BLOOD TEST, UNLESS IT WAS THOUGHT OF AS A SEPARATE BRAND, PEOPLE LOSE TRACK OF YOU. THEY THOUGHT IT WAS WALGREENS WHO WAS PERFORMING THE TESTS. SO THE WORK BEGAN TO TRY TO PUBLICIZE THERANOS THROUGH NEWSPAPER ARTICLES AND SO FORTH, AND THE FIRST OF THOSE ARTICLES IS THE ARTICLE THAT WAS WRITTEN BY JOSEPH RAGO IN THE FALL OF 2013. THAT'S THE EXPLANATION FOR WHAT HAPPENED PRIOR TO AND AT THE TIME OF THE LAUNCH. NOW, YOU KNOW THAT THERANOS DID LAUNCH, AND THERE WAS TESTIMONY IN THE CASE BY MR. JHAVERI THAT AT SOME POINT, IN HIS PERCEPTION, THE ROLLOUT OF STORES RUN BY THERANOS WITHIN WALGREENS WAS SLOWING AND THAT IT WASN'T GOING TO RECOVER DUE TO VENOUS DRAWS.

LET ME COMMENT ON THAT A BIT. I THINK IT'S MAYBE AN UNDERREPRESENTATION OF THE RECORD. FIRST OF ALL, WHEN MR. JHAVERI INTERACTED WITH MS. HOLMES, ALL OF THE INTERACTIONS WERE VERY POSITIVE AND OPTIMISTIC AS IN THIS EMAIL THAT HE SENT TO HER IN SEPTEMBER OF 2014, WHICH IS PRECISELY THE TIME IN WHICH HE SAYS THAT THE LAUNCH WAS BEING SLOWED. BUT LET ME PUT THIS WHOLE DEBATE AND DISCUSSION IN A BROADER CONTEXT WITH RESPECT TO SOMETHING THAT MR. SCHENK DID NOT MENTION AS PART OF HIS REMARKS. WALGREENS AND THERANOS HAD A CONTRACT UNDER WHICH THERANOS WAS TO LAUNCH IN 3,000 STORES IN THE 24 MONTHS FOLLOWING DECEMBER 31ST, 2013. THEY HAD AGREED THAT THE ROLLOUT WOULD CONSIST OF 3,000 STORES IN THAT TIMEFRAME. THERE WAS A LITTLE BIT OF A MODIFICATION IN THAT NUMBER OVER TIME. IN MARCH OF 2014, THE NUMBER WAS LOWERED TO ABOUT 500 BASED ON, BASED ON PROGRESS AND DECISIONS AS TO WHAT GEOGRAPHY THE ROLLOUT WOULD TAKE PLACE IN.

BUT ALL OF THIS WAS GOVERNED NOT BY THE PERCEPTIONS OF ONE EMPLOYEE OF WALGREENS OR THE TESTIMONY OF SOMEONE TODAY, IT WAS DEFINED BY THIS CONTRACT WHICH DISCUSSED WHAT THE EXPECTATIONS OF THE PARTIES WERE. NOW, MR. JHAVERI, THE BASIC THRUST OF MR. JHAVERI'S TESTIMONY WAS, WELL, IF THE PERCENTAGE OF VENOUS DRAWS IN OUR STORES DIDN'T GO DOWN, WE WEREN'T GOING TO CONTINUE TO ROLLOUT. WELL, THE CONTRACT DIDN'T CONTAIN ANY LANGUAGE OR ANY REQUIREMENT THAT THERANOS MEET A CERTAIN NUMBER OF TESTS. THERE WAS NOT A METRIC THAT WAS DEFINED BETWEEN THE PARTIES AT ALL AS TO WHETHER STORES WOULD CONTINUE TO ROLLOUT.

MR. DOWNEY: IT WASN'T IDENTIFIED AS ANY KIND OF PERFORMANCE STANDARD THAT THERANOS HAD TO MEET. IT IS SIMPLY AN ISSUE THAT CAME UP AS PART OF MR. JHAVERI'S DISCUSSIONS WITH MR. BALWANI. MS. HOLMES, IN FACT, UNDERSTOOD THAT THE PARTNERSHIP BETWEEN WALGREENS AND THERANOS WAS GOING WELL. IN 2014, AS YOU RECALL, SHE WAS SENT THESE, THESE CUSTOMER FEEDBACK SLIDES WHICH COMMENTED ON THE EXPERIENCE OF PATIENTS WHO VISITED WALGREENS STORES. THE OVERALL EXPERIENCE OF THOSE PATIENTS WAS EXCELLENT, ABOUT 4.85 OUT OF 5. AND WITH RESPECT TO MR. JHAVERI'S COMMENTS ABOUT HIS INTERACTIONS WITH MR. BALWANI, MS. HOLMES CONTINUED TO ENGAGE WITH WALGREENS EXECUTIVES HERSELF. SHE TESTIFIED ABOUT HER MEETINGS WITH MR. GOURLAY. THE GOVERNMENT SAYS THAT SHE KNEW THAT STORES WEREN'T GOING TO CONTINUE TO ROLLOUT BECAUSE OF ONE TEXT THAT SHE RECEIVED IN NOVEMBER OF 2014, ONE TEXT THAT SHE RECEIVED FROM MR. BALWANI WHICH THEY HAVE REPEATEDLY SHOWN. WHAT DO WE KNOW ABOUT THE TIMING OF THAT TEXT?

WE KNOW THAT TWO WEEKS LATER MS. HOLMES HAD A MEETING WITH AN INDIVIDUAL TO WHOM MR. JHAVERI REPORTED IN WALGREENS, AND THAT THEY AGREED AT THAT MEETING THAT THERANOS WOULD CONTINUE TO ROLL OUT IN WALGREENS STORES. THIS IS WELL AFTER ANY OF THE INVESTORS WHO WERE THE SUBJECT OF TESTIMONY TESTIFIED DURING THE COURSE OF THIS CASE. THERE SIMPLY IS NOT EVIDENCE THAT MS. HOLMES IN 2014 THOUGHT THERE WAS NOT GOING TO BE A WALGREENS PARTNERSHIP. NOW, I WANT TO ASK A BASIC QUESTION ABOUT THE CONDUCT OF MS. HOLMES WITHIN THERANOS, BUT NOT WITH THE EMPLOYEES. I WANT TO ASK A QUESTION OF YOU TO CONSIDER AS TO IF MS. HOLMES WERE A CRIMINAL, AS THE GOVERNMENT ALLEGES, WHAT KIND OF A BOARD OF DIRECTORS WOULD SHE APPOINT? WOULD SHE APPOINT CRONIES OR PEOPLE WHO MIGHT FOLLOW HER INSTRUCTIONS? YOU WOULD THINK SO.

BUT SHE APPOINTED THESE PEOPLE, AN INCREDIBLY ILLUSTRIOUS GROUP OF PEOPLE, WHO HAD EXPERIENCE OVER TIME IN THE TECHNOLOGY INDUSTRY, IN THE MEDICAL INDUSTRY, IN GOVERNMENT, IN RETAIL, MANY, MANY DIFFERENT AREAS THAT TOUCHED ON THERANOS'S OPERATION AND IN WHICH SHE COULD GET CANDID AND DIRECT FEEDBACK. GENERAL MATTIS TESTIFIED THE BOARD WAS VERY ENGAGED, THEY WERE VERY STRONG INDIVIDUALS, THEY GAVE FEEDBACK, THEY WERE CAPABLE OF ASKING QUESTIONS. IT'S CLEAR FROM THE BOARD DOCUMENTS OVER TIME THAT THE BOARD WAS TOLD ABOUT THE DEVELOPMENT OF THE 4.0 SERIES AS EARLY AS 2010. THEY SAW THE INSIDE OF THE DEVICE, JUST AS YOU HAVE SEEN DURING THE COURSE OF THIS TRIAL. NOW, I WANT TO ASK A QUESTION WITH RESPECT TO THE LIST OF INDIVIDUALS THAT YOU LOOKED AT. DO YOU THINK THAT MS. HOLMES, IN CONNECTION WITH UNDERTAKING HER WORK AT THERANOS, DECIDED THAT SHE WOULD ASSEMBLE THAT GROUP OF INDIVIDUALS FOR PURPOSES OF CONDUCTING A CRIMINAL CONSPIRACY? THAT SEEMS TO ME, LADIES AND GENTLEMEN, TO BE VERY, VERY UNLIKELY. AND THAT'S AN ADDITIONAL JUDGMENT OF HER INTENT THAT YOU CAN CONSIDER AS PART OF YOUR DELIBERATIONS. YOUR HONOR, I'M AT SORT OF A BREAKING POINT THERE. I KNOW YOU WANTED TO BREAK AT 3:45.