Closing Argument by the Defense — Continued

MR. DOWNEY: GOOD MORNING, LADIES AND GENTLEMEN. I WANT TO PICK UP WHERE I LEFT OFF AND I WANT TO GO THROUGH WITH YOU SOME OF THE PARTICULAR COUNTS THAT ARE IN THE INDICTMENT AND THAT MS. HOLMES IS CHARGED WITH. BEFORE I DO THAT, I WANT TO CLARIFY ONE THING THAT I SAID TO YOU YESTERDAY WITH REGARD TO THE STANDARDS OF PROOF THAT YOU SHOULD CONSIDER AS YOU RETURN TO DELIBERATE. IF YOU REMEMBER YESTERDAY, I USED THIS ILLUSTRATION WITH YOU OF THE STEPS THAT YOU SHOULD GO UP TO TRY TO MAKE A DETERMINATION OF WHETHER A CRIME HAS BEEN PROVEN BEYOND A REASONABLE DOUBT, AND I WANT TO MAKE SURE THAT I'M CLEAR AS TO THE DIFFERENCE BETWEEN THE CLEAR AND CONVINCING STANDARD AND THE HIGHER STANDARD, WHICH IS THE BEYOND A REASONABLE DOUBT STANDARD. LET ME SHOW YOU A SLIDE IN CONNECTION WITH THAT. THE CLEAR AND CONVINCING STANDARD REQUIRES A "FIRM BELIEF OR CONVICTION THAT IT IS HIGHLY PROBABLE THAT FACTUAL CONTENTIONS ARE TRUE." A FIRM BELIEF THAT IT IS HIGHLY PROBABLE.

BEYOND A REASONABLE DOUBT MEANS THAT YOU ARE "FIRMLY CONVINCED" THAT THE DEFENDANT IS GUILTY. THOSE ARE THE DIFFERENT STANDARDS. SO IF THE DEFENDANT IN YOUR MIND IS IN A PLACE WHERE SHE IS -- YOU HAVE A FIRM BELIEF THAT IT IS HIGHLY PROBABLE THAT THE CONTENTIONS THAT THE GOVERNMENT MAKES HERE ARE TRUE, THAT DOES NOT MEET THE BEYOND A REASONABLE DOUBT STANDARD, AND YOU SEE THERE THE BEYOND A REASONABLE DOUBT STANDARD. SO WITH THAT IN MIND, LET'S LOOK AT SOME OF THE PARTICULAR COUNTS THAT ARE IN THE INDICTMENT AND SOME OF THE PARTICULAR INVESTORS. LET ME TALK ABOUT SOMETHING THAT THE GOVERNMENT REALLY DIDN'T TALK ABOUT YESTERDAY, WHICH IS WHEN MS. HOLMES ENTERED CONVERSATIONS WITH INVESTORS, WHAT WAS SHE THINKING ABOUT? WHAT TYPES OF INVESTORS DID SHE WANT TO HAVE INVEST IN THE COMPANY AND WHAT DID SHE THEREFORE FOCUS ON AS PART OF HER CONVERSATIONS WITH THEM?

WELL, AS YOU REMEMBER, SHE TESTIFIED DURING THE COURSE OF HER DIRECT EXAMINATION THAT SHE WAS LOOKING FOR PEOPLE WHO WERE LONG-TERM INVESTORS, AND SO SHE WAS TALKING ABOUT WHAT THE COMPANY WOULD LOOK LIKE IN FIVE OR TEN YEARS, OR A YEAR, NOT REPORTING, AS ANOTHER COMPANY MIGHT, ON THE PRESENT PERFORMANCE OF THE COMPANY. THAT'S IMPORTANT, LADIES AND GENTLEMEN, BECAUSE IT REALLY REFLECTS A FUNDAMENTAL DISCONNECT BETWEEN THE GOVERNMENT'S UNDERSTANDING OF THE FACTS AND OUR UNDERSTANDING OF THE FACTS. IN THE GOVERNMENT'S VIEW, THE CASE IS REALLY ABOUT WHAT THE TEST MENU WAS IN THE CLIA LABORATORY DURING THIS PHASE I PERIOD, WHICH MS. HOLMES TOLD YOU SHE BELIEVED WOULD BE A BRIEF PERIOD. THAT WAS AN OLD DEVICE THAT WAS BEING USED FOR A PERIOD IN THAT LAB. IT WAS NOT THE PRIMARY MODE OF ANALYSIS FOR FINGERSTICK TESTS. THE MODIFIED MACHINES WERE. BUT THE GOVERNMENT MAKES MUCH OF THE FACT THAT THIS WAS A LIMITED DEVICE. THAT'S, IN ESSENCE, THE THEORY OF THEIR CASE.

IF YOU GO BACK AND READ THE MATERIALS THAT MS. HOLMES SHARED WITH INVESTORS AND YOU RECONSIDER WHAT SHE SAID TO INVESTORS, YOU'LL SEE THAT SHE WAS TALKING ABOUT THE SERIES 4 DEVICE, THE SERIES 4 BEING THE DEVICE THAT SHE HAD FOCUSSED ON IN CONNECTION WITH HER EFFORTS TO GET APPROVAL FROM THE FDA. AND SHE WAS TALKING ABOUT PHASE II, FOR THE MOST PART, OF THERANOS'S OPERATIONS. THAT'S THE DISCONNECT. SHE WAS NOT CONCEALING THE NUMBER OF TESTS THAT WERE DONE ON THE PARTICULAR METHOD OF THE 3.5 DEVICE IN THE LAB. SHE WAS NOT EVEN DISCLOSING THE MODIFIED DEVICES FOR REASONS THAT WE DISCUSSED YESTERDAY. SO THAT IS REALLY THE FUNDAMENTAL DISCONNECT THAT I THINK EXISTS IN THE CASE AS TO HOW THE EVIDENCE IS PRESENTED. AND WHEN YOU GO BACK, YOU HAVE TO ASK YOURSELF, HAS THE GOVERNMENT PROVEN BEYOND A REASONABLE DOUBT THAT MS. HOLMES WAS REALLY ATTEMPTING TO DECEIVE PEOPLE IN THE WAY THAT SHE TALKED ABOUT THERANOS'S TECHNOLOGY BY NOT ACKNOWLEDGING THE 3 DEVICE AT THAT TIME.

LET ME TALK NOW GENERALLY ABOUT THE PEOPLE WHO INVESTED IN THERANOS. AS YOU KNOW, YOU HEARD FROM SIX PEOPLE WHO HAD SOME INVOLVEMENT WITH AN INVESTMENT IN THERANOS. FOUR WERE ACTUALLY INVESTORS, AND TWO WERE PEOPLE WHO WERE IN SOME WAY AFFILIATED WITH INVESTORS: MR. TOLBERT AND MS. PETERSON. THERE WERE ACTUALLY MANY PEOPLE WHO INVESTED IN THERANOS OVER TIME. BY THE END OF THE TIME THAT THERANOS WAS AN OPERATING COMPANY, THERE HAD BEEN ABOUT 275 PEOPLE OR ENTITIES THAT INVESTED IN THERANOS. NOW, PEOPLE LOST MONEY. I DON'T MINCE WORDS ABOUT THAT. MS. HOLMES CERTAINLY DID NOT INTEND FOR PEOPLE TO LOSE MONEY. THAT'S A BAD EVENT AND A FAILURE ON HER PART.

MR. DOWNEY: IT SHOULD NOT BE SOMETHING THAT YOU HEAR AS US EXCUSING ANYTHING IN HER BEHAVIOR WITH REGARD TO THAT ISSUE. BUT THAT'S NOT THE ISSUE THAT WE'RE CONCERNED WITH IN THIS TRIAL. THE ISSUE WE'RE CONCERNED WITH IS, DID SHE INTENTIONALLY MAKE MISREPRESENTATIONS TO PEOPLE FOR THE PURPOSE OF INDUCING THEM TO INVEST IN HER COMPANY? AND AS WE REVIEW THE EVIDENCE, I THINK THE EVIDENCE IS FAIRLY CLEAR THAT SHE DID NOT, MUCH LESS SATISFY YOU BEYOND A REASONABLE DOUBT, THAT SHE WAS ENGAGED IN THAT TYPE OF DECEPTION THAT THE GOVERNMENT CLAIMS. SO LET'S LOOK AT THE PEOPLE THAT WE HEARD FROM IN CONNECTION WITH THE CASE. AS YOU RECALL, THERE WERE TWO INVESTMENTS, C1 INVESTORS: MR. EISENMAN, MR. TOLBERT, AND MR. LUCAS; AND THE C2 INVESTORS THAT INVESTED IN 2014: MR. GROSSMAN, MR. MOSLEY, AND MS. PETERSON. LET ME -- I'LL TALK ABOUT EACH OF THEM AND TALK ABOUT EACH OF THEIR INVESTMENTS IN A MOMENT, BUT I WANT TO REVIEW WITH YOU SOME THINGS THAT THEY ALL HAD IN COMMON.

FIRST, AND I THINK MOST IMPORTANTLY, ALL OF THE RELATIONSHIPS BETWEEN THESE INVESTORS AND THERANOS WERE NOT GOVERNED BY THE DISCUSSIONS THAT THE GOVERNMENT FOCUSES ON OR NEWSPAPER ARTICLES. THE RELATIONSHIPS BETWEEN THESE INVESTORS AND THERANOS WERE GOVERNED BY A CONTRACT, THE STOCK PURCHASE AGREEMENT THAT YOU SAW AS PART OF OUR CROSS-EXAMINATIONS OF EACH OF THE INVESTOR WITNESSES. AND THE STOCK PURCHASE AGREEMENT HAD A LOT OF PROVISIONS THAT ARE RELEVANT TO THE CASE THAT THE GOVERNMENT PRESENTS HERE. WHAT WERE THOSE? WELL, FIRST OF ALL, AS THE WITNESSES TESTIFIED, THIS IS NOT LIKE AN INVESTMENT THAT WOULD BE MADE IN A STOCK IN A PUBLIC COMPANY WHERE THE PUBLIC COMPANY IS ROUTINELY DISCLOSING INFORMATION ABOUT ITS OPERATIONS. THIS IS AN INVESTMENT IN A PRIVATE COMPANY WHERE THE INFORMATION THAT IS PROVIDED IS LIMITED. IT MAY BE EPISODICALLY PROVIDED. THERE MAY BE INFORMATION THAT THE COMPANY KNOWS THAT IS NOT KNOWN TO THE INVESTORS IN THE COMPANY.

SO WHAT DOES A COMPANY IN THAT CIRCUMSTANCE RELY ON TO MAKE SURE THAT THE INVESTORS ARE CAPABLE OF MAKING THE INVESTMENT? WELL, THEY TELL THE INVESTORS THAT AND THEY SAY, WE WANT YOU TO REPRESENT TO US THAT YOU ARE A SOPHISTICATED ENOUGH INVESTOR AND YOU HAVE ENOUGH EXPERIENCE INVESTING IN THIS AREA THAT YOU'RE CAPABLE OF EVALUATING THESE RISKS. AND THERE WERE INVESTORS LIKE THAT IN CONNECTION WITH THIS. YOU SAW MR. LUCAS TESTIFY. HE WAS NOT ONLY AN EXPERIENCED TECHNOLOGY INVESTOR, BUT HE HAD INVESTED SPECIFICALLY IN BIO MEDICAL DEVICES. MANY OF THE INVESTOR WITNESSES WERE PEOPLE WHO WERE PROFESSIONAL INVESTMENT ADVISORS, NOT THEMSELVES INVESTORS AT ALL. SEVERAL OF THE INVESTORS TESTIFIED TO CONCLUSIONS THAT THEY DREW FROM MS.

HOLMES'S TESTIMONY ABOUT THE STATE OF THE TECHNOLOGY, HOW DEVELOPED IT WAS, WHAT CERTAIN EVENTS MEANT FOR WHAT HAD BEEN PROVEN WITH REGARD TO THE TECHNOLOGY, AS IF THIS CONTRACT DID NOT CONTAIN THE FOLLOWING PROVISION, WHICH IS PROVISION 4.4, SPECULATIVE NATURE OF THE INVESTMENT. IN EVERY STOCK PURCHASE AGREEMENT, THE INVESTORS WERE TOLD, THIS IS A COMPANY THAT HAS A VERY LIMITED AND FINANCIAL, OPERATING AND FINANCIAL HISTORY. THAT WAS OBVIOUS TO THE INVESTORS ANYWAY. THERANOS WAS BECOMING INVOLVED IN A RETAIL BUSINESS THAT WAS BRAND NEW. AT THE TIME THE C1 INVESTORS MADE THEIR INVESTMENT, THERANOS HAD ONLY BEEN OPERATING IN THE RETAIL SECTOR FOR ONLY ABOUT A MONTH, AND LESS THAN A YEAR WHEN ALL OF THE INVESTORS INVESTED. SO THEY KNEW THIS WAS A NEW VENTURE AND THEY KNEW IT WAS SPECULATIVE AND THEY KNEW IT INVOLVED SUBSTANTIAL RISK. THEY ALSO DISCLAIMED ANY REPRESENTATIONS THAT THERANOS WAS MAKING AS THE BASIS FOR THEIR INVESTMENT.

IF YOU SEE SECTION 4.5, THE INVESTORS ACKNOWLEDGE THAT THEY UNDERSTOOD THAT THE INFORMATION INVESTED -- PROVIDED BY THE COMPANY WAS NOT INTENDED TO DESCRIBE EVERYTHING ABOUT THE COMPANY. IT WAS DESCRIBING CERTAIN ASPECTS ABOUT WHAT THE COMPANY WAS DOING. AND WHEN THEY TESTIFIED, YOU'LL RECALL THAT THE INVESTORS ACKNOWLEDGED THAT THEY KNEW THIS. MR. GROSSMAN, WHO WAS ONE OF THE MORE RECENT INVESTORS TO TESTIFY, HE WAS ASKED, DID YOU KNOW THAT THERE WERE ASPECTS OF THEIR OPERATIONS THAT THEY WERE NOT DISCLOSING TO YOU? AND HE SAID, YES, THEY TOLD ME THAT AND I KNEW THAT, IN ADDITION TO IT BEING A PROVISION OF THE CONTRACT.

MR. DOWNEY: THEY ALSO SPECIFICALLY, SPECIFICALLY WERE TOLD, WE ARE TELLING YOU WHAT WE THINK AS THERANOS ABOUT THE BUSINESS, HOW IT WILL PERFORM IN THE FUTURE, WHAT WE THINK WE WILL EARN, WHAT BUSINESS LINES WE THINK WE WILL HAVE. AND WE'RE TELLING THAT TO YOU TO INFORM YOU. BUT YOU SHOULD UNDERSTAND THAT BECAUSE WE'RE A NEW COMPANY AND A SPECULATIVE COMPANY, BUSINESS PLANS MAY CHANGE. AND THAT'S IN SECTION 4.5 OF EVERY STOCK PURCHASE AGREEMENT WHERE EACH INVESTOR SAYS, I KNOW THAT THOSE BUSINESS PLANS ARE SPECULATIVE, I KNOW THAT PROJECTIONS THAT YOU PROVIDE ME MAY NOT MATERIALIZE, AND THAT WHAT I AM BEING TOLD AS TO WHAT YOU PROJECT MAY ACTUALLY BE SIGNIFICANTLY DIFFERENT FROM THE RESULTS THAT YOU'RE ACTUALLY ABLE TO GENERATE. SO WHEN WE LOOK AT SOME OF THE ISSUES WITH SPECIFIC INVESTORS AROUND FINANCIAL PROJECTIONS THEY RECEIVED AND BUSINESSES THAT THERANOS THOUGHT IT WOULD BE ABLE TO DEVELOP, BEAR THAT IN MIND. THAT'S THE CONTRACT UNDER WHICH EVERY INVESTOR MAKES THEIR INVESTMENT.

NOW, LET ME TALK ABOUT EACH INVESTOR INDIVIDUALLY JUST FOR A FEW MOMENTS WITH EACH. FIRST, YOU'LL RECALL THAT MR. EISENMAN, WHO TESTIFIED ABOUT HIS INVESTMENT AS PART OF THE C1 ROUND OF INVESTMENTS. MR. EISENMAN IS SOMEONE WHO HAS BEEN INVOLVED IN THE FINANCIAL INDUSTRY AND MAKING INVESTMENTS ON BEHALF OF HIMSELF AND OTHERS FOR ESSENTIALLY HIS WHOLE PROFESSIONAL CAREER, 35 YEARS OR SO. HE WAS NOT ONLY INVOLVED IN ADVISING OTHERS, BUT HE WAS SIGNIFICANTLY INVOLVED IN HIS WIFE'S FAMILY'S PRIVATE OFFICE WHERE THEY MADE INVESTMENTS IN CONNECTION WITH PRIVATE COMPANIES, MADE INVESTMENTS WITH COMPANIES LIKE THERANOS ALL OF THE TIME, AND HE ACKNOWLEDGED THAT WHEN HE TESTIFIED. HE ALSO ACKNOWLEDGED THAT HE WAS FAMILIAR WITH SPECULATIVE INVESTMENTS AND THE RISKS THAT THEY BORE, AND FOR THAT REASON HE SAID HE WOULD NEVER ADVISE ONE OF HIS OWN CLIENTS TO INVEST IN A PRIVATE COMPANY LIKE THERANOS BECAUSE HE THOUGHT THE RISK FOR THEM WOULD BE TOO HIGH.

SO IN MAKING THE INVESTMENT, HE UNDERSTOOD THE NATURE OF THE COMPANY THAT THIS WAS. NOW, WHAT DID HE TESTIFY ABOUT AND WHAT DID THE EVIDENCE SHOW ABOUT HIS INVESTMENT IN THERANOS? ALTHOUGH HE TESTIFIED ON DIRECT EXAMINATION FOR QUITE A WHILE, THE EVIDENCE IS ACTUALLY FAIRLY CLEAR ABOUT HIS CONTACT WITH MS. HOLMES IN CONNECTION WITH EACH INVESTMENT THAT HE MADE. YOU RECALL THAT HE INVESTED IN 2006, WHICH IS BEFORE THE CONSPIRACY PERIOD, AND THEN HE INVESTED AGAIN IN 2013. LET'S LOOK AT EACH OF THOSE INDIVIDUAL INVESTMENTS. IN CONNECTION WITH HIS 2006 INVESTMENT, AND YOU MAY RECALL THIS EXCHANGE, HE INVESTED ON OCTOBER 13TH, 2006. HE TESTIFIED ABOUT A NUMBER OF CONVERSATIONS THAT HE RECALLED HAVING WITH MS. HOLMES. BUT, IN FACT, THE DOCUMENTS FROM THE TIME REFLECTED THAT HE HAD ONLY SPOKEN TO HER ONCE.

HE HAD SPOKEN TO HER FOR ABOUT FIVE MINUTES, AND THAT THE FOCUS OF THE CALL WAS A CHAT, AND THAT HIS IMPRESSIONS WERE THAT SHE WAS A TERRIFIC PERSON, AND THEY OBVIOUSLY CHATTED ABOUT THE FACT THAT THEY HAD A COMMON BACKGROUND. NOT MUCH WAS REFLECTED IN THE CONTEMPORANEOUS RECORD AS TO WHAT HE WAS TOLD IN CONNECTION WITH HIS 2006 INVESTMENT BY MS. HOLMES. THEN THE INVESTMENT THAT IS THE SUBJECT OF OUR CHARGE HERE IS THE INVESTMENT THAT HE MADE IN LATE DECEMBER OF 2013. AND MR. EISENMAN DID NOT SPEAK TO MS. HOLMES AT ALL IN CONNECTION WITH THAT INVESTMENT. HE TESTIFIED HE HAD NO CONTACT WITH HER IN CONNECTION WITH THAT INVESTMENT. AND, IN FACT, I THINK THE RECORD SHOWED HE HAD NOT HAD CONTACT WITH HER PERSONALLY FOR A NUMBER OF YEARS BEFORE THAT INVESTMENT. HE ALSO TOLD YOU THAT HE HAD TALKED TO MS. HOLMES OVER A NUMBER OF YEARS BETWEEN 2006 AND 2010, BUT THAT WHEN HE MADE HIS INVESTMENT DECISION IN 2013, NONE OF THAT WAS RELEVANT TO THE DECISION HE WAS MAKING.

HE TESTIFIED HE WAS RELYING ON THE CURRENT INFORMATION THAT HE HAD. SO MS. HOLMES AND ANY PERSONAL CONTACT BETWEEN HER AND MR. EISENMAN WERE NOT PARTICULARLY RELEVANT TO HIS DECISION TO INVEST. NOW, WHAT WAS -- WHY WAS HE INVESTING? WHAT CONTACT DID HE HAVE? WELL, YOU'LL REMEMBER THAT HE HAD CONTACT WITH MR. BALWANI IN CONNECTION WITH MAKING HIS INVESTMENT IN 2013, AND HE TESTIFIED THAT THOSE INTERACTIONS WERE PLEASANT AND THAT MR. BALWANI WAS SOLICITOUS OF HIM AND MR. BALWANI HAD BEEN VERY UNFRIENDLY WITH HIM IN CONNECTION WITH OTHER DEALINGS THAT THEY HAD, AND I THINK THE RECORD WAS CERTAINLY CONSISTENT WITH THE FACT THAT MR. BALWANI HAD BEEN UNFRIENDLY WITH HIM IN CONNECTION WITH THEIR OTHER INTERACTIONS.

MR. DOWNEY: BUT WHAT DOES THE RECORD OF WHAT HAPPENED AT THE TIME SHOW AS TO WHAT HAPPENED BETWEEN MR. BALWANI AND MR. EISENMAN? WELL, WE KNOW THAT MR. EISENMAN ASKED FOR INFORMATION FROM MR. BALWANI IN CONNECTION WITH HIS INVESTMENT, AND THAT IS HERE IN EXHIBIT 1371. AND THESE WERE HIS QUESTIONS: WHAT IS THE SIZE OF THIS ROUND? ARE DIRECTORS PARTICIPATING IN THIS ROUND? IN OTHER WORDS, WHILE I'M INVESTING, IS THE OTHER BOARD OF DIRECTORS INVESTING AT THE SAME TIME? AND AM I CORRECT THAT THERE WILL BE ANOTHER ROUND OF $200 MILLION IN JANUARY AT A HIGHER PRICE? WAS MR. BALWANI'S RESPONSE FRIENDLY AS MR. EISENMAN DESCRIBED? IT WAS NOT. HE SAID, "WE CAN'T ANSWER YOUR QUESTIONS ABOUT DIRECTORS, OTHER INVESTORS, AND CERTAINLY NOT ABOUT ANY FUTURE INVESTMENT ROUNDS AND SPECULATE ABOUT WHAT THOSE VALUATIONS MAY BE." NOW, THAT'S SIGNIFICANT IN PART BECAUSE IT SHOWS THAT REALLY VERY FEW REPRESENTATIONS WERE MADE TO MR. EISENMAN IN CONNECTION WITH HIS DECISION TO INVEST.

BUT MORE SIGNIFICANTLY, IT REALLY SUGGESTS TO YOU WHAT MATTERED TO MR. EISENMAN IN CONNECTION WITH MAKING INVESTMENT DECISIONS. CONTRARY TO WHAT THE GOVERNMENT TRIED TO ELICIT FROM HIS TESTIMONY NOW, WHAT MATTERED TO MR. EISENMAN, WHICH IS PERFECTLY FAIR, IS, IS WHAT WERE OTHER SOPHISTICATED INVESTORS DOING WITH RESPECT TO THIS ROUND OF INVESTMENT? WERE DIRECTORS ALSO INVESTING? WERE THERE OTHERS WHO WERE INTERESTED IN THE INVESTMENT WHO WOULD INVEST AT A HIGHER PRICE SOON? NOW, THE ANSWER TO THOSE QUESTIONS WERE KNOWN TO MR. BALWANI, AND IT MIGHT HAVE BEEN FAVORABLE FOR HIM TO TELL MR. EISENMAN. WE KNOW THAT AFTER THE FIRST OF THE YEAR THERE WAS AN ADDITIONAL ROUND, AND THAT WAS AT A HIGHER PRICE. BUT HE DIDN'T PROVIDE THAT INFORMATION TO MR. EISENMAN BECAUSE HE DIDN'T THINK IT WAS AN APPROPRIATE REQUEST ON MR. EISENMAN'S PART, AND HE DIDN'T THINK THAT HE SHOULD PROVIDE IT SIMPLY TO MR. EISENMAN AND NOT TO OTHER INVESTORS. WHAT DOES THIS SHOW YOU?

IT SHOWS YOU THAT ALL OF THE REPRESENTATIONS THAT THE GOVERNMENT HAS FOCUSSED ON WERE NOT ON MR. EISENMAN'S MIND AT THE TIME. HE WASN'T INTERESTED IN THE TECHNOLOGY. HE WASN'T INTERESTED IN THE RELATIONSHIP BETWEEN THERANOS AND THE DEPARTMENT OF DEFENSE, HE WASN'T INTERESTED IN THERANOS'S PHARMACEUTICAL COMPANY. HE WAS INTERESTED IN KNOWING ABOUT THE FINANCIAL DETAILS OF WHAT WAS HAPPENING AT THERANOS SO THAT HE COULD EVALUATE WHETHER THIS IS A STOCK THAT HE COULD BUY AND POTENTIALLY QUICKLY SELL. THAT'S PERFECTLY FINE. THAT'S A PERFECTLY FINE DECISION AND A PERFECTLY FINE JUDGMENT ON HIS PART. BUT IT DOESN'T RELATE TO WHAT IS CLAIMED BY THE GOVERNMENT HERE, THAT HE WAS DEFRAUDED IN CONNECTION WITH REPRESENTATIONS ON A NUMBER OF ISSUES THAT HE SHOWED NO INTEREST IN AT THE TIME. WHAT IS THE REAL GIST OF MR. EISENMAN'S CLAIM, AS WELL AS THE ACCOUNT INVOLVING MR. EISENMAN, AS WELL AS MANY OF THE OTHER INVESTORS? WELL, IT'S REALLY THE EVIDENCE THAT I WENT OVER YESTERDAY.

HE SAYS HE READ "THE WALL STREET JOURNAL" ARTICLE, HE SAYS HE LOOKED AT THE WEBSITE AND HE DREW CERTAIN INFORMATION FROM THAT ABOUT WHERE THERANOS WAS. AS I SHOWED YOU YESTERDAY, MANY OF THE THINGS THAT HE AND OTHERS CLAIMED THAT THEY DIDN'T KNOW WAS KNOWN PUBLICLY. MR. PARLOFF HAD BEEN TOLD, FOR EXAMPLE, ABOUT PHASE I AND PHASE II AFTER MR. EISENMAN'S INVESTMENT, WHICH WAS THE SUBJECT OF HIS QUESTION TO MR. BALWANI. IT WAS PUBLICLY KNOWN THAT THERE WAS VENOUS TESTING, ET CETERA, ET CETERA. ALL OF THE ISSUES THAT WERE FREQUENTLY REHEARSED THROUGH MEDIA ARTICLES WITH THE INVESTORS, THERE WAS OTHER INFORMATION OUT THERE THAT WOULD HAVE PROVIDED MR. EISENMAN WITH WHAT HE CLAIMED HE DIDN'T KNOW. LET'S LOOK AT THE NEXT INVESTOR, MR. LUCAS. MR. LUCAS WAS ALSO A PROFESSIONAL INVESTOR. HE WAS A VENTURE CAPITALIST WHO INVESTED FULL TIME IN TECHNOLOGY. HE OPERATED HIS OWN VENTURE CAPITAL FIRM, BLACK DIAMOND VENTURES, AND HE INVESTED IN TECHNOLOGY AND IN MEDICAL DEVICE COMPANIES.

AND HE KNEW A LOT ABOUT THERANOS BECAUSE HE HAD BEEN INVOLVED WITH THERANOS FOR A NUMBER OF YEARS, AND HIS UNCLE WAS THE CHAIRMAN OF THE BOARD OF THERANOS. BUT UNLIKE THE OTHER INVESTORS, LIKE MR. EISENMAN, FOR EXAMPLE, HE WAS INTERESTED IN THERANOS'S TECHNOLOGY, AND HE DID ASK QUESTIONS THAT WERE SPECIFIC TO THERANOS'S TECHNOLOGY. AND WHAT DOES THE RECORD REFLECT? WELL, THE RECORD REFLECTS WHEN HE ASKED THOSE QUESTIONS, HE GOT ACCURATE ANSWERS THAT MATCH WHAT YOU KNOW ABOUT WHAT WAS GOING ON AT THERANOS.

MR. DOWNEY: FIRST OF ALL, YEARS BEFORE HE MADE THIS 2013 INVESTMENT THAT IS THE SUBJECT OF THE COUNT IN THE INDICTMENT, IT WAS EXPLAINED TO HIM THAT THERE WOULD BE VARIOUS SERIES OF DEVICES ON WHICH BLOOD TESTS WOULD BE RUN THAT THERANOS WAS INVENTING, THAT THOSE WOULD GROW GRADUALLY MORE AND MORE SOPHISTICATED, BUT THAT THIS WAS A PROCESS THAT WAS GOING TO DEVELOP OVER TIME. HE CERTAINLY WAS A SOPHISTICATED TECHNOLOGY INVESTOR. HE KNEW THAT. HE ALSO TESTIFIED THAT HE KNEW ACCURATELY WHAT THE GOVERNMENT CLAIMS NO ONE KNEW, WHICH IS HE WAS ASKED, DID YOU KNOW HOW MANY FINGERSTICK SAMPLES THERANOS HAD ACTUALLY DEVELOPED ASSAYS WITH? AND HE SAID -- HIS ESTIMATE WAS THAT IT WAS DOZENS, AND AT LEAST IT WOULD HAVE BEEN DOZENS OF TESTS BECAUSE IT COULD DO THE MAJORITY OF THE MOST COMMON TESTS OUT THERE. WELL, YOU KNEW WHAT THE DIALOGUE WAS INSIDE OF THERANOS BECAUSE OF THE EVIDENCE THAT YOU HAVE SEEN.

THEY TRIED TO FIGURE OUT, WHAT ARE THE 43 OR THE 60 OR THE 70 TESTS THAT WOULD ALLOW US TO DO THE MOST COMMON BLOOD TESTS? THAT'S WHAT THEY DID, AND THAT'S WHAT THEY OFFERED OUT OF THEIR CLIA LAB, AND THOSE DEVICES -- AND THOSE WERE ANALYZED EITHER ON THE MODIFIED MACHINES OR ON THE DEVICES. MR. LUCAS WAS CLEARLY TOLD, THAT'S THE AMOUNT OF FINGERSTICK SAMPLES THAT WE HAVE. SO FOR INVESTORS WHO EVIDENCED AN INTEREST IN THE TECHNOLOGY, THEY GOT ACCURATE INFORMATION. AND THAT WAS TRUE OF MR. LUCAS AND IT REFLECTS, I THINK, WHAT THE INTENT OF MS. HOLMES AND OTHERS WAS WITH RESPECT TO INTERACTING WITH INVESTORS ON THESE ISSUES. I THINK MR. LUCAS ALSO TESTIFIED ABOUT OTHER ELEMENTS OF THERANOS THAT WERE IMPORTANT TO HIM, AND ONE OF THEM I THINK IS QUITE IMPORTANT. AND HE TESTIFIED I THINK PARTICULARLY POINTEDLY ABOUT IT. WHEN INVESTORS WERE INVESTING, THIS WAS NOT A QUESTION OF THE PRESENT TEST MENU OR A QUESTION OF THE PRESENT CAPACITY ON THE NUMBER OF FINGERSTICK SAMPLES.

THEY WERE LOOKING AT WHAT IS -- WHERE IS MS. HOLMES TAKING THIS COMPANY? IS THIS SOMETHING WORTH INVESTING IN? AND I THINK MR. LUCAS DESCRIBED THAT TO YOU IN SOME DETAIL. HE DESCRIBE MS. HOLMES'S PASSION, THAT HER INTEREST WAS NOT IN MAKING MONEY, AND THAT SHE HAD A MISSION TO BRING THIS TECHNOLOGY TO THE WORLD, AND THAT WAS ATTRACTIVE TO HIM. HE WANTED TO BE PART OF THAT INVESTMENT BECAUSE HE BELIEVED IT WOULD SUCCEED, AND IF IT SUCCEEDED, IT WOULD NOT ONLY BE A PROFITABLE VENTURE, BUT A VENTURE WORTH INVESTING IN. LET ME ALSO MENTION ONE OTHER THING WITH MR. LUCAS, AND I WON'T SAY THIS WITH RESPECT TO EVERY INVESTOR, BUT I THINK IT'S TRUE ACROSS THEM. WHEN INVESTORS WERE INVESTING IN 2013 OR 2014, WHY DID THEY INVEST? THE PRINCIPAL REASON THEY INVESTED WAS NOT ABOUT ANY PARTICULAR TECHNOLOGY OR ANY PARTICULAR NUMBER OF FINGERSTICK TESTS.

THE REASON THAT THEY INVESTED WAS THEY KNEW THAT WALGREENS HAD AGREED TO PUT THERANOS'S TECHNOLOGY IN THEIR STORES EVENTUALLY AND TO OPERATE THERANOS SERVICE CENTERS. THAT JUDGMENT WAS ALL THEY NEEDED TO KNOW BECAUSE THAT MEANT TWO THINGS TO THEM. ONE, IT MEANT THAT A BIG NATIONAL COMPANY HAD EVALUATED THERANOS AND MADE A DECISION TO BECOME A PARTNER WITH THERANOS IN BRINGING ITS TECHNOLOGY TO THE PUBLIC MARKET. THAT'S A BIG DEAL. THAT'S A MUCH BIGGER DEAL THAN THE NUMBER OF PARTICULAR TESTS AT ANY GIVEN MOMENT. IT'S A STATEMENT THAT THIS TECHNOLOGY COMPANY IS GOING TO BE ABLE TO MAKE ITS TECHNOLOGY WIDELY AVAILABLE. SECOND, WHAT DID THEY ASSUME, WHICH WAS AN ACCURATE ASSUMPTION? THEY ASSUMED THAT A COMPANY LIKE WALGREENS WOULD HAVE LOOKED AT THERANOS AND ITS TECHNOLOGY IN GREAT DETAIL. AND YOU KNOW THAT'S TRUE.

YOU KNOW THAT THERE WAS A LOT OF TECHNICAL DUE DILIGENCE THROUGH THE JOHNS HOPKINS STUDY, THE JOHNS HOPKINS DUE DILIGENCE AND THE OTHER LAB CONSULTANTS THAT WALGREENS WORKED WITH AS PART OF ITS EVALUATION OF THERANOS. THAT'S WHAT WAS REALLY DRIVING THESE INVESTMENTS. AND MR. LUCAS DURING HIS TESTIMONY ACKNOWLEDGED THAT. WHAT DID IT MEAN FINANCIALLY FOR THEM THAT THERE WAS THIS WALGREENS PARTNERSHIP? WELL, THAT WAS TALKED ABOUT WITH RESPECT TO WHAT THE PRICING WAS OF THEIR SHARES AND HOW MUCH THEY RECOGNIZED IT AS OF THE TIME THAT THEY WERE BEING OFFERED THE OPPORTUNITY TO INVEST AT $15. REMEMBER THAT MR. LUCAS, MR. EISENMAN, AND MR. TOLBERT, OR MR. HALL WHO MR. TOLBERT WORKED FOR, THEY WERE ALL INDIVIDUALS WHO EITHER DIRECTLY OR INDIRECTLY HAD INVESTED IN THERANOS YEARS BEFORE THESE 2013 INVESTMENTS.

MR. DOWNEY: AND BY THE TIME THEY WERE BEING OFFERED THIS SECOND OPPORTUNITY TO INVEST, THEY KNEW THAT WALGREENS, OR SOME STRATEGIC PARTNER OF THERANOS, WAS NOW WILLING TO INVEST AT $15 A SHARE, WHICH WAS ACTUALLY $75 A SHARE BECAUSE IT WAS A SPLIT SHARE. THEY HAD INVESTED AT NUMBERS LIKE 2.82 A SHARE, AND IN MR. LUCAS'S CASE, $0.92 A SHARE. SO THEY ASSUMED, AT THE TIME THAT THEY WERE MAKING THIS INVESTMENT DECISION, THAT THEY HAD ALREADY -- THEY ASSUMED ACCURATELY THAT THEY HAD ALREADY REALIZED A SUBSTANTIAL RETURN ON THEIR INVESTMENT WITH THERANOS. THIS WAS REALLY A DECISION AS TO WHETHER THEY WANTED TO INVEST AS WELL AT THIS INCREASED PRICE. THAT'S HOW THEY WERE EVALUATING THIS. THEY ALSO KNEW, AS YOU SAW, ALTHOUGH NOT TOLD BY MR. BALWANI OR MS. HOLMES, THEY SUSPECTED THAT THERE WOULD BE ANOTHER OFFERING IN THE NEW YEAR AND THE PRICE WOULD BE HIGHER. THAT WAS, IN FACT, TRUE. THE C2 ROUND WAS OFFERED AT $17 A SHARE.

SO THEY WERE LOOKING AT AN OPPORTUNITY TO INVEST AT $15 A SHARE, RECOGNIZING THAT THE PRICE OF THERANOS STOCK WAS LIKELY TO GO TO $17 A SHARE, WHICH, IN FACT, NEW OFFERINGS WERE HELD AT THAT PRICE. AND THAT'S THE WAY THAT THEY WERE VIEWING THIS INVESTMENT. THEY VIEWED THAT AS POSSIBLE BECAUSE OF THE WALGREENS PARTNERSHIP, WHICH WAS ALSO ACCURATE. THE ARGUMENT THAT THEY WERE REALLY LOOKING OR MAKING AN INVESTMENT IN THERANOS BECAUSE THEY WERE RELYING ON WHAT WAS SAID IN A NEWSPAPER ARTICLE WHEN, IN FACT, WE KNOW WHAT THE RECORD REFLECTS THEY WERE LOOKING AT, WHICH IS THE EFFECT OF OTHER INVESTMENTS, THE EFFECT OF FUTURE INVESTMENTS, THE EFFECT OF THE WALGREENS PARTNERSHIP DOESN'T SUGGEST WHAT WAS, IN FACT, MATERIAL TO THEM. LET'S LOOK NOW AT MR. TOLBERT. MR. TOLBERT WAS NOT HIMSELF AN INVESTOR. AND MR. TOLBERT WORKS FOR A GENTLEMAN NAMED CRAIG HALL, WHO IS A TEXAS REAL ESTATE INVESTOR, AND MR.

HALL DID NOT TESTIFY OR EXPLAIN THE REASONS HIMSELF AS TO WHY HE WAS SUPPORTIVE OF MAKING AN INVESTMENT IN THERANOS. IN 2006 THEY HAD INVESTED WITH MR. LUCAS, NOT DIRECTLY IN THERANOS, BUT THEY HAD INVESTED THROUGH MR. LUCAS IN THERANOS. I THINK IT'S FAIR TO SAY THAT BECAUSE THEIR ORIGINAL INVESTMENT WAS THROUGH MR. LUCAS, IT WOULD HAVE BEEN REASONABLE FOR THERANOS GENERALLY, AND FOR MS. HOLMES IN PARTICULAR, TO ASSUME THAT INFORMATION THAT WAS BEING PASSED TO MR. LUCAS WOULD BE PASSED ON TO MR. TOLBERT AND ULTIMATELY ON TO MR. HALL. BUT WHEN YOU HEARD THE EVIDENCE, IF YOU COMPARE WHAT MR. LUCAS KNEW ABOUT THERANOS, THINGS LIKE THEY WERE OFFERING NOT EVERY TEST ON FINGERSTICK BUT SOME DOZENS OF TESTS ON FINGERSTICK, AND WHEN YOU COMPARE THAT TO WHAT MR. TOLBERT KNEW, THEY DON'T MATCH, AND I ACKNOWLEDGE THAT. AND I DON'T KNOW WHETHER THAT'S BECAUSE THERE WAS A GAP IN INFORMATION BETWEEN MR. LUCAS AND MR. TOLBERT, OR WHETHER MR. TOLBERT'S RECOLLECTION OF WHAT MR.

LUCAS TOLD HIM HAS JUST LEFT HIS MEMORY WITH THE PASSAGE OF TIME. BUT IN ANY EVENT, ESSENTIALLY WHAT WAS PASSED ON TO MR. LUCAS BY MS. HOLMES AND OTHERS, I THINK SHE PRESUMED WOULD HAVE BEEN KNOWN BY MR. HALL AND BY MR. TOLBERT AS WELL. MR. TOLBERT HAD NO DIRECT CONVERSATIONS WITH MS. HOLMES AT ALL AFTER THE HALL GROUP'S FIRST INVESTMENT THROUGH MR. LUCAS IN 2006. NONE. HE HAD NO CONTACT WITH HER AT ALL BETWEEN 2006 AND 2013. NOR IN CONNECTION WITH HIS INVESTMENT IN 2013 DID HE HAVE A DIRECT CONVERSATION WITH MS. HOLMES. SO WE'RE NOT REALLY FOCUSSED ON DIRECT INTERPERSONAL DEALINGS BETWEEN THEM. WHAT THE GOVERNMENT FOCUSES ON HERE IS THE TAPE RECORDING THAT YOU HEARD OF THE DECEMBER 20TH CALL, WHICH IS A TELEPHONE CALL THAT MR. TOLBERT PARTICIPATED IN. AS YOU RECALL, HE TESTIFIED THAT THERE WERE MANY PARTICIPANTS IN THE CALL, THAT HE SECRETLY TAPE RECORDED THAT INFORMATION FOR THE BENEFIT OF MR. HALL, AND NO ONE ELSE BUT HE KNEW THAT HE WAS TAPING THE CALL.

THE MAIN FOCUS, I THINK, REALLY OF THIS CALL, AND THE MAIN FOCUS OF THE GOVERNMENT'S PRESENTATION OF EVIDENCE HERE IS THE STATEMENT THAT MS. HOLMES MADE DURING THAT TAPE RECORDING ABOUT THERANOS'S RELATIONSHIPS WITH THE MILITARY AND WHAT THE USE OF THERANOS DEVICES WAS IN CONNECTION WITH MEDEVACS, ET CETERA. I WANT TO GO THROUGH THAT WITH YOU IN A MOMENT, BUT I WANT TO ALSO REMIND YOU THAT THE CONVERSATION THAT IS HAD ON THAT TAPE WHERE MS. HOLMES IS DISCUSSING THE RELATIONSHIP BETWEEN THERANOS AND THE DEPARTMENT OF DEFENSE IS NOT SOMETHING THAT MS. HOLMES BROUGHT UP OR INTRODUCED INTO THE CONVERSATION.

MR. DOWNEY: THE COMMENTS SHE MADE WERE IN QUESTION -- WERE IN RESPONSE TO A QUESTION BY ANOTHER INVESTOR WHO ASKED HER, IS THERE A MILITARY ASPECT THAT THERANOS IS GOING TO PURSUE? AND MS. HOLMES SAYS AS PART OF HER ANSWER THAT, WELL, YOU KNOW, THE COMPANY DOES HAVE ACTIVITIES IN THAT REGARD, BUT THAT THE COMPANY'S FOCUS GOING FORWARD IS GOING TO BE ON THE RETAIL MARKET WITH WALGREENS AND HOPEFULLY WITH OTHER RETAIL PARTNERS. BUT I WANT TO LOOK AT WHAT MS. HOLMES ACTUALLY SAYS ON THAT TAPE, WHICH YOU HEARD AS PART OF THE TAPE, AND OF COURSE YOU CAN HEAR AGAIN AS PART OF YOUR DELIBERATIONS. AND I WANT TO BREAK IT DOWN AND COMPARE IT TO WHAT WAS ACTUALLY GOING ON WITH THERANOS'S MILITARY PROGRAMS SO THAT YOU UNDERSTAND WHAT WAS BEING CONVEYED AS PART OF THIS CONVERSATION. LET'S LOOK AT WHAT MS. HOLMES ACTUALLY SAYS. THERE REALLY ARE TWO PARTS TO THIS.

THERE'S A PART WHERE THERE'S A DISCUSSION OF THE WORK THAT THERANOS WAS DOING IN CONNECTION WITH AFGHANISTAN, AND THEN THERE'S A SEPARATE DISCUSSION ABOUT THERANOS'S WORK WITH SPECIAL OPERATIONS. SO WHAT DOES MS. HOLMES SAY ON THAT TAPE IF YOU ACTUALLY RECALL WHAT SHE SAID? IT'S REALLY BROKEN DOWN INTO THREE PARTS. FIRST, SHE SAYS THAT ONE PIECE OF WORK THAT THEY WERE DOING IS IN THE CONTEXT OF WORK IN THE MIDDLE EAST, AND SPECIFICALLY IN AFGHANISTAN. AND THEN SHE GOES ON TO DESCRIBE A SIGNIFICANT MEDICAL PROBLEM THAT EXISTED WITH GETTING MEDICAL TREATMENT FOR SOLDIERS ON A TIMELY BASIS. SHE THEN GOES ON TO SAY, WELL, THE ABILITY TO PLACE AND TAKE A TECHNOLOGY LIKE THIS AND PUT IT IN FLIGHT HAS THE POTENTIAL TO CHANGE SURVIVAL RATES. SO THERE'S A POTENTIAL PLACEMENT THAT COULD SAVE LIVES. THIRD, SHE SAYS WE'VE BEEN DOING A LOT OF WORK THERE. NOW, WHY WOULD SHE SAY THAT?

WELL, LET'S LOOK AT THE WORK THAT THERANOS WAS ACTUALLY DOING IN CONNECTION WITH THE PROGRAM IN AFGHANISTAN AT THAT TIME. FIRST, WAS THERE WORK THAT THERANOS WAS DOING IN CONNECTION WITH DEPLOYING ITS DEVICES IN AFGHANISTAN? YOU KNOW THAT THERE WAS. THERANOS HAD ENTERED A CONTRACT ABOUT A YEAR BEFORE THIS CALL WITH CENTCOM, AND THE IDEA WAS THAT THE DEVICES WOULD BE EVALUATED AT BAGRAM AIR FORCE BASE IN AFGHANISTAN. WHAT I'M SHOWING YOU NOW AS PART OF EXHIBIT 10457 IS THE DOCUMENT THAT REFLECTED THE WORK THAT WAS TO BE DONE. THEN WAS THERE GOING TO BE, AS PART OF THIS PROGRAM, POTENTIAL PLACEMENT ON MEDEVAC HELICOPTERS THAT COULD SAVE LIVES? YES. IF YOU READ THE LANGUAGE, THERE'S A NUMBER OF DIFFERENT USES OF THERANOS DEVICES IN THIS CONTEXT THAT WERE CONSIDERED AND WERE DESCRIBED AS PART OF THE PROCESS. AS YOU SEE HERE, THERE'S A SUGGESTED USES COULD INCLUDE MEDEVAC, BUT IT COULD INCLUDE MULTIPLE PLATFORMS ON LAND, AIR, SEA, ET CETERA.

NOW, WAS THERANOS DOING ANY WORK TOWARDS THIS GOAL OR WAS THIS, AS I THINK THE GOVERNMENT SUGGESTS, JUST A FANTASY OF MS. HOLMES? WELL, THE TRUTH IS, AND YOU'VE HEARD TESTIMONY DURING THE CASE, THERANOS WAS DOING A LOT OF WORK TOWARDS THIS GOAL. THERANOS WAS DEVELOPING A SPECIFIC DEVICE FOR PURPOSES OF DEPLOYMENT WITH THE MILITARY, NOT ONLY IN AFGHANISTAN, BUT IN OTHER LOCATIONS, CALLED A 4S DEVICE, A PROGRAM ON WHICH THERANOS SPENT TENS OF MILLIONS OF DOLLARS AND WHICH IS PART OF -- PART OF WHICH IS THIS WORK THAT IS DESCRIBED IN THE CONTRACT THAT IS 10547, AND YOU CAN LOOK AT THAT AS PART OF YOUR DELIBERATIONS. NOW, LET'S GO ON TO THE SECOND PART OF WHAT SHE SAYS, WHICH IS IN CONNECTION WITH SPECIAL OPERATIONS COMMAND. SHE SAYS, SEPARATELY, WE'VE BEEN DOING A LOT OF WORK WITH SPECIAL OPERATIONS COMMAND IN THE CONTEXT OF MISSIONS IN REMOTE AREAS. SHE TALKS ABOUT THE PROBLEM OF THERE BEING AN ABSENCE OF MEDICAL CARE AND PEOPLE BEING EVACUATED GENERALLY OUT OF CONTINENT.

AND THEN SHE GOES ON TO SAY WE, AS THERANOS, CREATED A DISTRIBUTED SYSTEM THAT CAN BE REMOVED -- THAT CAN BE USED IN REMOTE AREAS. WHAT IS SHE TALKING ABOUT HERE? WELL, HERE SHE'S TALKING ABOUT THE CONTRACT -- TWO DIFFERENT CONTRACTS. ONE IS THE PROGRAM THAT HAD ALREADY BEEN DONE WITH SPECIAL OPERATIONS FORCES IN AFRICA. YOU'LL REMEMBER THAT THERE WAS A PROGRAM UNDER WHICH DEVICES WERE TAKEN TO REMOTE LOCATIONS IN AFRICA AND THEY WERE EVALUATED AS TO WHETHER THEY COULD SUSTAIN THE CONDITIONS OF REMOTE AREAS. THOSE LOCATIONS ARE IDENTIFIED HERE IN EXHIBIT 12251. AGAIN, THE DESCRIPTION SHE GIVES OF CURRENTLY AVAILABLE TECHNOLOGIES BEING UNSUITABLE ON THE CALL IS EXACTLY MATCHED BY SOME OF THE LANGUAGE THAT'S IN THE CONTRACT THAT THERANOS HAD WITH AFRICOM AT THIS TIME.

MR. DOWNEY: WHAT ABOUT SPECIAL OPERATIONS COMMAND IN PARTICULAR? SIMILARLY THERE WAS AN ARRANGEMENT WITH SPECIAL OPERATIONS COMMAND, WHICH I'LL TALK ABOUT IN A MOMENT. NOW, YOU HEARD FROM MR. EDLIN ABOUT THE SUBSTANTIAL WORK THAT THERANOS WAS DOING IN CONNECTION WITH DEPLOYING THESE DEVICES. YOU ALSO HEARD ABOUT IT FROM MS. HOLMES. AND YOU KNOW THAT THERANOS HAD DESIGNED DEVICES THAT COULD BE USED IN AN EXTREME ENVIRONMENT. SO WHEN MS. HOLMES WAS TALKING ABOUT THIS ON THIS CALL, THIS IS WHAT SHE WAS TALKING ABOUT, THOSE POINTS. MR. TOLBERT WAS ASKED DURING HIS TESTIMONY, WHAT DID YOU UNDERSTAND, WHAT DID YOU TAKE AWAY FROM THIS CONVERSATION THAT MS. HOLMES WAS TELLING YOU? WELL, LET'S RECALL HIS TESTIMONY WHERE HE WAS ASKED THAT QUESTION. AND HE SAID, WELL, HE UNDERSTOOD FIRST THAT THERE WAS SIGNIFICANT WORK BEING DONE TO DEPLOY THE THERANOS SYSTEM IN THEATRE. THAT WAS ACCURATE.

AS I SAY, THERANOS WAS SPENDING TENS OF MILLIONS OF DOLLARS AND HAD A HIGH NUMBER OF PEOPLE WORKING ON THIS PROJECT. HE THEN WAS ASKED, WHAT DID YOU TAKE HER STATEMENTS ABOUT SPECIAL OPERATIONS COMMAND? AND HE SAYS THE UNDERSTANDING WAS THAT THEY HAD BEEN WORKING WITH SPECIAL OPERATIONS COMMAND, AND IT CERTAINLY REPRESENTED A CAPABILITY AND A BUSINESS THAT THE COMPANY HAD PURSUED. THAT IS ALSO ACCURATE. YOU KNOW THAT FROM THE TESTIMONY OF MR. EDLIN AND FROM MS. HOLMES'S TESTIMONY, AND FROM THE MANY DOCUMENTS THAT HAVE BEEN PRODUCED DURING THE COURSE OF THE CASE. NOW, THIS TAPE, WHICH THE GOVERNMENT INTRODUCED, IS THE BEST EVIDENCE, ALONG WITH THE TAPES FROM MR. PARLOFF, ABOUT HOW MS. HOLMES TALKED ABOUT THERANOS'S RELATIONSHIPS WITH THE DEPARTMENT OF DEFENSE AND HOW IT TALKED ABOUT ITS ASPIRATIONS, HOW IT TALKED ABOUT PROGRAMS THAT IT HAD WITH SPECIAL OPERATIONS COMMAND, HOW IT TALKED ABOUT THE WORK THAT IT WAS DOING IN AFGHANISTAN. BUT THESE PROJECTS WERE REAL PROJECTS.

THERE WAS A LOT OF INVESTMENT THAT THE COMPANY MADE IN THIS. THE COMPANY DEALT WITH NUMEROUS PEOPLE IN THE DEPARTMENT OF DEFENSE. YOU SAW THAT IN EMAILS THAT WERE INTRODUCED DURING MR. EDLIN'S TESTIMONY. THESE PROGRAMS WENT ON FOR YEARS. THERANOS HAD BEEN TALKING WITH THE DEPARTMENT OF DEFENSE ABOUT THESE DEPLOYMENTS SINCE 2011. YOU KNOW, AS A RESULT OF HIS TESTIMONY, THAT THERANOS TOOK ITS 4 SERIES DEVICES TO MACDILL AIR FORCE BASE FOR EVALUATION BY CENTCOM AND THEY WERE FURTHER MODIFIED IN RESPONSE TO THAT MEETING. YOU KNOW THAT THERANOS ACTUALLY DELIVERED SERIES 4 DEVICES TO SPECIAL OPERATIONS COMMAND, WHICH SPECIAL OPERATIONS COMMAND ULTIMATELY DECIDED NOT TO USE, BUT THEY WERE BUILT. AND DURING DECEMBER OF 2013 WHEN THIS CALL WAS HAPPENING, MS. HOLMES WAS VERY MUCH AWARE THAT THESE PROGRAMS WERE MIDSTREAM. THE SOCOM DEVICES WOULD BE DELIVERED TO SPECIAL OPERATIONS COMMAND ABOUT FOUR OR FIVE MONTHS AFTER THIS CALL.

THERANOS HAD AGREED WITH CENTCOM THAT IT WOULD DELIVER DEVICES IN AFGHANISTAN ABOUT EIGHT MONTHS -- SCHEDULED TO BE DELIVERED ABOUT EIGHT MONTHS AFTER THIS CALL. THESE ARE THE CONTACTS -- THIS IS THE CONTEXT IN WHICH THESE STATEMENTS WERE BEING MADE. THERANOS WAS, IN FACT, REALLY DOING THE WORK WHICH MS. HOLMES DESCRIBED. AS YOU SEE FROM THE TAPE, SHE DID NOT SAY THESE DEVICES ARE IN FLIGHT FOR CLINICAL USE, WHICH IS HOW MANY OF THE WITNESSES HAVE BEEN QUESTIONED. SHE TALKS ABOUT THE WORK THAT THERANOS WAS DOING IN CONNECTION WITH THESE PROGRAMS. SHE ALSO SAYS, THIS IS NOT GOING TO BE OUR BUSINESS. WE'LL DO A LITTLE BIT HERE, BUT THIS IS NOT GOING TO BE OUR BUSINESS. SO FROM THE PERSPECTIVE OF INVESTORS, THEY ARE BEING TOLD, I THINK ACCURATELY, WHAT THE STATE OF THERANOS'S BUSINESS WAS. LET'S LOOK AT THE CONTRACTS THAT THERANOS HAD WITH THE MILITARY OVER TIME. THERE'S THE CENTCOM CONTRACT, WHICH I MENTIONED, WHICH WAS, AS I SAY, ACTIVE DURING THIS PERIOD. THERE WAS THE SPECIAL OPERATIONS COMMAND CONTRACT, WHICH WAS ENTERED IN 2012, MODIFIED IN 2013. AND THERE WAS THE PROGRAM WITH AFRICOM WHICH YOU WILL RECALL SEEING TESTIMONY ABOUT DURING THE COURSE OF MR. EDLIN'S TESTIMONY. AND I WANT TO SHOW YOU SOME OF THE INTERACTIONS THAT THERANOS HAD AS PART OF THAT PROGRAM, WHICH YOU'LL REMEMBER. IF WE LOOK AT SLIDE 33, AND THIS IS EXHIBIT 13986 -- SORRY, 34. THIS IS A REPORT FROM THE COMMAND SURGEON OF AFRICOM ABOUT THERANOS'S DEVICES AND THEIR DEPLOYMENT TO AFRICOM.

MR. DOWNEY: SHE WRITES IN DECEMBER OF -- OR JULY OF 2012 TO MR. EDLIN, COPYING MS. HOLMES, THAT SHE HAS BEEN TO AFRICA AND SHE HAS TAKEN THE DEVICE TO AFRICA WHERE THE DEVICE TRAVELLED WELL AND IT FUNCTIONED WELL. SHE TALKED ABOUT DIFFICULTIES WITH THE FUNCTIONALITY OF THE SCREEN, BUT SHE REPORTED THAT SHE HAD TAKEN THE DEVICE AND USED IT IN CAMEROON AND IN UGANDA AND SOUTH SUDAN. THIS WAS NOT A FICTION THAT MS. HOLMES WAS MAKING UP AND SHE WAS NOT INTENDING TO EXAGGERATE WHAT WORK HAD BEEN DONE. THIS WAS VERY MUCH A PART OF THE WORK THAT THERANOS WAS DOING. I THINK MR. TOLBERT'S TESTIMONY SHOWS YOU WHAT WAS REALLY UNDERSTOOD AS PART OF THESE CONVERSATIONS WITH PEOPLE WHO HEARD HER TALK ABOUT THESE DEVICES. NOW, I WANT TO TALK ALSO ABOUT WHAT THE GOVERNMENT DID NOT DO IN CONNECTION WITH ITS CASE ON THIS SUBJECT. THEY INTRODUCED, AS MR.

SCHENK DETAILED YESTERDAY, TESTIMONY FROM, I DON'T KNOW, FIVE, SIX, SEVEN PEOPLE WHO SAID, SHE TOLD ME THAT THERE WAS A DEVICE AND IT WAS IN FLIGHT AND BEING CLINICALLY USED IN THAT CONTEXT, ET CETERA. BUT THE GOVERNMENT DIDN'T CALL A SINGLE PERSON FROM THE DEPARTMENT OF DEFENSE WHO WORKED ON THESE CONTRACTS WHO WOULD HAVE BEEN ABLE TO GIVE ACCURATE DESCRIPTIONS OF THE STATE OF THOSE PROGRAMS, WHAT THEY WERE TRYING TO DO IN CONNECTION WITH THOSE PROGRAMS. NOTHING. THEY ASKED GENERAL MATTIS WHEN HE TESTIFIED WHETHER HE KNEW THAT THOSE PROGRAMS HAD SUCCEEDED. OF COURSE HE WAS NOT INVOLVED IN THOSE PROJECTS BECAUSE, AS HE TOLD YOU, AFTER HE CAME TO THERANOS, HE RECUSED HIMSELF FROM ALL ACTIVITIES WITH THE DEPARTMENT OF DEFENSE. THAT'S NOT THE ONLY TIME THAT MS. HOLMES TALKED ABOUT THIS MEDEVAC ISSUE AND IT WAS CAPTURED ON TAPE. REMEMBER THAT MR. PARLOFF ALSO TALKED ABOUT THE MEDEVAC ISSUE, AND THAT WAS CAPTURED ON A TAPE OF A CONVERSATION BETWEEN MS. HOLMES AND MR. PARLOFF.

AND YOU CAN LOOK AT WHAT WAS SAID AS PART OF THAT CONVERSATION. MR. PARLOFF ASKED MS. HOLMES, ARE YOU DOING STUFF OVERSEAS ALREADY? AND MS. HOLMES SAID, WE HAVE DONE WORK OVERSEAS FOR PHARMACEUTICAL COMPANIES AND A LITTLE BIT WITH FOREIGN GOVERNMENTS IN THE PAST, BUT WE'VE GOT OUR WORK CUT OUT FOR US HERE. SHE DOESN'T MENTION WORK ABROAD IN CONNECTION WITH ANY MILITARY PROGRAM. BUT IN RESPONSE TO THEIR CONVERSATION AS IT CONTINUES, TOWARDS THE END OF IT SHE DOES TALK ABOUT SOME POTENTIAL APPLICATIONS WITH THE MILITARY. AND REMEMBER, THIS IS IN 2014. SHE SAYS TO HIM, THERE'S MILITARY-SPECIFIC APPLICATIONS, TOO, THAT ARE QUITE PROMISING. THAT ARE QUITE PROMISING. SOMETHING THAT MIGHT HAPPEN IN THE FUTURE. NOW, YOU SEE THAT THAT IS SORT OF SIMILAR LANGUAGE TO HOW SHE TALKED ABOUT, YOU KNOW, THE POTENTIAL IMPLICATIONS, THERE COULD BE SOME PROMISE IN THAT, ET CETERA. BUT THEN SHE GOES ON TO TALK ABOUT IT MORE SPECIFICALLY. COULD THERE BE A MILITARY USE FOR THIS?

COULD THERE BE A MEDEVAC USE FOR IT, ET CETERA? AND LET'S SEE WHAT SHE SAYS. WELL, "I MEAN, AND -- AND THAT -- THAT HAS IMPLICATIONS, BROADLY." THIS IS 2014. SHE'S SAYING THAT THERE'S A POTENTIAL APPLICATION IN THE FUTURE WITH THE MILITARY. NOW, WE KNOW WHAT MR. PARLOFF UNDERSTOOD AS A RESULT OF THIS CONVERSATION BECAUSE WE KNOW WHAT HE WROTE IN HIS ARTICLE, WHICH IS IN EXHIBIT 1776. AND HE SAYS, "THAT MAKES IT POSSIBLE TO IMAGINE ONE DAY PLACING HOLMES'S LABS RIGHT BY THE OPERATING ROOMS IN HOSPITALS OR IN MILITARY EVACUATION HELICOPTERS." ONE DAY IN THE FUTURE. THIS IS A CAPACITY THAT THERANOS MIGHT BE CAPABLE OF ACHIEVING. NOW, WHAT DID THE TESTIMONY IN THIS CASE LOOK LIKE COMPARED TO THE TAPES? WELL, IN BOTH OF THE TAPES YOU SEE SOME COMMONALITIES. SHE NEVER SAYS THERANOS DEVICES ARE BEING CURRENTLY BEING USED. SHE NEVER TALKS ABOUT THESE ACTUALLY BEING IN FLIGHT WITH CLINICAL USE. SHE TALKS ABOUT POTENTIAL APPLICATIONS.

SHE DESCRIBES PROJECTS THAT YOU KNOW ARE REAL PROJECTS. HER WORDS TRACK THE CONTRACT LANGUAGE VERY CLOSELY. SHE DESCRIBES USE IN REMOTE AREAS. SHE DESCRIBES THE PROBLEMS THAT THEY'RE TRYING TO SOLVE. AND IN EVERY SITUATION SHE SAYS, THIS ISN'T OUR FOCUS. OUR FOCUS IS ON WALGREENS AND OTHER ASPECTS OF THE RETAIL MARKET. NOW, YOU'LL RECALL THAT MR. PARLOFF TALKED ABOUT HAVING A CONVERSATION WITH MS. HOLMES THAT WASN'T CAPTURED ON THE TAPE. AND HE SAID IN CONNECTION WITH THAT CONVERSATION, WHICH WAS I GUESS A THIRD CONVERSATION -- THE FIRST AND SECOND CONVERSATION ARE REFLECTED ON TAPE AND YOU KNOW WHAT WAS SAID AS PART OF THAT.

MR. DOWNEY: BUT HE TESTIFIED THAT HE WAS TOLD BY MS. HOLMES NOT ON TAPE THAT A THERANOS DEVICE WAS BEING USED IN AFGHANISTAN. HE DIDN'T HAVE ANY NOTES OF THAT CONVERSATION THAT HE STILL POSSESSED AT ALL. NOW, THAT'S, THAT'S -- THAT WOULD BE ODD, HONESTLY, BECAUSE HE INTERVIEWED HER, AS HE TESTIFIED, FOR ABOUT 13 HOURS OVER 11 DAYS, HAD ABOUT 10 HOURS OF TAPED CONVERSATIONS WITH HER, AND HE TAPED TWO CONVERSATIONS WITH HER THAT REFLECT DISCUSSION OF THIS. BUT HE SAYS IN A THIRD CONVERSATION SHE SAYS SOMETHING DIFFERENT. MR. SCHENK ON DIRECT EXAMINATION, AS HE QUOTED YESTERDAY, ELICITED TESTIMONY FROM -- I'M SORRY, MR. BOSTIC DID, FROM MR. PARLOFF WHERE HE SAID, NO, SHE TOLD ME THAT THIS IS IN USE ON A MEDEVAC. BUT THEN ON CROSS-EXAMINATION WHEN MR. CLINE ASKED HIM ABOUT THAT, HE SAID, SHE NEVER ACTUALLY TOLD YOU THAT IT WAS -- THERE WAS USE IN AFGHANISTAN, DID SHE? HE RESPONDED, "I THOUGHT SHE DID."

HE THEN WAS ASKED, "SO YOU THOUGHT YOU HAD MORE THAN JUST THE IMPRESSION THAT YOU DESCRIBED TO THE GOVERNMENT IN THOSE FIRST TWO MEETINGS?" HE SAID, "WELL, IT IS SEVEN YEARS AGO. IT MIGHT HAVE BEEN A VERY STRONG IMPRESSION. I, I -- I'M NOT CERTAIN." NOW, I DON'T FAULT MR. PARLOFF FOR THAT. THAT'S THE EVOLUTION OF MEMORY IN THE CONTEXT OF EVERYTHING THAT HAS HAPPENED. BUT WE KNOW FROM THE CONTEMPORANEOUS RECORD WHAT WAS TOLD ABOUT MEDEVACS. WE KNOW THAT HE WAS TOLD THAT THESE WERE APPLICATIONS THAT THERANOS WAS PURSUING AS A POTENTIAL IN THE FUTURE. AND I THINK THE COMMENTARY ON THIS SUBJECT, WITH THE BENEFIT OF WHAT MS. HOLMES ACTUALLY SAID ON BOTH RECORDINGS, YOU SHOULD HEAR ALL OF THAT, ALL OF THE TESTIMONY ABOUT THAT IN CONNECTION WITH THAT THOUGHT. IT SHOULD RAISE, I THINK IN YOUR MIND, SOME QUESTION ABOUT TESTIMONY THAT WITNESSES HAVE OFFERED ON THIS MEDEVAC ISSUE. IN ANY EVENT, YOU KNOW THAT IN EVERY ISSUE -- IN EVERY CIRCUMSTANCE MS.

HOLMES WAS SAYING TO INVESTORS, THIS SHOULDN'T BE MATERIAL TO YOUR INVESTMENT DECISION. SO THOSE ARE THE THREE INVESTORS IN THE C1 ROUND, MR. EISENMAN, MR. LUCAS, AND MR. TOLBERT. LET ME TALK NOW ABOUT THE C2 ROUND. YOU HEARD FROM MR. GROSSMAN, WHO WAS ONE INVESTOR. I THINK THE POINTS WITH MR. GROSSMAN CAN BE SUMMARIZED FAIRLY SUCCINCTLY. FIRST, HE INVESTED WITH A LARGE TEAM OF PEOPLE. THERE WERE THREE PEOPLE WHO HAD A LOT OF EXPERIENCE IN THE AREAS THAT HE WAS EVALUATING WITH THERANOS, INCLUDING DR. RABODZEY, WHO HE TESTIFIED ABOUT WHO EVALUATED THERANOS'S TECHNOLOGY QUITE CLOSELY. MR. GROSSMAN'S INTERACTIONS WITH MS. HOLMES IN CONNECTION WITH HIS INVESTMENT WERE, IN FACT, QUITE LIMITED. HE HAD AN HOUR INTRODUCTORY MEETING WITH MR. BALWANI AND MS. HOLMES IN DECEMBER OF 2013. HE TESTIFIED NOTHING REALLY CONFIDENTIAL WAS DISCUSSED THERE BECAUSE HE HADN'T SIGNED A CONFIDENTIALITY DISCLOSURE AGREEMENT.

HE HAD A MEETING ABOUT A MONTH LATER THAT LASTED ABOUT 90 MINUTES PERHAPS WITH MS. HOLMES, AND SHE LEFT. AND THEN HE HAD A FOLLOW-ON MEETING WITH MR. BALWANI AND OTHERS. THOSE ARE THE ONLY TWO INTERACTIONS THAT MR. GROSSMAN HAD. BUT IN THE PERIOD FOLLOWING THEREAFTER, MR. GROSSMAN'S FIRM CONDUCTED NEARLY DAILY DUE DILIGENCE AND DAILY ANALYSIS AS YOU WOULD EXPECT HIS BUSINESS, WHICH IS A HEDGE FUND, TO DO IN CONNECTION WITH ITS INVESTMENT, AND THEN ULTIMATELY MADE THE DECISION TO INVEST IN EARLY FEBRUARY OF 2014. NOW, WHAT DID THEY LOOK AT IN THAT PERIOD AND WHAT DID THEY KNOW ABOUT THERANOS? WELL, THEY KNEW A LOT. IN FACT, THEY REALLY KNEW ALMOST EVERYTHING ABOUT THERANOS BEFORE THEY MADE A DECISION TO INVEST. YOU SAW THAT THEY LOOKED AT AND ANALYZED ALL OF THE REGULATORY ISSUES, THEY LOOKED AT ALL OF THE ISSUES ABOUT THE LAB INDUSTRY, THEY SPOKE TO MR. BALWANI ABOUT HOW MANUFACTURING WOULD WORK, THEY TOURED THE CLIA LAB. ALL OF THIS TOOK PLACE AFTER MS.

HOLMES INTERACTED WITH MR. GROSSMAN. SHE DID NOT INTERACT WITH HIM AGAIN. ALL OF THAT KIND OF ANALYSIS. AND THE OTHER THING THAT WE KNOW IS THAT DR. RABODZEY ANALYZED THERANOS'S TECHNOLOGY. HOW? WITH THE INFORMATION THAT THERANOS GAVE HIM. THEY SAID, HERE IS OUR DATA IN CONNECTION WITH HOW OUR TESTS PERFORM, AND HE LOOKED AT THAT AND DID THAT ANALYSIS IN DETAIL, AND HE SAID, YOU KNOW, I THINK THIS DATA MAY NOT DEMONSTRATE AS GOOD A PERFORMANCE AS YOU MIGHT EXPECT. SO PFM, AS YOU RECALL, MR. GROSSMAN'S FIRM SAID, WELL, WE'VE GOT TO FIND OUT MORE ABOUT THE TECHNOLOGY.

MR. DOWNEY: SO WITHOUT MS. HOLMES'S KNOWLEDGE, THEY REACHED OUT THROUGH MR. GROSSMAN'S FATHER-IN-LAW TO TALK TO DR. ROBERTSON, MS. HOLMES'S MENTOR FROM STANFORD WHO WAS A COLLEAGUE OF MR. GROSSMAN'S FATHER-IN-LAW. AND MR. GROSSMAN SPOKE WITH PROFESSOR ROBERTSON. YOU SEE HIM REPORTING HERE TO HIS COLLEAGUE THAT IN CONNECTION WITH ASKING HIM ABOUT THE TECHNOLOGY, HE HAD A MIND BLOWING CALL WITH ELIZABETH'S PROFESSOR WHO HELPED HER START THIS AND WHO WAS AN ORIGINAL BOARD MEMBER. AND THEN IF YOU LOOK AT THE NEXT SLIDE YOU SEE WHAT HE REPORTS. MR. ROBERTSON REPORTS THAT HE WAS TOLD -- I'M SORRY. MR. GROSSMAN REPORTS THAT HE WAS TOLD BY DR. ROBERTSON THAT THERE IS NO TECHNICAL RISK AT ALL IN THEIR CORE TECHNOLOGY; THERE WERE ROUGHLY 300 DIFFERENT TYPES OF THINGS TO MATCH A FULL MENU; THERE IS NOTHING THAT THE TECHNOLOGY CAN'T DO. MR. GROSSMAN OBVIOUSLY RELIED ON THAT INFORMATION AS HIS EMAIL AND THE CONTEMPORANEOUS DOCUMENTS REFLECT. BUT THAT IS NOT INFORMATION THAT CAME FROM MS.

HOLMES OR FROM ANYBODY THAT SHE DIRECTED TO PROVIDE THAT INFORMATION TO HIM. SO ONE ASSUMPTION THAT HE HAD WAS THIS TECHNOLOGY WAS VERY GOOD, THE SAME ASSUMPTION THAT DR. ROBERTSON HAD AND THE SAME ASSUMPTION THAT MS. HOLMES HAD. HE ALSO MADE A BIG ASSUMPTION IN DECIDING TO INVEST, WHICH WAS NOT UNCOMMON, HE ASSUMED THAT THERANOS WOULD BE THE NEXT FACEBOOK OR THE NEXT TESLA OR THE NEXT GOOGLE. THERANOS SAID, THIS IS HOW MUCH WE THINK WE'RE WORTH. HE VALUED THERANOS AT MANY TIMES WHAT THERANOS PERCEIVED ITSELF TO BE WORTH. AND THIS IS CLEARLY A BIG FACTOR AS YOU WILL RECALL FROM HIS TESTIMONY. HE ALSO, LIKE THE OTHER INVESTORS, FOCUSSED ON WALGREENS AND THE WALGREENS RELATIONSHIP. AND YOU KNOW THAT BECAUSE AS PART OF HIS INTERNAL DISCUSSIONS WITH HIS HEDGE FUND, HE ENCOURAGED PARTNERS AND FAMILY AND FRIENDS TO INVEST IN THERANOS, AND HE MADE THIS PRESENTATION.

AND HOW THEY MADE THIS PRESENTATION TELLS YOU EVERYTHING YOU NEED TO KNOW ABOUT WHAT WAS IMPORTANT TO PFM IN MAKING ITS INVESTMENT. HE DIDN'T TELL THE PEOPLE HE WAS ASKING TO INVEST ABOUT WHAT THERANOS'S REVENUE WAS. HE FOCUSSED ON WALGREENS AND THE WALGREENS RELATIONSHIP. AND HE TOLD THE INVESTORS THAT THERANOS WAS GOING TO ROLL OUT IN WALGREENS STORES. HE DIDN'T TELL THEM ABOUT THE NUMBER OF STORES THAT THERANOS WAS IN, WHICH THERANOS HAD TOLD HIM. HE DIDN'T TELL THEM ANYTHING ABOUT PFM'S INTERNAL DEBATE REGARDING THE ACCURACY OF THE TECHNOLOGY. AND HE DIDN'T MENTION ANYTHING ABOUT MILITARY PROGRAMS OR PHARMACEUTICAL PROGRAMS AS A BASIS ON WHICH THEY SHOULD INVEST. HE TOLD THEM ABOUT WALGREENS AND THE FACT THAT THERANOS HAD A CONTRACT WITH WALGREENS BECAUSE THAT WAS WHAT MATTERED TO HIM. LET'S TALK NEXT ABOUT MR. MOSLEY WHO TESTIFIED. MR.

MOSLEY, AS YOU'LL RECALL, WAS A LAWYER AT A LARGE NEW YORK LAW FIRM WHO REPRESENTED MANY OTHERS WHO INVESTED IN THERANOS, MANY OF THE WEALTHY FAMILIES OF THE COUNTRY: THE WALTON FAMILY, THE DEVOS FAMILY, ET CETERA. HE WAS INTRODUCED TO THERANOS BY DR. KISSINGER, AND AFTER HIMSELF BECOMING INTERESTED IN THERANOS, HE RECOMMENDED THAT MANY OTHER PEOPLE INVEST IN THERANOS AS HIS TESTIMONY DEMONSTRATED. NOW, HOW DID THE GOVERNMENT PRESENT MR. MOSLEY'S DECISION TO INVEST? WELL, THEY SAID, IN ESSENCE, THAT MS. HOLMES SENT A SLIDE DECK TO MR. MOSLEY, AND IN CONNECTION WITH THAT SLIDE DECK AND THE PFIZER STUDY WHICH THEY SENT TO HIM AT THAT TIME, WHICH WAS IN LATE AUGUST, EARLY SEPTEMBER, 60 DAYS LATER HE DECIDED TO INVEST, AND THEY FOCUSSED DURING HIS DIRECT EXAMINATION ON STATEMENTS AS PART OF THAT SLIDE DECK. BUT WHAT REALLY HAPPENED WITH RESPECT TO MR. MOSLEY'S INVESTMENT DECISION? WELL, THERE WAS A HUGE AMOUNT OF ACTIVITY IN BETWEEN THE DATE THAT MS.

HOLMES SENT HIM THAT SLIDE DECK AND THE DATE THAT HE ULTIMATELY DECIDED TO INVEST IN LATE OCTOBER. HE TALKED TO MANY OF HIS CLIENTS WHO WERE ALSO INVESTING IN THERANOS. HE TALKED TO OTHERS WHO WERE KNOWLEDGEABLE ABOUT THERANOS. FOR EXAMPLE, HE TALKED TO DR. KISSINGER, HIS CLIENT. HE TALKED TO THE LAWYER FOR THERANOS, MR. BOIES, WHO WAS HIS LONG-TIME FRIEND AND HIS FORMER LAW PARTNER. HE TALKED TO HIS CLIENTS FROM THE WALTON FAMILY WHO WERE ALSO EVALUATING WHETHER TO INVEST AT THAT TIME. HE LOOKED AT MANY ASPECTS OF THERANOS THAT HAD NOTHING TO DO WITH THE POWERPOINT THAT THERANOS SENT TO HIM. HE LOOKED AT THERANOS'S RELATIONSHIP WITH WALGREENS, OF COURSE. BUT HE ALSO LOOKED AT THE PATENT PORTFOLIO. HE LOOKED AT THE JOHNS HOPKINS REPORT.

MR. DOWNEY: HE DID ALL KINDS OF DILIGENCE IN CONNECTION WITH HIS DECISION TO INVEST. HE WAS DOING MORE THAN LOOKING AT THE POWERPOINT AND READING ARTICLES IN THE NEWSPAPER. AND HE TESTIFIED WHEN HE CAME, LADIES AND GENTLEMEN, THAT HE KNEW THERANOS WAS ONLY IN A FEW DOZEN WALGREENS STORES. HE KNEW THAT THERANOS USED COMMERCIAL DEVICES AS PART OF WHAT IT DID. HE KNEW THAT THERE WAS A TWO-PHASE MODEL. HE KNEW THERE WAS A PHASE I, PHASE II MODEL. HE KNEW THAT THE PROJECTIONS WERE BASED ON SPECIFIC ASSUMPTIONS AND THAT THEY MIGHT CHANGE. AND HE KNEW THERE WAS NOT GOING TO BE PHARMACEUTICAL AND MILITARY WORK. HE KNEW EVERYTHING. AND HE KNEW THAT AS A RESULT OF HIS INTERACTIONS WITH ALL THESE OTHERS WHO WERE LOOKING TO INVEST IN THERANOS AT THE SAME TIME. AND BASED ON THAT KNOWLEDGE, HE WAS ENTHUSIASTIC ABOUT THERANOS. AND WHAT DID HE DO IN RESPONSE TO WHAT HE DID? WELL, HE DID WHAT HE REPORTED AT THE TIME.

AS YOU SAW IN THIS EMAIL, EXHIBIT 14135, HE SAID THAT HE WAS RECOMMENDING THE INVESTMENT TO HIS CLIENTS. AND A NUMBER OF THEM DID INVEST. IN FACT, MR. MOSLEY MAY HAVE BEEN THE MOST SIGNIFICANT FACTOR IN THE INVESTMENTS THAT CONSTITUTED THE MOST AMOUNT OF MONEY THAT WERE INVESTED IN THERANOS. IF YOU WERE TO AGGREGATE THE CLIENTS OF MR. MOSLEY THAT INVESTED IN THERANOS, THEIR TOTAL INVESTMENTS TOTALLED MORE THAN $400 MILLION, AND YOU'LL RECALL FROM HIS TESTIMONY HIS DISCUSSION OF HIS MANY INTERACTIONS WITH THOSE FAMILIES. REMEMBER THAT THERANOS KNEW HE WAS THE LAWYER FOR THOSE FAMILIES AND THEY SHARED WITH HIM ALL OF THE INFORMATION THAT I JUST DESCRIBED TO YOU. ASK YOURSELF IF ALL OF THESE INVESTORS KNEW THAT SAME INFORMATION AND WHETHER THE INVESTMENT OF MR. MOSLEY OR OF OTHERS WAS REALLY BASED, AS THE GOVERNMENT SUGGESTS, ON ISOLATED STATEMENTS IN POWERPOINTS. NOW, ANOTHER FEATURE OF MR.

MOSLEY'S TESTIMONY AND, IN FACT, OF THE NEXT INVESTOR I'LL DISCUSS, OR THE NEXT INDIVIDUAL I'LL DISCUSS, MS. PETERSON, IS THAT THEY READ THE PARLOFF ARTICLE. AND WE'VE TALKED ABOUT THE PARLOFF ARTICLE THUS FAR QUITE A LOT, ABOUT MEDEVAC ISSUES, AND WE'VE TALKED ABOUT THE FACT THAT MR. PARLOFF KNEW ABOUT THE PHASE I, PHASE II MODEL. HE KNEW ABOUT VENOUS TESTING. HE KNEW THAT SMALL SAMPLES WERE CURRENTLY BEING OFFERED, BUT THAT OTHER VENOUS TESTS WERE BEING OFFERED IN THE CLIA LAB. HE KNEW ALL OF THAT. AND GIVEN ALL OF THOSE DISCLOSURES, IT'S HARD TO SAY THAT MS. HOLMES WAS INTENDING TO DECEIVE MR. PARLOFF. HE KNEW A LOT ABOUT THERANOS'S BUSINESS. BUT THE GOVERNMENT SAYS MS. HOLMES DID DECEIVE MR. PARLOFF, AND THEY SUGGEST THIS BY FOCUSSING ON ONE SEGMENT OF TAPE IN THE TEN HOURS OF TAPE THAT THERE ARE, WHICH WAS PLAYED YESTERDAY BY MR. SCHENK. AND THAT'S THE TAPE WHERE MR. PARLOFF AND MS.

HOLMES HAVE A CONVERSATION ABOUT WHAT THE LAP IS GOING TO LOOK LIKE IN RESPONSE TO A REQUEST THAT HE MADE TO VISIT THE ARIZONA LAB. WELL, I WANT TO TAKE A LOOK AT THAT BECAUSE THE IMPLICATION OF THE GOVERNMENT IN CONNECTION WITH THE PARLOFF TAPES IS THAT SHE DIDN'T TELL MR. PARLOFF THAT COMMERCIAL DEVICES WERE BEING USED IN SOME CONTEXT IN CONNECTION WITH THERANOS'S PROGRAM. BUT SHE CLEARLY DID TELL HIM THAT BECAUSE WE SEE FROM THIS SECTION OF TAPE THAT SHE SAYS TO HIM SOMETHING THAT I WILL DECIPHER FOR YOU, WHICH SHE SAYS THAT THE LAB IN ARIZONA IS A MODERATE, WILL BE A MODERATE COMPLEXITY LAB. A MODERATE COMPLEXITY LAB MEANS THAT IT DOESN'T USE THESE PROPRIETARY DEVICES, OR THESE LDT'S. IT NECESSARILY USES DEVICES THAT COME FROM OTHER COMPANIES THAT ARE COMMERCIAL DEVICES. THAT DISCLOSURE TELLS MR. PARLOFF EVERYTHING THAT HE NEEDS TO KNOW.

SO THIS DISCUSSION ABOUT VISITING THE LAB IN CALIFORNIA OR ARIZONA, IF IT'S EVEN CLEAR WHAT THAT SNIPPET IS ABOUT, CLEARLY ISN'T DESIGNED TO DECEIVE HIM ABOUT THE FACT THAT THERANOS WAS USING COMMERCIAL MACHINES. I ALSO SHOULD SAY THAT, YOU KNOW, ONE OF THE THEORIES THAT I THINK THE GOVERNMENT HAS ABOUT THE PARLOFF ARTICLE IS THAT MS. HOLMES HAD AN OBLIGATION TO TELL HIM EVERYTHING ABOUT THE COMPANY SO THAT HE COULD WRITE A FULSOME DISCLOSURE OF ALL OF THERANOS'S ACTIVITIES. BUT HE TELLS READERS IN THE ARTICLE THAT THERE ARE THINGS THAT THERANOS DID NOT DISCLOSE TO HIM. AND WHEN THERANOS SENDS THAT ARTICLE AROUND, YOU'LL RECALL THAT THE NOTE FROM THERANOS TO SHAREHOLDERS SAID THAT IT HAD ONLY DISCLOSED A SELECTIVE AMOUNT OF INFORMATION TO HIM. SO THIS IS NOT, THIS IS NOT A SITUATION WHERE THIS WAS DESIGNED TO BE A FULSOME, FULSOME ARTICLE DESCRIBING ALL OF THERANOS'S ACTIVITIES.

MR. DOWNEY: LET ME TALK ABOUT THE LAST INVESTOR, WHICH IS THE DEVOS FAMILY. LISA PETERSON FROM THE DEVOS FAMILY TESTIFIED. THE DEVOS FAMILY INVESTED THROUGH THE RDV INVESTMENT, AND THE DEVOS FAMILY MEMBERS ARE DESIGNATED IN THE SLIDE THAT I'M SHOWING YOU, AND I'VE ASTERISKED THOSE MEMBERS OF THE INVESTMENT COMMITTEE, THOSE MEMBERS OF THE FAMILY WHO ARE THE MEMBERS OF THE INVESTMENT COMMITTEES, THAT IS DOUG DEVOS, DAN DEVOS, DICK DEVOS, AND RICK DEVOS. MR. MOSLEY WAS THE LAWYER FOR THE FAMILY AND TALKING TO THEM ABOUT THE INVESTMENT AT THAT TIME. BUT NO MEMBER OF THIS INVESTMENT COMMITTEE, NONE, CAME TO THIS COURT AND TESTIFIED ABOUT WHY THE DEVOS FAMILY, THROUGH ITS INVESTMENT VEHICLE, DECIDED TO MAKE THIS INVESTMENT, WHETHER IT WAS BASED ON INFORMATION THAT THEY LEARNED FROM THERANOS DIRECTLY, WHETHER IT WAS BASED ON INFORMATION THAT THEY LEARNED FROM OTHERS. BUT THE ONE THING THAT WE DO KNOW IS MS.

PETERSON, WHO DID COME AND TESTIFY, DID NOT PLAY A ROLE WITH REGARD TO THEIR DECISION TO INVEST. SHE DID WORK IN THE INVESTMENT GROUP, AND SHE DID REPORT TO HER BOSS, JERRY TUBERGEN. BUT SHE TESTIFIED THAT SHE DIDN'T HAVE ANY AUTHORITY TO MAKE AN INVESTMENT DECISION. SHE SAID SHE WAS NOT PART OF MR. TUBERGEN'S CONVERSATIONS WITH THE INVESTMENT COMMITTEE OR PART OF CONVERSATIONS WITH THEM AT ALL. AND, IN FACT, WHAT THE RECORD REFLECTS IS THAT THE DEVOS FAMILY -- YOU KNOW, HER CONTENTION DURING HER DIRECT TESTIMONY WAS THAT SHE HAD WRITTEN A MEMO, AND THIS MEMO REFLECTED WHAT WAS IMPORTANT TO THE DEVOS FAMILY'S DECISION TO INVEST. BUT WE KNOW THAT THE DEVOS FAMILY HAD DECIDED TO INVEST BEFORE THAT MEMO WAS EVER REVIEWED. JUST TO REMIND YOU OF THE CHRONOLOGY, THERE WAS A HIGH LEVEL MEETING AT THERANOS IN THE MIDDLE OF OCTOBER 2014 AND IT WAS DESIGNED FOR THE DEVOS FAMILY MEMBERS TO UNDERSTAND THERANOS.

AND AT THAT MEETING THE FAMILY SAID THAT THEY WOULD COMMUNICATE -- THEY WOULD INVEST $100 MILLION ON THE SPOT AT THAT MEETING BASED ON THAT MEETING. AND YOU SAW DOCUMENTS WHICH REFLECTED THAT DECISION MIGHT HAVE EVEN BEEN MADE A WEEK BEFORE THAT MEETING. MS. PETERSON'S MEMO, WHICH WAS DRAFTED FOR THE INVESTMENT COMMITTEE, WAS NOT DRAFTED, WE KNOW, UNTIL AFTER OCTOBER 20TH, AT THE VERY LEAST. AS YOU SEE IN THESE EMAILS, SHE SAID ON OCTOBER 20TH THAT SHE'LL DOCUMENT SOMETHING FOR THE FILE. AND THEN IN NOVEMBER SHE NOTES THAT SHE WON'T HAVE A SIGNATURE ON THAT FOR A WHILE, EVEN THOUGH THE INVESTMENT DECISION WAS MADE AT LEAST A FEW WEEKS BEFORE. SO LET'S REVIEW THE INVESTORS AND WHY THEY INVESTED. I THINK THEY HAVE A FEW THINGS IN COMMON. FIRST, AS I MENTIONED, THEY ALL SIGNED CONTRACTS WITH THERANOS. THEY WERE ALL INVOLVED WITH OTHERS WHO INVESTED. THEY WERE ALL HEAVILY INFLUENCED BY THE WALGREENS RELATIONSHIP.

THE LAST ISSUE WITH INVESTORS THAT I WANT TO TALK ABOUT IS THIS ISSUE REGARDING REVENUE THAT MR. SCHENK MENTIONED YESTERDAY AND MR. LEACH EXAMINED MS. HOLMES ABOUT YESTERDAY. WHAT DOES THE GOVERNMENT ALLEGE? THEY ALLEGE THAT MS. HOLMES REPRESENTED THAT THERANOS WOULD GENERATE $100 MILLION IN REVENUES IN 2014 AND $990 MILLION IN 2015. NOW, THE GOVERNMENT SAYS, WELL, THAT CAN'T HAVE BEEN MADE IN GOOD FAITH BECAUSE THERANOS ONLY GENERATED VERY MODEST REVENUES, ABOUT A FEW HUNDRED THOUSAND DOLLARS IN BOTH 2014 AND 2015. WELL, THAT'S REALLY NOT AN ACCURATE PICTURE OF WHAT WAS GOING ON INSIDE OF THERANOS OR ITS ACTIVITIES. THERE'S NO QUESTION THAT THERANOS GENERATED HUNDREDS OF MILLIONS OF DOLLARS IN CASH DURING THE PERIOD THAT WE'RE CONCERNED ABOUT, AND IT CAME FROM CUSTOMERS. IT WASN'T RECOGNIZED AS ACTUAL REVENUE, IT WAS DEFERRED REVENUE. AND YOU SEE HERE IN EXHIBIT 10685 THAT IT TOTALLED MORE THAN $200 MILLION. SO MONEY WAS COMING INTO THE COMPANY.

THE COMPANY WAS NOT ONLY EARNING A FEW HUNDRED THOUSAND DOLLARS A YEAR. IN FACT, IT WAS EARNING AN ENORMOUS AMOUNT OF CASH DURING THIS PERIOD. THE QUESTION THAT THE GOVERNMENT IS REALLY FOCUSSING YOU ON, BUT I THINK IT'S REALLY NOT CENTRALLY WHAT IS GOING ON, IS, WAS THAT REVENUE ACTUAL REVENUE OR WAS IT DEFERRED REVENUE? WELL, WE KNOW WHAT THE INVESTORS KNEW ABOUT THAT BECAUSE THEY WERE GIVEN BOTH THE BALANCE SHEET, WHICH REFLECTED THE DEFERRED REVENUE, AND THEY WERE GIVEN THE REVENUE PROJECTIONS FOR BOTH 2014 AND 2015. IF YOU LOOK HERE, AS THE GOVERNMENT ALLEGES, THERANOS DID PROJECT THEY WOULD HAVE $140 MILLION IN REVENUE IN 2014. AND THIS WAS PROVIDED TO MR. MOSLEY, FOR EXAMPLE, IN THE SUMMER OF 2014. BUT WHAT WAS MR. MOSLEY TOLD AT THE SAME TIME?

MR. DOWNEY: THIS IS THE BALANCE SHEET. AND HE WAS TOLD THAT THERANOS HAD DEFERRED REVENUE OF ABOUT $168 MILLION AS OF THAT TIME. SO THE QUESTION, IF YOU REALLY COMPARE THESE TWO DOCUMENTS, IS WOULD THIS DEFERRED REVENUE BECOME ACTUAL REVENUE BY THE END OF 2014? NOW, THAT DECISION IS A DECISION THAT MS. HOLMES WOULD NOT MAKE, COULD NOT MAKE, DID NOT MAKE. AS YOU RECALL, MS. SPIVEY TESTIFIED THIS WAS A VERY COMPLEX ACCOUNTING JUDGMENT. SHE WAS TALKING TO THE OUTSIDE ACCOUNTANTS FOR THERANOS ABOUT WHETHER THERANOS COULD RECOGNIZE THAT REVENUE DURING THE COURSE OF 2014. BUT WE DO KNOW WHAT MS. HOLMES BELIEVED, BECAUSE AS LATE AS DECEMBER OF 2014, MR. BALWANI TOLD MS. HOLMES THAT $100 MILLION OF THAT AT LEAST WOULD BE -- $100 MILLION OF THIS DEFERRED NUMBER WOULD BE RECOGNIZED AS ACTUAL REVENUE IN 2014. NOW, IT WASN'T.

IT WASN'T FOR WHATEVER REASON, AND THE RECORD IS NOT CLEAR ON THIS, THE ACCOUNTING JUDGMENT WAS MADE THAT THIS CASH WHICH HAD COME INTO THE COMPANY IN TENS OF MILLIONS OF DOLLARS SHOULD REMAIN DEFERRED REVENUE AND NOT BE RECOGNIZED AS ACTUAL REVENUE IN 2014. WE DON'T KNOW FROM THE RECORD WHY THAT IS. WE DON'T KNOW WHY MR. HOLMES -- OR WHY MR. BALWANI THOUGHT IT COULD BE RECOGNIZED AS REVENUE IN 2014, AS LATE AS DECEMBER. BUT WE DO KNOW THAT IT WAS NOT UNREASONABLE FOR MS. HOLMES, WHEN SHE SAW THESE PROJECTIONS, TO BELIEVE THAT THEY WERE AN ACCURATE STATEMENT OF WHAT WOULD HAPPEN IN 2014. NOW, WHAT ABOUT THE 2015 NUMBER? IN 2015 THE PROJECTION WAS THAT THE COMPANY WOULD MAKE ABOUT $990 MILLION. FIRST OF ALL, REMEMBER THE BACKDROP FOR THIS. THE BACKDROP FOR THIS IS THESE PROJECTIONS, WHICH WERE TALKING ABOUT A FUTURE PERIOD, THE INVESTORS ARE TOLD THIS IS, THIS IS SPECULATIVE, BUT WE'RE GIVING YOU AN ESTIMATE OF WHAT WE THINK WOULD HAPPEN. THAT WAS PART OF THE CONTRACT.

BUT AS WELL, THE INVESTORS WERE TOLD, HERE'S THE NUMBER OF STORES WE'RE IN NOW, AND WE HAVE A BIG RISK, WHICH IS FOR THE REVENUE NUMBERS TO BE ACHIEVED, WE'VE GOT TO EXPAND ACROSS WALGREENS STORES ACROSS THE COUNTRY. WE'RE ASSUMING THAT WE WILL GET TO CERTAIN NUMBERS OF WALGREENS STORES. NOW, MS. HOLMES INTERACTED WITH, FOR EXAMPLE, MS. PETERSON ON A VERY LIMITED BASIS, BUT YOU COULD SEE FROM MS. PETERSON'S OWN NOTES THAT MS. HOLMES IS SAYING TO HER, WE HAVE THESE CONTRACTS TO BE IN WALGREENS STORES, BUT OUR RISK IS, CAN WE EXECUTE ON THAT? THERE WASN'T ANY SECRET ABOUT THAT AS PART OF THESE CONVERSATIONS. PEOPLE KNEW THAT. AND THEY HAD TO EXPAND FROM THE NUMBER OF STORES THAT THEY WERE IN CURRENTLY, WHICH WAS 30 OR SO, TO 900 STORES TO ACHIEVE THESE RESULTS. THAT WAS ALL KNOWN AND THEY KNEW THAT THERANOS WOULD HAVE TO EXECUTE TO DO THAT. TESTIMONY OF MR. MOSLEY ACKNOWLEDGED HE KNEW THAT, MR. GROSSMAN ACKNOWLEDGED THAT HE KNEW THAT.

YOU KNOW, THERE ARE A LOT OF FACTORS THAT GO INTO THIS. BUT THE NUMBERS THAT WERE BEING GIVEN WERE BASED ON A PROJECTION OF WHAT WOULD HAPPEN. THOSE NUMBERS WERE BEING PLACED IN A MODEL THAT MR. BALWANI PREPARED AND CONTROLLED. IT'S VERY DIFFICULT TO SAY THAT MS. HOLMES HAD BAD INTENT WITH REGARD TO THAT WHEN THE RISKS ASSOCIATED WITH IT ARE BEING DISCLOSED. AND WE ALSO KNOW THAT IN TERMS OF PREPARING THESE FINANCIAL PROJECTIONS, THIS WAS NOT MS. HOLMES'S PROVINCE. THIS WAS WORK THAT WAS DONE BY MR. BALWANI. WE KNOW FROM CONTEMPORANEOUS EMAILS THAT WHEN THE COMPANY NEEDED REVENUE PROJECTIONS, THAT MS. HOLMES GOT THEM FROM MR. BALWANI, AND I THINK MR. SCHENK ACKNOWLEDGED THAT YESTERDAY. AND ONE LAST ISSUE, WHICH MR. LEACH ASKED MS. HOLMES ABOUT ON CROSS-EXAMINATION, IS THERE WERE DIFFERENT REVENUES GIVEN IN CONNECTION WITH A DIFFERENT ISSUE AT THERANOS, THE SO-CALLED ARANCA ANALYSIS, WHICH THE REVENUE NUMBER WAS PROJECTED TO BE A LOWER NUMBER.

THE GOVERNMENT MAY, IN ITS REBUTTAL TO ME, MAKE A BIG DEAL ABOUT THAT. I DON'T KNOW. BUT I WOULD SAY TO YOU THAT MS. HOLMES TESTIFIED, AND THIS WAS NOT EXPLORED WITH HER ON CROSS-EXAMINATION IN ANY DETAIL, THAT THINGS WERE DONE FOR DIFFERENT PURPOSES. THESE ANALYSES DID NOT HAVE THE SAME PURPOSES WITHIN THE COMPANY, AND THAT THESE PROJECTIONS, BOTH PROJECTIONS AS TO WHAT THE COMPANY WOULD EARN FOR THE NEXT YEAR, WHICH WERE SHARED WITH THE BOARD, AS WAS THE OTHER NUMBER, AND SHE WAS VERY TRANSPARENT WITH DIRECTORS ABOUT BOTH OF THOSE NUMBERS. LET ME TALK LAST ON THE INVESTORS ABOUT THE ISSUE OF DEMONSTRATIONS, AND I'LL REALLY ONLY TALK BRIEFLY ABOUT THIS SUBJECT, AND I'LL ASK YOU TO KEEP A FEW THINGS IN MIND IN CONNECTION WITH DEMONSTRATIONS.

MR. DOWNEY: OBVIOUSLY THERE WERE THOUSANDS OF DEMONSTRATIONS I THINK MS. HOLMES TESTIFIED OVER TIME. AND SOME OF THE MOST IMPORTANT CONCEPTS IN CONNECTION WITH THOSE RELATE TO THE TESTIMONY OF MR. EDLIN AND MS. HOLMES'S OWN TESTIMONY. FIRST OF ALL, MR. EDLIN TESTIFIED THAT HE HAD COORDINATED THE LOGISTICS; THAT ALL OF THE SCIENTIFIC WORK DONE IN CONNECTION WITH DEMONSTRATIONS WAS DONE BY DR. YOUNG; THAT MANY, MANY PEOPLE INSIDE OF THERANOS WERE INVOLVED IN THESE DEMONSTRATIONS, WHICH ARE PORTRAYED AS BEING EFFORTS TO DECEIVE PEOPLE. MR. EDLIN THOUGHT OTHERWISE. HE THOUGHT THE PURPOSE OF THIS WAS TO SHOWCASE THERANOS'S TECHNOLOGY AND TO SHOW THIS IS HOW THE DEVICE OR OTHER TECHNOLOGY AT THERANOS WORKS. WHEN I, WHEN I ASKED HIM ON CROSS-EXAMINATION, WERE YOU INVOLVED IN AN EFFORT TO DECEIVE PEOPLE? HE SAID OF COURSE NOT, THAT HE WAS -- AND HE DID NOT HAVE ANY IMPRESSION THAT ANYBODY AT THERANOS WAS TRYING TO DECEIVE PEOPLE IN CONNECTION WITH THESE DEMONSTRATIONS AND HOW THEY WERE CONDUCTED.

AND THERE REALLY WERE DIFFERENT KINDS OF DEMONSTRATIONS. AS YOU KNOW, THERE WAS A PHASE I AND PHASE II AS PART OF THERANOS'S RELATIONSHIP WITH WALGREENS. SOME OF THE DEMONSTRATIONS SHOWED HOW PHASE I WORKED SO THAT BLOOD WOULD BE DRAWN FROM THE PERSON GETTING THE DEMONSTRATION. IT WOULD BE PUT INTO A BOX AND TRANSPORTED BACK TO THE CENTRAL LAB. OTHER TIMES THE DEVICE WOULD BE PROCESSED -- THE SAMPLES WOULD BE PROCESSED ON THE DEVICE IN THE ROOM. SOMETIMES PEOPLE WANTED TO GIVE THEIR BLOOD. SOMETIMES PEOPLE DIDN'T. THEY JUST WANTED TO SEE HOW THE MACHINE WORKED. THERE WERE ALL SORTS OF PERMUTATIONS ABOUT THIS. BUT YOU'VE SEEN FROM THE RECORD WHAT HAPPENED. THERE'S BEEN TESTIMONY ABOUT MR. RAGO AND HIS DEMONSTRATION. IN CONNECTION WITH HIS DEMONSTRATION, HIS BLOOD SAMPLE WAS TAKEN FROM HIM AND IT WAS TAKEN TO THE CENTRAL LAB. THE GOVERNMENT IMPLIED THAT THAT WAS DECEPTIVE. BUT, IN FACT, HE REPORTED IN THE ARTICLE THAT BLOOD WAS ANALYZED AT THERANOS IN A CENTRAL LAB.

HE DIDN'T WATCH IT BEING ANALYZED ON THE DEVICE. AND AS TO PEOPLE WHO DIDN'T WANT A BLOOD SAMPLE TAKEN FROM THEM, WHICH HAPPENED, AND I THINK YOU SAW EVIDENCE ABOUT THAT, A PROTOCOL WAS DEVELOPED SO THAT YOU COULD SEE HOW THE TECHNOLOGY WORKED FROM THE BEGINNING TO THE END. WHY? BECAUSE IF YOU PUT A SAMPLE INTO THIS DEVICE AND IT DIDN'T HAVE BLOOD IN IT, THE DEVICE FAILED AND THE PERSON RECEIVING THE DEMONSTRATION WOULDN'T SEE HOW THE DEVICE WORKED. SO WHY DID THERANOS DEVELOP A NULL PROTOCOL? MR. EDLIN TOLD YOU. BECAUSE PEOPLE WANTED TO SEE A DEMONSTRATION WITHOUT GIVING A BLOOD SAMPLE, AND THIS ALLOWED THE DEVICE TO FUNCTION WITHOUT BLOOD BEING ACTUALLY DRAWN AND ANALYZED. NOW, THE REPORTS THAT WERE DONE IN CONNECTION WITH DEMONSTRATIONS, THEY MADE CLEAR THAT THEY WERE ONLY TECHNOLOGY DEMONSTRATIONS. THESE WEREN'T USED FOR CLINICAL TREATMENT OF PATIENTS. YOU SEE THAT ON EVERY FORM AT THE TOP WHERE THE DEMONSTRATIONS WERE DESCRIBED AS TECHNOLOGY DEMONSTRATIONS.

SCIENTISTS WERE INVOLVED IN ALL OF THESE PROCESSES AND THEY DETERMINED WHAT THE FINAL RESULTS WOULD BE. YOU SAW EXTENSIVE TESTIMONY FROM MR. EDLIN AND FROM MS. HOLMES ABOUT DR. YOUNG'S OVERSEEING THESE PROCESSES AND MANAGING HOW THE RESULTS WERE REPORTED SO THAT THEY WOULD BE CONSISTENT WITH ACCURATE VIEWS OF WHAT PATIENT'S BLOOD RESULTS WERE. ALL OF THAT, LADIES AND GENTLEMEN, IS THE CONTEXT AROUND THESE DEMONSTRATIONS. OBVIOUSLY THERE ARE THOUSANDS OF DEMONSTRATIONS, BUT I WOULD ASK YOU TO BEAR IN MIND TESTIMONY THAT NO ONE WAS TRYING TO DECEIVE PEOPLE, THAT THE PROCESS WAS MANAGED BY SCIENTISTS, AND THAT THE DEMONSTRATIONS HAVE DIFFERENT PURPOSES. SO DON'T ASSUME THAT IF YOU SEE SOMETHING IN A DEMONSTRATION WITH BLOOD BEING TAKEN OUT OF A ROOM, IT MEANS THAT SOMETHING UNTOWARD IS HAPPENING. NOW, I WANT TO MOVE FROM THERE TO TALKING ABOUT THE OTHER CONSPIRACY THAT IS ALLEGED WHICH RELATES TO THERANOS PATIENTS. AND THE ALLEGATIONS HERE, OF COURSE, AS YOU KNOW, IS THAT THERANOS'S TECHNOLOGY WAS NOT CAPABLE OF CONSISTENTLY PRODUCING ACCURATE AND RELIABLE RESULTS. WELL, I WOULD ASK YOU, IN CONNECTION WITH THIS, TO JUST BEAR IN MIND THAT THE LAB WAS MANAGED BY A LAB DIRECTOR, AND THERE ARE PROCESSES THAT WERE ESTABLISHED IN THE LAB, AND THAT THESE INFORM MS. HOLMES'S INTENT. THE LENS THROUGH WHICH YOU REALLY WANT TO LOOK, I THINK, AT THIS PATIENT CASE IS THAT THERE'S A PROCESS GOING ON IN THE LAB.

MR. DOWNEY: AND ASK YOURSELF THE QUESTION, WAS MS. HOLMES'S INTENT WITH RESPECT TO WHAT WAS GOING ON IN THE LAB, WAS IT IN GOOD FAITH? DID SHE BELIEVE THAT THE TESTS THAT WERE BEING OFFERED WERE ACCURATE AND RELIABLE? IF SHE DID, WHY DID SHE BELIEVE IT? WELL, AS YOU COULD GLEAN FROM THE CROSS-EXAMINATION OF DR. ROSENDORFF, SHE REALLY SAW SIX THINGS WHEN SHE LOOKED AT THE LAB. FIRST, SHE SAW THAT DR. ROSENDORFF WAS RESPONSIBLE FOR DETERMINING WHAT TESTS AND WHAT METHODS WERE APPROPRIATE FOR TESTING. RECALL THAT DR. ROSENDORFF WAS THE LAB DIRECTOR AT THERANOS FROM THE TIME THE LAB OPENED UNTIL ABOUT NOVEMBER OF 2014. HE TESTIFIED LONGER THAN ANY OTHER WITNESS IN THE CASE OTHER THAN MS. HOLMES. HE WAS A HIGHLY QUALIFIED LAB DIRECTOR. HE HAD BEEN IN A SIMILAR POSITION AS PART OF THE CHILDREN'S HOSPITAL IN PITTSBURGH, AND HE WAS A VERY IMPRESSIVE CANDIDATE.

THE FIRST THING HE DID WAS HE SAID WE, WE DETERMINED WHICH TESTS WE SHOULD OFFER, WHETHER IT SHOULD BE ON A THERANOS DEVICE OR SOME OTHER DEVICE. THAT HAPPENED, IN FACT, AT THERANOS, AND IT WAS REQUIRED BY LAW AS YOU SAW IN CONNECTION WITH SOME OF THE DOCUMENTS INTRODUCED IN THE CASE. THE LAB DIRECTOR DECIDES WHAT SYSTEMS ARE USED, WHAT TESTS ARE USED IN CONNECTION. HE TESTIFIED THAT THAT IS, IN FACT, WHAT HAPPENED. IT WAS NOT MS. HOLMES'S RESPONSIBILITY, IT WAS HIS RESPONSIBILITY. SECOND, IN CONNECTION WITH EVERY TEST THAT WAS OFFERED IN THE THERANOS LAB, IT WOULD NOT BE OFFERED, ACCORDING TO DR. ROSENDORFF'S TESTIMONY, UNLESS HE SIGNED A VALIDATION REPORT FOR IT. AND WHAT DID THAT MEAN? WELL, IT MEANT THAT HE WENT THROUGH A PROCESS BEFORE THAT TEST WAS OFFERED OF DETERMINING WHETHER THE TEST WAS ACCURATE AND RELIABLE FOR PURPOSES OF PATIENT USE. IT WAS A LONG PROCESS WITH MULTIPLE STEPS. THE REPORT WOULD BE SIGNED.

THERE WOULD BE PROCEDURES THAT WOULD BE CREATED TO MAKE SURE THAT THE PROCESSES WERE BEING ADHERED TO. THERE WOULD BE TRAINING IN THE LAB, ET CETERA, THE THINGS THAT YOU WOULD EXPECT. DR. ROSENDORFF TESTIFIED THAT WITH REGARD TO EVERY TEST OFFERED IN THE THERANOS LAB, HE SIGNED THESE VALIDATION REPORTS. YOU HEARD LENGTHY TESTIMONY ABOUT THAT AS PART OF BOTH OF HIS EXAMINATIONS. NOW, I WANT TO DIVERT FROM THIS DISCUSSION TO TALK ABOUT ONE ISSUE, WHICH IS THAT SOME OF THE WITNESSES THAT THE GOVERNMENT OFFERED, THEY TESTIFIED IN A MANNER THAT IN SOME WAYS IS A LITTLE BIT IN TENSION WITH WHAT DR. ROSENDORFF TESTIFIED, BECAUSE WHILE DR. ROSENDORFF TESTIFIED THAT HE VALIDATED EVERY TEST THAT WAS OFFERED, YOU RECALL THAT MS. GANGAKHEDKAR EARLIER IN THE CASE SAID THAT SHE HAD CONCERNS ABOUT THE TESTS THAT WOULD BE OFFERED IN THERANOS'S CLINICAL LAB, AND SHE LEFT IN RESPONSE TO THOSE. SO I WANT TO GIVE YOU THE FULL PICTURE IN REGARD TO THAT ISSUE. MS.

GANGAKHEDKAR LEFT THE COMPANY, AFTER WORKING THERE FOR YEARS AND YEARS, IN SEPTEMBER OF 2013. AND SHE SAID, YOU KNOW, AT THE TIME I HAD CONCERNS ABOUT SOME OF THE ASSAYS. SHE HAD LED THE IMMUNOASSAY TEAM AND SHE WAS -- SHE TESTIFIED, I THINK, AS WELL, AS YOU SAW ON CROSS-EXAMINATION, THAT SHE WAS PROUD OF THE WORK, BUT SHE HAD SOME CONCERNS ABOUT THE ASSAY. WELL, LET'S LOOK AT WHAT THE CONTEMPORANEOUS DOCUMENTS REFLECT. HER COMMUNICATIONS WITH MS. HOLMES WERE FRIENDLY. SHE WISHED THE COMPANY TREMENDOUS SUCCESS AS A RESULT OF HER DEPARTURE AND SHE WAS PROUD OF THE WORK THAT SHE HAD DONE. ALSO, WE KNOW THAT MS. HOLMES WAS TOLD THAT MS. GANGAKHEDKAR WAS LEAVING BECAUSE OF HEALTH REASONS, FAMILY REASONS, STRESS REASONS, ET CETERA. SO THE CONTEMPORANEOUS RECORDS DIDN'T QUITE MATCH MS. GANGAKHEDKAR'S TESTIMONY, BUT THAT REALLY IS A SIDE ISSUE BECAUSE WHAT YOU SEE FROM MS. GANGAKHEDKAR'S REPORT IS ACTUALLY MS. HOLMES'S GOOD FAITH. MS. GANGAKHEDKAR TESTIFIED, I WENT TO MS.

HOLMES AND SAID I'M CONCERNED ABOUT ASSAYS BEING VALIDATED. I'VE BEEN RAISING THESE ISSUES TO MR. BALWANI. YOU'LL RECALL THAT THERE WAS A VERY UNPLEASANT EXCHANGE BETWEEN MR. BALWANI AND MS. GANGAKHEDKAR AS TO HER WORK ETHIC WITH FAIRLY SERIOUS CRITICISM OF HER ON MR. BALWANI'S PART. THAT WAS IN EXHIBIT 3961. AND SHE WENT TO MS. HOLMES AND SAID, I'M CONCERNED, I'M LEAVING THE COMPANY. AND MS. HOLMES'S REACTION WAS NOT, IF YOU'RE EXPRESSING CONCERNS, YOU'RE FIRED. I HAVE A SIMILAR REACTION, I'M CRITICAL OF YOU.

MR. DOWNEY: MS. HOLMES SAID, WELL, IF YOU'RE STRESSED AND IF YOU HAVE HEALTH ISSUES, WHY DON'T YOU JUST TAKE A LEAVE OF ABSENCE? DON'T LEAVE THE COMPANY. TAKE TIME OFF UNTIL YOUR HEALTH PROBLEMS HAVE BEEN RESOLVED AND THEN COME BACK WHEN YOU'RE READY TO COME BACK. WHAT DOES ALL OF THAT MEAN AS TO WHAT THE GOVERNMENT'S EVIDENCE MEANS ON THAT? WELL, FIRST OF ALL, IT MEANS THAT MS. HOLMES WAS NOT TRYING TO SUPPRESS ANY CONCERNS THAT WERE BEING RAISED BY MS. GANGAKHEDKAR. MS. HOLMES WAS REACTING TO THAT IN A VERY HUMAN WAY AND SAYING, COME BACK AND WORK WITH US. BUT ALSO IN RESPONSE TO THE CONCERNS THAT MS. GANGAKHEDKAR RAISED, WHAT WE KNOW IS THAT NO, NO ASSAY, NO TEST WAS EVER OFFERED IN THE THERANOS CLIA LABORATORY IN 2013 AND 2014 THAT DR. ROSENDORFF DIDN'T ULTIMATELY SIGN OFF ON. THE EVIDENCE DURING HIS TESTIMONY SHOWED THAT THERE WERE ASSAYS ON WHICH THERANOS DELAYED THE DECISION TO USE TESTS ON EITHER THE EDISON OR ON THE MODIFIED MACHINES BECAUSE THERE WERE CONCERNS.

BUT THE LAUNCH OF THOSE TESTS WAS DELAYED UNTIL AFTER THOSE CONCERNS HAD BEEN RESOLVED TO DR. ROSENDORFF'S SATISFACTION. SO I'LL SAY TWO THINGS ABOUT MS. GANGAKHEDKAR'S TESTIMONY. FIRST, NOTHING ABOUT IT SHOWS THAT MS. HOLMES WAS TRYING TO EXPRESS CONCERNS OR DISMISS CONCERNS OR ANYTHING LIKE THAT. BUT SECOND, ANY CONCERN SHE RAISED WAS, IN MS. HOLMES'S MIND, RESOLVED BY DELAY OF ANY ASSAYS UNTIL THOSE CONCERNS COULD BE EVALUATED AND RESOLVED BY DR. ROSENDORFF AND OTHERS WORKING IN THE CLIA LAB. NOW, THE IMPLICATION OF WHAT DR. ROSENDORFF ULTIMATELY TESTIFIED TO WAS THAT HE WAS UNCOMFORTABLE WITH TESTS THAT WERE BEING OFFERED BY THERANOS. BUT HE ACTUALLY TESTIFIED TO JUST THE OPPOSITE. HE SAID THAT HE COULDN'T RECALL EVER PUTTING A SIGNATURE ON A VALIDATION REPORT WHERE HE THOUGHT THAT ASSAY WASN'T APPROPRIATE FOR PATIENT USE.

SO I THINK THAT, YOU KNOW, THE THIRD FOUNDATIONAL POINT HERE IS THAT NOT ONLY DID HE APPROVE ALL OF THE TESTS THAT WERE OFFERED, BUT HE WAS COMFORTABLE SIGNING THE APPROVALS FOR THOSE TESTS TO BE OFFERED IN THE CLIA LAB. NEXT I THINK, AND IMPORTANTLY, REMEMBER THAT HE ACKNOWLEDGED THAT HE NEVER CAME TO A CONCLUSION THAT THE 3.5 DEVICE THAT REFLECTED -- WAS TESTING ASSAYS IN THE THERANOS LAB WAS ITSELF UNRELIABLE. HE NEVER CAME TO THAT CONCLUSION. AND HIS BEHAVIOR AT THE TIME REFLECTED THAT. HE CONTINUED TO APPROVE THE USE OF THAT DEVICE TO TEST PATIENTS IN THE CLIA LAB UP UNTIL ALMOST HIS DEPARTURE. YOU SEE THAT HE'S APPROVING THEM AS LATE AS SEPTEMBER OF 2014. HE LEFT THE COMPANY WITHIN ABOUT 60 DAYS OF THAT. SO THE SUGGESTION THAT HE IN SOME SENSE WAS FUNDAMENTALLY UNCOMFORTABLE WITH THE EDISON DEVICE OR WITH OTHER ELEMENTS OF THERANOS'S TECHNOLOGY IS NOT SUPPORTED BY THE RECORD. FIFTH, HE TESTIFIED THAT IN EVERY INSTANCE HE FOLLOWED THE CLIA REGULATIONS.

THERE WERE NO DEVIATIONS FROM WHAT WAS REQUIRED. HE SAID THAT DIRECTLY UNDER OATH. AND LAST, AND THIS REALLY ADDRESSES MOST OF THE GOVERNMENT'S CASE, HE SAYS THAT, YES, ISSUES CAME UP IN THE CLIA LAB. WE SAW SOME OF THOSE INSTANCES YESTERDAY IN EMAILS THAT MR. SCHENK SHOWED YOU. BUT HE SAID IN RESPONSE TO THAT, THERANOS THOROUGHLY INVESTIGATED THOSE ISSUES. AND I WANT TO RUN THROUGH A FEW OF THOSE WITHOUT GETTING INTO THE PARTICULARS, BUT JUST GIVING YOU SOME GUIDEPOSTS TO LOOK AT THOSE ISSUES IF THEY'RE OF CONCERN TO YOU IN CONNECTION WITH DELIBERATING. LET ME TALK ABOUT SOME OF THE INDIVIDUALS WHO YOU SAW WHO RAISED CONCERNS, AND THEN I'LL TALK ABOUT SOME OF THE TESTS THAT MR. SCHENK MENTIONED YESTERDAY. FIRST, YOU HEARD TESTIMONY FROM MS. CHEUNG, WHO TESTIFIED EARLIER IN THE CASE, THAT SHE HAD SOME CONCERNS AS THE RESULT OF A QUALITY CONTROL EXPERIMENT THAT WAS UNDERTAKEN IN THE CLIA LAB. WELL, THE EVIDENCE IN THE CASE ON THIS IS VERY CLEAR. MS.

HOLMES WAS NOT SOMEONE WHO INTERACTED WITH MS. CHEUNG WHILE SHE WAS AT THERANOS, MS. CHEUNG DIDN'T RAISE THOSE CONCERNS WITH MS. HOLMES, AND MS. HOLMES WAS NOT TOLD BY ANYONE ELSE THAT MS. CHEUNG HAD THOSE CONCERNS AT THE TIME THAT MS. CHEUNG WAS WORKING AT THERANOS. WHAT WE DO KNOW IS THAT DR. ROSENDORFF KNEW OF THOSE CONCERNS AND THAT HE REACTED TO THOSE CONCERNS. THE GIST OF MS. CHEUNG'S TESTIMONY WAS THAT THERE WAS A PROFICIENCY TESTING EXPERIMENT IN FEBRUARY OF 2014 AND THE RESULTS WERE VERY POOR. YOU'LL RECALL HER TESTIFYING ABOUT THAT.

MR. DOWNEY: AND DR. ROSENDORFF SAID I LOOKED AT THAT AT THE TIME, AND HE LOOKED AT IT AGAIN WHILE HE WAS SITTING UP HERE ON THE STAND. AND HE SAID THE WAY THAT THAT EXPERIMENT WAS DONE WAS FLAWED, AND THE REASON THOSE RESULTS WERE BAD IS THAT IT WASN'T DONE ACCORDING TO THE APPROPRIATE POLICY. SO AS A RESULT OF DR. ROSENDORFF'S CONCLUSIONS, DR. YOUNG'S CONCLUSIONS, ET CETERA, WHEN THIS ISSUE CAME UP LATER TO MS. HOLMES, SHE WAS PRESENTED WITH THE BELIEF THAT THE CONCERNS THAT MS. CHEUNG HAD RAISED WERE NOT JUSTIFIED. NOW, THAT ONLY MAKES SENSE THAT DR. ROSENDORFF WOULD LOOK AT THAT ISSUE AND RESOLVE THAT ISSUE BECAUSE, AS A MATTER OF LAW AND AS A MATTER OF FACT, THAT WAS HIS RESPONSIBILITY. WHAT WAS, WHAT WAS DONE AFTER MS. CHEUNG'S CONCERNS WERE RAISED? WELL, THEY UPDATED THE POLICY FOR HOW EXPERIMENTS SHOULD BE RUN ON QUALITY CONTROL BECAUSE DR. ROSENDORFF SAID MS. CHEUNG DIDN'T -- MS.

CHEUNG AND MANY OTHERS INSIDE OF THE LAB WHO WERE INVOLVED WITH THAT EXPERIMENT DIDN'T UNDERSTAND HOW THESE QUALITY CONTROL EXPERIMENTS SHOULD BE RUN. YOU HEARD A LOT OF TESTIMONY. SO THAT'S ONE INDIVIDUAL RAISING CONCERNS. THE SECOND INDIVIDUAL THAT WE HEARD ABOUT, BUT DID NOT SEE, WAS TYLER SHULTZ. I WON'T GO THROUGH HIS CONCERNS IN DETAIL BECAUSE YOU SAW SOME OF THOSE DOCUMENTS WHEN MS. HOLMES TESTIFIED. BUT SUFFICE IT TO SAY THAT THE GIST OF THAT TESTIMONY IS MR. SHULTZ RAISED CONCERNS, MS. HOLMES TOOK THOSE CONCERNS VERY SERIOUSLY. HE RAISED THEM THREE SEPARATE TIMES. IN EACH INSTANCE MS. HOLMES ALMOST IMMEDIATELY BROUGHT THE FACT THAT MR. SHULTZ HAD THESE CONCERNS TO THE ATTENTION OF DR. YOUNG, EFFECTIVELY THE CHIEF TECHNICAL OFFICER, ASKED HIM TO EVALUATE THOSE CONCERNS, ASKED HIM TO MEET WITH MR. SHULTZ, ASKED HIM TO UNDERSTAND WHETHER THOSE CONCERNS HAD MERIT. IF THEY DIDN'T HAVE MERIT, TO EXPLAIN TO MR. SHULTZ WHY THEY DID NOT HAVE MERIT.

AND ALL OF THAT IS REFLECTED IN DOCUMENTS THAT HAVE BEEN INTRODUCED IN THE CASE. SO I'LL GIVE YOU THOSE EXHIBIT NUMBERS. THEY'RE EXHIBIT 1667, EXHIBIT 7421, AND EXHIBIT 7434. I THINK IF YOU'LL GO BACK AND LOOK AT THOSE, YOU'LL SEE THAT THE RECORD FROM THE TIME IS CONSISTENT WITH THAT DESCRIPTION. NOW, MORE EXTENSIVELY YESTERDAY MR. SCHENK JUST WENT THROUGH JUST A BLITZ OF EMAILS WHERE THERE WOULD BE AN ISSUE IN CONNECTION WITH A PARTICULAR ASSAY THAT WOULD ARISE FOR ONE REASON OR ANOTHER. AND MR. SCHENK SUGGESTED TO YOU THAT THE EXISTENCE OF THOSE EMAILS, FRANKLY WHETHER MS. HOLMES WAS ON ALL OF THEM OR NOT, SUGGESTED THAT MS. HOLMES SHOULD HAVE KNOWN THAT THE CLIA LAB WAS NOT OFFERING ACCURATE AND RELIABLE RESULTS. WHAT DO WE KNOW ABOUT HOW THERANOS APPROACHED THOSE ISSUES WHEN THEY AROSE? WELL, FIRST OF ALL, WE KNOW THAT DR.

ROSENDORFF HAD PUT IN PLACE, AS HE SHOULD HAVE, A STANDARD OPERATING PROCEDURE THAT SAID EVERY TIME AN ISSUE IS RAISED ABOUT AN ASSAY, WE HAVE TO DO AN INTERNAL REVIEW OF THAT CONCERN, WE HAVE TO EVALUATE WHETHER THAT CONCERN GOES TO THE INTEGRITY OF THE ASSAY THAT WE ARE OFFERING. AND, IN FACT, IN EACH INSTANCE, INCLUDING EACH INSTANCE RAISED BY MR. SCHENK YESTERDAY, THAT IS WHAT WAS DONE. HOW DID THAT WORK? THERE WAS -- THE ISSUE WOULD BE FLAGGED, LAB PERSONNEL AND SCIENTISTS WOULD LOOK AT THE DATABASE THAT STORED THE INFORMATION THAT RELATED TO TESTS ON THAT ASSAY, THEY WOULD LOOK AS TO SEE WHETHER THERE WERE COMMON ISSUES AMONGST WHEN THAT TEST WAS OFFERED, WHERE THAT TEST WAS OFFERED, THE LAB TECHNICIAN WHO PROCESSED IT, THE PARTICULAR PERSON WHO WAS DRAWING THE SAMPLES. IS THERE SOMETHING HAPPENING WITH RESPECT TO THIS ASSAY THAT IS LEADING TO INACCURATE RESULTS? AND THEY WOULD COME TO A CONCLUSION.

AND IF THE CONCLUSION WAS THERE'S A PROBLEM FUNDAMENTALLY WITH THIS TEST OR WITH THIS DEVICE, THEY WOULD EITHER STOP OFFERING IT COMPLETELY AS AN ASSAY OR THEY WOULD STOP OFFERING IT AND TRANSFER IT TO ANOTHER DEVICE WHERE IT COULD BE OFFERED. THAT WAS WHAT THE POLICY MR. ROSENDORFF PUT IN PLACE, DR. ROSENDORFF PUT IN PLACE REQUIRED, AND THE EVIDENCE IN THE CASE SUGGESTS THAT THAT WOULD HAPPEN. LET'S TAKE AN EXAMPLE, AND IT'S ONLY ONE EXAMPLE, BUT MR. SCHENK WENT THROUGH IT YESTERDAY, THE EXAMPLE OF HCG. AND YOU'LL RECALL THAT THIS WAS THE SUBJECT OF A LOT OF TESTIMONY IN DR. ROSENDORFF'S CROSS-EXAMINATION.

MR. DOWNEY: THE GOVERNMENT YESTERDAY PUT UP A -- SUGGESTED A CHRONOLOGY TO YOU THAT LOOKS SOMETHING LIKE THIS WITH REGARD TO BEGINNING OF ISSUES ON HCG AND SUGGESTED THAT THERE HAD BEEN A VALIDATION REPORT WHERE DR. ROSENDORFF HAD DETERMINED TO PUT HCG ON AN EDISON DEVICE IN MARCH, THAT TESTING HAD BEGUN IN MAY, AND THAT IN LATE MAY DR. ROSENDORFF HAD STOPPED THAT TESTING, AND THAT THIS WAS PRESENTED AS THIS WAS THE RESULT OF A CONCERN THAT HAD BEEN RAISED AND REFLECTED A CONCERN ON DR. ROSENDORFF'S PART. BUT WHAT ACTUALLY HAPPENED WITH RESPECT TO THIS ISSUE? THERE'S ACTUALLY A MUCH LARGER SERIES OF EVENTS INVOLVING A MUCH LARGER SERIES OF EXHIBITS THAT WERE INTRODUCED IN THE CASE. AND THIS SHOWS YOU WHAT HAPPENED. AFTER MAY 9TH, THE HCG ASSAY WAS OFFERED ON AN EDISON DEVICE. AS EXHIBIT 4145 DEMONSTRATES, THE QUESTION CAME IN. DR. ROSENDORFF AND DR. YOUNG DISCUSSED IT. ALMOST IMMEDIATELY MS. HOLMES ASKED TO MEET WITH THEM AS SOON AS SHE KNEW ABOUT THE ISSUE.

AND LATER THAT DAY, THE PHYSICIAN WHO HAD TREATED THE PATIENT WHERE THERE WAS AN ISSUE WAS CONTACTED AND THERE WAS A PLAN OF ACTION FOR REACTING TO THE POTENTIALLY ERRANT ISSUE. WE KNOW FROM THE RECORD THAT MS. HOLMES WROTE, PERHAPS EARLY THE NEXT MORNING, THAT SHE HAD DONE MANY MEETINGS ON IT TODAY, REFERRING TO THAT SAME DAY, THE 2TH. SHE MET WITH THE STAFF OF THE CLIA LAB, INCLUDING DR. ROSENDORFF, THE NEXT DAY. AND THEN JUST SHORTLY AFTER THAT MEETING ENDED, DR. ROSENDORFF STOPPED TESTING ON THE EDISON DEVICE FOR THIS HCG ASSAY. THE SUGGESTION THAT A CONCERN BEING RAISED WITH MS. HOLMES GAVE HER NOTICE OF INACCURATE AND UNRELIABLE RESULTS AND THAT WASN'T IMMEDIATELY CORRECTED IS INCONSISTENT WITH WHAT THE RECORD SHOWED ON THIS ISSUE. NOW, THERE WAS A SUBSEQUENT SERIES OF EMAILS THAT DISCUSS AN INVESTIGATION INTO THIS ISSUE, AND DR.

ROSENDORFF'S TESTIMONY REFLECTED THAT HE WAS AWARE BY THE MIDDLE OF JUNE THAT THOSE QUESTIONS HAD BEEN RESOLVED AND THAT THE HCG ASSAY WAS AGAIN BEING OFFERED ON THE EDISON DEVICE, AND THAT THAT WAS, AS IT WAS THE TRUTH WITH RESPECT TO ALL ASSAYS, SOMETHING THAT HE HAD SIGNED OFF ON AND APPROVED. SO WHAT DOES THIS JUST ONE SCENARIO OF ALL THE OF THE SCENARIOS MENTIONED YESTERDAY BY MR. SCHENK DEMONSTRATE? FIRST OF ALL, IT DEMONSTRATES THAT WHEN A PROBLEM WAS RAISED, THERE WERE IMMEDIATE MEETINGS ABOUT IT. IT WAS NOT TREATED CAVALIERLY. SECOND, THERE WAS A DISCUSSION WITH THE PATIENT'S PHYSICIAN. IF A PATIENT HAD BEEN POTENTIALLY AFFECTED, THEY TALKED TO THAT PHYSICIAN. THIRD, THEY STOPPED THE TESTING, AS I TOLD YOU A FEW MOMENTS AGO. THEY WOULD EITHER OFFER IT ON ANOTHER PLATFORM OR THEY WOULDN'T OFFER IT AT ALL. THEY TRIED TO FIGURE OUT WHAT HAPPENED. AND THEN DR. ROSENDORFF WOULD MAKE A DECISION BASED ON THE INVESTIGATION, WAS THIS ACTUALLY AN ISSUE RELATED TO THE ASSAY?

WAS IT RELATED TO THE DEVICE? AND DEPENDING ON THE RESULTS OF THAT DETERMINATION, HE WOULD ALLOW THE TEST TO START OR CEASE OFFERING THAT TEST. NOW, ANOTHER EMAIL WAS BROUGHT UP BY MR. SCHENK YESTERDAY, AND IT WAS ALMOST AS IF DR. ROSENDORFF'S CROSS-EXAMINATION DID NOT HAPPEN. THIS IS AN EMAIL THAT DR. ROSENDORFF WAS SHOWN ON HIS DIRECT. YOU WILL RECALL IT WAS FROM CHRISTIAN HOLMES, MS. HOLMES'S BROTHER, TO HER TALKING ABOUT HCG. AND THE TEXT OF THAT EMAIL SAID, HCG HAS SOME SERIOUS ISSUES AND PATIENT COMPLAINTS, AND IT WAS IMPLIED ON DIRECT EXAMINATION AND YESTERDAY THAT THIS WAS FURTHER NOTICE TO MS. HOLMES OF INACCURACY WITH REGARD TO THIS VERY SENSITIVE ASSAY. BUT WHAT DID THE -- WHAT DOES THE BALANCE OF THAT EMAIL, AS WELL AS OTHER EXHIBITS RELATED TO THIS, DEMONSTRATE? FIRST OF ALL, THE ISSUE THAT CHRISTIAN HOLMES WAS TALKING ABOUT HERE WAS NOT AT ALL ACCURACY OR RELIABILITY.

WHAT HE WAS TALKING ABOUT IS THAT THE NUMBER OF SAMPLES THAT THE COMPANY WAS RECEIVING TO TEST HCG ON WAS BACKLOGGED AND WOMEN WERE WAITING TO FIND OUT WHETHER THEY WERE PREGNANT OR NOT, AND THAT'S OBVIOUSLY A SENSITIVE SITUATION. WHY DID THAT HAPPEN? BECAUSE THE REAGENTS HADN'T BEEN ORDERED BY DR. ROSENDORFF OR THOSE WORKING FOR DR. ROSENDORFF IN THE LAB. THE EXCHANGE BETWEEN CHRISTIAN HOLMES AND HIS SISTER HERE HAS NOTHING TO DO WITH ACCURACY OR RELIABILITY OF THE HCG TEST. THAT'S A PATTERN THAT YOU SEE ACROSS THESE ASSAYS, EITHER THE CONCERN IS NOT WHAT'S BEING RAISED WITH MS. HOLMES MAY LOOK AMBIGUOUS BUT IT'S NOT A CONCERN ABOUT ACCURACY, IT'S A CONCERN THAT WAS INVESTIGATED OR RESOLVED, OR IT'S A CONCERN THAT WAS INVESTIGATED AND THEY CEASED OFFERING THE ASSAYS.

MR. DOWNEY: I'M NOT GOING TO GO THROUGH ALL OF THOSE, BUT FOR THE RECORD I WILL SAY THAT WE HAVE DONE THAT WITH RESPECT TO HDL MENTIONED YESTERDAY, EXHIBITS -- THE EXHIBITS OFFERED BY THE GOVERNMENT, AND WE'LL PROVIDE YOU WITH THOSE FROM THE DEFENSE. THE EXHIBITS WHICH GIVE FURTHER CONTEXT ON HDL FOR YOU TO TAKE A LOOK AT ARE LISTED HERE. THEY PROVIDE THE CONTEXT AS TO WHAT REALLY HAPPENED WITH RESPECT TO THESE ASSAYS FOLLOWING THE PATTERN THAT I'VE JUST DESCRIBED. NOW, HOW DO YOU KNOW WHAT I'VE TOLD YOU IS JUST TRUE EVEN WITHOUT DIGGING THROUGH ALL OF THE DOCUMENTS THAT I'VE LISTED ON THIS SLIDE? HOW DO YOU KNOW THAT THERANOS DID NOT BELIEVE, AND THEREFORE MS. HOLMES DID NOT BELIEVE, THAT IT WAS OFFERING INACCURATE OR UNRELIABLE TEST RESULTS? WELL, RECALL DR. ROSENDORFF WAS ASKED SQUARELY ABOUT THIS.

HE SAID -- AFTER BEING SHOWN ALL OF THESE EMAILS AND AFTER THESE ISSUES WERE DISCUSSED AT LENGTH WITH HIM, HE WAS ASKED SQUARELY, "YOU NEVER OFFERED TESTS THAT YOU THOUGHT WERE INACCURATE AND UNRELIABLE WHEN YOU WERE SERVING AS LAB DIRECTOR AT THERANOS; CORRECT? "CORRECT." THE LAB DIRECTOR DID NOT BELIEVE THAT THE TESTS WERE INACCURATE OR UNRELIABLE. AND THEN HE WAS ASKED, "DID YOU EVER USE A TEST ON PATIENTS THAT YOU BELIEVED WAS INACCURATE OR UNRELIABLE?" AND HE SAID, "NO. NO." THE PERSON WHO WAS SUPPOSED TO MAKE THESE DETERMINATIONS DID NOT BELIEVE THAT TESTS WERE INACCURATE OR UNRELIABLE. WHAT THE GOVERNMENT HAS REALLY DONE WITH RESPECT TO THIS ISSUE IS THAT THEY HAVE LOOKED AT ISSUES THAT ARE COMING UP AND BEING INVESTIGATED AND RESOLVED AND CONFLATED THAT WITH THE IDEA THAT MS. HOLMES SHOULD SOMEHOW STEP IN AND FILL IN FOR THE LAB DIRECTOR AND REMOVE OR KNOW THINGS THAT THE LAB DIRECTOR DOESN'T KNOW. WELL, THAT WOULD BE ENTIRELY IMPROPER AS I THINK YOU HEARD DR.

ROSENDORFF TESTIFY. AND HE SAID THAT NOT ONLY WITH REGARD TO THE TESTS THAT WERE OFFERED, THE CLASSES OF TESTS, SAY HDL OR HCG. HE SAID HE NEVER WAS AWARE OF A PATIENT GETTING A TEST THAT AT THE TIME HE BELIEVED WAS INACCURATE OR UNRELIABLE AT THE TIME THAT IT WAS OFFERED. HE SAID THAT OVER AND OVER AND OVER AGAIN. HE SAID THAT HE NEVER ALLOWED FOR THE RELEASE OF INACCURATE RESULTS, THAT HE NEVER DIRECTED, THAT MS. HOLMES NEVER DIRECTED THAT A PARTICULAR MACHINE BE USED, THAT SHE NEVER TOLD HIM TO RELEASE A RESULT THAT SHE THOUGHT HE SHOULDN'T RELEASE. THAT SHE NEVER DIRECTED HIM OR OVERRULED HIM ON ANYTHING IN CONNECTION WITH THE LAB, NOTHING. THE EMAIL THAT THE GOVERNMENT USES HERE TO SHOW INTENT, ET CETERA, HAPPEN WITHIN THIS FRAMEWORK WHERE THERE'S A LAB DIRECTOR FOR THE FIRST YEAR. HE ALSO TOLD YOU, YOU KNOW, NO LAB IS PERFECT, THAT THERE ARE POTENTIAL ISSUES IN EVERY LAB.

I THINK WE SHOWED YOU AN EMAIL WHICH REFLECTED HIM ACTUALLY SAYING THAT AN ISSUE HAD COME UP AND BEEN RAISED BY A DOCTOR AND THAT -- THIS WASN'T THE FAULT OF THE TEST OR OF THERANOS; THAT THIS WAS A MISREADING OF THE SITUATION BY THE DOCTOR. HE ACKNOWLEDGED THAT THERE WERE LAB ERRORS IN EVERY LAB. I THINK IN THE INSTANCE WHERE HE TRIED TO CLAIM THAT THEY WERE MORE FREQUENT THAT AT THERANOS THAN IN HIS PRIOR EXPERIENCES, HE WAS THEN SHOWN AND ACKNOWLEDGED THAT HE HAD TESTIFIED PREVIOUSLY TO THE OPPOSITE PROPOSITION. NOW, LET'S TALK ABOUT HIS DEPARTURE FROM THERANOS BECAUSE IT WAS PORTRAYED ON HIS DIRECT EXAMINATION AND AGAIN YESTERDAY AS IF HIS DEPARTURE WAS MOTIVATED BY A CONCERN ON HIS PART THAT SOMETHING UNTOWARD WAS HAPPENING AT THERANOS. FIRST OF ALL, I WOULD JUST ASK YOU TO VIEW THIS THROUGH THE LENS OF MS. HOLMES'S INTENT. HE SENT AN EMAIL TO MS. HOLMES WHICH WAS A GRACIOUS EMAIL. HE DID NOT IDENTIFY ANY OF THE CONCERNS THAT HE IS NOW IDENTIFYING.

AS YOU'LL RECALL THIS STORY, WHAT HAPPENED WITH REGARD TO DR. ROSENDORFF WAS THAT THERANOS WANTED HIM TO STAY FOR A PERIOD OF 60 DAYS AFTER HIS DEPARTURE BECAUSE THEY WANTED TO FIND A NEW LAB DIRECTOR TO REPLACE HIM BECAUSE HIS DEPARTURE WAS UNEXPECTED. AND SHORTLY AFTER THOSE DISCUSSIONS WITH DR. ROSENDORFF, HE BEGAN TO SEND EMAILS WITH VARIOUS COMPLAINTS AND QUESTIONS ABOUT THINGS AT THERANOS. YOU'LL REMEMBER JUST RECENTLY DURING MS. HOLMES'S TESTIMONY WE SAW AN EMAIL EXCHANGE WHERE HE HAD RAISED A QUESTION ABOUT IS THERE EBOLA ON THE PREMISES OF WHERE THE CLIA LAB IS? AND, OF COURSE, THERE WAS NOT. THE EVIDENCE SHOWED THAT THERE WERE, IN CONNECTION WITH RESEARCH BEING DONE AT A DIFFERENT FACILITY, EBOLA WAS BEING DISCUSSED.

MR. DOWNEY: BUT THE SAME WAS TRUE IN CONNECTION WITH CONCERNS ABOUT THE CLIA LAB. HE RAISED THIS EMAIL TO MS. HOLMES IN THE MIDDLE OF NOVEMBER AND HE SAID THAT HE WAS UNCOMFORTABLE WITH WHAT WAS HAPPENING IN THE COMPANY AND THAT HE WAS GETTING QUESTIONS THAT HE DIDN'T WANT TO ANSWER, ET CETERA. WELL, LET'S LOOK AT WHAT MS. HOLMES SAID IN RESPONSE TO THAT EMAIL. SHE SAID, OUTSIDE OF THE FACT THAT YOU'VE NEVER EMAILED ME ON ANY CONCERNS, YOU KNOW FROM EVERY CONVERSATION HOW FUNDAMENTAL IT IS FOR YOU NEVER TO DO ANYTHING YOU'RE NOT COMPLETELY CONFIDENT IN. SHE WAS SURPRISED ON THIS PRESENTATION FROM DR. ROSENDORFF. NOW, DR. ROSENDORFF TESTIFIED THAT HE HAD A NUMBER OF CONCERNS ABOUT THE INTEGRITY OF ASSAYS THAT WERE BEING OFFERED, BUT I'D ASK YOU TO KEEP THE FOLLOWING IN MIND IN CONNECTION WITH THAT. FIRST, HE'S GIVEN VERY UNRELIABLE AND INCONSISTENT STATEMENTS OVER TIME. AS YOU RECALL HE WAS SHOWN THOSE DURING HIS EXAMINATION AND HE ACKNOWLEDGED MAKING PRIOR INCONSISTENT STATEMENTS.

HE LEFT THERANOS BECAUSE HE HAD FOUND A NEW JOB AND HE WANTED TO START THAT NEW JOB, AND HE DID NOT WANT TO STAY AT THERANOS FOR THE 60 DAY PERIOD THAT THERANOS WAS TRYING TO GET HIM TO STAY THERE. IN THE MONTHS LEADING UP TO THIS, WE SHOWED YOU SEVERAL EMAILS WHERE HE WAS ERRATIC AND UNRESPONSIVE. YOU MAY RECALL EMAILS FROM MS. HOLMES'S BROTHER IN WHICH THEY WERE TRYING TO GET HIM TO RESPOND TO A DOCTOR'S CONCERN. AND THEN WHILE HE'S BEEN UNDER INVESTIGATION IN CONNECTION WITH HIS LAB LICENSE, HE'S GIVEN INCONSISTENT STATEMENTS ABOUT THE REASONS THAT HE LEFT THERANOS. SO I THINK WHEN YOU HEAR HIS ASSERTION ABOUT CONCERNS OF THERANOS, YOU SHOULD VIEW THAT TESTIMONY THROUGH THAT LENS. NOW, AFTER DR. ROSENDORFF LEFT, AS YOU KNOW, DR. DHAWAN BECAME THE LAB DIRECTOR. AND I THINK IT'S FAIR TO SHOW YOU THAT THE GOVERNMENT SAID YESTERDAY, AS THEY'VE SAID THROUGHOUT THE CASE, THAT MR. HOLMES AND MR. BALWANI CHOSE TO PICK MR. BALWANI'S DERMATOLOGIST TO RUN THE LAB. AND THEY SAID THAT MS.

HOLMES AND MR. BALWANI PUT DR. DHAWAN IN CHARGE. THAT IS NOT A FAIR CHARACTERIZATION OF WHAT MS. HOLMES WAS SEEING AT THE TIME. LET'S LOOK AT WHAT MS. HOLMES WAS SEEING AT THE TIME AS TO WHAT WAS HAPPENING AFTER DR. ROSENDORFF LEFT. THIS IS THE GOVERNMENT'S PRESENTATION, WHICH IS THE DERMATOLOGIST WAS IN CHARGE AND THERE WERE NO OTHER PROTECTIONS. BUT FIRST, AS YOU KNOW, DR. SAWYER, WHO THE GOVERNMENT DIDN'T ACKNOWLEDGE OR MENTION IN ITS OPENING UNTIL DR. DHAWAN WAS EXAMINED ABOUT IT, SHE CAME AT THE SAME TIME AND SHE PROVIDED ADDITIONAL SERVICE. BUT MORE FUNDAMENTALLY, THERE WAS LAB PERSONNEL WHOM MS. HOLMES TESTIFIED MR. BALWANI HAD IDENTIFIED AS THESE ARE THE INTERNAL PERSONNEL WHO ARE WORKING IN LIEU OF HAVING A FULL-TIME LAB DIRECTOR, AND HE IDENTIFIES DR. SURAJ SAKSENA AS THE INTERNAL CANDIDATE WHO HE EXPECTED TO BECOME THE LAB DIRECTOR. AND HE SAID THAT HE HAD WORKED IN THE CLIA LAB FOR A LONG TIME.

HE WAS FULLY QUALIFIED, IN FACT, BUT THERE WERE REQUIREMENTS ON PAPER THAT HE HAD TO MEET, AND HE WAS GETTING THOSE, AND MR. BALWANI EXPECTED HE WOULD BECOME THE NEXT LAB DIRECTOR. NOW, THAT'S THE PICTURE THAT MS. HOLMES SAW, NOT THAT MR. BALWANI'S DERMATOLOGIST WAS IN CHARGE, BUT RATHER THAT THERE WAS THIS GROUP OF QUALIFIED PEOPLE: DR. SAKSENA, THERE WAS THE OUTSIDE CONSULTANT; MR. HURST, WHO HAD SET UP THE CLIA LAB, WHO AGAIN WAS ENGAGED, AND HE WAS WORKING IN CONNECTION WITH IT; THERE WAS QUALITY CONTROL PERSONNEL LIKE MR. GEE WHO HAD BEEN WORKING WITH THE COMPANY FOR OVER A YEAR; AND THERE WERE PEOPLE IMMEDIATELY UNDER THE LAB DIRECTOR, MS. ALAMDAR, SIDHU, GODFRED MASINDE, A HUGE STAFF WORKING IN THE CLIA LAB WHO HAD SUBSTANTIAL QUALIFICATIONS. BUT FUNDALLY, WHAT THE GOVERNMENT WANTS TO SAY HERE IS THAT MS. HOLMES RECEIVED NOTICE FROM MR. BALWANI THAT THIS LAB WAS BEING -- WAS IN BAD SHAPE, AND THAT THAT WAS NOTICE TO MS. HOLMES THAT SHE SHOULD HAVE KNOWN THINGS. AND THEY SHOWED YOU THIS TEXT YESTERDAY. ACTUALLY, I THINK I HAVE IT HERE ON THE SLIDE. THEY SHOWED YOU THIS TEXT, AND THIS IS THE NOTICE THAT THE GOVERNMENT HAS AS TO THE PROBLEMS IN THE CLIA LAB. BUT NOBODY SAYS HERE -- HE SAYS THAT HE'S GOING TO WORK ON FIXING THIS, AND HE WILL TAKE THE LAB OVER.

MR. DOWNEY: AND YOU KNOW WHAT HIS REPRESENTATIONS OF THAT TO MS. HOLMES SOUNDED LIKE BECAUSE WE SAW HIS DESCRIPTION OF HIS SITUATION IN AN EMAIL DURING THE COURSE OF THE CASE FROM A FEW MONTHS BEFORE THIS. HE PRESENTED HIMSELF, IN TAKING THE CLIA LAB OPERATIONS, AS SOMEBODY WHO WAS UNIQUELY GIFTED AT ORGANIZATIONAL STRUCTURES AND OPERATIONS, AND HE ASSURED MS. HOLMES THAT HE WAS NOW GOING OUT TO THE CLIA LAB, WHICH WAS IN A DIFFERENT FACILITY, AND TAKING IT OVER. AND WHAT DOES THE RECORD SHOW FROM THIS MOMENT IN NOVEMBER OF 2014 UNTIL CMS AND DR. DHAWAN AT THE END OF 2015? WHAT PROBLEMS DID MS. HOLMES LEARN ABOUT IN THE CLIA LAB DURING THIS PERIOD FROM NOVEMBER OF 2014 UNTIL THE FALL OF 2015? DO YOU KNOW THE NUMBER OF ISSUES THAT ARE IN THE RECORD OF MS. HOLMES BEING TOLD ABOUT SOME ISSUE IN CONNECTION WITH AN ASSAY DURING THAT PERIOD? ONE, WHICH WAS PRESENTED AT THAT TIME TO HER AS BEING RESOLVED. THAT'S IT. THAT IS WHAT THE RECORD IN THIS MATTER SHOWS; THAT AFTER THE POINT AT WHICH DR.

ROSENDORFF DEPARTED, THIS LARGE STAFF OF INDIVIDUALS LED BY MR. BALWANI, WITH SUPPLEMENTAL SUPPORT FROM QUALITY CONTROL EXPERTS AND FROM OUTSIDE LAB DIRECTORS WITH THE CONSULTANT, MR. HURST, THAT NO PROBLEMS WERE RESULTING IN THE CLIA LAB THAT REQUIRED HER ATTENTION. NONE. NONE. THE PRESENTATION OF THAT TO MS. HOLMES WAS THAT THE PROBLEM IN THE CLIA LAB PRIOR TO DR. ROSENDORFF'S DEPARTURE, WHAT WOULD BE REASONABLE TO INFER? THAT IT WAS DR. ROSENDORFF. THERE'S NO INDICATION THAT ANY ISSUE WAS RAISED THAT WAS NOT ADDRESSED DURING THAT PERIOD. WHEN IS THE FIRST TIME THAT MS. HOLMES STARTS TO HEAR ABOUT THOSE ISSUES? IN THE FALL OF 2015 AS SHE TESTIFIED DURING HER DIRECT TESTIMONY. NOW, WE KNOW THAT AFTER CMS CAME IN AND MADE THE FINDINGS THAT IT MADE, DR. DAS WAS HIRED. YOU KNOW THAT HE TESTIFIED THAT HE WAS HIRED WITH A NUMBER OF OTHER LAB DIRECTORS; THAT HE WAS GIVEN THE MISSION OF TURNING OVER ROCKS; THAT MS.

HOLMES WAS SUPPORTIVE OF THAT; AND THAT HE WAS PART OF A REFORM EFFORT TO MAKE THE OPERATIONS OF THAT LAB PROFESSIONAL WITH MS. HOLMES'S SUPPORT AND WITH THE FULL SUPPORT OF RESOURCES. THAT SOUNDS LIKE A DEFENSE WITNESS. SO WHY DID THE GOVERNMENT OFFER DR. DAS'S TESTIMONY? WELL, THEY OFFERED HIS TESTIMONY TO I THINK IMPLY THAT THE TECHNOLOGY THAT WAS BEING USED IN THE LAB, THE EDISON DEVICE THAT WAS BEING OFFERED WAS UNRELIABLE OR GENERATING INACCURATE RESULTS OR WAS INHERENTLY DOOMED TO GENERATE INACCURATE AND UNRELIABLE RESULTS. WELL, FIRST OF ALL, I WOULD SAY TO YOU, LADIES AND GENTLEMEN, ALL OF THAT, OF COURSE, IS AFTER THE CONSPIRACY PERIOD HERE. WE KNOW WHAT HAPPENED WHEN MS. HOLMES HEARD ABOUT DR. DAS'S CONCERNS. BUT SECOND AND MORE FUNDAMENTALLY, THE RECORD REFLECTS THAT DR. DAS DID NOT THINK THAT THE CONCERNS THAT CMS HAD RAISED WERE ABOUT FUNDAMENTALLY THE CAPABILITIES OF ANY OF THERANOS'S TECHNOLOGY. WE KNOW THAT HE WAS ASKED TO REVIEW A STATEMENT THAT MS.

BENNETT PROPOSED, THE GIST OF WHICH SAYS THAT THEY REFER TO HOW TECHNOLOGIES WERE USED AND NOT TO THE FUNDAMENTAL INTEGRITY OF THOSE TECHNOLOGIES. HE WAS ASKED IF THAT WAS ACCURATE AND HE RESPONDED "IT'S ACCURATE, IN MY OPINION." NOW, WHAT DID DR. DAS IN FACT CONCLUDE? HE CONCLUDED THAT THE VALIDATION REPORTS THAT DR. ROSENDORFF HAD SIGNED HAD BEEN DONE INCORRECTLY; THAT THERE WERE STANDARDS SET AS TO WHAT SHOULD ALLOW THOSE TESTS TO BE OFFERED, AND THOSE STANDARDS WERE ALL WRONG. THAT DR. ROSENDORFF IN EFFECT, AS THE GATEKEEPER FOR ASSAYS COMING INTO THE LAB, ALLOWED TESTS TO BE OFFERED WITH INCORRECT ASSESSMENT AND THAT THOSE VALIDATION REPORTS NEVER SHOULD HAVE BEEN SIGNED BY DR. ROSENDORFF. SO IN ESSENCE, DR. DAS'S TESTIMONY IS REALLY A CRITICISM OF THE JOB THAT DR. ROSENDORFF DID AS LAB DIRECTOR. BUT THAT DOESN'T MEAN THAT AT THE TIME MS. HOLMES'S TESTIMONY OR MS. HOLMES'S STATE OF MIND WAS NOT EVERYTHING THAT WAS HAPPENING WITHIN THE CLIA LAB WAS BEING DONE IN A REASONABLE, A RELIABLE, AND IN AN ACCURATE MANNER. NOW, YOUR HONOR, I WOULD SUGGEST THAT WE JUST TAKE OUR BREAK MAYBE NOW. I JUST HAVE A BRIEF AMOUNT OF ADDITIONAL TIME AND WE'LL FINISH UP AFTER THAT, BUT I PROBABLY HAVE 20 MINUTES.

MR. DOWNEY: I WANT TO SPEND JUST A FEW MINUTES TALKING WITH YOU ABOUT THE PATIENT COUNTS OF THE INDICTMENT AND GIVE YOU THE FRAMEWORK THAT I THINK WILL BE HELPFUL TO YOU IN LOOKING AT THOSE COUNTS. FIRST OF ALL, RECALL WHAT THE CHARGE IS IN CONNECTION WITH THE SECOND CONSPIRACY, THE PATIENT CONSPIRACY, AND THE PATIENT COUNTS. IT'S NOT THAT ANY INDIVIDUAL PATIENT GOT AN ERRANT TEST. THAT'S OBVIOUSLY A RESULT THAT NO ONE WANTS AND IT'S UNDERSTANDABLY FRUSTRATING AND UPSETTING FOR THEM AND WE SAW SOME OF THAT DURING THE COURSE OF THIS CASE. BUT THE QUESTION IS, DID MS. HOLMES KNOW, IN RUNNING THERANOS, THAT THERANOS WAS NOT ABLE TO CONSISTENTLY PROVIDE ACCURATE AND RELIABLE RESULTS? SO I THINK THE PLACE TO START WITH RESPECT TO THIS ANALYSIS IS, IS WHAT WE KNOW ABOUT THE NUMBER OF TESTS THAT THERANOS OFFERED AND WHAT THE GOVERNMENT DID IN CONNECTION WITH ITS CASE. I WOULD HAVE TO SAY FIRST, LADIES AND GENTLEMEN, THE GOVERNMENT DIDN'T OFFER YOU ANY OVERVIEW DURING ITS CASE OF STATISTICAL EVIDENCE.

WE HAVE NO IDEA OTHER THAN BASED ON THE ANECDOTES THAT WE'VE HEARD THROUGH EMAILS ON A FEW OCCASIONS AND THE INDIVIDUAL CASES WE KNOW ABOUT FROM THE THREE PATIENTS WHO TESTIFIED OF ERRORS OR POTENTIAL ERRORS. THERE WAS NO PRESENTATION OF EVIDENCE AS TO THE RATE THAT THOSE ERRORS WERE OCCURRING. THERE WAS NO SAMPLING OF DATA. THERE WAS NO PRESENTATION AT ALL OF ANY KIND OF A STATISTICAL ANALYSIS. I WOULD SAY TO YOU, LADIES AND GENTLEMEN, THAT THAT ALONE IS A BASIS ON WHICH TO DECIDE THAT THIS CHARGE DOES NOT HAVE MERIT. WHY? WELL, WE KNOW FROM TESTIMONY DURING THE COURSE OF THE CASE HOW MANY TESTS THERANOS OFFERED WHEN IT WAS RUNNING A CLINICAL LAB, AND IT'S SOMEWHERE IN THE NEIGHBORHOOD AT LEAST OF 8 MILLION PATIENTS WHO GOT TESTS. IT MAY HAVE BEEN MORE. THERE WERE SLIGHTLY DIFFERENT ESTIMATES AS TO THE NUMBER OF TESTS THAT WERE OFFERED. NOW, IN REALTIME, WHAT DID MS. HOLMES KNOW BETWEEN 2013 AND EARLY 2016? WHAT DID MS. HOLMES KNOW ABOUT INACCURACY WITH RESPECT TO THOSE TESTS?

SO WE'RE NOT TALKING ABOUT DR. DAS'S ANALYSIS, WHICH IS PERFORMED AFTER THESE EVENTS. WE'RE TALKING ABOUT WHAT HAPPENED IN REALTIME THAT TOLD HER OF ERRANT RESULTS AMONGST THESE 8 MILLION TESTS? WELL, THE TRUTH IS THAT WE DON'T REALLY KNOW MUCH EXCEPT FOR THE PATIENTS WHO HAVE COME TO TESTIFY, AND THE GOVERNMENT IN THE COURSE OF ITS CASE WAS ABLE TO PRESENT TESTIMONY FROM THREE PATIENTS, AND THEY TESTIFIED THAT IN CONNECTION WITH THREE DIFFERENT ASSAYS THAT THERANOS OFFERED, THAT SEVEN OF THE RESULTS CONTAINED ERRORS OR SEEMED TO CONTAINED ERRORS. TWO OF THOSE DOCTORS FOR THOSE PATIENTS TESTIFIED, DR. ZACHMAN AND DR. BURNES. THERE WERE NO OTHER WITNESSES AND NO OTHER TESTIMONY FROM DOCTORS OR PATIENTS ABOUT ERRANT RESULTS. SO THAT'S OUT OF THE 8 MILLION TESTS THAT WE KNOW WERE OFFERED OVER TIME. AND THEN I DO WANT TO LOOK AT EACH OF THOSE COUNTS INDIVIDUALLY BECAUSE THEY'RE EACH IMPORTANT.

BUT I THINK, AS YOU CONSIDER BOTH THE CONSPIRACY COUNT AND YOU CONSIDER EACH OF THESE INDIVIDUAL COUNTS, REMEMBER THAT THE CHARGE HERE IS THAT MS. HOLMES INTENTIONALLY DEFRAUDED PEOPLE IN SUGGESTING THAT THERANOS'S TESTS WERE ACCURATE OR RELIABLE. AND THE EVIDENCE THAT HAS BEEN SHOWN IS THAT SHE SHOULD HAVE KNOWN THAT BASED ON THESE THREE RESULTS OUT OF 8 MILLION TESTS, AND PERHAPS, EVEN IF ONE WERE TO ACCEPT THE GOVERNMENT'S OFFERED IMPLICATIONS FROM EMAILS, MAYBE ANOTHER 20 EMAILS, WHICH WE DON'T REALLY KNOW WHAT THE END OF THAT STORY WAS. BUT LET ME DISCUSS EACH OF THE CASES BECAUSE I THINK EACH OF THESE CASES IS ALSO INSTRUCTIVE STATISTICALLY. YOU KNOW THAT MS. TOMPKINS TESTIFIED, AND SHE GOT AN HIV RESULT WHICH SHE UNDERSTOOD TO BE AN HIV POSITIVE RESULT. SHE WAS TREATED BY A PHYSICIAN NAMED DR. ASIN, GERALD ASIN. THE GOVERNMENT CHOSE NOT TO CALL DR. ASIN AS PART OF ITS CASE-IN-CHIEF. BUT WE KNOW WHAT DR. ASIN CONCLUDED WITH RESPECT TO THERANOS'S TESTS OVER TIME BECAUSE WE INTRODUCED THROUGH OUR SUMMARY WITNESS, MR. MIDDLETON, THE RESULTS OF THE STATISTICS AS TO HOW MANY TESTS DR. ASIN ORDERED FROM THERANOS, AND IT'S ABOUT 2,000 TESTS. WE ONLY KNOW OF THE ONE ERRANT RESULT, EVEN FOR THAT ONE PHYSICIAN WE KNOW HAD AN ERRANT TEST, WE KNOW HE ORDERED ABOUT 2,000 TESTS.

MR. DOWNEY: AND THEN WE HEARD FROM MR. ELLSWORTH WHO HAD THE ERRANT PSA TEST, AND AS YOU RECALL, HE WAS DR. BURNES'S PATIENT AND HE DID TESTIFY, AND HE ACTUALLY TESTIFIED THAT HE HAD BEEN USING THERANOS SERVICES FOR A YEAR, AND THAT IN CONNECTION WITH ALL OF THE TEST RESULTS THAT WERE GENERATED OVER THE COURSE OF THAT YEAR BY PATIENTS OF HIS WHO WENT TO THERANOS, THE GOVERNMENT ACTUALLY DIDN'T EVEN ASK TO SEE THE OTHER RESULTS TO EVALUATE WHETHER THEY WERE CORRECT OR NOT. SO, AGAIN, WITH ONE DOCTOR WHO USED THE SERVICE OVER A LONG PERIOD OF TIME, THERE APPEARS TO HAVE BEEN ONE TESTING ERROR THAT THE GOVERNMENT COULD IDENTIFY. THEN WE ALSO HAD TESTIMONY EARLIER IN THE CASE FROM MS. GOULD, WHICH WAS OBVIOUSLY A SITUATION FOR HER THAT WAS A HORRIBLE SITUATION, AND WE KNOW FROM THE TESTIMONY THAT HER NURSE PRACTITIONER WAS DR. ZACHMAN, AND DR. ZACHMAN WORKED FOR A CLINIC, AND SHE HAD SEVERAL OTHER PHYSICIANS AND PRACTITIONERS WHO WERE PART OF THAT CLINIC WITH HER.

AND SHE WAS ASKED BY THE GOVERNMENT AS PART OF THIS INVESTIGATION TO LOOK THROUGH THE RECORDS OF THAT CLINIC AND TO IDENTIFY OTHER PROBLEMATIC RESULTS ON THE HCG ASSAY, AND SHE -- WE INTRODUCED THE EVIDENCE WHEN DR. ZACHMAN TESTIFIED THAT SHE, SHE WASN'T ABLE TO IDENTIFY OTHER INSTANCES OF ERROR FOR -- IN THOSE CASES. MY POINT, LADIES AND GENTLEMEN, IS SIMPLY THIS: DR. ROSENDORFF TESTIFIED THAT IT WAS WELL-KNOWN THAT THERE WERE ERRORS IN CONNECTION WITH LAB TESTING. IT DOESN'T MATTER WHAT THE LAB IS, IT'S -- THERE ARE ERRORS, AND NO ONE IS EXCUSING THAT OR DEFENDING IT. BUT THE QUESTION IS WHETHER THE ERRORS HERE PUT MS. HOLMES ON NOTICE THAT THERE WAS A PROBLEM, AND STATISTICALLY THERE'S NO EVIDENCE THAT -- NO SUGGESTION THAT THE EVIDENCE THAT THE GOVERNMENT HAS ADDUCED THAT THESE ERRORS WERE HAPPENING AT A LEVEL THAT SHOULD HAVE PUT HER ON NOTICE THAT THERANOS'S TESTS WERE INACCURATE OR UNRELIABLE.

LET ME LOOK AT THE INDIVIDUAL CASES IN A BIT MORE DETAIL, BECAUSE EVEN WITHIN THE CASES I THINK THEY'RE INSTRUCTIVE AS TO THE DATA THAT HAS BEEN PRESENTED TO YOU. COUNT TEN CONCERNS MS. TOMPKINS, THE PATIENT WHO GOT AN HIV RESULT THAT SHE INTERPRETED AS AN HIV POSITIVE REPORT. I SHOULD SAY, FIRST OF ALL, THAT THAT WAS NOT ON A THERANOS DEVICE. THE HIV POSITIVE TEST THAT SHE UNDERSTOOD SHE GOT WAS ON AN FDA APPROVED DEVICE, A COMMERCIAL DEVICE, SO THE TEST WAS NOT RUN WITH THERANOS TECHNOLOGY. BUT BE THAT AS IT MAY, THE LAB RESULTS ON THEIR FACE ACTUALLY WOULD BE DIFFICULT FOR A LAYPERSON TO INTERPRET BECAUSE THEY INTRODUCE SOMEWHAT CONTRADICTORY THINGS. YOU CAN LOOK AT THIS EXCERPT FROM THE LAB RESULTS OF MS. TOMPKINS, AND AS YOU SEE, ALTHOUGH THERE WERE SOME INDICATIONS OF POSITIVE FINDINGS IN CONNECTION WITH THIS TEST, THERE WAS ALSO A STATEMENT THAT SAID "NO LABORATORY EVIDENCE OF AN HIV-1 INFECTION."

NOW, THE GOVERNMENT DIDN'T SHOW YOU ANY EVIDENCE THAT THIS RESULT -- WHAT SENSE WAS TO BE MADE OF THIS RESULT AND WHETHER IT ACTUALLY CONVEYED THAT THIS PATIENT WAS POSITIVE FOR HIV. AND, IN FACT, I DON'T THINK THE GOVERNMENT INTRODUCED ANY TESTIMONY FROM AN EXPERT, OR EVEN ANY TESTIMONY FROM THE DOCTOR WITH WHOM MS. TOMPKINS HAD DEALT, DR. ASIN. BUT WE KNOW BECAUSE OF A DOCUMENT THAT WE ADMITTED LATE IN THE CASE WHAT HAPPENED INSIDE OF THERANOS WITH REGARD TO MS. TOMPKINS'S TESTS. AND THIS IS NOT A DOCUMENT THAT YOU SAW DURING THE COURSE OF THE CASE, BUT THIS IS EXHIBIT 14259. AND I WOULD ENCOURAGE YOU, IN EVALUATING COUNT TEN, TO LOOK AT IT. THERE'S A REPORT INTERNALLY FROM PERSONNEL THAT MS. TOMPKINS HAD BEEN SPOKEN TO, AND DR. ASIN HAD BEEN SPOKEN TO TO RECONCILE THIS SOMEWHAT CONFUSING REPORT OF RESULTS.

AND THE RECOMMENDATION WAS THAT THIS DID NOT INDICATE THAT SHE WAS HIV POSITIVE, BUT THAT SHE NEEDED TO PURSUE FURTHER TESTING IN LIGHT OF THE RESULTS WHICH HAD AN INCONSISTENCY. THIS EMAIL CONVEYS THAT THAT HAD BEEN CONVEYED TO DR. ASIN; THAT DR. ASIN SAID THAT HE COMPLETELY UNDERSTOOD THE TESTING PROTOCOL, AND HE DIDN'T HAVE ANY ISSUES WITH THESE RESULTS OR WITH THE WAY THAT THE PROTOCOLS WERE EXPLAINED TO HIM. THEN THE THERANOS PERSON GOES ON TO EXPLAIN THAT THEY ALSO TALKED TO MS. TOMPKINS. THEY EXPLAINED WHAT THE CDC RECOMMENDED IN THIS SITUATION FOR FURTHER TESTING. MS. TOMPKINS WAS UNDERSTANDABLY FRUSTRATED BY THE CONFUSION, AND SHE SAID -- BUT SHE WAS ADVISED THIS IS WHY, IN CONNECTION WITH THIS CIRCUMSTANCE, INITIAL TEST RESULTS HAVE TO BE EITHER CONFIRMED OR DISPROVED BY FOLLOW-UP TESTS.

MR. DOWNEY: THEN THE UNDERSTANDING WAS, WELL, THIS IS REALLY FOR A CONVERSATION BETWEEN HER AND HER PHYSICIAN, DR. ASIN. NOW, WE DON'T KNOW WHAT HAPPENED THERE BECAUSE DR. ASIN WASN'T CALLED BY THE GOVERNMENT. BUT THE SUGGESTION THAT MS. TOMPKINS WAS GIVEN AN INDICATION THAT SHE WAS HIV POSITIVE AND THAT THERE WAS NO COMMUNICATION WITH HER TO CLARIFY POTENTIAL ADDITIONAL TESTING, AND THAT THERE WAS NO ADDITIONAL COMMUNICATION WITH HER PHYSICIAN TO MAKE SURE THAT THE LAB AND THE DOCTOR WERE ALIGNED AS TO HOW THE PATIENT SHOULD BE TREATED IS JUST NOT FAIR AND NOT CONSISTENT WITH WHAT THE DOCUMENTS SHOW. SO I WOULD PARTICULARLY ASK YOU TO LOOK AT THAT EXHIBIT, 14259, BECAUSE I THINK IT GIVES YOU A WINDOW ON THE PRESENTATION OF SOME OF THIS EVIDENCE. LET ME TALK ABOUT COUNT ELEVEN, WHICH RELATES TO MR. ELLSWORTH WHO HAD THE PSA TESTS WHERE THERE WERE RESULTS THAT I THINK IT WAS FAIRLY OBVIOUS CONTAINED ERRORS ACROSS THE TESTS. WHAT HAPPENED WITH REGARD TO THE ASSAY THAT MR.

ELLSWORTH RECEIVED HIS TESTS ON? WELL, MS. HOLMES DIDN'T FIND OUT ABOUT THIS ERRANT TEST RESULT UNTIL WEEKS AFTER IT HAPPENED. THERE'S NO EVIDENCE THAT SHE KNEW OF THIS PARTICULAR PATIENT SITUATION UNTIL WEEKS AFTER IT HAPPENED. AND BY THE TIME THAT MS. HOLMES WAS TOLD ABOUT IT, SHE WAS TOLD THE ISSUE HAD BEEN RESOLVED BECAUSE THE PSA TEST WAS NO LONGER BEING OFFERED ON THE EDISON DEVICE. THAT'S CONVEYED IN DOCUMENTS THAT YOU SEE IN THE CASE WITH THE LISTING OF DATES AFTER THE LAST DATE OF MR. ELLSWORTH'S MAY 16TH DATE, AND BY THE END OF JUNE THAT TEST WAS NO LONGER BEING OFFERED ON THE THERANOS DEVICE. LET'S TALK ABOUT THE -- MS. GOULD, WHO HAD THE SITUATION WITH THE HCG TEST. ALL INDICATIONS FROM THE RECORD HERE AGAIN ARE NOT THAT SHE DIDN'T RECEIVE ERRONEOUS RESULTS IN THIS INSTANCE.

I THINK THE RECORD INDICATES THAT THEY WERE VIEWED AS ERRONEOUS RESULTS, AND THAT THERANOS TOOK THEM AS ERRONEOUS RESULTS, AND THAT IT RESPONDED BY SUGGESTING TO HER THAT THE COMPANY HAD MADE AN ERROR AND THAT THE COMPANY APOLOGIZED FOR THAT ERROR, AND THAT IT WANTED TO TAKE STEPS WITH RESPECT TO HER AND WITH RESPECT TO HER TREATING PHYSICIANS TO BOTH ACKNOWLEDGE THAT AND TO TAKE STEPS TO CORRECT THE EFFECTS OF ANY ERROR ON HER. AGAIN, THE ALLEGATION HERE IS THAT MS. HOLMES KNEW THAT THE COMPANY COULD NOT CONSISTENTLY PROVIDE ACCURATE AND RELIABLE RESULTS. WHEN YOU HAVE A POOL OF MILLIONS OF TESTS, IT'S HARD TO SEE HOW THESE THREE INSTANCES PROVE THAT KIND OF KNOWLEDGE ON HER BEHALF WHEN, IN FACT, SHE MAY NOT HAVE KNOWN UNTIL THEY WERE RESOLVED OF TWO OF THEM, AND IN THE THIRD INSTANCE THE RESPONSE WAS TO TRY TO ADDRESS THE SITUATION. WHAT DID MS. HOLMES HEAR ABOUT PATIENT EXPERIENCES THAT YOU DIDN'T HEAR AS PART OF THE GOVERNMENT'S CASE?

WELL, WE INTRODUCED SEVERAL EXHIBITS DURING THE COURSE OF THE CASE WHICH I WOULD ENCOURAGE YOU TO LOOK AT IN WHICH SHE WAS GETTING POSITIVE FEEDBACK ABOUT WHAT THE TECHNOLOGY WAS DOING TO EVALUATE PEOPLE'S HEALTH, NOT ONLY BECAUSE THE TESTS WERE CONSIDERED ACCURATE AND RELIABLE. THERE ARE EXAMPLES OF THOSE. BUT ALSO BECAUSE CERTAIN POPULATIONS THAT DID NOT HAVE AS MUCH ACCESS TO BLOOD TESTING HAD ACCESS BECAUSE THERANOS'S METHOD OF DRAWING BLOOD WAS MORE COMFORTABLE, AS IN THIS EXHIBIT, 7623. I'M SORRY. IT'S IN EXHIBIT 7514. BUT IN EXHIBIT 7623, THIS REALLY IS A COMMENT ON ACCURACY BECAUSE THERANOS'S TECHNOLOGY ALLOWED THIS PATIENT TO RECEIVE HER TEST RESULTS VERY QUICKLY BECAUSE OF THE TRANSMISSION THROUGH SOFTWARE. AND SHE WAS ABLE TO DISCOVER AHEAD, AHEAD OF HER DOCTOR, AND UNLIKE THE EXPERIENCE THAT SHE HAD HAD WITH OTHER COMPANIES, SHE WAS ABLE TO UNDERSTAND THAT SHE HAD A SERIOUS, SERIOUS MEDICAL ISSUE. SHE WAS VERY GRATEFUL, WHICH SHE CONVEYED BACK TO THE COMPANY.

YOU'LL REMEMBER THE STANFORD PHYSICIAN IN EXHIBIT 7586A, WHO REPORTED HE WAS A PHYSICIAN AND THAT TESTS THAT HE HAD GOT FROM THERANOS WERE $25. THEY WOULD HAVE BEEN 750 ELSEWHERE. AND THAT HE, AS A PHYSICIAN, COMPARED THE RESULTS THAT HE WAS GETTING TO THE RESULTS THAT WERE BEING OFFERED BY OTHER LABS, AND THAT THEY WERE CONGRUENT. THAT'S -- THIS IS THE KIND OF INFORMATION THAT MS. HOLMES WAS RECEIVING IN REALTIME. AND SOME OF THAT FEEDBACK WAS EXTRAORDINARY. I MEAN, PEOPLE TESTIFYING ABOUT -- THROUGH EMAIL TESTIFYING ABOUT TRAVELLING LONG DISTANCES TO COME TO THERANOS TO BE TESTED BECAUSE THE PRICES MADE IT ACCESSIBLE, AND THAT VERY MUCH INFORMED HER VIEW OF WHAT THERANOS SERVICES WERE DOING FOR PEOPLE'S HEALTH.

MR. DOWNEY: I WANT YOU TO LOOK FOR A MOMENT AT EXHIBIT 2214 AND NOTE THIS COMMENT ABOUT SOMEBODY COMING ALL OF THE WAY FROM SOUTHERN CALIFORNIA TO GET THESE TESTS BECAUSE THEY WERE, THEY WERE CHEAPER IN ARIZONA THAN THEY WERE IN CALIFORNIA. AND THE COST HAD BEEN KILLING THIS PATIENT BECAUSE AS A CANCER PATIENT, THEY HAD TO GET FREQUENT TESTING AND AFFORDING IT WAS DIFFICULT. THIS IS THE LONGITUDINAL ISSUE THAT I MENTIONED YESTERDAY IN CONNECTION WITH MS. HOLMES'S STATE OF MIND. PEOPLE COULD CONTINUE TO GET THEIR BLOOD TESTED MORE FREQUENTLY SO THEY COULD GET MORE SNAPSHOTS OF THEIR HEALTH WHICH WOULD GIVE THEM MORE ACCURATE INFORMATION ABOUT WHAT WAS GOING ON WITH THEM. THIS IS WHAT MS. HOLMES WAS SEEING IN REALTIME. NOW, THERE'S ONE LAST COUNT IN CONNECTION WITH THE INDICTMENT THAT I'LL JUST MENTION VERY BRIEFLY, AND THIS IS COUNT 12 WHICH RELATED, IF YOU RECALL, TO MR. SCHENK'S DISCUSSION YESTERDAY TO THE HORIZON ENTITY, WHICH WAS AN ADVERTISING ENTITY.

MY COMMENTS ON THIS WILL BE VERY BRIEF BECAUSE YOU REALLY HAVE NO EVIDENCE RELATING TO THIS COUNT. WE DON'T KNOW -- WE DO KNOW THERE WAS A WIRE TRANSFER FROM THERANOS TO HORIZON IN CONNECTION WITH THIS. WE DON'T KNOW WHETHER THAT WIRE WAS USED TO BUY ADVERTISEMENTS, WE DON'T KNOW WHETHER ADVERTISEMENTS RAN, AND IF THEY DID, WHAT THEY SAID. WE DON'T KNOW OF ANY RELATIONSHIP BETWEEN MS. HOLMES AND THE CONTENT OF THOSE ADS. SO THE GOVERNMENT HAS REALLY PROVED NOTHING WITH RESPECT TO THIS OTHER THAN THAT THERE WAS A WIRE TRANSFER. THE OTHER WITNESS WHO TESTIFIED ABOUT THIS WAS MS. SPIVEY, THE CONTROLLER, WHO SAID SHE DID IN FACT SEND THIS WIRE AND THAT HORIZON WAS A MARKETING FIRM. THE LAST SUBSTANTIVE ISSUE I WANT TO TALK TO YOU ABOUT, LADIES AND GENTLEMEN, IS EACH SIDE'S VIEW OF WHAT MS. HOLMES'S MOTIVES WERE. YOU RECALL THAT MR. LEACH SAID TO YOU IN OPENING STATEMENT THAT THE REASON HE WOULD DEMONSTRATE TO YOU THAT MS.

HOLMES COMMITTED CRIMES WAS BECAUSE SHE FOUND HERSELF, SHORTLY BEFORE SHE RAISED MONEY FROM INVESTORS, OUT OF TIME AND OUT OF MONEY. AND MR. SCHENK BEGAN HIS REMARKS WITH THAT SAME THEME YESTERDAY. I WANT TO LOOK FIRST AT THE EVIDENCE IN SOME DETAIL, AND THEN I WANT TO COMMENT A LITTLE FURTHER ON IT. FIRST, THE GOVERNMENT'S THEORY HERE IS THAT IN 2009 MS. HOLMES RAN OUT OF MONEY, EARLY 2009. WE DON'T KNOW THE PRECISE DATE. MS. SPIVEY TESTIFIED IT WAS SOMETIME IN EARLY 2009 THAT THE COMPANY WAS RUNNING LOW ON CASH. MS. SPIVEY ALSO TESTIFIED THAT AT SOME TIME LATER IN 2009, THERANOS WAS NO LONGER LOW ON CASH, THAT THEY SECURED A LOAN FROM FIDELITY AND THAT THE COMPANY WAS FINANCIALLY STABLE. THE GOVERNMENT'S THEORY IS THAT MS. HOLMES ENGAGED WITH WALGREENS AND SAFEWAY BEGINNING IN MARCH 2010, A YEAR AFTER THIS PERIOD WHERE THE COMPANY WAS SHORT ON CASH, BECAUSE IT HAD BEEN SHORT ON CASH IN THE EARLY PART OF 2009. THERE'S JUST NO EVIDENCE TO SUPPORT THE GOVERNMENT'S THEORY THAT MS.

HOLMES WAS OUT OF MONEY IN CONNECTION WITH THIS. THE AGREEMENT WITH WALGREENS WAS NOT SIGNED UNTIL JULY OF 2010 AND PAYMENTS UNDER THAT AGREEMENT WEREN'T MADE UNTIL LATER. THAT'S LITERALLY AFTER, 15 MONTHS AFTER MR. LEACH AND MR. SCHENK TELL YOU THE COMPANY WAS DESPERATE FOR MONEY AND HAD TO GO OUT AND DECEIVE PEOPLE. THERE'S NO EVIDENCE AT ALL, NONE AT ALL, WHICH LINKS THERANOS'S EFFORTS TO ENTER INTO PARTNERSHIPS WITH WALGREENS AND SAFEWAY TO ANY DESPERATION FOR MONEY, ANY CONCERN ABOUT MONEY. WHAT DOES THE RECORD SHOW ABOUT THE PERIOD WHERE THOSE PARTNERSHIPS WERE DISCUSSED? EXACTLY THE OPPOSITE. THERANOS WENT OUT TO RAISE MONEY DURING THE HEIGHT OF ITS ACHIEVEMENT. REMEMBER THAT IT WAS IN EARLY 2010 THAT THERANOS BEGAN TO BELIEVE THAT IT HAD ACHIEVED THE TECHNOLOGICAL BREAKTHROUGH THAT IT WOULD BE ABLE TO OFFER ANY TEST ON ITS SMALL DEVICE AND TO ANALYZE ANY TEST, AND THEY WANTED TO BRING THAT TECHNOLOGY OUT TO THE PUBLIC, AND THEY TALKED TO RETAIL STORES, INCLUDING WALGREENS AND SAFEWAY, ABOUT THAT AND THEY DECIDED TO ENTER INTO THOSE PARTNERSHIPS. THAT'S THE STORY THAT WE'VE TOLD YOU. THE STORY THAT THE GOVERNMENT HAS TOLD YOU IS THAT THOSE PARTNERSHIPS WERE CREATED BECAUSE 15 MONTHS BEFORE THERE HAD BEEN A DESPERATION FOR CASH. YOU HAVE TO WEIGH WHICH OF THOSE MOTIVES SEEMS MORE PLAUSIBLE TO YOU.

MR. DOWNEY: NOW, IN 2013 THE GOVERNMENT SAYS THE CONSPIRACY WAS AGAIN REINFORCED. OF COURSE IT WAS ONGOING IN THE GOVERNMENT'S VIEW FROM 2010 TO 2013, BUT THERE WAS ADDITIONAL ACTIVITY BECAUSE THE GOVERNMENT WAS ABLE TO LOCATE A POINT IN 2013 WHEN THERANOS WAS LOW ON CASH AND INVESTMENTS WERE TAKEN IN THEREAFTER. BUT YOU KNOW THAT THAT THEORY ALSO HAS NO MERIT BECAUSE YOU KNOW WHAT ELSE WAS HAPPENING IN CONNECTION WITH THAT TIMEFRAME, WHICH IS THAT THERANOS WAS ABOUT TO ENTER INTO THE AGREEMENT WITH WALGREENS WHERE THE ROLLOUT PLAN FOR ALL OF THE STORES THAT THERANOS AND WALGREENS WERE GOING TO OFFER BLOOD TESTING SERVICES IN WAS ABOUT TO BE SIGNED. THEY HAD BEEN DISCUSSING THAT SINCE SEPTEMBER. ULTIMATELY THE C1 INVESTMENT CLOSES AT THE END OF DECEMBER 2013. THE GOVERNMENT SAYS BECAUSE SOME OF THOSE INVESTORS SENT MONEY EARLIER THAN THAT, THAT THEY WERE SOLICITED BECAUSE OF A DESPERATION FOR CASH. YOU HAVEN'T HEARD FROM ANY OF THOSE INVESTORS ON THAT WITNESS STAND. THE GOVERNMENT HAS NO IDEA.

THIS RECORD SHOWS NOTHING TO YOU ABOUT WHY THOSE TRANSACTIONS WERE ENTERED. AND WE KNOW THAT WITH REGARD TO THE WITNESSES THAT THEY DID BRING, WITH MR. EISENMAN, WITH MR. LUCAS, AND MR. TOLBERT WHO INVESTED IN THAT PERIOD, WE KNOW FROM THE RECORD THAT THERANOS -- THAT WALGREENS HAD AGREED TO AND DID MAKE A SUBSTANTIAL PAYMENT TO THERANOS AT THE SAME TIME AS THOSE INVESTMENTS. WHAT IS THE STORY AS TO WHY THERANOS SOUGHT INVESTMENTS THEN? BECAUSE THEY SIGNED THAT CONTRACT WITH WALGREENS. THEY NEEDED TO BUILD UP THE CAPACITY TO OFFER THEIR BLOOD TESTING SERVICES IN 3,000 STORES, TO TRAIN ALL OF THE PERSONNEL, TO BUILD MANUFACTURING FACILITIES, TO BUILD UNITS, TO CONTINUE WITH RESEARCH AND DEVELOPMENT, ALL OF THOSE THINGS. THAT'S WHAT THAT FUND RAISING WAS ABOUT DURING THAT TIME. YOU DECIDE WHICH OF THOSE MOTIVES MAKES MORE SENSE TO YOU IN LIGHT OF THE OVERALL RECORD OFFERED IN THIS CASE.

I ALSO SUGGESTED TO YOU WHEN WE WERE LOOKING AT THE ISSUE OF REVENUE BEFORE THAT REALLY UNDERLYING ALL OF THIS -- AND IF YOU THINK BACK TO MR. LEACH'S OPENING, AND EVEN MR. SCHENK'S REMARKS YESTERDAY, IS THE NOTION THAT THERANOS WASN'T MAKING ANY MONEY. THERE WAS NO CASH COMING IN SO THEY HAD TO CONTINUALLY RECRUIT INVESTORS. YOU KNOW FROM THE DOCUMENT THAT I SHOWED YOU EARLIER THAT'S NOT TRUE. FROM INSURERS, FROM HOSPITALS, FROM OTHER PLACES, THERANOS WAS GETTING TENS OF MILLIONS OF DOLLARS DURING THIS PERIOD BECAUSE ALL OF THOSE PARTNERS BELIEVED THAT THERANOS WOULD OFFER THESE SERVICES AND THAT THEY WOULD BE SUCCESSFUL IN TREATING PATIENTS. SO THEY WERE EAGER FOR PARTNERSHIPS WITH THERANOS AND THERANOS WAS TAKING A GOOD DEAL OF MONEY IN. NOW, I WOULD ASK YOU TO LOOK AT REALLY THE TWO STORIES THAT ARE TOLD HERE IN LIGHT OF THE DOCUMENTS THAT YOU HAVE IN FRONT OF YOU. OUR STORY IS THAT MS.

HOLMES WAS VERY DEVOTED TO HER MISSION, AND THAT SHE DID NOT, IN CONNECTION WITH HER WORK AT THERANOS, SELL ANY STOCK. THAT, LADIES AND GENTLEMEN, IS UNDISPUTED. FROM THE TIME SHE FOUNDED THIS COMPANY UNTIL THE TIME THAT THIS COMPANY COLLAPSED, SHE DID NOT SELL A SINGLE SHARE OF STOCK DESPITE REPEATED OPPORTUNITIES, ONE AFTER ANOTHER, TO SELL THAT STOCK. WHAT IS THE GOVERNMENT'S THEORY AS TO WHY SHE DID NOT SELL STOCK? I THINK WE HEARD FOR THE FIRST TIME YESTERDAY, BUT NOT IN THE EVIDENCE IN THE CASE, A THEORY, WHICH WAS THAT MS. HOLMES HELD A FORM OF STOCK THAT SHE WOULD LOSE CONTROL OVER THE COMPANY IF SHE SOLD STOCK. THERE'S NO EVIDENCE IN THE RECORD TO THAT EFFECT. NO WITNESS TESTIFIED LIKE THAT. THERE'S NO INDICATION TO YOU THAT THAT'S, THAT THAT'S CORRECT, AND THERE'S CERTAINLY NO INDICATION THAT SHE COULDN'T HAVE SOLD TENS OF MILLIONS OF DOLLARS OF STOCK WHILE LOSING CONTROL OF THE COMPANY -- WITHOUT LOSING CONTROL OF THE COMPANY.

JUST NO EVIDENCE THAT THAT'S A MOTIVE IN THE CASE. AND YOU SHOULD CONSIDER, YOU SHOULD CONSIDER THE FACT THAT THAT MOTIVE IS ARTICULATED FOR THE FIRST TIME IN THE GOVERNMENT'S SUMMATION AS TO THE GOVERNMENT'S PERSUASIVENESS WITH RESPECT TO ARTICULATING A MOTIVE FOR THESE CRIMES. NOW, I HAVE TALKED TO YOU FOR HOURS, AND I'M SURE YOU'RE READY TO BE RID OF ME, AND PROBABLY VERY FATIGUED AT THE END OF ANOTHER WEEK OF TRIAL. BUT I WANT TO SPEND ANOTHER MINUTE TALKING TO YOU ABOUT SOME CONCEPTS THAT I THINK WILL BE IMPORTANT AND HELPFUL TO YOU AS YOU UNDERTAKE YOUR DELIBERATIONS IN THIS CASE. THE FIRST CONCEPT I WANT TO TALK TO YOU ABOUT IS THE CONCEPT OF UNANIMITY.

MR. DOWNEY: WE TALKED ABOUT REASONABLE DOUBT YESTERDAY, AND I WANT YOU TO BEAR THAT IN MIND. BUT MOST THINGS THAT WE DO IN THIS COUNTRY, IMPORTANT THINGS THAT WE DECIDE IN THE INSTITUTIONS THAT WE HAVE, WE DO THOSE BY MAJORITY VOTE, AND WE ACCEPT THAT. THE SUPREME COURT DECIDES CASES FIVE TO FOUR. CONGRESS PASSES OR DOESN'T PASS LEGISLATION BY ONE VOTE SOMETIMES. THE HEALTH CARE SYSTEM IN THIS COUNTRY WAS CHANGED BY ONE VOTE. THAT HAPPENS. BUT YOU ARE IN A DIFFERENT INSTITUTION HERE. YOU ARE IN AN INSTITUTION WHERE, FOR MS. HOLMES TO BE CONVICTED OF A FELONY OFFENSE, EVERY ONE OF YOU, EVERY ONE OF YOU HAS TO BE PERSUADED BEYOND A REASONABLE DOUBT THAT SHE COMMITTED EVERY ELEMENT OF THAT OFFENSE. YOU'VE TAKEN THE OATH TO UPHOLD THAT DUTY, AND YOU'VE BEEN AN INCREDIBLY ATTENTIVE JURY, AND I KNOW THAT EVERY ONE OF YOU WILL UPHOLD THAT DUTY FOR YOURSELF AND IN YOUR DELIBERATIONS WITH OTHERS. AND I WOULD SAY TO YOU, AFTER ALL OF THE EVIDENCE THAT I HAVE DISCUSSED, AFTER ALL OF THE EVIDENCE THAT MR.

SCHENK HAS DISCUSSED WITH YOU, WITH ALL OF WHAT MR. BOSTIC WILL DISCUSS WITH YOU, AS IS APPROPRIATE, THAT YOU CAN LOOK THROUGH ALL OF THAT EVIDENCE AND YOU CAN LOOK TO THE NARRATIVE THAT EACH SIDE HAS TOLD YOU IN THIS CASE. YOU KNOW WHAT MS. HOLMES DID IN HER LIFE. YOU KNOW THAT SHE LEFT SCHOOL. SHE GAVE UP A COLLEGE EDUCATION THAT PEOPLE WOULD GIVE THEIR RIGHT ARM FOR. SHE GAVE UP HER YOUTH. SHE GAVE UP HER FRIENDS. SHE GAVE UP HER CLOSE RELATIONSHIP WITH HER FAMILY. WHY? BECAUSE SHE BELIEVED SHE WAS BUILDING A TECHNOLOGY THAT WOULD CHANGE THE WORLD. THAT'S OUR STORY. WHAT IS THE GOVERNMENT'S STORY? THE GOVERNMENT'S STORY IS THAT BEGINNING IN 2010 EVERY DAY, EVERY DAY FROM 2010 TO 2016, SHE KNEW SHE WAS COMMITTING A CRIME. SHE WAS ROBBING INVESTORS AND THAT SHE -- IN 2013 SHE BEGAN ROBBING PATIENTS. AND THEN YOU KNOW WHAT HAPPENED? ONE DAY IN MARCH OF 2016 DR. DAS WALKED INTO HER OFFICE. AND YOU HEARD ABOUT THAT. DR.

DAS SAID TO HER, I THINK THAT THERE ARE 60,000 RESULTS GENERATED ON YOUR PROPRIETARY DEVICE THAT WE HAVE TO VOID. THAT'S A TOUGH THING TO HEAR WHEN YOU'VE SPENT 11 YEARS BUILDING A TECHNOLOGY. YOU KNOW THAT. NOW WE KNOW IN THE GOVERNMENT'S NARRATIVE WHO THIS WOMAN WAS AND WHAT CRIMES SHE COMMITTED. WE KNOW THAT WHEN SHE HEARD THAT IN THE GOVERNMENT'S VIEW, SHE MUST HAVE THOUGHT THAT THERE ARE A THOUSAND CRIMES HIDDEN UNDER THE ROCKS OF THIS COMPANY, AND IT HAS NOW BEEN DISCOVERED AND I HAVE TO REACT APPROPRIATELY. YOU DON'T NEED TO KNOW WHAT AN ASSAY IS. YOU DON'T NEED TO KNOW WHAT CLIA IS. YOU KNOW FROM YOUR OWN EXPERIENCE AND FROM YOUR OWN COMMON SENSE HOW TO EVALUATE PEOPLE'S INTENT. AND YOU KNOW THAT AT THE FIRST SIGN OF TROUBLE, CROOKS CASH OUT, CRIMINALS COVER UP, AND RATS LEAVE A FLEEING SHIP. SHE DIDN'T DO ANY OF THOSE. NONE. DID SHE COVER UP? WHAT DID SHE TELL DR. DAS? TURN OVER EVERY ROCK, EVERY ROCK, UNDER WHICH THE GOVERNMENT SAYS WAS HIDDEN A THOUSAND CRIMES.

DID SHE CASH OUT? YOU KNOW THAT ALREADY. SHE DIDN'T SELL A SINGLE SHARE OF STOCK EVEN THOUGH SHE HAD THAT OPPORTUNITY FOR SIX YEARS AND FOR TWO MORE YEARS THEREAFTER. SHE DID NOT SELL A SINGLE SHARE OF STOCK. NOT A SINGLE ONE. AND DID SHE LEAVE IN THE FACE OF THAT CRITICISM AND SAY, YOU KNOW WHAT? DR. BONANNI CAN RUN THIS. SOMEBODY CAN RUN THIS. THEY CAN DO A BETTER JOB THAN I CAN. LET ME JUST TAKE MY MONEY AND I'LL GET OUT. NO. SHE STAYED. WHY? BECAUSE SHE BELIEVED IN THIS TECHNOLOGY. SHE STAYED THE WHOLE TIME, AND SHE WENT DOWN WITH THAT SHIP WHEN IT WENT DOWN. LADIES AND GENTLEMEN, THAT IS WHO THIS WOMAN IS, AND I AM ASKING YOU TO ACQUIT HER ON ALL COUNTS IN THE INDICTMENT, AND YOU DON'T NEED MORE FROM ME TO KNOW WHAT HER INTENT WAS. THANK YOU, LADIES AND GENTLEMEN.