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Federal Criminal Trialtrial-daytrial-dayJohn C. BosticRobert S. LeachLance A. WadeErika CheungSo-Han SpiveydirectcrossredirectDay 6 - September 14, 2021Juror health, hardship, and outside-information issues preceded testimony about Theranos's finances and laboratory practices. So-Han Spivey addressed revenue, losses, cash, and forecasts, while Erika Cheung described ongoing validation and vitamin D quality-control failures.
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Day 6 - September 14, 2021

Juror Changes, Theranos Finances, and Laboratory Quality Controls

Judge Edward J. Davila
6Proceedings
3Pages
2Witnesses
2,311Lines
Day 6 of 51
Appearing:

Juror health, hardship, and outside-information issues preceded testimony about Theranos's finances and laboratory practices. So-Han Spivey addressed revenue, losses, cash, and forecasts, while Erika Cheung described ongoing validation and vitamin D quality-control failures.

Full day summary

Before the jury entered, the court reported that Juror No. 9 had tested negative for COVID-19 after a potential exposure. The court also addressed Juror No. 7's employment hardship and later seated Alternate Juror No. 1 as a deliberating juror. Juror No. 12 was questioned about a friend's mention of news coverage, her former KPMG employment, and her sentencing question; she said she received no case information and could remain impartial. The court then instructed the full jury not to consider punishment. It also approved immunity for anticipated witness Surekha Gangakhedkar and warned against attempted juror interference. Theranos controller So-Han Spivey testified about the company's limited revenue, mounting losses, accumulated deficits, cash reports, contracts, and stock valuations. She traced forecasts supplied to Aranca to Holmes but denied knowing the source of substantially larger figures in an investor-related projection, which the court admitted only provisionally pending further foundation. On cross-examination, Spivey distinguished cash receipts from recognized revenue, acknowledged that research and development accounted for much of the 2011–2013 operating expense, and said she lacked personal knowledge of investor meetings. On redirect, she explained that deferred revenue had not yet been earned and could be refundable depending on the contract. Erika Cheung testified that she resigned because she considered Theranos's technology inadequate for processing patient samples. She described the limited capacity of Edison devices, the unfinished 4.0 device, and validation work that remained ongoing during her employment. Cheung then described repeated vitamin D quality-control failures that prevented patient testing and said two of six data points were removed so the control would pass. The court admitted the related Exhibit 1287; broader disputes over laboratory emails, including Exhibit 1289, remained unresolved and were deferred for further argument.

1. Juror Issues and Witness Immunity Ruling

Before testimony resumed, the court addressed juror health, hardship, outside contacts, and a disclosure inquiry; approved immunity for Surekha Gangakhedkar; seated an alternate in Juror No. 7's place; and reminded the jury to avoid outside information.

Procedural
Court Opening, Appearances, and Juror No. 9 Health Update

The court resumed trial after reporting that Juror No. 9 received two negative COVID-19 test results.

Procedural
Juror No. 7 Hardship Excusal and Substitution

The court stated an inclination to excuse Juror No. 7 for financial hardship, and both sides said they had no objection.

Procedural
Witness Immunity Application and Ruling

The court approved the government's immunity application for Surekha Gangakhedkar after prosecutors said her counsel indicated she would invoke the Fifth Amendment and the defense took no position.

Procedural
Potential Juror Contact and Tampering Warning

The court warned against juror interference after receiving a report that a spectator had called out to jurors waiting for security.

Procedural
Juror No. 12 Disclosure Inquiry

Juror No. 12 denied receiving case information from an indirect media contact or through KPMG connections and affirmed impartiality after the court clarified that the jury would not consider sentencing or punishment.

Procedural
Juror Substitution and Outside-Information Inquiry

Alternate Juror No. 1, Mr. Bednar, replaced the excused Juror No. 7, and no juror reported learning or sharing outside case information.

Highlights

2. So-Han Spivey — Direct/Cross/Redirect (Continued)

Judge Davila instructed jurors not to consider punishment, after which So-Han Spivey completed direct, cross, and redirect testimony about Theranos's finances, revenue recognition, contracts, and forecasts. Spivey was excused, and the government called Erika Cheung.

Jury Instruction
Jury Instruction on Punishment

Judge Davila instructed jurors that punishment was for the court to decide and could not factor into whether the government proved its case beyond a reasonable doubt.

Direct
So-Han SpiveyRobert S. Leach
782 lines

Theranos's former controller traced the company's revenue, losses, cash position, contracts, and Aranca valuation forecasts, while disclaiming knowledge of a separate investor projection document admitted only provisionally.

Cross
So-Han SpiveyLance A. Wade
702 lines

Spivey distinguished cash from recognized revenue, described large deferred customer receipts and heavy R&D spending, attributed one 409A estimate to Balwani, and limited her knowledge of investor projections and KPMG's stock-option review.

Redirect
So-Han SpiveyRobert S. Leach
85 lines

Spivey clarified that deferred revenue was unearned and potentially refundable, tied 2009 cash receipts to operating expenses, and confirmed that Aranca assigned no weight to the C-2 financing approach in its stock-option valuation.

Highlights

3. Erika Cheung — Direct

Erika Cheung described Theranos's testing systems and validation problems, followed by an evidentiary hearing and resumed testimony about a vitamin D quality-control failure.

Direct
Erika CheungJohn C. Bostic
338 lines

Erika Cheung described Edison limitations, Theranos's reliance on third-party analyzers and outsourced testing, ongoing assay validation, and discrepancies she observed in her own vitamin D results.

Procedural
Email Exhibit Admissibility Hearing
73 lines

Defense challenged Theranos email exhibits on hearsay, foundation, and relevance grounds; the court allowed foundation for Exhibits 1287 and 1289 and deferred the remaining dispute.

Direct
Erika CheungJohn C. Bostic
165 lines

Cheung described repeated vitamin D QC failures, an attempted fallback to a conventional analyzer, and manual removal of two data points to obtain a passing result; Exhibit 1287 was admitted, while Exhibit 1289 remained disputed.

Highlights

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