Investor says Holmes mislead on tech’s use

DeVos family was told products used on military, rep says

In another bruising day for Theranos founder Elizabeth Holmes in her criminal fraud trial, an investment manager for the family of former U.S. Secretary of Education Betsy DeVos testified Tuesday that Holmes’ claims were key to the family’s decision to invest $100 million in the firm.

Lisa Peterson testified in U.S. District Court in San Jose that Holmes, while courting the DeVos family as potential investors, claimed Theranos’ technology was in use “on military helicopters.” Federal prosecutors allege Holmes falsely claimed her company’s technology was being used on U.S. military choppers.

The jury heard earlier from former Theranos product manager Daniel Edlin that although Theranos had worked with the Pentagon to try to get Theranos’ technology into battlefield use, he was not aware of it being used clinically on soldiers in war zones, or on military aircraft.

Holmes’ lawyer, during cross-examination later, sought to cast doubt on Peterson’s claim that Holmes told her about military helicopter use, suggesting that a Fortune magazine articles he had read, which referred to possible future deployment of Theranos machines on med-evac choppers, may have been the source of her claim, rather than conversations with Holmes.

Peterson’s testimony also added weight to damning testimony last week that Theranos had put out its own rosy report on its technology with the Theranos logo and the logo of drug giant Pfizer, but that Pfizer had not authorized use of its logo and had dismissed Theranos’ technology and Holmes’ claims about it.

That double-logo report, touting the “superior performance” and “excellent” accuracy of Theranos’ machines, was sent by Theranos to the DeVos family and led Peterson to conclude that Pfizer had prepared the report, she testified.

“It validated everything (Holmes) was telling us,” Peterson said in court.

“Pfizer is a large reputable pharmaceutical company that we thought had used the analyzer and had seen that the results were accurate.”

The DeVos family, through their RDV Corporation, ultimately invested a sum double what they had been considering before visiting the company’s headquarters in Palo Alto, Peterson testified. After the family members — Betsy DeVos was not present for the visit — were told during the visit about other investors putting in $100 million, senior members of the family’s investment committee decided to match that amount, Peterson testified.

Holmes, a Stanford University dropout who founded Theranos in 2003 at age 19, is accused of bilking investors out of hundreds of millions of dollars and misleading patients and doctors with false claims that Theranos’ machines could conduct a full range of tests using only a few drops of blood from a finger-stick. She is charged with a dozen felony fraud charges and has pleaded not guilty. She faces up to 20 years in prison if convicted.

Peterson testified about a number of claims by Holmes that represent additional key elements in the prosecution’s central allegation that she deliberately defrauded investors. Holmes told Peterson that Theranos used its own analyzer equipment, and that its machines were portable and could accurately conduct hundreds of tests using only a tiny amount of blood from a finger-stick.

Prosecutors allege that the company’s machines could never conduct more than a handful of tests and that Holmes was aware of the deception. The jury has seen a considerable amount of evidence indicating Theranos devices had accuracy problems, that it had been using third-party machines for tests its own devices could not perform, and that it was often using blood drawn with needles from veins rather than via a finger-stick.

“We asked questions and we got answers that we were satisfied with, that were different than what came out later,” Peterson testified.

Holmes, while seeking the DeVos family’s funding, was targeting five or six families as potential investors, because the company wanted to move faster than would be possible with private equity or institutional financing, Peterson testified. The Walton family, which owns Walmart, also invested, jurors heard Tuesday.

Under cross-examination by Holmes lawyer Lance Wade, Peterson acknowledged that the CEO of the DeVos family firm, Jerry Tubergen, was an expert on investments. Peterson also said she could not confirm that the DeVos family read her memos about Theranos, but testified that she had discussed the memos’ contents with them repeatedly.

Wade also told the court that Theranos’ website had made reference to drawing blood from veins at times, and that when drugstore chain Walgreens announced a partnership with Theranos, it said venous draws might be required.

Peterson also agreed with Wade that nothing would have prevented the DeVos family, before making their investment, from bringing in an expert to evaluate Theranos’ technology. “We didn’t think we needed to,” Peterson testified. “We were relying on what we were told by (Theranos). They were telling us that it worked.”