The Washington Post

Theranos whistleblo­wer takes stand again in Holmes trial

Former employee says she was concerned about reliabilit­y of company’s blood-testing technology

- BY RACHEL LERMAN rachel.lerman@washpost.com

SAN JOSE — In testimony here Wednesday, a Theranos whistleblo­wer described how she grew concerned that the company’s technology was not reliable enough to be using on patients during a landmark trial regarding the blood-testing start-up’s former CEO Elizabeth Holmes.

Erika Cheung, a former lab worker, said she grew concerned about tests on the company’s mini blood-lab machine not passing quality-control checks in the research lab. Theranos would regularly throw out two data points, called “outliers,” to try to get tests to pass quality checks, she said. Choosing the outliers was like “cherry-picking,” she said, and there weren’t rules about which data points to choose.

This gave her pause about how it could affect patients.

“It was very concerning in a research context because once that translates to a patient setting, it’s giving you a good indication that the system isn’t working reliably enough to feel confident and comfortabl­e in running patient samples,” she said.

Holmes, who founded the company as a 19-year-old in 2003, has pleaded not guilty.

Holmes is on trial in federal court for 12 charges of wire fraud and conspiracy to commit wire fraud. The government alleges she misled investors and patients about the capabiliti­es of her company’s blood-testing technology and about the financial health of the start-up. Theranos collapsed in 2018, years after media investigat­ions raised concerns about the company’s operations.

Prosecutor­s outlined in their opening statement last week that they are seeking to prove intent to commit fraud and deceive investors on the part of the founder. The defense said she made mistakes but did not commit fraud.

Holmes arrived wearing a dark green dress and a matching green mask, hand-in-hand with her mother, Noel Holmes, for her third day of trial Wednesday.

Both the prosecutio­n and defense questioned Cheung, who is expected to continue testifying Friday when the trial resumes.

Cheung said quality-control checks were failing on the Theranos-built Edison machines much more often than on traditiona­l lab machines made by third-party companies. Cheung eventually brought her concerns to Ramesh “Sunny” Balwani, the company’s president.

“The feedback and reception that I got from him was essentiall­y, ‘What makes you think you’re qualified to make these calls?’ ” she said.

Balwani is charged with the same counts as Holmes and will be tried in a separate trial next year. He has pleaded not guilty.

Cheung said she also brought her concerns to former secretary of state George Shultz, a Theranos board member at the time.

“It was starting to get very uncomforta­ble and very stressful for me working at the company, and I was attempting to tell as many people as I could, but it was not, just not seeming to get through to people,” she said.

She left the company and said she received a letter from Theranos’s lawyers, saying they had reason to believe she had shared confidenti­al company informatio­n. Cheung said she had started talking to an investigat­ive journalist at the Wall Street Journal.

“To me it seemed kind of as a final resort to get the truth out about what was happening with these patient samples,” she said.

The Journal published an investigat­ion into Theranos in 2015, raising concerns about the ability of the company’s technology.

Cheung also said during her testimony that she reported an official complaint to the Centers for Medicare and Medicaid Services, which oversees clinical labs.

Defense attorney Lance Wade took Cheung through the makeup of different teams that worked in the lab, and the many steps of the process to develop and validate blood tests before they could be used.

Cheung confirmed that she was relatively low-level on the team (Theranos was her first job after college), and that she was qualified to do basic operations in the lab. Wade pointed to the many people on the lab teams that had advanced degrees.

Wade directed Cheung to various documents, including validation reports for blood tests that showed signatures from lab leaders. The documents also noted that obvious outliers were excluded from some averages.

 ?? DAVID ODISHO/BLOOMBERG NEWS ?? Theranos founder Elizabeth Holmes, 37, and her husband, Billy Evans, leave the federal court in San Jose last week.
DAVID ODISHO/BLOOMBERG NEWS Theranos founder Elizabeth Holmes, 37, and her husband, Billy Evans, leave the federal court in San Jose last week.

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