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 Holmes Criminal Fraud Trial (Update #8) 

Michael Santos

Michael Santos

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Theranos lab directors are important trial witnesses as to the handling of its blood-testing technology.

LAB DIRECTORS IN NAME ONLY? HOLMES’ CRIMINAL FRAUD TRIAL (UPDATE #8)

INTRODUCTION

We continue to learn about the federal criminal justice system in the United States through the developments in the white-collar fraud trial of Elizabeth Holmes. Holmes faces federal charges of defrauding patients and investors with claims of revolutionary blood-testing technology.

*Pro-Tip: Remember to consult legal counsel for legal advice regarding any court case. Prison Professors, an Earning Freedom company, regularly helps clients locate and vet experienced white-collar defense counsel. We work alongside, not in place of defense counsel to help clients obtain better outcomes.

DISCUSSION

The prosecution continues to parade witnesses before the jury to establish the extent of Holmes’ involvement in Theranos’ misrepresentations to the public, investors, doctors, and patients because its proprietary finger-prick blood-testing technology did not work. 

For its part, the defense continues to forcefully cross-examine each and every witness, as is every criminal defendant’s constitutional right under the Sixth Amendment.

Another Lab Director Takes The Stand

After Dr. Adam Rosendorff left Theranos in late 2014 (and became a whistleblower), Theranos needed a new lab director. Since Theranos’ fortunes depended on its ability to show that it had rolled out groundbreaking technology, the role of the lab director was critical.

Holmes and Balwani filled the vacant role with Sunil Dhawan, a dermatologist who said he knew Theranos executive Sunny Balwani because he had treated him as a patient for 15 years. Looking back at Dhawan’s role now, it would appear that Holmes and Balwani looked to place a trusted doctor and friend in this critical role rather than an actual medical expert in blood-testing technology.

The Wall Street Journal reports that in November 2014, Balwani asked Dhawan to serve as temporary lab director as a favor, assuring Dhawan that he could continue with his dermatology practice or his family life. At that time, Theranos, a company then worth hundreds of millions of dollars, hired a part-time, potentially unqualified lab director?

Because Dhawan was a board-certified doctor, he met state and federal requirements to be a lab director. But he did not have the proper background or expertise. Dhawan was not board-certified in laboratory science and had no prior experience running a lab of the scale or scope of Theranos. Before getting recruited by Balwani, Dhawan knew nothing about Theranos or its blood-testing technology, and he had to use Google to get a basic idea. 

Dhawan agreed to serve as Theranos lab director in a minimal capacity. He told the jury that he visited the Theranos lab a couple of times and barely met or spoke to any lab employees, doctors, or patients in his lab director role. Dhawan said he spent maybe 5 or 10 hours performing the role from November 2014 to the summer of 2015.

Was Theranos hiring just a patsy, a figurehead, essentially renting Dhawan’s medical license as cover? 

That is undoubtedly how prosecutors will spin this. They are trying to leave the jurors with the impression that Holmes did not care to have true medical expertise in the lab. The defense will blame Balwani since this witness was his longtime dermatologist and Balwani was the COO.

By contrast, Rosendorff, the former lab director at Theranos from April 2013 until he quit in November 2014, had been much more hands-on. Indeed, as has been widely reported, Rosendorff became quite frustrated with Theranos’ management for their failure to address his concerns about the accuracy of the company’s blood-testing technology and lab practices.

State Audit

Around September 2015, Dhawan’s contact with Theranos employees increased as the company prepared for a state audit of its lab. In that regard, Dhawan was asked to sign many documents and was physically present at the lab on the day of the state inspection.

Specifically, Dhawan had to sign about 300 standard operating procedure forms. As lab director, he did not meet Holmes herself until September 2015.

After the state lab inspection, the work dwindled, and no one requested much from him. 

Cross-Examination

The theme to defend Holmes by blaming Balwani showed up during Dhawan’s cross-examination. 

Holmes’ lawyer asked Dhawan about co-defendant Balwani:

“He was running the laboratory from an operational standpoint, correct?” 

“I can’t comment on that because I was never told he was running the lab,” Dhawan answered, “but it was my assumption he was, yeah.”

To counter Dhawan’s testimony about his minimal activities as lab director, Holmes’ defense team revealed that another lab director existed alongside Dhawan, at least on paper. Lynette Sawyer, a public health doctor, also had the job title of Theranos lab director in 2014 and 2015. Sawyer’s name was added to Theranos’s lab license on Nov. 19, 2014, around the same time the company recruited Dhawan for the job.

Was Sawyer just another “lab director” in name only? 

When asked about Sawyer on cross-examination, Dhawan said he did not know about her. Critically, Dhawan did not know that Sawyer had also signed Theranos lab documents. Jurors saw other Theranos documents showing that Sawyer’s name was removed from the license in August 2015, around the time that Dhawan said he began getting asked to sign dozens of lab approvals in advance of a federal regulator audit.

On cross-examination, Holmes’ defense team also suggested that the Theranos lab employed many people full time and that it is normal for lab directors to rely on staff to help them make decisions.

CONCLUSION

Prosecutors will argue that Theranos’ lab directors after Rosendorff quit were there in name only. No qualified board-certified lab professional was put in place to monitor Theranos’ blood-testing on patients and ensure compliance with federal regulations.

Balwani, Theranos’ Chief Operating Officer, hired Dhawan to rubber-stamp lab paperwork, according to the prosecutors’ theory of the case. Although as a board-certified doctor Dhawan technically met state and federal requirements to be named lab director, he lacked the requisite medical experience to do so. 

Sunny Balwani’s trial on the same fraud charges as Holmes will take place in spring 2022. 

Holmes’ defense strategy for this witness, like for so many others, is to blame Balwani.

Prison Professors, an Earning Freedom company, works alongside (not in place of) civil and criminal defense counsel to help clients proactively navigate through investigations and prosecutions. Our team also helps clients prepare mitigation and compliance strategies.

If you have any questions or are uncertain about any of the issues discussed in this post, schedule a call with our risk mitigation team to receive additional guidance.

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