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 Investor Records Call With Holmes (Trial Update #18) 

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Michael Santos

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Theranos investor records call with Elizabeth Holmes in 2013, captures misrepresentations in her own words.


It remains to be seen whether Elizabeth Holmes will testify on her own behalf at her criminal fraud trial. But the jury has already heard from her. Prosecutors have played for the jury clips of interviews Holmes gave television media in 2015 and 2016. Moreover, the jury also heard a recording of Holmes talking about her blood-testing startup in an investor conference call in 2013.


During the trial testimony of investor Brian Tolbert, jurors heard the Theranos founder and Chief Executive Officer pitching for private capital. Unbeknownst to her, an investor on that call made a recording. 

Was it Legal for Tolbert to Record Investor Call?

Let’s take a brief detour into the laws that apply to recording telephone and in-person conversations. 

The Federal Wiretap Act

Congress enacted the federal Wiretap Act as part of the Omnibus Crime Control and Safe Streets Act of 1968 (18 US Code § 2510).

Under the federal Wiretap Act, it is illegal for any person to secretly record an oral, telephonic, or electronic communication when other parties to the communication have a reasonable expectation of privacy unless:

  • one person to the conversation consents to the recording, or 
  • the person making the secret recording is authorized by law to do so.

 18 US Code § 2511.

Thus, federal law allows recording telephone and in-person conversations with the consent of at least one of the parties. This law is called a one-party consent law. Under one-party consent laws, any party to the conversation can record the phone call or conversation.

States’ Recording Laws

States also have specific laws governing the secret recording of oral, telephonic, and other electronic communications. Courts will look to the law of the state in which someone makes a recording to determine if the recording was proper, and courts may also look at the parties’ expectations of privacy. 

Many states are even more restrictive than the federal Wiretap Act, and no person may record a private communication without the consent of every party to that communication. In practical terms, those states prohibit all covert recordings other than when law enforcement gets a warrant to do so.

Criminal Penalties

The consequences for violating federal or state recording laws can include fines and/or prison time.

Under 18 US Code § 2511, someone who violates the federal Wiretap Act faces a possible sentence of up to five years in prison and a fine of $500.

Each state imposes some criminal penalty on those who violate secret recording laws. For example, under California Penal Code § 631, a person violating California’s law faces a possible misdemeanor conviction, a one-year prison sentence, and a $2,500 fine.


Tolbert’s Recording Was Legal

Tolbert was in Texas when he recorded Holmes on the 2013 investor pitch. Like the federal Wiretap Act, Texas has a one-party consent law. As such, Tolbert’s recording did not violate federal or state recording laws, and no one argues that there was any reasonable expectation of privacy involved in that call.

Since the federal Wiretap Act and Texas law both allow secret taping as long as the party making the recording consents, Tolbert’s recording did not violate the law. Had Tolbert made that recording illegally, Holmes’ team could have objected to the prosecution’s playing the recording for the jury.

Holmes’ Statements on 2013 Investor Call

Tolbert had already invested $2 million in Theranos before the 2013 investor call with Holmes. He testified that Holmes was so convincing on that call that he decided to invest another $5 million. In addition, Tolbert said that Holmes created a sense of urgency on that call, telling investors that the window of opportunity to invest in Theranos was closing.

“There was a limited amount of time to react and make an investment decision,” Tolbert told jurors. 

On the recording, Holmes confidently describes Theranos’ blood testing technology as superior to other methods, which was untrue. 

In her own words, Holmes told investors that Theranos’ blood tests were highly accurate: 

“In this framework that we’ve created, we’ve built the opportunity for people to be able to do their tests in a whole new way. Being able to get access to this laboratory data which is incredibly powerful information that drives so much of clinical decision making. We don’t have the variability that is associated with traditional laboratory testing. We have built this out in such a way in which we have a less than 5 percent variance on our tests. This is a richness of data for the physician community.” 

She also touted Theranos’ work with Pfizer, the US military, and, of course, Walgreens. Holmes highly exaggerated claims that Theranos was “working” with Pfizer or the US military. 

Theranos was working with Walgreens, and Walgreens allowed Theranos to create a “national footprint as fast as we can,” Holmes told investors. 

About the Walgreens partnership, Holmes told investors in 2013:

“We launched our retail infrastructure. We are operating now in California and Arizona. We have opened our first stores and have patients coming in live every day. We are working to expand that as fast as possible. The speed with which we expand is critical in the context of capturing the market opportunity that we created. And we are putting a lot of resources into establishing a national footprint as fast as we can.”

“We are already creating significant value, and, of course, we’re just getting started,” Holmes said. 

Holmes told the investors how the company’s value increased from $20 million in 2006 to $7 billion by 2013, based on the value of privately held shares. Holmes also focused on how the company’s share price had gone from 82 cents in a funding round years earlier to $75 in 2013.

How Damaging Is Tolbert’s Testimony?

As a smaller investor, Tolbert is an essential witness for the prosecution. Some jurors might have little sympathy for large $100 million investors, believing they should have known better. 

But even those jurors might more readily relate to the plight of a smaller investor like Tolbert, who was without vast resources to double-check everything Theranos claimed in its investor pitches. 

An investor like Tolbert is more sympathetic and more reliant on Theranos’ representations when making an investment decision.

Experts believe Tolbert’s recording is highly damaging to Holmes’ defense. 

Contrary to what jurors hear Holmes saying to investors on that 2013 recorded call, the truth was otherwise:

  • Whistleblowers have testified that Theranos’ device was inaccurate and unreliable.
  • Sunny Balwani, Holmes’ deputy and Theranos Chief Operating Officer, texted Holmes that the blood lab was a “disaster zone.” Still, Holmes continued opening Walgreens wellness centers and pitching wealthy investors to pour additional millions of dollars into Theranos.
  • While Holmes told investors that Theranos was worth more than $7 billion, jurors have heard that Theranos had net losses of $11 million in 2009, $16 million in 2010, and $27 million in 2011. These losses could perhaps suffice to show Holmes’ reasons to defraud investors.
  • Holmes also told investors that Theranos would generate $140 million in revenue in 2014 without disclosing that Theranos had no revenues in 2012 and 2013. 


Holmes’ lawyers have not confirmed whether Holmes will testify during the trial. If convicted on charges that she deceived investors, she could face up to 20 years in prison. 

Holmes has probably not yet decided whether to testify. But she may feel the pressure to testify and try to reconcile the statements she made on the 21013 investor call Bryan Tolbert recorded.

Holmes’ attorneys continue to defend her as a naive and young CEO who worked hard but highly underestimated business obstacles. Still, they say, business failure is not a crime.

Follow the Prison Professors blog for regular updates on the Elizabeth Holmes criminal fraud trial.

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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