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 Theranos And The Military (Holmes Trial Update #14) 

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Prosecutors claim that Elizabeth Holmes lied to investors about Theranos having a commercial relationship with the military.

THE TRUTH ABOUT THERANOS AND THE MILITARY (HOLMES TRIAL UPDATE #14)

INTRODUCTION

A former Theranos product manager who worked directly for Elizabeth Holmes, Daniel Edlin is the first Theranos insider the prosecution has called to testify at the trial.

Edlin was among a group of college friends of Holmes’ brother, Christian Holmes, who joined Theranos in 2011. Edlin stayed at Theranos until December 2016, almost a year after the Wall Street Journal scandal first broke. 

Edlin told the jury that he left Theranos in 2016 to go to business school but also admitted he left because “I no longer believed based on what I was seeing that the company was capable of standing behind the claims it had been making about its technology.” 

To read Prison Professors’ prior blog posts regarding Edlin’s trial testimony, click here: Holmes Trial Update #13.

DISCUSSION


Theranos made Edlin the point-person coordinating Theranos’ efforts to develop a program for the United States Department of Defense. 

For several years, he worked with military officials about deploying Theranos’ blood-testing devices. One of Theranos’ Board members, also a Holmes supporter and a Theranos investor, was former Defense Secretary Jim Mattis. 

Prosecutors allege that Elizabeth Holmes lied to investors about Theranos having a profitable relationship with the military. Prosecutors claim that Holmes exploited the budding relationship with the military to mislead investors and business partners. 

In the end, Edlin’s testimony confirmed that although Theranos tried to develop a program with the Department of Defense, the efforts never resulted in using Theranos devices on the battlefield or in treating soldiers.

Did Theranos Mislead Walgreens & Safeway?

Walgreens and Safeway executives have already testified at trial that Holmes indicated Theranos was working with the US military.  Indeed, Wade Miquelon’s recollection was quite specific. The former Walgreens Chief Financial Officer testified about what Holmes said: that the military used Theranos’ devices in evacuation helicopters in Afghanistan.

Click here for Prison Professors’ Holmes Trial Update #10 regarding Wade Miquelon’s trial testimony: Walgreens’ Holmes Trial Testimony.

But former Defense Secretary and Theranos Board member Jim Mattis testified to the contrary. He would have known if the military was ever using Theranos devices. 

To read more about Defense Secretary Mattis’ trial testimony, check out this Prison Professors’ blog post: Prison Professors Holmes Trial Update #6.

Edlin’s testimony was also very definitive: Theranos’ devices were never used in a war zone or ever sent out to the Middle East for research or clinical use.

Did Edlin ever discuss with Holmes the reasons why the military never deployed Theranos’ devices? 

Edlin testified that Holmes chalked it up to a resource allocation issue: Theranos would focus its resources on the Walgreens launch instead of the US military program.

Did Edlin ever hear Holmes say that the failure to launch the Theranos devices with the military was because of any technical limitations with Theranos’s devices? 

“She did not tell me that,” was Edlin’s answer when prosecutors asked.

Holmes & Edlin Worked Closely on Military Program

Edlin’s testimony about Theranos and the military is damaging because of how closely Edlin said he worked with Holmes on this project. He testified that he worked directly with her to support the relationships with the military and the Defense Department. The words Edlin chose to describe Holmes’ participation were that Holmes was “highly involved.”

Edlin elaborated, saying:

“I’d say any substantive communication I had with the military, I either discussed with her ahead of time … or email drafts were reviewed and approved before I sent them back out.” 

Establishing Holmes’ direct participation is critical for prosecutors. Part of the defense strategy has been — when possible — to distance Holmes from the facts on the ground, blaming her co-defendant Sunny Balwani or others (lab directors) because they were more involved than her on a daily basis. 

The Theranos & US Military Program

According to Edlin, “the end goal” for the discussions “was to start a research program that would compare Theranos’ testing to the testing available to the military at that time.”  The discussions with the military about the research program went on for “months, if not years.” 

Among other things, Theranos ended up sending three devices for assessment to a Kentucky Department of Defense facility. Edlin testified: “I recall the devices were sent, received, but then no additional action was taken.” 

Afghanistan

Edlin also described a study Theranos had agreed to do, analyzing “leftover blood samples from active-duty soldiers that had been de-identified.” Internal Theranos documents set forth protocols for sending Theranos devices to a lab at Bagram Air Field in Afghanistan. 

But Theranos never sent any devices to Bagram, and the study never happened. This is quite significant because everyone understood that the military would not be able to use Theranos’ devices without that study. 

Africa

When questioned about separate efforts to deploy Theranos devices to Africa, Edlin explained they first had to establish that Theranos’ devices could operate under the high-temperature conditions in Africa.

Theranos’ devices operated optimally at temperatures ranging between 72 degrees to 82 degrees, and there was a high probability that the devices would not operate appropriately outside that temperature range. If so, they would not have been adequate for use in the field.

Internal emails show that Theranos’ scientists tested the devices at temperatures above 100 degrees. Without those tests, the military would not consider using the devices in Africa. 

Edlin, who handled Theranos’ efforts to answer the question, testified that he asked several department heads to provide available data on how Theranos’ devices performed in different temperatures. 

Significantly, Edlin also testified that he circulated some of what he had learned to Holmes in March 2013. He relayed to Holmes that a Theranos scientist told him:

“Nope, the Edison did not have a way to cool down” and would shut down in higher temperatures.” 

Another scientist said the devices had to operate in an environment between 72 degrees and 82 degrees “or risked performance problems.”

But Daniel Young, Theranos’s top scientist, had concluded a year earlier that the Theranos device could perform at high temperatures. He wrote an email stating: “48 hours of continual testing of the reader at 110 deg F completed successfully tonight. We ran 100 protocols sequentially – so I feel very good about reliability for this deployment.”

Indeed, consistent with Young’s conclusion, other internal emails show that Theranos sent some devices to Africa. Upon receipt, Theranos’ military contact for Africa said: 

“The machine traveled well, functioned well, my only complaint is the touch screen. Very frustrating.” 

The email says he hoped to obtain full funding for the Theranos proposal. It also notes that the military had tested Theranos’ devices in Cameroon, Uganda, and South Sudan. 

Is this the basis on which Holmes began to claim to investors that the military was using Theranos’ devices? Hard to tell. 

Still, what is the bottom line, and to what extent did Holmes understand it?

After years of back-and-forth with the US military, the bottom line is that the military never put Theranos’ devices into use. Indeed, no evidence elicited at trial so far suggests that the deployment of Theranos’ devices ever became a serious possibility. 

Marketing Claims: Puffery or Fraud?

Theranos’ marketing claims in pitch materials and investor presentations are a recurring theme at the trial so far. It is no surprise that the prosecution alleges Theranos also made exaggerated or debatable claims in presentations to the US military. 

Prosecutors showed Edlin a presentation document that Theranos had prepared for the US military. According to prosecutors, the presentation is riddled with false claims.

One example is the claim that Theranos devices could run “every” blood test “available through the traditional centralized or hospital laboratory infrastructure.” Not true then, or ever, prosecutors say. Another example is the claim that Theranos devices “could process multiple samples on a given cartridge.” 

When prosecutors asked Edlin whether these statements (and others) were true, Edlin simply said that he had no reason to think those statements were untrue at the time. 

CONCLUSION

Edlin is the first insider to testify at the trial, and he may have done significant damage to the defense of Elizabeth Holmes. The upshot of his testimony about the relationship between Theranos and the US military is that it never got off the ground in the way that Holmes conveyed to investors and business partners. 

In addition, Holmes knew or should have known that Theranos’ devices faced long odds of ever being able to work on the battlefield. Jim Mattis testified earlier in the trial that Theranos’ devices did not work reliably and could not handle extreme temperatures like those in many combat zones. The military never put Theranos’ devices to use, something that Edlin also acknowledged.

Witness credibility and the weight that testimony carries will be entirely up to the jury in this case.

Follow the Prison Professors blog for regular updates on the Elizabeth Holmes ongoing criminal fraud trial. Our team at Prison Professors regularly publishes about the criminal justice system.

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.

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