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 Top 3 Insider Revelations At Holmes’ Trial #13 

Michael Santos

Michael Santos

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Former project manager Daniel Edlin worked closely with Elizabeth Holmes and testified about Theranos’ shortcuts and deception at her trial.

INSIDER TAKES THE STAND AT HOLMES TRIAL: TOP 3 REVELATIONS (UPDATE #13)

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.” 

DISCUSSION

Over time, Edlin’s role was that of a de facto chief of staff for Holmes. He reported directly to Holmes for several years and was in daily contact with her. Essentially, Edlin had a front-row seat.

At Theranos, Edlin worked with current and potential business partners and helped implement the relationship with Walgreens. He also worked extensively on Theranos’ efforts to develop a program for the US military, although those efforts never led to military use of Theranos technology.

Finally, Holmes trusted Edlin to handle important VIP tours of Theranos’ headquarters, including tours for potential investors and business partners. 

Theranos VIP And Media Tours

At the heart of Holmes’ criminal case are the allegations that she knowingly misled patients, doctors, and investors, by claiming that Theranos’ technology could accurately test for a range of conditions using just a few drops of blood taken by finger stick.

Edlin’s testimony suggests the company may have tried to give high-profile visitors the impression that everything was copacetic.

Edlin testified that when important guests came to tour the company’s office, they modified the facility to present a more curated image of the company and technology to VIP guests. 

For example, Edlin said that Holmes often asked him to make changes ahead of tours of the Theranos headquarters, including hiding certain areas of its research and development lab from important visitors. Edlin testified that they sometimes used partitions to conceal areas housing specific Theranos devices.

miniLab Displays & Partitions

On one occasion in 2013, Edlin helped set up a display of about 10 to 15 Theranos “miniLab” blood analyzers in a room adjacent to the clinical lab ahead of a tour so that visitors could see them. After the tour ended, Theranos employees took down the display. 

Edlin later learned that the miniLabs, one of Theranos’ highly touted proprietary devices, were never used to test actual patients.  

Those VIP tour displays of miniLabs? Purely optics.

Edlin told the jury that partitions hid some areas of the clinical labs during visitor tours. Edlin usually followed a set route through headquarters to avoid certain areas during VIP tours, and he discussed the tour routes with Holmes in advance.

What about the clinical lab, where patient samples were actually processed? 

Edlin did not recall ever giving a tour of the clinical lab itself.

Although Edlin did not say this himself, prosecutors will argue that the partitions and tour routes served to hide the third-party commercial blood analyzers in the clinical lab. As the Wall Street Journal revealed in October 2015, Theranos was misleading investors about its technology. The reality was that Theranos did not rely on its own devices for most of the tests performed at the clinical lab, and it used its own devices in only a fraction of actual patient tests. 

Smoking Gun?

In what many reporters consider “smoking gun” testimony, Edlin disclosed the practice of hiding errors on Theranos devices from visitors. Edlin described software that Theranos employees installed on its blood-testing machines to make the device appear to be working even if an error had occurred. They knew that the Theranos devices could malfunction and sometimes produced inconsistent results during demonstrations.

 For this reason, if a visitor underwent a blood test during a tour demonstration, Theranos installed software to hide any potential errors to allow Theranos scientists to interpret the results before sharing them. At the time, Edlin did not think of this as deceptive but rather a regular part of their process. Their purpose was simply to allow lab experts a chance to validate the results before sharing them with the visitor.

In a series of emails sent in August 2013 between Edlin and other Theranos employees about an upcoming demonstration, Edlin wrote:

“Most likely, we will collect a number of samples and store them in the shipping container like the last meeting we had, and then process them separately in the lab.” 

A software developer added that the devices used for the demos should also include something called the “demo app,” which “shields protocol failures from the client.”

“Does that mean that even if an error prevented the machine from returning a result, it would appear to still be working?” a prosecutor asked Edlin in front of the jury.

“Right,” Edlin responded.

No Intent to Deceive

When asked if he was trying to deceive anyone when showing visitors Theranos’ technology, Edlin replied, “Of course not.”

Edlin denied any intent to deceive in Theranos’ effort to make test results look normal when demonstrations of Theranos’ technology did not go as planned. He said he relied on Theranos’s lead scientist, Daniel Young, for information about Theranos’ technology. 

“In carrying out your duties from the time that you started at Theranos until late 2015, you never took a step on behalf of the company where you thought you were deceiving someone, correct?” Edlin was asked.

“Correct,” Edlin replied. 

Just Change the Reference Range

Jurors also saw a series of emails from June 2013 discussing a lab test demonstration in New York. Specifically, the lab tests were run in New York and repeated at Theranos’ California lab. However, the two tests came up with different results.

“The discrepancy will be a problem. We need to see if we can correct for it,” Holmes wrote in an email to her staff.

In response, Young asked Edlin to change the reference ranges on the two results. The reference range is the benchmark against which patients can know if their lab results on a given test are higher or lower than average. By changing the reference range, what was going to be a low result would become a normal-looking blood-test result. 

Edlin agreed: “That would be the outcome of this change,” adding that he could not speak to Young’s intent in asking him to change the reference ranges.

Defense Damage Control

After Edlin testified that during media and investor demonstrations of the Theranos devices, staff would actually run the blood tests in a lab, not on the devices, Holmes’ defense team went on damage control.

On cross-examination, defense counsel gave Edlin a chance to explain that Theranos often ran those demos just to show the device’s graphical user interface, not to generate an accurate blood test result. If the purpose was to show visitors how the hardware worked, the defense could argue that they did not intend to deceive. 

In addition, defense counsel established that Edlin had no intent to deceive anyone as he performed his job duties at Theranos. 

Against all of the evidence prosecutors elicited from Edlin, it is not clear how much comfort Holmes can take from the cross-examination.

Top 3 Revelations

Edlin’s testimony revealed more than three notable facts, and in our next blog post, Edlin’s revelations about Theranos’ relationship with the Department of Defense. 

As far as VIP tours at headquarters and demonstrations of the Theranos technology, our top three are: 

1-Holmes and others instructed Edlin to follow specific tour routes with investors, media, and other VIPs; 

2-Holmes and others instructed Edlin to partition off certain areas of the lab space (where non-Theranos devices were in use); and 

3-Holmes and others instructed Edlin to use the “demo app” devices that Theranos rigged with software to hide malfunction and error messages.

CONCLUSION

Edlin was the first insider to testify at the trial, and he may have done significant damage to the defense. 

It goes to the core of the fraud case against Holmes and Balwani that during demos for Theranos investors, they ran apps that blocked error messages from appearing. Also, in some cases, instead of tests happening in front of visitors, blood samples were taken elsewhere for analysis. Edlin revealed that Holmes herself and Daniel Young, a Theranos lead scientist and vice president, played critical roles in what ultimately happened during demos for visitors and investors.

Follow the Prison Professors blog for regular updates about the Elizabeth Holmes trial and 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.

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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