What Elizabeth Holmes didn’t say is as important as what she did say

The Theranos founder’s silence spoke loudly in the courtroom.

Theranos founder Elizabeth Holmes

Theranos founder and former CEO Elizabeth Holmes arrives for her trial in San Jose Tuesday.

Photo: Justin Sullivan/Getty Images

Theranos investor Brian Grossman explicitly asked Theranos if there were other operating expenses his firm, PFM, needed to take into account. At no point did Theranos ever mention that it had purchased and was using third-party machines.

“You never told PFM that Theranos was using third-party machines?” prosecutor Robert Leach asked.

“Correct,” former Theranos CEO Elizabeth Holmes said.

During its cross-examination on Tuesday, the government pointed out times Holmes could have disclosed the whole truth to investors, but chose not to. As CEO of the blood-testing startup, Holmes was known for mesmerizing audiences with her passionate pitches for revolutionizing health care. But as the months-long fraud trial of the former Theranos CEO drew near its end with the defendant on the stand, the case against her appeared to hinge as much on when she held her tongue as when she spoke.

She didn’t bother to correct the record when Fortune published a cover story on Theranos, despite knowing there were multiple inaccuracies. The story said Theranos did not buy analyzers from third parties (it did) and that the lab’s footprint was smaller as a result (it wasn’t). But rather than seek to correct or clarify the article, Holmes distributed it to Theranos shareholders and touted it as a testament to the company’s success.

“At the time you were not worried people would be given an inaccurate impression?” Leach asked.

“I was not,” Holmes said.

Holmes also denied trying to hide from investors that Theranos used venous draws for tests, but an email showed Theranos employees coming up with back-up plans in case potential investors from BDT stopped by the Walgreens lab.

Her brother, Christian Holmes, wrote that the “assumption” from Holmes was that they must not draw blood venously, and that the potential investors couldn’t be told if their order prompted a venous draw. If the order did require more than a fingerprick, one proposed scenario instructed the lab not to run the full tests, and if the investors noticed in the receipt that orders were missing, Theranos would instruct a customer service employee manning the help line to say everything was fine and then tell a technician to come out and “distract” the investor from reading the receipt.

Holmes said she wanted to impress the investors. BDT ended up not investing.

At other times, Holmes’ testimony directly contradicted the investors who had testified before her, as she denied ever telling investors that Theranos was used on medevacs.

In a series of repetitive questions, Leach asked Holmes if Theranos had ever had its devices on military helicopters (no), in Iraq (no), in Afghanistan (no), in the Middle East (no) or on the battlefield in combat zones (also no). She said she knew that telling investors these things would be wrong since they weren’t true and didn’t think she had mentioned it, but investors, from commercial partners like Safeway to the DeVos family office, had all testified that Holmes and the company had said that the devices were being used by the military and on medevacs.

Holmes’ defense, so far, has been to treat the modified third-party devices as trade secrets that helped make the company valuable, which is why they were not disclosed.

She’s also pointed the finger at Sunny Balwani, Theranos’ former president and her ex-boyfriend, who faces his own fraud trial beginning in January. He was directly in charge of the lab and led her to believe that the Theranos lab was “excellent,” telling her it was “one of the best labs in the world,” she said. She also blamed Theranos’ financial projections on Balwani, after the jury saw two different projections for 2015 — one the showed expected revenue as $113 million and another that showed it at $990 million.

Holmes’ testimony capped her sixth day on the stand as her fraud trial, which began in September, nears a close. Her testimony is likely to end on Wednesday, and both sides could call additional witnesses. Holmes currently faces 11 charges of fraud and conspiracy to commit fraud.


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