SAN JOSE, Calif. (KRON) — Former Theranos employees who worked in a blood lab once described as a “disaster zone” testified this week about major technology flaws.
For Ramesh “Sunny” Balwani’s federal fraud trial, a former lab director who reported directly to Balwani testified that he felt “upset and concerned” by how frequently Theranos blood testing machines failed quality control checks.
While CEO Elizabeth Holmes wooed wealthy investors with promises of revolutionizing healthcare, Balwani was in charge of the blood lab, according to prosecutors.
Prosecutors charged Balwani with 12 counts of fraud and conspiracy for crimes he allegedly committed while he was Holmes’ secret boyfriend and COO of her company.
Holmes was convicted by a jury in January on four counts of defrauding investors. Prosecutors said Balwani was Holmes’ co-conspirator for carrying out the biggest scandal in Silicon Valley’s history.
Two witnesses have testified so far at Balwani’s trial: Erika Cheung, a whistleblower and former Theranos blood lab tech, and Mark Pandori, one of the lab’s former directors.
Prosecutors peppered Cheung and Pandori with questions aimed at illustrating how inaccurate Theranos’ machines, named Edisons, really were.
Pandori testified that, for some blood tests, knowing whether an Edison machine would deliver accurate results for patients was like “flipping a coin.”
“With a 51 percent failure rate, that’s like flipping a coin,” Pandori testified about TTA test results from Edisons.
Vitamin D tests had 18% failure rates, TT4 23%, FT4 20%, PSA 29%, and TST 45% in March of 2014.
Assistant United States Attorney John Bostic asked Pandori, “Were you concerned about the accuracy of results going out to patients?”
“Yes. When you are working in a place like Theranos, you’re developing something new. And you want it to work. Quality control remained a problem for the duration of my time at the company. There was never a solution to poor performance,” Pandori testified.
Pandori said he left the company for many reasons, including a lack of solutions.
Holmes attracted investors, called “VIPs” by hosting demos and running blood tests on the investors themselves.
Balwani’s team “always applied a higher level of pressure” to process blood tests for “VIPs” as rapidly as possible, placing their tests before all other patients, Pandori testified.
“As lab director, did you agree with that practice?” Bostic asked Pandori.
“No. It misrepresents the true process. It wouldn’t accurately reflect turn-around time. And it’s a spiritual problem. because you are trying to get a lab result for one human being before another human being, just because they are a potential investor,” Pandori testified.
Prosecutors said Holmes and Balwani were aware of technology failures in the lab, but they pushed forward with accepting patients through Walgreens anyway because their company was running out of money.
During Holmes’ trial, prosecutors showed private text messages Balwani wrote to Holmes.
“Normandy lab is a f***ing disaster zone,” Balwani texted Holmes on Nov. 28, 2014.
They also continued claiming that Theranos’ new micro technology put an entire blood lab into one little box, and could run any test from just a few drops of blood, prosecutors said.
In opening statements, Balwani’s defense team blamed Holmes for what went wrong.
Defense Attorney Stephen Cazares told the jury, “Sunny did not start Theranos, he did not control Theranos, he did not have final decision making authorities.”
“Sunny never made a dime from Theranos. Sunny committed no crime, no fraud, and never intended to deceive or cheat anybody. Not investors, and not patients,” Cazares said.
Cheung left Theranos and reported problems she witnessed to a Wall Street Journal reporter, as well as state regulators. The company’s attorneys threatened Cheung with a lawsuit for leaking “trade secrets,” she said.
Bostic asked Cheung, “Why did you decide to reveal information about what you saw at Theranos to authorities?”
Balwani’s defense attorney objected to the question.
Bostic told judge Edward Davila, “She is entitled to explain why she did what she did.”
Judge Davila overruled the objection and allowed Cheung to answer.
She said, “Theranos had gone to extreme lengths to (cover up) what was happening in the lab. It was important to report the truth. I felt that despite the risk, and I knew there could be consequences, people really need to see the truth of what was happening behind closed doors.”
Cheung testified as a star witness for prosecutors at both Holmes’ highly-publicized trial and at Balwani’s trial this week.
When the judge told Cheung that she could step down from witness stand, she threw her head back and let out a deep sigh of relief.
Testimony from a new witness will begin at 9 a.m. Friday.
Holmes testified at her own trial in self defense for several days. Her name is included on a long list of potential witnesses who may be called on for Balwani’s trial.
Balwani faces up to 20 years in prison if convicted. Holmes will be sentenced in September and also faces a maximum of 20 years behind bars.