Theranos Trial: United States vs. Elizabeth Holmes, Days 19 and 20 (The Thrill is Gone)

I've lost interest in the trial. Other than a possible appearance by Stanley Druckenmiller, the rest appears predictable: will the jury follow the law, or will emotion overwhelm judgment? Another lab director testified, this one Sunny Balwani's former dermatologist. Ars Technica's headline says it all: "Theranos' second lab director got 5K a month to rubber-stamp forms." Daniel Edlin--former Theranos employee and friend of Elizabeth Holmes' brother--then disclosed a "demo" feature, one that "shields protocol failures from the client." Though the "demo" mode was featured at one or more product demonstrations, using it is common practice if a product is in development.

Setting aside insinuations and theatrics, the Walgreens contract Elizabeth Holmes signed--which clearly didn't contemplate third-party devices like the Advia 1800--means sympathy is her most persuasive tool. Not being fond of self-congratulatory testimony--which I'm sure will involve Theranos' patents--nor mudfests, I'll be sitting out coming weeks.

Email from Elizabeth Holmes, June 1, 2013: "The discrepancy will be a problem. We need to see if we can correct for it."

Elizabeth Holmes' imitation of Apple Inc.'s Steve Jobs may have been an attempt at fourth-wave feminism, but the latest Apple Watch reveals more intersectionality than the same marketing firm. My friend, who works on the Apple Watch, responded to my criticism of the Watch by explaining it wasn't meant to be a mini-version of the iPhone. The Watch's utility revolves around real-time and transferable health data, including from... you guessed it: blood. Later, I understood how the iPhone intended to become a health device when I tried adding "standing time" to one of my apps, only to realize it required pairing with the Apple Watch. Other available features from the Watch include blood alcohol content, blood glucose, Vitamin D, blood pressure, and blood oxygen--all items the Theranos analyzer wanted to test in 30 minutes or less at your local grocery store or pharmacy. It all became clear to me in that minute. Feeling down or not quite right? Blood might explain why better than a doctor's visit and more conveniently.

The hi-tech health future hasn't arrived, at least not for most of us. Holmes' lawyers will probably argue though Theranos failed, its patents helped move the industry closer to intended targets. They'll also argue Holmes was fearful of interfering with Sunny Balwani's decisions, though I can't stomach an American white woman accusing a brown man of domestic violence to excuse fraud without hard evidence and an apology to Emmett Till.

To Holmes' lawyers, I offer the following rebuttal:

Failure is not a crime... unless two consecutive contracts say you can't use any device but your own to test blood, and your CEO knows other devices are being used;

Trying your hardest and coming up short is not a crime... unless you're touting product features to journalists and investors at the same time you know quality control problems could take years to resolve; and

Blaming your lover and business partner is a legitimate defense to a conspiracy charge... unless he bailed out your company by giving you a multi-million dollar loan, then tried to prove his love to you by supporting your ambitions, only to have you choose a younger man after he failed.

I can't tell you whether Holmes will be convicted, but I don't need more information to determine the odds, which favor a hung jury. To quote Bill Miller, the absence of future trial updates does not indicate a desire "to enter into an Ezra Pound end of life silence, although that does have some appeal." If I think of something interesting or useful to say about the trial that others are not saying, I will sit down at the keyboard again.

© Matthew Mehdi Rafat (2021) 

SSN 2770-002X 

Attribution: this post quotes Bill Miller, CFA from "3Q 2021 Market Letter" dated October 9, 2021.

Bonus: "A deeply troubled company is always the fault of the CEO, the board of directors, and the controlling stockholders who appoint these worthies. It is never the fault of the frontline troops." -- Joe Coulombe aka "Trader Joe"