Former Vice President received an exclusive tour of a completely fake medical testing laboratory within Theranos, which he found “most impressive”
One thing clinical laboratory leaders and pathologists may still be curious about concerning the whole Theranos affair is how the company founder Elizabeth Holmes could fool so many high-ranking individuals—including then Vice President Joe Biden—into endorsing a completely fraudulent medical laboratory test process.
But it was the lengths to which Holmes and Balwani went to “trick” Joe Biden into endorsing Theranos—and subsequently receive the positive press that followed—that MSN found most intriguing.
According to MSN, in July of 2015 Holmes and Balwani procured Biden’s endorsement by giving the VP a tour of a “completely fake, staged lab.”
“What’s most impressive to me is you’re not only making these lab tests more accessible, you’re charging historically low prices, which is a small fraction of what is charged now, while maintaining the highest standards, and empowering people whether they live in the barrio or a mansion, putting them in a position to help take control of their own health,” stated then VP Joe Biden (above with Elizabeth Holmes) in a Theranos press release. Sadly, many clinical laboratory leaders who were skeptical and outspoken about Theranos’ claims were ignored by the press. (Photo copyright: ABC News.)
Wall Street Journal Reporter Exposes Theranos Fraud
According to a 2018 article by John Carreyrou which was part of his expose´ of Theranos published in The Wall Street Journal, “Ms. Holmes and Mr. Balwani wanted to impress Vice President Biden with a vision of a cutting-edge, automated laboratory. Instead of showing him the actual lab with its commercial analyzers, they created a fake one, according to former employees who worked in Newark. They made the microbiology team vacate a room it occupied, had it repainted, and lined its walls with rows of [Theranos] miniLabs stacked up on metal shelves.”
And the ruse worked. A 2015 Theranos press release outlined the visit at the time and stated that Biden found the facility inspiring and was impressed by the work being done by the company.
“I just had a short tour and I’m glad because you can see first-hand what innovation is all about just walking through this facility. This is the laboratory of the future,” Biden said in the press release.
In 2015, then Vice President Joe Biden toured the Theranos facility with Elizabeth Holmes, observed their supposedly innovative finger stick test system, and met with several Theranos employees. Later reports exposing the fraud stated that Holmes and Balwani were desperate to obtain Biden’s approval as it would provide positive press for Theranos, a good reputation within the industry, and lure potential investors. Theranos later tweeted a photo (above) of the visit showing Biden and Holmes walking amongst numbered blood-testing machines with a huge Theranos logo banner in the background. (Photo copyright: Connor Radnovich/The Chronicle.)
Biden’s visit occurred just a few months before Carreyrou’s Wall Street Journal report questioned the efficacy of Theranos’ blood testing technology and alleged the lab testing company tried to cover up its failures and mislead investors and patients.
Prior to that hard-hitting exposé, Holmes was heralded by the media as a star in the field of medicine. She was even prominently featured on magazine covers of influential business periodicals such as Fortune, Forbes, and Inc.
Others Who Were Bamboozled by Holmes and Balwani
Biden was not the only high-profile individual who was fooled by Holmes, Balwani and their billion-dollar con job. Other high-profile people included:
Theranos ceased operations in September of 2018 amidst the exposing of the fraud and inability to locate a buyer for the company. The shutdown rendered all investments in the company worthless.
Holmes to Receive New Hearing in Federal Court
In January of this year, Holmes was found guilty of three counts of wire fraud and one count of conspiracy to commit wire fraud for lying to investors about Theranos products. She faces up to 20 years in prison and a fine of $250,000 plus restitution for each count.
And so, clinical laboratory leaders and pathologists now have a better idea as to how Joe Biden was hoodwinked and endorsed a completely fake blood testing laboratory at Theranos. Can he be blamed for his ignorance of clinical laboratory test technology? Probably not. But it makes for interesting reading.
Issues arose after a pathologist who once was the clinical laboratory director at Theranos suggested his testimony during the trial was misconstrued by federal prosecutors
Just when clinical laboratory directors and pathology group managers thought they could look forward to a world without an ongoing Theranos fraud trial, company founder and ex-CEO Elizabeth Holmes requested a new trial. Her request was based on comments by pathologist and former Theranos lab director Adam Rosendorff, MD, that he was remorseful about his testimony in Holmes’ fraud trial.
Now, it appears the court will hear Holmes’ argument. On October 4, a federal judge agreed to delay Holmes’ sentencing to consider new evidence that was submitted to the court in a September filing and further evaluate her request for a new trial.
In that filing, Holmes claimed that Rosendorff visited her home on August 8 to express regret over his testimony. According to Holmes, Rosendorff alleged that his statements had been misconstrued by prosecutors at her trial. He stated that “he tried to answer the questions honestly, but that the prosecutors tried to make everyone look bad” and he now feels like “he had done something wrong,” The Guardian reported.
Theranos founder and ex-CEO Elizabeth Holmes (left) as she was seen entering the federal courthouse in San Jose, Calif., on Sept. 1 to argue that her trail verdict should be overturned due to new comments from pathologist and former lab director Adam Rosendorff, PhD, who expressed remorse over his original testimony. Clinical laboratory managers may want to track these new developments in the unfolding saga of Theranos and Elizabeth Holmes. (Photo copyright: AP/Daily Mail.)
Pathologist Rosendorff’s Testimony about Holmes
Rosendorff, the pathologist who served as the CLIA laboratory director at Theranos for several years, was a major witness for the prosecution in the Holmes trial which lasted nearly four months. During his four-day testimony, he contended that Holmes was cognizant of accuracy issues with Theranos’ blood-testing device and that she intentionally misled both investors and patients.
In January, a jury found Holmes guilty of three counts of wire fraud and one count of conspiracy to commit wire fraud for lying to investors about Theranos products. The jury of eight men and four women deliberated for more than 50 hours over seven days to arrive at the verdict. She faces up to 20 years in prison and a fine of $250,000 plus restitution for each count.
In September, US District Judge Edward Davila, who presided over Holmes’ original fraud trial, declined to overturn the guilty verdict.
The new hearing regarding the issues with Rosendorff’s testimony will occur on October 17, the original date of Holmes’ sentencing. Davila stated that he has scheduled an entire day for hearing, but that he expects it to take less than the full allotted day.
Judge Wants to Know If Former Theranos Lab Director Told the Truth
If her request for a new trial is denied, Holmes will be sentenced sometime between November and January. She is currently free on bail while awaiting her sentencing.
Regarding the latest development, Davila stated that it was unusual for a witness to appear at a convicted defendant’s home. “I will say I haven’t seen a case where this happened before,” Davila told CNN.
“What the court wants to know is, Dr. Rosendorff, do you feel the government manipulated you in the preparation or in any way in regards to your testimony?” Davila said about what will be covered in the October 17 hearing. “What I want to know is, did you tell the truth?”
After Holmes used Rosendorff’s appearance at her home to request a new trial, the former Theranos lab director filed a sworn declaration with the court on September 21 that he stands by his testimony “in every respect.”
“Nevertheless, I feel compassion for Ms. Holmes and Mr. Balwani, and even more so for the members of their families who were not responsible for their conduct but will be affected by the punishment they may receive,” he wrote.
And so, the saga of Elizabeth Holmes continues. Clinical laboratories will once again get a view into how a lab director’s responsibilities can alter testing outcomes—and fraud trials.
Federal judge must rule on her bid for a new trial, after former Theranos lab director Adam Rosendorff’s statement that he regrets his testimony during her criminal fraud trial
It is a rare event for a board-certified clinical pathologist to be named in national news headlines, but that is what is happening now to Adam Rosendorff, MD, who served as the CLIA laboratory director at Theranos for several years.
Rosendorff is once more the subject of news headlines because of his recent statements expressing “regret” about his testimony for the prosecution during the trial of Elizabeth Holmes, founder and ex-CEO of now defunct Theranos. This development caused attorneys for Holmes to file a motion for a new trial.
In August, Rosendorff showed up at the residence of Elizabeth Holmes and made statements to her attorneys that are the basis for the motion to conduct a new trial.
In a recent court filing requesting the new trial, Holmes’ attorneys described Rosendorff as a “star witness” for the prosecution and pointed out, “The government mentioned him more than any other government witness in both opening and closing statements, and Dr. Rosendorff testified longer than any other government witness.”
During four days of testimony last October, Rosendorff emerged as a central prosecution witness. On the stand, he supported prosecutors’ contention that Holmes knew about the accuracy issues with Theranos’ Edison blood-testing device and intentionally mislead investors and patients.
In court testimony, Adam Rosendorff, MD (above) said, “I had frequent conversations with Elizabeth about concerns that I had in the laboratory,” and [that] she was often copied on emails discussing issues, the Wall Street Journal reported at the time. As clinical laboratory leaders who closely followed his testimony know, Rosendorff was Theranos’ laboratory director from April 2013 to November 2014. (Photo copyright: LinkedIn.)
Rosendorff Attempts to Meet with Holmes
The “Dr. Rosendorff’s Encounter at Ms. Holmes’ Home” section of the 17-page filing states Rosendorff appeared at the home of Holmes and her partner William Evans on August 8 after leaving a voicemail earlier in the evening asking for a meeting with Holmes. Rosendorff allegedly had two short conversations with Evans, who told him Holmes could not speak to anyone and asked Rosendorff to leave. Rosendorff was described by Evans as speaking in a “trembling” voice and appearing to be “in distress.”
The filing goes on to state Rosendorff told Evans “that he wanted to speak to Ms. Holmes because it would be ‘healing for both himself and Elizabeth to talk.’ He stated that ‘when he was called as a witness, he tried to answer the questions honestly but that the prosecutors tried to make everyone look bad’ and that ‘the government made things sound worse than they were when he was up on the stand during his testimony.’”
The filing continues: “Dr. Rosendorff stated that ‘Theranos was early in his and [Ms. Holmes’] career,’ that ‘everyone was just doing the best they could,’ and ‘everyone was working so hard to do something good and meaningful.’”
The section concludes, “He stated that ‘he fe[lt] guilty’ and that he ‘felt like he had done something wrong,’ apparently in connection with his testimony in Ms. Holmes’ case. He stated that these issues were ‘weighing on him’ and that “he was having trouble sleeping.’”
Rosendorff’s Regrets Unlikely to Trigger New Trial
In the filing, Holmes’ attorneys wrote, “under any interpretation of his statements, the statements warrant a new trial under Rule 33. But, at a minimum … the Court should order an evidentiary hearing and permit Ms. Holmes to subpoena Dr. Rosendorff to testify about his concerns.”
Bloomberg, however, quoted criminal defense attorney Michael Weinstein, JD, Chair of Cole Schotz P.C.’s White-Collar Litigations and Government Investigations Practice, as saying Rosendorff’s misgivings about his testimony are unlikely to warrant a new trial.
“A witness having second thoughts and how they were generally perceived is not new in criminal trials but often don’t lead to new trials or much of anything,” Weinstein told Bloomberg. “The burden for that is simply too high.” Weinstein was not involved in the Holmes case.
CBS News reached out to Rosendorff via LinkedIn, who responded he had no comment, adding, “Do not contact me.”
Nevertheless, Holmes’ lawyers have proposed an October 3 hearing to discuss why they believe a new trial is merited. Their request for a new trial came less than a week after U.S. District Judge Edward Davila rejected the defense team’s bid to have Holmes’ January convictions thrown out, the Mercury News reported.
“The evidence does support the jury’s findings,” Davila said at a September 1 hearing in San Jose, California, in which he issued a preliminary ruling denying her bid to have the verdict thrown out.
Theranos Saga Continues
At the hearing, Holmes’ lawyer Amy Mason Saharia, JD, told Davila the defense team would make another attempt to overturn the jury’s findings based on “new evidence,” the Mercury News stated. That new evidence appears to be Rosendorff’s admission that he has regrets about his testimony in the case.
Holmes, 38, is currently free on bail, but faces up to 20 years in prison and a fine of $250,000, plus restitution on each of four counts. She will be sentenced on October 17. The court originally set her sentencing date for September 26, but agreed to delay her sentencing without giving a reason for the delay, CBS News reported.
Will former Theranos laboratory director Adam Rosendorff, MD’s, regrets alter the court’s previous decisions? Who knows? Many clinical laboratory directors and medical laboratory scientists followed Elizabeth Holmes’ nearly four-month long fraud trial with rapt interest. They will now have to wait a few more weeks to find out if the disgraced Theranos executive will get a new trial or a prison sentence.
Damages sought include reimbursement of costs for voided clinical laboratory tests as well as an injunction ‘to prevent Theranos and Walgreens from engaging in further misrepresentations and unfair conduct’
Theranos founder and ex-CEO Elizabeth Holmes and ex-COO/President Ramesh “Sunny” Balwani have been found guilty on multiple counts of fraud and now await sentencing in federal criminal court. But the pair’s legal entanglements are not yet over. A class-action lawsuit filed on behalf of patients who purchased Theranos clinical laboratory testing services between November 2013 and June 2016 is weaving its way through the legal system.
“The lawsuit claims, among other things, that these blood testing services were not capable of producing reliable results, that the defendants concealed the blood testing services’ unreliability, that Walgreens knew that the blood testing services were unreliable and not market-ready, that the defendants conspired to commit fraud on consumers, that Theranos’ ‘tiny’ blood testing technology (blood drawn with finger pricks) was still in development, and that the customers who were subject to ‘tiny’ Theranos blood draws by Walgreens employees gave their consent to those blood draws under false pretenses,” the news release notes.
If the defendants are found liable, plaintiffs, who could number in the hundreds of thousands, could receive money or benefits. The Mercury News reported that Arizona’s attorney general had identified 175,000 consumers who purchased tests from Theranos/Walgreens at an average cost of $60 per test.
A class-action lawsuit filed on behalf of patients who purchased Theranos blood testing services at a Walgreens or Theranos location includes as defendants company founder/CEO Elizabeth Holmes (left), ex-Theranos President/COO Ramesh “Sunny” Balwani (right), as well as Theranos, Inc., Walgreens Boots Alliance, and Walgreens Arizona Drug Company. The trial is expected to begin in 2023. It will no doubt draw the attention of clinical laboratory directors and pathologists who followed the Holmes/Balwani fraud cases very closely. (Photo copyright: The Wall Street Journal.)
Federal Court Upholds Class Certification
The Top Class Actions news site notes that in 2021 Walgreens and Balwani unsuccessfully appealed to get the class-action lawsuit against them decertified.
Class: All purchasers of Theranos testing services, including consumers who paid out-of-pocket, through health insurance, or through any other collateral source between November 2013 and June 2016.
Arizona Subclass: All purchasers of Theranos testing services in Arizona between November 2013 and June 2016.
California Subclass: All purchasers of Theranos testing services in California, between September 2013 and June 2016.
Walgreens Edison Subclass: All purchasers of Theranos testing services who were subjected to “tiny” blood draws (finger pricks) by a Walgreens employee between November 2013 and March 2015.
“The lawsuit seeks damages, including reimbursement of the amounts paid by consumers for the voided tests, as well as an injunction to prevent Theranos and Walgreens from engaging in further misrepresentations and unfair conduct,” the Lieff Cabraser website states.
In its notice to potential members of the class action, JND Legal Administration states the “defendants contend that they did not do anything wrong, and they are not liable for any harm alleged by the plaintiffs.” In addition, the notice points out, “There is no money available now, and there is no guarantee that there will be.”
Where could money come from to pay plaintiffs? Likely not from Theranos or Holmes. Though Theranos reached a peak valuation of $9 billion in 2014, it owed at least $60 million to unsecured creditors when the company was dissolved in 2018, USA Today reported. After turning over its assets and intellectual property, Theranos anticipated having only $5 million to distribute to creditors.
And Forbes reported that Holmes’ net worth dropped from $3.6 billion to $0 in 2016.
However, Balwani, who netted nearly $40 million in 2000 when he sold shares of software company Commerce One, has an estimated net worth of $90 million, according to Wealthypipo. As of 2022, Walgreens Boots Alliance is ranked number 18 on the Fortune 500 rankings of the largest United States corporations by total revenue.
The Arizona Theranos Litigation website points out that the suit does not seek damages or other relief for personal injury, emotional distress, retesting costs, or medical care costs. Any Theranos/Walgreens customer intent on pursuing such legal action would need to exclude themselves from the class action case and proceed with separate litigation. The deadline to opt out of the class-action lawsuit is September 12, 2022.
And so, though clinical laboratory directors and pathologists may have thought the saga of Theranos ended following Balwani’s conviction, it apparently continues. It is anyone’s guess what is to come.
Balwani’s lawyers opted not to have their client testify in his own defense and called only two witnesses, while Holmes’ defense team offered jurors the opportunity to hear her testimony
Elizabeth Holmes and Ramesh “Sunny” Balwani dreamed of revolutionizing the clinical laboratory blood-testing industry with their now defunct Theranos Edison device, which they claimed could perform multiple tests with a single finger prick of blood. Instead, they became the rare Silicon Valley executives to be convicted of fraud.
On July 7, ex-COO/President Balwani was convicted on all 12 counts of wire fraud and conspiracy charges in his federal fraud trial. Holmes, Theranos’ founder/CEO and former romantic partner to Balwani, avoided convictions six months ago in January on seven of the 11 counts she faced for her role in exaggerating the accuracy and reliability of the company’s Edison blood-testing device and providing false financial claims to investors.
“Once again, a jury has determined that the fraud at Theranos reached the level of criminal conspiracy,” said FBI Special Agent in Charge Sean Ragan in a press release posted on Twitter following the verdict. “The FBI has spent years investigating this investment fraud scheme with our partners at USPIS and the FDA Office of Criminal Investigations. Lies, deceit, and criminal actions cannot replace innovation and success.”
Ramesh “Sunny” Balwani (above center), former COO/President of Theranos, is shown leaving the federal courthouse in San Jose, Calif., on July 7 after he was found guilty on all 12 counts of fraud, a verdict more severe than ex-CEO and Theranos founder Elizabeth Holmes received in January for similar charges. Clinical laboratory directors and medical laboratory scientists have been closely monitoring both trails. (Photo copyright: Jim Wilson/The New York Times.)
Balwani’s Age and Experience May Have Worked Against Him
Michael Weinstein, JD, a former Justice Department prosecutor who is the Chair of White-collar Litigation at Cole Schotz, told The New York Times that Balwani’s age and his trial date—three months after Holmes’ conviction—worked against him. Balwani, 57, could not present himself as a young and inexperienced tech executive easily manipulated by those around him, as Holmes, 38, had attempted to do.
“Holmes could come off as a bit naïve, and [her defense team] tried to sell that,” Weinstein said of the former Stanford University dropout who founded Theranos in 2003 when she was 19.
In Holmes’ case the verdict was mixed, with jurors acquitting her of the patient fraud counts but unable to reach a decision on some of the investor fraud counts, Bloomberg reported.
Mr. Balwani, however, “came off as more of an experienced technology executive,” Weinstein added.
Weinstein pointed out that because the government’s case against Balwani mirrored its case against Holmes, prosecutors had time to refine their strategy before making a second appearance inside US District Court Judge Edward Davila’s San Jose courtroom.
“The streamlined presentation, the streamlined evidence, the streamlined narrative—all was beneficial for the government in the end,” he said.
Ever since opening arguments in March, Balwani’s legal team portrayed him to the jurors as a loyal partner who believed in Theranos’ technology and “put his money where his mouth is,” the Guardian noted.
Prosecutors, however, made the case that Balwani had a hands-on role in running the lab and was the source of Theranos’ overinflated financial projections.
Balwani invested about $15 million in the startup between 2009 and 2011 and never cashed in when his stake grew to $500 million. That money evaporated when Theranos collapsed.
In all, 24 witnesses testified against Balwani. He was ultimately convicted of all 12 counts he faced:
Two counts of conspiring with Holmes,
Six counts of defrauding investors, and
Four counts of patient fraud.
Major Differences in Trial Testimony
The Balwani trial made headlines due to COVID-19 pandemic related delays, but otherwise did not produce the news-generating moments that punctuated Holmes’ nearly four-month-long court appearance. Thirty-two witnesses appeared at the Holmes trial, including Secretary of Defense James Mattis, according to CNN.
Another significant difference in the two trials was that Holmes testified in her own defense. Holmes spent nearly 24 hours on the stand, CNN Business noted at that time, during which she cast the blame for Theranos’ failings on those around her, including Balwani.
ABC NewsRebecca Jarvis, host and creator of the podcast “The Dropout,” believes Balwani’s decision not to testify worked against him.
“[The abuse claims] did not come up at his trial, but during [Holmes’] seven days of testimony, they were a big portion of what she talked about,” Jarvis said in an ABC News “Start Here” podcast. “The biggest difference is that he didn’t take the stand to say, ‘I didn’t do this,’ or … raise his own objections to the claims against him.
“You think about a jury who is supposed to know nothing about any of [the defendant’s] backstory, and they’re shown these things like … case pictures of [Holmes] so much younger than [Balwani], supposedly having to rely on him for his expertise,” Jarvis added.
“You can imagine where the jury may have found that presentation more sympathetic than Sunny Balwani who had experience,” she said.
Text May Have Been Balwani’s Undoing
Balwani’s defense team called only two witnesses:
A naturopathic physician who used Theranos’ blood-testing lab, and
A technical consultant who Balwani’s legal team hired to assess the accessibility of patient data in Theranos’ Laboratory Information System (LIS), which the defense argued could have provided evidence of the accuracy of Theranos’ test results.
“This verdict also signals the jurors did not buy Balwani’s highly speculative argument that the database Theranos lost in 2018 would have proven his innocence,” Park said.
“We are obviously disappointed with the verdicts,” he said. “We plan to study and consider all of Mr. Balwani’s options including an appeal.”
Following the verdicts, Judge Davila raised Balwani’s bail to $750,000 and set a Nov. 15 sentencing date. Holmes is scheduled to be sentenced Sept. 26.
Balwani’s own words may have been his final undoing. During closing arguments, prosecutors again showed jurors a text message Balwani sent to Holmes in 2015, The New York Times reported.
“I am responsible for everything at Theranos,” he wrote. “All have been my decisions too.”
Clinical laboratory directors and medical laboratory scientists will no doubt continue to monitor the fallout from these two extraordinary federal fraud trials. There’s still much to learn about CLIA-laboratory director responsibility and how the government plans to prevent future lab testing fraud from taking place.
