Business News Live Updates: Stock Market and FOMC Meeting

 

Erin Woo

Still, in a 9/2/14 memo Mosley wrote to Kissinger, he wrote: “There is substantial data and other information attesting to the quality, performance and reliability of the Theranos technology and equipment.” Wade highlights this line.

 

Erin Woo

Wade asks Mosley to confirm that he hadn’t done substantial research into the company at this point, and Mosley counters that he doesn’t think he would have had a way to.

 

Erin Woo

Mosley testifies that his 2014 analysis of Theranos came from printed materials provided by the company and his conversations with Holmes. Wade notes that Mosley didn’t mention media in his outline, but Mosley said he had “certainly” read media articles about the company.

 

Erin Woo

He was also connected with the Oppenheimer family ($20 million) and John Elkann ($5 million), who were friends of Kissinger’s but not Mosley’s clients.

 

Erin Woo

Mosley was VERY well-connected with Theranos’s investors. Per a slide entered into evidence, he was the attorney for the Walton family ($150 million invested), DeVos family ($100 million), Cox family, ($100 million), Andreas Dracopoulos ($25 million), Henry Kissinger ($3 million).

 

Erin Woo

Good morning! I am back in the courtroom for the Elizabeth Holmes trial. After some pretrial arguments about whether testimony from a patient called BB should be excluded (no decision yet disclosed), the lawyer Daniel Mosley is on the stand to continue his cross.

 

Erin Griffith

The jury is dismissed for the day. Chaotic vibes today, between the guy who snapped a photo in the courtroom, a stifling 76 degree room and a worked up person in the hall bugging journalists about their parking dispute.

 

Erin Griffith

Mosley’s description of what he does at BDT is comically vague. “I’m involved in the management of the firm, I run the New York office. We advise and work with high net worth families and I do that type of work.”

 

Erin Griffith

I imagine this will be a contentious cross-examination. We’re already talking third-generation billionaires and levels of white shoe law firm prestige.

 

Erin Griffith

Theranos’s investment docs had a provision for mandatory redemption, i.e., the company could buy back shares at any price at any time. 🤔 Holmes reassured Mosley that wouldn’t happen.

 

Erin Griffith

We see a list of Theranos’s risks in Mosley’s memo to Kissinger. Prosecution asks why it doesn’t list the risk that Holmes could give inaccurate descriptions of her company’s technology. “I did not believe it was a risk,” he says.

 

Erin Griffith

Mosley testifies that he liked that Elizabeth Holmes’ shares in Theranos had 100x voting power of the other investors. “She was obviously a visionary that had created this company and developed the technology and having her in control of the company was a good thing.”

 

Erin Griffith

Mosley wrote a memo to Henry Kissinger about Theranos’s technology with a strong, strong endorsement. He believed fully in the conclusions from the pharma validation reports.

 

Erin Griffith

Byron Trott’s firm, BDT, threw a conference in Chicago in 2014, where Mosley introduced Holmes to the DeVos family, the Walton family and the Cox family — all clients of his.

 

Erin Griffith

We talk about the revenue projections and Schenk pre-empts the defense’s argument that projections are about the future and not supposed to be accurate by asking Mosley about that. Since it was October, Mosley expected the $140 million revenue projection for the year to be pretty close.

 

Erin Griffith

It is incredible how much mileage Holmes got out of one Fortune article. I think every investor who has testified said they read it. I guess prosecution keeps bringing it up because we know the author Roger Parloff will soon testify.

 

Erin Griffith

We run through the entire rigmarole we have now seen many times: listing out the specific and clear promises Theranos made to investors about its technology and the investor testifying they invested on that information.

 

Erin Griffith

We’re looking at illegible handwritten notes Mosley took and it feels like deciphering ancient scrolls

 

Erin Griffith

Holmes snail mailed Mosley a thick stack of presentations in 2014. We discuss lines like: “The company plans to be private for the long term.” “Theranos has grown from cash from its contracts for some time.”

 

Erin Griffith

The Web of Powerful Men goes on: We see an email where Mosley offers to connect Holmes to the Walton family. Mosley says Holmes wanted investors who were “high quality families.”

 

Erin Griffith

Next witness is Dan Mosley, a lawyer and guy about business. He invested $6 million in Theranos after Henry Kissinger, his client, introduced him in 2014. He now works for Byron Trott, Warren Buffett’s banker who was discussed during the DeVos testimony.

 

Erin Griffith

Theranos’s work with S-P fell off when the company merged with Merck. We see emails from Holmes to Cullen trying to move the validation forward with no response from Cullen. Kline make the final point that S-P never told Holmes about her concerns.

 

Erin Griffith

Kline, who is a lot folksier than Wade, asks Cullen to repeat that she never voiced her concerns with Theranos to the company because it was awkward. Apart from one email, is Cullen aware of any emails from S-P or Theranos asking for more information? “No.”

 

Erin Griffith

(Note: This was 2009.) “There was insufficient technical detail for us to be able to evaluate the technology.” She says Holmes answered almost exclusively, even questions directed to others.

 

Erin Griffith

Cullen testifies she never objected to the validation protocol. We see the invoice for Theranos’s work with S-P with the objective of “comprehensive validation of the Theranos cytokine panel under F.D.A./I.C.H. guidelines.”

 

Erin Griffith

Kline asks about the validation work that S-P did with Theranos was sufficient. “It hit the requirements, but at the end of the day, the execution would not have been in alignment with F.D.A. requirements for validation.”

 

Erin Griffith

John Kline is leading a cross-examination. Cullen testifies that S-P was impressed with the demo they did of one blood test on a Theranos machine they were given.

 

Erin Griffith

In the second version of this document, the conclusion adds the word “more” to the line about the results’ accuracy. Cullen says again she doesn’t agree with that conclusion. End of direct exam of Cullen.

 

Erin Griffith

We see the infamous validation report that featured Schering-Plough logo. Cullen says she did not agree with the report’s conclusions and no one at S-P said the docs were accurate.

 

Erin Griffith

Cullen says she didn’t say anything about it at the meeting because “um, it’s awkward.” Unfortunately I can’t see Holmes’s expression but I have a feeling if they run into each other in the bathroom later it’ll be even more awkward! 😬

 

Erin Griffith

Cullen adds that there were no direct answers to questions and the questions were fairly technical, so the answer should be fairly technical and direct. “There were what I’d describe as cagey responses or attempts to redirect to other topics of discussion.”

 

Erin Griffith

We see a calendar invite and agenda from a May 5 meeting. This was the first time Cullen met Holmes in person. Cullen said she asked many questions and “was dissatisfied, quite honestly, with the response to the questions.”

 

Erin Griffith

Peterson is excused. Next witness is Constance Cullen. Cullen worked at Schering-Plough. They asked her to participate in evaluating Theranos’s technology. They beta tested a few machines and she visited Theranos’s offices.

 

Erin Griffith

It’s usually pretty clear in the gallery who is a reporter and who is a member of the public. There are always a few people in suits who I can’t quite place. The guy who took a photo had a suit on. He is, unsurprisingly, not here now.

 

Erin Griffith

Uh… we went on a break because someone walked into the back of the courtroom and took a photo. That person is now being chastised by the judge.

 

Erin Griffith

Theranos told RDV in October of 2014 that it would do $140 million in revenue that year. It had zero. Prosecutor Robert Leach: “Did you in anyway dream that revenue for that year would be zero?” She says no, “projections should be somewhat close.”

 

Erin Griffith

Peterson pushes back: “You’re trying to measure our sophistication as an investor when we weren’t given complete information.” Wade moves to strike and Judge Davila tells Peterson to wait for Mr. Wade’s questions.

 

Erin Griffith

Wade shows Peterson the legal agreement for the investment and goes through all the normal disclaimers — projections can change, the investment was speculative, RDV (the DeVos firm) was accredited and sophisticated, etc. The “you should have known better” argument.

 

Erin Griffith

Some points of contention: When the investment decision was made. Whether Peterson had gone to Theranos’s website to see it advertised CLIA lab tests. What Theranos said about its military work. Comments Peterson made in prior depositions that contradict her testimony today.

 

Erin Griffith

Wade keeps asking questions meant to trap Peterson over prior comments, she keeps offering more detailed answers, Wade keeps striking her answers from record. After striking at least five, the judge scolds Wade: “Some of your questions are lend themselves to an explanation.”

 

Erin Griffith

Right out the gate prosecution objects to an email defense is using to refresh Peterson’s memory that she wasn’t on. Judge Davila: Anything can be used to refresh a witness’s recollection — a shoe, a sock…. Defense attorney Lance Wade: I’ll keep my shoes on, your honor.

 

Erin Griffith

🩸 US v. Holmes continues today with cross-examination of Lisa Peterson, who…