The Theranos Trial: Elizabeth Holmes’s Defense Works to Undermine Central Prosecution Witness – The Wall Street Journal


Former Theranos lab director Adam Rosendorff appeared as a prosecution witness on Tuesday.

Photo: Vicki Behringer

SAN JOSE, Calif.—A lawyer for Theranos Inc. founder Elizabeth Holmes tried to undercut a key prosecution witness’s testimony Tuesday, as new clues emerged about her defense strategy of shifting blame to her former top deputy and ex-boyfriend.

Former Theranos lab director Adam Rosendorff testified Tuesday in Ms. Holmes’s criminal-fraud trial that every time the company fielded a physician complaint, every time quality control failed and every time test results fell out of appropriate ranges, “it raised serious and grave concerns…

SAN JOSE, Calif.—A lawyer for Theranos Inc. founder

Elizabeth Holmes
tried to undercut a key prosecution witness’s testimony Tuesday, as new clues emerged about her defense strategy of shifting blame to her former top deputy and ex-boyfriend.

Former Theranos lab director Adam Rosendorff testified Tuesday in Ms. Holmes’s criminal-fraud trial that every time the company fielded a physician complaint, every time quality control failed and every time test results fell out of appropriate ranges, “it raised serious and grave concerns for me about the accuracy of the testing process.” The concerns eventually led him to quit, he said.

Lance Wade,
an attorney for Ms. Holmes, took an aggressive stance during his cross-examination, pushing Dr. Rosendorff to say that he was coached by prosecutors on the answers he gave.

His voice rising, Mr. Wade asked whether during several preparation sessions with prosecutors and federal agents, Dr. Rosendorff went through the questions they intended to ask and the answers he planned to give.

“I was always instructed to be truthful and tell the truth,” Dr. Rosendorff responded.

Asked a second time, he responded, “I was merely instructed to tell the truth.”

Mr. Wade’s stance with Dr. Rosendorff differed substantially from his conciliatory tone during cross-examination of prosecution witnesses in previous weeks of Ms. Holmes’s trial. The 37-year-old Stanford University dropout is accused of 10 counts of wire fraud and two counts of conspiracy to commit wire fraud for representations she made to investors and patients about Theranos’s finger-prick blood-testing technology.

So far, Ms. Holmes’s defense against allegations that she overstated Theranos’s capabilities has been limited to cross-examination and Mr. Wade’s opening remarks to jurors. Court filings partially unsealed Monday night offered hints about what her defense might look like when it is her turn to call witnesses to the stand—and potentially take the stand herself.

As the long-awaited trial of Theranos founder and former CEO Elizabeth Holmes gets underway, WSJ looks back at the scandal’s biggest milestones and speaks with legal reporter Sara Randazzo about what we can expect to see in the fraud trial. Photo Illustration: Adele Morgan/WSJ

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The filings, unsealed in response to a motion by The Wall Street Journal’s publisher, Dow Jones & Co., show how she might position herself against Ramesh “Sunny” Balwani, her former boyfriend and No. 2 at the company, who is accused of the same crimes. Both have pleaded not guilty.

Ms. Holmes’s lawyers have said in filings that she could argue that she and Mr. Balwani had an emotionally and physically abusive relationship that left her under his control during the period in which the government alleges the two blood-testing executives committed a massive fraud. Mr. Balwani’s lawyer has said that Mr. Balwani “unequivocally denies that he engaged in any abuse at any time.”

Ms. Holmes’s lawyers explained in a newly unsealed filing that “she deferred to and relied on what she perceived to be Mr. Balwani’s business acumen. She relied on Mr. Balwani to provide her with accurate information about the state of the company’s operations.”

Without conceding that any statement she made was actually false, her lawyers said that she can still argue that, “If Ms. Holmes in good faith believed that what she was saying was true because she relied on and deferred to Mr. Balwani, she did not commit wire fraud.”

Ms. Holmes met Mr. Balwani during a language-immersion trip to China when she was 18-years-old and he was 37, Ms. Holmes’s lawyer told jurors earlier in the trial. In his early years with the company, the executive used his personal wealth, gained from his work at an earlier tech startup, to help prop up Theranos.

Weeks of prosecution witnesses remain before Ms. Holmes’s lawyers can present their defense in full.

Dr. Rosendorff is the eighth witness to take the stand so far.

The former lab director testified that his concerns culminated in late 2014, when he decided to quit, days after Mr. Balwani discussed firing him in an email to Ms. Holmes that was shown to jurors Tuesday.

In the weeks leading up to his resignation, Dr. Rosendorff exchanged a series of heated emails with Mr. Balwani and others, including Ms. Holmes’s brother, Christian Holmes, a senior Theranos manager who fielded customer complaints.

When told by Mr. Holmes how to respond to a doctor who complained about cholesterol results, Dr. Rosendorff responded that he wouldn’t do it. “If you’re asking me to defend these values then the answer is no,” he said in a Nov. 14, 2014, email.

On Dr. Rosendorff’s last day of work, he testified, he met with Mr. Balwani and when the Theranos executive offered his hand Dr. Rosendorff declined to shake it.

Dr. Rosendorff testified that after he left Theranos, he spoke to two lawyers and to then-Wall Street Journal reporter

John Carreyrou
about his experience at the company. “I felt obligated from a moral and ethical perspective to alert the public,” he said.

The Wall Street Journal first reported on questions about Theranos’s technology in 2015, including that the company ran few tests on its proprietary finger-stick machines and instead used commercial blood analyzers that it sometimes modified.

Dr. Rosendorff said he spoke off the record to Mr. Carreyrou, and his name never appeared as a source in the Journal’s reporting. Mr. Carreyrou and a spokesman for the Journal declined to comment.

During cross-examination, Mr. Wade questioned Dr. Rosendorff about his legal obligations as lab director and whether he ever offered lab tests for patient use that weren’t accurate.

Dr. Rosendorff responded that no, whenever he was alerted that a test was inaccurate or unreliable, he ordered the lab to cease doing those tests.

Write to Sara Randazzo at sara.randazzo@wsj.com

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