Elizabeth Holmes tried to appeal to Rupert Murdoch to ask him to stop the Wall Street Journal from publishing its expose revealing Theranos’ alleged fraud, prosecutors told the court on Tuesday.
Her trial also heard how the former CEO’s lavish lifestyle and hunger for fame fueled the fraud.
The 37-year-old’s reputation as a high flying successful tech CEO began to unravel, as did her luxury lifestyle of private jets, high end hotels and a team of assistants to serve her every whim, after the WSJ began investigating Theranos in 2015.
Seemingly panicked, Holmes turned directly to the media tycoon who had invested $125 million in the company.
But he lost his cash after its failings were first exposed by The Wall Street Journal – one of Murdoch’s publications.
In an email from January 2015, Holmes wrote to Murdoch: ‘It was wonderful to have you here today. I so look forward to the opportunity to continue our conversations, including one day a more detailed conversation on China. It would be an honor to have you be part of our company.’
Murdoch responded: ‘Thanks Elizabeth. Enjoyed every minute of it. Any blood results? See you soon, Rupert.’
But as the Wall Street Journal started digging into the failed company in the same year, Holmes appealed to Murdoch to ask him to squash the articles suggesting Theranos’ devices were flawed and inaccurate, and reminding him that he had invested in the company.
Court sketch of Theranos founder Elizabeth Holmes during cross examination on Tuesday
Prosecutors also argued that the hunger for fame and fortune were behind Holmes’ decision to commit fraud
Holmes’ email included an attachment of a briefing document sent by her attorney David Boies asking that former Wall Street Journal editor in chief Gerard Baker meet with her team.
‘As I’ve reflected on this, I thought that were I in your shoes I would want to know/be in the loop on this one,’ Holmes wrote to Murdoch. ‘We are very much hoping that Gerard will meet with our team. If you have thoughts on this please let me know.’
In the email she attached all the material Theranos shared with WSJ reporter John Carreyrou who was investigating the company.
Boies previously met with Carreyrou, his editor and a lawyer at the paper’s newsroom in New York, and threatened litigation in letters.
Holmes testified that she reached out to Murdoch again after WSJ published it’s first investigative report on Theranos on October 15, 2015.
During her cross examination on Tuesday Assistant U.S. Attorney Robert Leach focused on Holmes’ response to Carreyrou’s reporting.
Prosecutors said Holmes turned directly to The Wall Street Journal’s owner Rupert Murdoch (pictured) in 2015 in an effort to stop the reporting on her company
Court sketch of Theranos founder Elizabeth Holmes being cross examined by prosecutor Robert Leach
Prosecutors displayed text messages between Holmes and her then-boyfriend Ramesh ‘Sunny’ Balwani, 56, plotting how to to ‘get ahead’ of the upcoming WSJ story.
In the messages Holmes and Balwani discussed altering Carreyrou’s blood test. In another text they mocked his French accent and speculated as to who Carreyrou’s sources were.
‘I couldn’t say it more strongly: The way we handled the Wall Street Journal process was a disaster,’ Holmes testified on Tuesday. ‘We totally messed it up.’
Holmes, who declined Carreyrou’s requests for an interview for five months before his initial article, admitted she went to great lengths to protect Theranos trade secrets.
‘We were certainly actively engaged with Mr. Carreyrou,’ Holmes testified. ‘We were very worried about Mr. Carreyrou’s story.’
‘I think I mishandled the entire process of the Wall Street Journal reporting,’ Holmes added.
Elizabeth Holmes’ apartment in Lombard Street, the famous San Francisco road (pictured)
The entrance to Elizabeth Holmes’ swanky apartment in San Francisco road (pictured)
Prosecutors also argued that the hunger for fame and fortune were behind her decision to commit fraud.
Before the jury entered the courtroom Assistant Attorney Leach said prosecutors planned on grilling Holmes about her extravagant lifestyle, including trips she took on the company’s private jet and her powwowing with the rich and famous.
‘She coveted fame, she covered attention, she coveted the ability to interact with these people,’ Assistant Attorney Leach said. ‘That’s a very powerful part of her motive.’
But Holmes’s attorney Kevin Downey objected to the evidence and referred a pre-trial order from U.S. District Judge Edward Davila that limited evidence about Holmes’s lifestyle and wealth, WSJ reported.
Leach rebutted that as CEO Holmes enjoyed a large salary and took frequent trips on to Mexico.
Leach also added that Holmes owned a home with her former boyfriend Balwani.
Luxury lifestyle experiences of Holmes
The attorneys for Elizabeth Holmes were able to block some details of her lifestyle from her trial but prosecutors still raised the issue on Tuesday, Some of the experiences which were banned from trial include:
1. Events and dinners, including the 2015 White House State Dinner and the Time 100 Gala in 2015
2. Flights on private jets
3. Luxury trips and exclusive hotel stays
4. Luxury shopping sprees
5. Multiple personal assistants
Judge Davila rejected Downey’s argument and said specifics about Holmes’ indulgences were off limits but evidence that directly rebutted her testimony would be allowed.
Once valued at $9 billion, Theranos vaulted Holmes to Silicon Valley stardom.
Holmes earned a six-figure salary as CEO and had an ownership stake in Theranos that was valued at up to $4.5 billion, FOX Business reported.
As CEO Holmes was able to fly on private jets, stay in luxury hotels, and had access to multiple assistants, prosecutors said.
On Tuesday Holmes also testified that she regretted the treatment of former employees Erika Cheung and Tyler Shultz, who she referred to as a ‘low-level disgruntled employee.’
Cheung was a former lab worker who testified that she had concerns about Theranos’ lab practices and reported them to the main U.S. lab regulator.
While Shultz has not testified, he has spoken publicly about his raising concerns about the accuracy of Theranos’s lab testing while at the company.
Holmes currently faces nine counts of wires fraud, and two of conspiracy, and could face 20 years in prison if convicted.
She is accused of lying about Theranos, which had touted technology that supposedly could run diagnostic tests more quickly and accurately than traditional lab testing with a drop of blood from a finger prick.
Since the trial began in September, jurors in San Jose have heard evidence that prosecutors say proves Holmes defrauded investors between 2010 and 2015 and deceived patients once Theranos began making its tests commercially available, including through a partnership with Walgreens.
Prosecutors during opening statements said Holmes turned to fraud after pharmaceutical companies lost interest in the Theranos technology.
Her attorneys told jurors that Holmes was simply a young, hardworking entrepreneur whose company failed.
Holmes has testified that she believed Theranos could have achieved its goal of a miniaturized device that would make diagnostic testing cheaper and more accessible, pointing to positive results from early work with drugmakers including Pfizer Inc.
She also said plans to place Theranos devices in Walgreens stores hit regulatory and logistical challenges.
During the trial, jurors also have heard testimony from more than two dozen prosecution witnesses, including patients and investors who prosecutors have said Holmes deceived.
On Monday, in her fourth day testifying in her fraud trial, Holmes, accused Balwani of being abusive and controlling, and forcing her to have sex against her will during their 12 year relationship, which ended in 2016.
‘He would force me to have sex with him when I didn’t want to because he would say that he wanted me to know he still loved me,’ said Holmes, in tears.
She told the court that Balwani, a Pakistan-born multimillionaire who made his fortune in the dot com boom in Silicon Valley, controlled what she ate and how she lived.
15 YEARS OF THERANOS
2003 – Holmes dropped out of Stanford University at 19 to found Theranos, pitching its technology as a cheaper way to run dozens of blood tests with just a prick of a finger and a few droplets of blood. Holmes said she was inspired to start the company in response to her fear of needles.
2004 – Theranos raises $6.9million and is valued at $30million.
2007 – Theranos is valued at $200billion.
2010 – Investors bought what Holmes was selling and invested hundreds of millions of dollars in the company. She said in a July Securities and Exchange Commission (SEC) filing that it had raised $45million. It is valued at $1billion.
2013 – Theranos announces partnership with Walgreens.
2014 – Theranos was worth more than $9billion and Holmes the nation’s youngest self-made female billionaire, hailed by Fortune magazine.
Elizabeth Holmes, founder and chief executive officer of Theranos Inc., speaks during the 2015 Fortune Global Forum in San Francisco, California, on November 2, 2015
February 2015 – In The Journal of the American Medical Association, a Stanford School of Medicine professor criticizes failure to publish anything in peer-reviewed biomedical journals. A notoriously secretive company, Theranos shared very little about its blood-testing machine with the public or medical community.
October 2015 – An investigation by The Wall Street Journal found that Theranos’ technology was inaccurate at best, and that the company was using routine blood-testing equipment for the vast majority of its tests. The story raised concerns about the accuracy of Theranos’ blood testing technology, which put patients at risk of having conditions either misdiagnosed or ignored, and Theranos temporarily halts finger prick tests.
June 2016 – Walgreens ended its blood-testing partnership with the company.
July 2016 – Department of Health and Human Services effectively banned Theranos in 2016 from doing any blood testing work at all.
2018 – Holmes forfeits control of Theranos and agrees to pay a $500,000 fine to settle charges by the SEC that she had committed a ‘massive fraud’ that saw investors pour $700million into the firm.