It is an admission of fact: Shortly after Elizabeth Holmes founded Theranos Inc., in 2003, she learned to make an impressive bevy of hair-raising claims: using a razor-thin Edison battery to run tests on tens of thousands of blood samples over short periods of time, Theranos could deliver reports a fraction of the time of competitors and perform them repeatedly, many times a day. Holmes was not off-the-wall in her ambitions: At the time, the snotty media called her a “21st-century Edison.”
Even with this barbarian streak, however, Holmes ran into trouble in 2015 when the company’s technology fell apart. Her U.S. partner, Walgreens Boots Alliance Inc., yanked their relationship in 2016. The drugstore giant, also a Theranos customer, quickly sued, accusing Holmes of reckless fraud. Theranos ultimately settled with the drugstore chain for $89 million.
By coincidence, a trial for the case began on Tuesday in the Northern District of California (otherwise known as the dragon house), and Holmes and her legal team had a lot to defend.
Theranos claims it’s at an “educational” stage of its life—the time period before a product hits the market. Holmes’ attorneys have attacked the credibility of the whistleblower and former product manager who testified against Holmes and her fellow defendants at Tuesday’s trial, claiming these employees at one point “violated the rules set forth in their employment contracts”—a charge both men denied.
Nina Anderson, a litigator with Mintz Levin who is representing one of the men in the case, contends that Theranos called into question the credibility of the whistleblower before the trial. “’Conflict of interest’ is a baseless allegation, and one that damages his credibility,” she says.
Joel Ross, who worked for Theranos from 2013 to 2015, told the jury that the company lied about its technology. Ross reported $150,000 in kickbacks Theranos paid to pharmacies that helped peddle its products, a charge in which Theranos denied any wrongdoing.
Part of the kickback allowed pharmacies to order almost every lab test they wanted, and it allowed them to hold many of them for their own use. “Theranos never issued real prices for these tests, and they showed no control over the cash flows of the pharmacies,” Ross said.
To reach needles, patients were given “millimeter-scale” Theranos pills. Researchers at Stanford University found that even a minute difference could reduce a patient’s dosage from 400 micrograms of iodine (the standard dosage) to 100 micrograms. Theranos contends they were not dangerously inaccurate.
A jury is expected to issue a verdict in about a week.
This article appears in the April 2018 issue of Harvard Business Review.