Today we heard Elizabeth Holmes speak in court — through recordings made for a FortuneRoger Parloff contributed the following article. In those recordings, Holmes claims that Theranos worked with the military, was currently working with pharmaceutical companies, that the company could do more than a thousand tests on its proprietary machines, and that the results were “at the highest level of quality.”
None of these claims were true.
Lying to reporters is not illegal, but it’s generally a bad idea since we tend to record our conversations. We’ve heard a lot about Parloff’s article in US v Elizabeth Holmes, because it was frequently sent to prospective investors as part of the materials Holmes supplied about the company.
Parloff taped approximately 10 hours of conversations to Holmes, the founder of Theranos and former CEO. He profiled Theranos after he noticed fancy celebrity lawyer David Boies had been arguing on behalf of a company Parloff had never heard of — and had won the case.
Holmes was interviewed by Parloff — as well as a who’s who of Theranos notables, including former Secretary of State Henry Kissinger, former Stanford professor Channing Robertson, and Mark Laret, the CEO of UCSF Medical Center. He visited Theranos’ Palo Alto headquarters. He did not visit the clinical laboratory. He did not see the clinical lab. He also toured the manufacturing facilities in Newark, California, which he said was “not a buzzing factory — no assembly lines or anything.” He went to a Walgreens and got his blood drawn with a fingerstick.
Parloff informed Holmes that Quest Diagnostics had 600 tests. Holmes asked him if Theranos could perform all of those tests. “Our platform can yield — I’m thinking of the best way to say this — we can do all those tests, so we can provide data back to clinicians for all the same tests,” she responded. That was a lie — we’ve heard testimony that Theranos devices couldn’t perform more than a handful of tests.
Later, Holmes told Parloff that Theranos has “done work overseas for pharmaceutical companies and a little bit with foreign governments in the past, but right now we’ve got our work cut out for us here.”
She went on to say that Theranos devices had been used in Afghanistan, but he was not to ask her board member, Gen. James “Mad Dog” Mattis, about it — it was off the record, and besides, Mattis couldn’t talk about it. Mattis stated earlier in the trial that he knew of no overseas use for Theranos.
Holmes stated in another recording that she believed Theranos could perform 1,000 tests on its proprietary machines. But only 200 tests are offered on the website, she claimed, because “we have operationalized certain tasks, expecting a certain set of ordering patterns.” The 200 are the most commonly-done ones, she said, “but we are adding to it.”
“Before the article comes out, we may have a new batch,” she added. This didn’t seem true, either — particularly given Theranos’ struggles with quality.
As Parloff’s testimony went on, I noticed how well she seemed to be playing him. At one point, she emailed Parloff to tell him, “As you know we want to generally keep the focus off the hardware. A way to do this if you are referring to it/the automation in our lab is to use the word analyzers which is likely the best word to use besides analytical systems (rather than the word device).”
Sources don’t get to dictate vocabulary in journalism — at least, not in good journalism. It wasn’t the first time she played Parloff, either.
In one recording, she explained that the secrecy was because Theranos hadn’t finished filing its patents. “The fact we have a single device that can perform any test is a big deal,” she said.
“The next story is that it would be done by this device.” And it wasn’t just one story, she teased: the story after that would be about the decentralization of the devices. “Hopefully we have the opportunity to tell that story with you,” Holmes said.
What happened here is pretty obvious — Holmes dangled future exclusives in exchange for the opportunity to dictate the terms of the article, even down to the vocabulary that Parloff used. The word “device” appears twice in his story, and neither time is it in reference to Theranos machines.
Parloff wasn’t a chump, though; by the time he’d written the article, he’d already done more due diligence than most people who InvestedTheranos. He’d heard that Theranos labs were still using venipuncture and asked Holmes about it. It was a scaling problem, she said.
He pressed: it wasn’t because her system couldn’t run certain tests? She replied that it was simply a matter of volume. “Our biggest point on that is our whole business is about eliminating the need for people to do venipuncture unless they want to, in which case they can, but everything we do is about eliminating that,” Holmes told him.
The exchange that defense lawyers are most likely to focus on, however, wasn’t recorded. Parloff asked Holmes direct if she kept, as an example, a Siemens analyzer in case of overflow. “And she said ‘unh-unh,’ like a nonverbal response that said no,” Parloff testified. Only his notes corroborated this.
Holmes also sent Parloff fake Schering-Plough and Pfizer reports that Theranos actually wrote. Parloff received the emails with praiseworthy conclusions.
Holmes was glowing when the article was published. She did not request corrections or complain about its contents — frankly unusual for a profile of any tech company. (Ask me how Apple spokespeople contacted me to complain about my iPhone. FactsBut what about me? Tone!)
Parloff continued to talk to Holmes, probably because Holmes was excited to hear more stories. One story he got was about an Arizona law which made it easier for patients and doctors to purchase their own lab tests from Theranos. In 2015, she told him that as of that year, Theranos had started using third-party analyzers, because their Arizona lab wasn’t certified to perform Theranos’ lab-developed tests.
“The technology is capable of running all those tests,” she told him, lying. As we found out earlier in the trial, Theranos’ devices couldn’t perform more than about a dozen tests.
Parloff later that year went to another demonstration, this time at the Boies Schiller law offices, New York. Two devices were there to perform tests on him: potassium (which didn’t work on Theranos devices, a former lab director testified) and Ebola. “Both machines were taking a long time, so I didn’t stay for the results,” Parloff said. He received his results the next night. Holmes also recorded Holmes instructing him not to say that the machine ran both of his tests.
The sky fell. John Carreyrou’s Wall Street Journal October 2015 article. Carreyrou stated that most Theranos tests were performed on third-party devices, and that Theranos devices were only used for 15 tests. Parloff immediately contacted Holmes. Parloff asked Holmes how many tests Theranos could perform as of December 2014. According to Parloff, Holmes lied again, saying, “50, 60, maybe 70, we can get you that number.”
It was incredible to hear Holmes in her own voice on recordings. We’ve heard now from multiple investors about what she told them, and it’s been consistent: the platform could do basically, well, everything; pharma companies had validated it; it had been used in the battlefield. But those investors didn’t record like Parloff did.
The defense will argue that Parloff’s cooperation with the prosecution in this trial was sour grapes — a journalist trying to get back at a source who duped him, and who’s trying to pass his own mistakes off onto Holmes. Today, though, the jury got to hear Holmes’ lies in her own voice.
Source: The Verge