James Mattis, the retired general and former defense secretary, took the stand yesterday in the criminal trial of Elizabeth Holmes, detailing how his faith in the company plummeted when a Wall Street Journal expose revealed that Theranos had been performing tests on third-party equipment.
“There just came a point where I didn’t know what to believe about Theranos anymore,” he said.
When Mattis first met Holmes in 2011 in San Francisco, he was taken by her vision and believed it could become a critical tool for the military. Later, she gave him a private demonstration, pricking his finger and showing him the company’s Edison device.At the time, Mattis was in charge of US Central Command, which covers the Middle East and Central Asia, and he felt the Theranos machine would be ideal in locations without doctors, such as on board ships or in remote battlefields. “I did not want to miss an opportunity,” he said, urging the military to test the device. “I wanted a comparative study on Theranos from day one so we could bring it online.”
Board membership
Mattis was soon asked to joined the company’s board, and he said he stopped lobbying the military at that time. When he joined, he also invested $85,000 in the company “to have skin in the game,” adding that the amount was significant for someone who had been in government service as long as he had. (When cross-examined by Holmes’s attorney, he misremembered his board salary as $50,000 rather than the $150,000 reflected in Theranos documents—an amount far larger than his initial investment.)
Ultimately, Theranos’s machine never was approved for use by the military after the Army health regulatory body determined that it didn’t meet the requirements of the program. The unit was concerned that it hadn’t received FDA approval.
Mattis told the court that he had assumed Theranos’s Edison device was performing the hundreds of tests the company advertised. Had he known the truth—that Theranos was using third-party equipment for all but a dozen or so tests—it “would have tempered my enthusiasm.”“I thought all along that we were doing it on Theranos’ gear,” he said. Under cross examination by the defense, Mattis said, “I assumed it would be more than a handful of tests or it would be useless to us [the military]."
During his time on the board, Mattis said that it was clear that “Ms. Holmes was in charge.” While Ramesh “Sunny” Balwani, who served as Theranos’s president and chief operating officer, would occasionally give financial forecasts, Mattis said that there were board meetings where Balwani was absent.
Mattis resigned from the board in 2016 when he was nominated by former President Trump to head the Department of Defense.
“Total confidence”
Around the time of Mattis’s involvement, Holmes was laying out details of her personal strategy with her business partner and then-boyfriend Ramesh “Sunny” Balwani in a string of texts that read like a pre-game hype speech. CNBC obtained the messages and hundreds others, though it didn’t reveal the source.
“My new life as of this night and forever more: - total confidence in myself best business person of the year – focus – details excellence – don’t give what anyone thinks – engage employees in meetings by stories and making it about them (ie prepare well),” Holmes told Balwani in November 2014.
After waiting ten minutes for a reply, Holmes asked Balwani, “No response?” He then replied “Awesome. U r listening and paying attention…”
Later that month, Holmes updated Balwani on investment prospects, saying she “just finished calls” with Alice Walton of the Walmart family and another man named Greg, who committed to invest $50 million and $100 million in the company. She also said, “Rupert over 100,” a reference to Rupert Murdoch, who would go on to invest $125 million.
“Can’t wait to learn more about conversation with Rupert,” Balwani replied. Holmes said, “He would have met longer.”
In April 2015, Holmes and Balwani messaged each other about an upcoming trip to Las Vegas, which came at a time when Theranos lost its lab director and was under increasing pressure to deliver. “The Vegas trip is such a distraction. Bad timing,” Balwani said. “But the guys bought everything non refundable. So we will do it. But then I don’t want distractions until we win.”Though the messages don’t reveal details about the reservations or who paid for them, Holmes' brother, Christian, had texted her about possible options. “Not sure if these are options but from dan : presidential suite at four seasons $3k,mandarin apex suite view of strip $3400 or presidential $15k, or encore junior suite $700 view of golf course.”
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