We have done ‘at least 100 hours’ of diligence on Theranos

Elizabeth Holmes, founder of Theranos Inc., arrives in federal court in San Jose, California on Tuesday, October 12, 2021.

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SAN JOSE, CALIF. – Former Safeway CEO Steve Burd said Tuesday that his company knew it was taking a risk by partnering with blood testing startup Theranos, and he admitted that a deal would have been good for the grocery chain’s share price .

On his second day testifying in the fraud trial against Theranos founder Elizabeth Holmes, Burd told jury that Safeway conducted a thorough independent investigation into the company’s claims about its technology prior to signing an agreement in 2010.

The nearly $ 400 million transaction resulted in 969 Safeway stores being remodeled in preparation for the blood testing machines. Safeway ended its partnership with Theranos in 2015, two years after Burd retired.

While Burd was summoned as a witness by prosecutors, defense attorney Kevin Downey, who represents Holmes, confronted the ex-CEO over what he knew about Theranos when he closed the deal.

“You knew then that she was a very young entrepreneur?” Downey said, referring to Holmes, who was in her 20s at the time. “Right,” replied Burd.

Downey continued, “Is it fair to say that Safeway did hundreds of hours of due diligence while the deal was signed?”

“At least 100,” said Burd, adding that he was “personally responsible” for executing the agreement.

Holmes rose to fame in Silicon Valley when he developed technology that promised hundreds of diagnostic tests with just one prick of blood. But Theranos never realized those aspirations, and Holmes is now being charged with fraud and conspiracy in 12 cases related to misleading investors and patients. She pleaded not guilty.

During the opening speech, defense attorney Lance Wade told jurors that running a failed startup doesn’t make them a criminal, despite a few mistakes. Holmes faces up to 20 years imprisonment if convicted.

With Burd on the stand, the defense sought to show that Safeway, a huge national chain, had not been betrayed in their negotiations.

“You would have communicated with Theranos almost every day for over a year,” Downey told Burd. The witness replied, “We were on a parallel path to close the deal and do the due diligence.”

Theranos had never made its devices available in a physical store. She later announced a partnership with Walgreens, which also flopped.

A person enters a Walgreens store in San Francisco, California, United States on Tuesday, April 13, 2021.

David Paul Morris | Bloomberg | Getty Images

“So you understood that Safeway, or Walgreens, or any of the other companies you spoke to, this was going to be their first consumer-based deployment of technology, right?” Downey asked. “So you understood that you never scaled this technology on a large scale, right?”

“I knew they didn’t have a lot of customers,” said Burd.

Downey also pointed out Safeway’s own challenges. The company’s share price had fallen from $ 19 in January 2012 to $ 14 in July that year as Safeway and Theranos worked to get the devices working.

“Did you text or otherwise communicate with Ms. Holmes and tell her that if you could announce the launch of a Theranos product in Safeway stores you thought Safeway’s share price would improve?” Downey asked. Burd testified that he couldn’t remember saying so, but agreed that Safeway’s stock would have risen if the launch had happened.

Some of Burd’s emails from this time in 2012 were read in court, showing his growing frustration with Theranos.

In one of his emails to Holmes, Burd wrote in the subject line: “Be discouraged”. He said: “I am one of the most positive people you will ever meet, I will not be discouraged.”

Burd also told jurors that Safeway was conducting trial tests with employees who worked on the company campus. However, the tests were inaccurate.

“I think whenever you start something new you will have some bumpy spots, but we still have bumpy spots,” said Burd. “We had samples that were lost, we had results that didn’t make sense.”

Wade Miquelon, former Walgreens chief financial officer, took the stand late Tuesday. He testified about a series of meetings he had with Holmes and her top manager Ramesh “Sunny” Balwani in 2010.

“This has been one of the most exciting companies we’ve seen, not just in the lab but in general,” said Miquelon, adding, “We were very excited to partner with them.”

Walgreens had over 40 Theranos blood testing centers in its stores at one point. Miquelon’s testimony continues on Wednesday.

SEE: Further details emerge in the Theranos Process


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