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Disgraced Theranos founder Elizabeth Holmes won a courtroom skirmish this week in a months-long battle over access to government documents in the federal criminal fraud and conspiracy case against her.
A lawyer for Holmes had on Monday faced off in federal court in San Jose against prosecutors and lawyers from government agencies, asking the judge to force the prosecution to obtain documents from the Food and Drug Administration and Centers for Medicare & Medicaid Services, which had exerted regulatory authority over Theranos before it went under late last year.
That federal agencies have not produced all the documents sought by the defense is “a major potential issue in the case,” Holmes lawyer Lance Wade told the court Monday.
U.S. attorney John Bostic argued that U.S. Department of Justice prosecutors such as himself were not empowered to obtain any document they asked for from federal agencies, and that prosecutors couldn’t be compelled by a court to produce all the documents the defense wanted because they didn’t have access to them.
Also, a lawyer for Holmes’ co-defendant, former Theranos president Sunny Balwani, asked for a court order forcing the FDA to use additional search terms — including “finger stick” and “nanotainer” — to comb its records for evidence related to Holmes’ defunct Palo Alto blood-testing startup.
Prosecutors allege Holmes and Balwani claimed their “miniLab” system could use a “nanotainer” containing a few drops of blood from a finger-prick to quickly conduct a full range of tests, when in fact the machine had accuracy and reliability problems, performed limited tests, and was slower than some competing devices.
On Tuesday, judge Edward Davila ruled in favor of Holmes and Balwani. The judge agreed with the defense that the Justice Department’s previous successes in working with the agencies to produce evidentiary documents showed that prosecutors can get their hands on agency materials.
“The court finds that the Prosecution has knowledge of and access to the at-issue documents,” Davila wrote in his decision. He further ordered prosecutors to “assist the Agencies however possible to ensure the timely production of documents.”
Davila also ordered the FDA to search its records using the six terms requested by Balwani’s lawyer, which also included “Laboratory Developed Test” and “Theranos.”
The defense, Davila noted, is seeking documents that include correspondence about Theranos between the government and John Carreyrou, the Wall Street Journal investigative reporter who broke the news of Theranos’ alleged fraud and who followed up with the book Bad Blood, a scathing indictment of Holmes. Also sought by the defense are government materials concerning Theranos’ compliance with laboratory regulations, and materials regarding “the FDA’s determination of the type of FDA approval required for Theranos’ proprietary technology,” Davila wrote.
The judge set a hard deadline of December 31 for production of the agencies’ materials, after saying Monday that he would not “disturb” the summer 2020 start date for the trial. “Defendants point out that the court initially ordered the Agencies to complete their document productions by October 2, 2019 and extended the deadline to October 25, 2019, but neither agency has completed their production,” Davila noted.
Davila also addressed a complaint by the defense that more than 1,000 emails from an FDA witness were missing substantial portions of their contents, a problem an FDA lawyer attributed to corrupted files, and addressed another defense complaint that the FDA and Centers for Medicare & Medicaid had failed to produce some hard-copy documents.
“The court orders that the Agencies shall continue their investigations of these issues and shall disclose the procedures and results of their investigations to the parties no later than November 26,” Davila wrote.
Holmes and Balwani, charged with 11 criminal counts of fraud and conspiracy, face maximum penalties of 20 years in prison and a $2.75 million fine, plus possible restitution, the Department of Justice has said.
Holmes last year was fined $500,000 by the Securities and Exchange Commission, which alleged she had committed a “massive fraud” that saw investors pour $700 million into Theranos, which Stanford University dropout Holmes founded in 2003. Under the settlement with the SEC — in which Holmes didn’t admit to or deny the agency’s allegations — she was banned from serving as an officer or director of a public company for the next 10 years.
Davila has set Aug. 4 for the start of the trial, with jury selection to begin July 28
