- Dermatologist Sunil Dhawan and former Walgreens executive Nimesh Jhaveri were among the prosecution witnesses against the Palo Alto-based private health care and life sciences company.
Sunil Dhawan, a dermatologist who became Theranos’ lab director in 2014, and Nimesh Jhaveri, former Walgreens executive, took the stand last week in the ongoing trial of Theranos Inc. founder and CEO Elizabeth Holmes, who’s facing several fraud charges in a federal court in San Jose, California. Holmes, now 37, had founded Theranos Inc., in 2003 as a 19-year-old college dropout and was hailed and celebrated as a Silicon Valley whiz-kid. Also charged is Ramesh “Sunny” Balwani, 56, Holmes’ ex-boyfriend, and former president and COO of Theranos Inc. He faces similar charges in a separate trial scheduled for next year.
Dhawan testified on Oct. 14 that he took up the job as lab director at the insistence of his patient Balwani, who was then the president of the Palo Alto-based private health care and life sciences company. According to news reports, Dhawan told the court that Balwani assured him that the job required “minimal” commitment. A November 2014 email was also shared in the court, where Balwani had mentioned that Dhawan’s role at the company “will be mostly an on-call consulting role,” news reports said. Dhawan also told the court that he had met the federal and state requirements to be a lab director. He admitted that at the time of Balwani’s offer, he didn’t know much about Theranos Inc. and that he conducted a Google search to find out about the company’s technology. He told the court that he’d just had “one short conversation about it,” with Balwani.
Talking about his role in the company, Dhawan testified that between November 2014 and the summer of 2015, ‘he only went to the lab twice and worked a total of five to 10 hours,” news reports said. During an audit in September 2015, Dhawan said he “served in a largely figurehead role,” CNBC reported. Gradually, the work “tailed off,” and Dhawan said he was never officially told when his position as lab director ended, the CNBC report said. He told jurors that he never met any employees, physicians or patients. And while his contract called for him to be paid $5,000 a month, Dhawan said he “never cashed any of the checks, and at one point asked to be paid in stock options instead.”
Dhawan was hired to replace Adam Rosendorff, who quit in 2014, “amid mounting frustrations about the inaccuracies and false results of the blood tests,” CNBC reported. “Unlike Dhawan, Rosendorff was a board-certified pathologist who spent every day inside the lab.”
Earlier on Oct. 14, Jhaveri spoke about the company’s relationship with Walgreens. He told the court that Walgreens’ goal in its partnership with Theranos “was to allow customers to get their lab results with just a few drops of blood,” the Wall Street Journal reported. “Providing a more efficient and less painful process than traditional labs would be “extraordinary,” the Journal quoted Jhaveri as saying. “It was changing the lab environment,” he said. “Less blood required was the actual magic, it was so intriguing to us at Walgreens.”
Citing testimony by former Walgreens chief financial officer Wade Miquelon, The Mercury News reported that Walgreens invested $140 million into Theranos Inc. Clinics with the blood-testing technology were rolled out to 40 drugstores in Arizona and one in California. In August 2014, a year into the partnership, Walgreens cut its rollout goal of 500 Theranos wellness centers to 200.
“Cost was an obstacle, training our team members was an obstacle, hiring phlebotomists was an obstacle,” Jhaveri said. “The entire operating model was not perfected so that’s why we decided to reduce the number.” He said he told Balwani “they needed to have a detailed plan to improve patient experience if they planned to expand.” he admitted to having had “minimal contact with Holmes, meeting with her only two or three times,” the Wall Street Journal said.
Jhaveri said Walgreens took “a step back” when former Wall Street Journal reporter John Carreyrou first broke the story that Theranos was misleading customers and investors about its testing accuracy. In 2016, the drug store chain began pulling the plug on Theranos services inside its drugstores, finally ended the Theranos partnership and sued Theranos, ultimately reaching a tentative settlement for less than $30 million, the Wall Street Journal reported in 2017,
Several former employees of Theranos Inc. have testified since the trial began last month, including Indian American chemist Surekha Gangakhedkar, a former manager of assay systems, and per a report in The Verge, “her job was preparing blood tests for use in patients.” Gangakhedkar told the court that Holmes would bully, pressurize, deceive and intimidate her employees. She said during her testimony that Holmes pushed her to validate test results of the company’s Edison 3.0 and 3.5 machines, despite their accuracy. She then described how after returning from a vacation in August 2013 she found out that Theranos was about to launch its Edison blood-testing devices in Walgreens stores despite there being basic errors in the machine’s operation. “I was very stressed and unhappy and concerned with the way the launch was going,” news reports quoted Gangakhedkar telling the court. “I was not comfortable with the plans that they had in place so I made a decision to resign and not continue working there.” After spending eight years in the company, Gangakhedkar resigned in September 2013. Per her LinkedIn page, she currently works at molecular diagnostics company Cepheid.
Holmes and Balwani were originally charged in June 2018 on two counts of conspiracy to commit wire fraud and nine counts of wire fraud. According to the indictment unsealed on June 15, 2018, Holmes and Balwani had engaged in a multi-million dollar scheme to defraud investors and a separate scheme to defraud doctors and patients, and both schemes entailed promotion. If convicted, each of them could face 20 years in prison and fines of $250,000, plus restitution, for each count of wire fraud and for each conspiracy count. The trial has been delayed multiple times by the COVID-19 pandemic and by the birth of Holmes’ child on July 10 of this year.