Another investor joined the ranks of seasoned financial experts who testified in the fraud trial against Theranos founder and CEO Elizabeth Holmes that they believed the company successfully ran dozens of functional, accurate, and life-saving blood tests when they decided to pay millions of dollars to invest.
Christopher Lucas, managing director of Black Diamond Ventures (BDV), told the judges on Thursday that his company invested $ 5,349,900 in Theranos in December 2013, more than doubling from its initial investment in 2006.
At the time of the 2013 investment, Lucas believed that the Theranos analyzers could perform “a high percentage” – “at least dozen” – of the most popular blood tests and that there were no “accuracy or reliability issues” with the tests or equipment.
He said he understood that the technology was being used by the US military and had an impact on the “survival rate of people in the field.”
Previous witnesses have testified that the Theranos devices never performed more than 12 types of tests; that the test results were inconsistent and did not match the results of conventional testing methods; and that the military never used Theranos technology on their staff.
Lucas testified that Holmes was the primary source of the information used in the 2013 investment decision.
Under cross-examination by Holmes’ lawyers, Lucas admitted that Holmes and Theranos had sent him written disclosures about the risks before his company made its first investment in 2006. He agreed that there is always the risk that technology will not develop as quickly as expected; like renovating a kitchen, “takes longer and costs more than you think.”
He also admitted that he had “failed” “normal” due diligence on the Theranos investment and made the $ 5,349,900 commitment without receiving the company’s financial statements.
He said he was happy with the deal because he thought Holmes was “articulate”, “passionate” and “intelligent” and “on a mission to bring technology to the world that would be very helpful”.
Holmes has been charged with referral fraud and referral fraud conspiracy on 12 counts for making false and misleading statements about Theranos blood testing technology to investors, doctors and patients. If convicted, she faces up to 20 years’ imprisonment and a $ 3 million fine.
The BDV investment is the basis for one of 12 transfer fraud counts in the indictment, each of which must be substantiated by evidence of an international telephone call or electronic communication such as the transfer sent by the BDV.
The number of indictments may be reduced to 11 based on an order issued by US District Judge Edward Davila on Wednesday prohibiting prosecutors from producing the testimony of a witness identified only as “Patient-Victim BB”.
In the preliminary proceedings, Davila asked the government to inform the defense exactly which tests “the government claims that Theranos was not able to consistently produce”. Since the type of blood test BB performed was not on that list, the judge granted a defense request to exclude any testimony from BB about the experience.
A phone call between Patient BB and Theranos about the test forms the basis for another charge of wire fraud in the indictment, which means the lack of evidence charge could be dismissed before or after the case gets to the jury.
The process will continue on Tuesday.