But the pitch by Holmes to the DeVos family in 2014 was so strong that the family doubled its initial $50 million investment to $100 million, according to court testimony.
“She was inviting us to participate in this opportunity,” Peterson said of Holmes, according to the testimony. Peterson added of Theranos’s technology: “They were telling us that it worked. We relied on what they told us.”
Peterson’s testimony came in the eighth week of Holmes’s trial, which has outlined the spectacular rise and fall of a health start-up founder who once promised to revolutionize blood testing.
Holmes, 37, is charged with 12 counts of wire fraud and conspiracy to commit wire fraud. If convicted, she faces up to 20 years in prison. She has pleaded not guilty and said she acted in good faith while running the company. In court documents before the trial began, her defense team accused her former boyfriend, Ramesh “Sunny” Balwani, who was Theranos’s chief operating officer at the time, of abusing and controlling her. Balwani, 56, has denied the claims, and Holmes’s defense team has not brought them up during the trial. Balwani, who has also pleaded not guilty, faces a separate trial in 2022.
A Justice Department representative speaking on behalf of Assistant U.S. Attorney Robert Leach said the agency had no comment. Lance Wade, a lawyer for Holmes, did not immediately respond to requests for comment early Wednesday. A spokesman for the DeVos family’s office did not immediately respond to a request for comment.
Holmes told the Securities and Exchange Commission in an interview years ago that she sought out investors such as the DeVos family because of her belief that they would support keeping Theranos a private company, according to the Journal. The DeVos family fortune comes from Amway, the multilevel marketing company founded by the family’s patriarch in the 1950s. In 2016, Betsy DeVos was named education secretary under President Donald Trump, despite never having held public office.
In addition to the DeVoses, Holmes mentioned investors such as the Walton family, which has more than 50 percent of Walmart shares and invested $150 million in Theranos, and the conservative media executive Rupert Murdoch, who owns News Corp and put $125 million into the company.
In total, investors put more than $900 million into Theranos.
“We were looking for family-owned businesses or family-controlled companies and leadership who wanted to invest in something for the really long term,” Holmes said in a 2017 court deposition.
Holmes approached the DeVos family in 2014, appealing to them by saying the blood-testing devices could be used in places such as military helicopters and refugee camps, Peterson testified. She noted that Holmes told the family that Theranos could run 200 to 300 tests through the company’s homegrown technology using only a tiny amount of blood. Peterson asked to work on the Theranos deal because she was “intrigued” by what it potentially meant to the health-care industry.
“This was going to be a game-changer for health care,” Peterson testified, according to CNBC.
The jury was given an email sent by RDV chief executive Jerry Tubergen to the DeVos family in September 2014, according to the Journal. In the email, Tubergen included a cover story on Holmes. “This morning I had one of the most interesting meetings I can recall with the woman profiled in the attached Fortune magazine article,” he wrote.
But, unbeknown to the DeVos family, Peterson said, Theranos was using third-party systems for its testing. When Leach asked Peterson whether Holmes mentioned that most of the company’s testing was done on third-party machines, the DeVos family office’s representative said no.
“Would that have mattered to you?” Leach asked.
“Yes,” Peterson replied.
Peterson told jurors Tuesday that Theranos shared financial projections suggesting the company not only was in healthy financial shape but also was prepared for a significant jump in revenue. She testified that the company projected revenue of $140 million in 2014 with a leap to $990 million in 2015. The DeVos family was unaware that Theranos had no revenue in 2012 and 2013, Peterson said.
She acknowledged during Wade’s cross-examination that RDV did not hire regulatory experts, counsel or medical experts in its due diligence process because RDV did not think they were needed.
Holmes did not stop misleading investors or the public after the DeVos family made its investment, Peterson testified. In court, prosecutors played clips from a 2015 interview of Holmes by CNBC’s Jim Cramer after a scathing investigation by the Journal on the faults in Theranos’s technology. The Journal said that Holmes was running a workplace in which employees were afraid to voice concerns about serious issues and were discouraged from working with other teams.
“This is what happens when you work to change things,” she said in the 2015 interview on CNBC. “First they think you’re crazy, then they fight you, and then all of a sudden you change the world.”
Prosecutors played another clip from a 2016 interview on NBC’s “Today” show in which Holmes said, “Anything that happens in this company is my responsibility at the end of the day.”
After that 2016 interview, Peterson said she met with Holmes for the first time since the DeVos family’s investment to ask a straightforward question: “What’s going on?”
″[Holmes] very much downplayed what had been happening in the press,” Peterson said, according to CNBC. “Much of the correspondence we had received from the company was downplaying what we had seen in the news.”
Holmes’s trial is expected to continue until late this year.
Rachel Lerman contributed to this report.