Angry Texans who lost $ 1.2 million Theranos investment light up Holme’s lawsuit

Elizabeth Holmes, founder and former CEO of Theranos, arrives for hearing Monday, November 4, 2019 at the U.S. District Courthouse in San Jose, California.
Enlarge / Elizabeth Holmes, founder and former CEO of Theranos, arrives for hearing Monday, November 4, 2019 at the U.S. District Courthouse in San Jose, California.

On Monday, during the trial of Elizabeth Holmes, Theranos investor Alan Eisenman entered the courtroom, holding an envelope filled with his personal notes in the air. He had not wanted to extradite them, but the defense had summoned them. Here, take them, he seemed to say.

It was just one of many theatrical moments that Eisenman would deliver on a short day of testimony in San Jose, California. Eisenman invested about $ 1.2 million in the startup, only to see his money disappear when the company went into the air in 2018. His investment lies behind one of the cases of wire fraud that Holmes is exposed to. But as the court heard, Eisenman had ample opportunity to disburse money.

His first chance was in 2010, when Holmes offered to pay him at least five times his initial investment to buy back his shares. In 2015, he had two more chances: Eisenman spoke to people at SharesPost, a private equity stock trading market, who said he could probably sell for $ 14.75, which would give him at least $ 20 million. Also in 2015, he was contacted by Chris Boies, son of Therano’s attorney and board member David Boies, who offered to pay $ 15 per share.

Holmes defense attorney Kevin Downey asked in cross-examination Eisenman how much money he could have made if he had sold. Eisenman did not kindly accept the question. “How is that relevant?” he asked.

In a redirect, Assistant U.S. Attorney John Bostic asked Eisenman what his understanding was of what his shares are worth today. “It’s not an understanding, it’s a conclusion. It’s worth zero,” Eisenman said.

Still, three years before Theranos was dissolved, Eisenman had the opportunity to pay out a return of about 2,000 percent. So why did he not do it?

Seeking information

Eisenman claimed that he could not make an informed decision and that he did not receive sufficient information from Holmes, COO Ramesh “Sunny” Balwani or any other person associated with Theranos. Part of his animus seems to stem from the fact that Eisenman, after his first investment, said he had several years of personal updates from Holmes himself. But then they stopped.

When Eisenman stopped receiving personal updates, he became concerned and peppered executives and the chairman of the board with requests for more details. People at Theranos did not take it well. In an email, Holmes claimed he had “harassed our president.” (At the witness stand, Eisenman said this was a “total misrepresentation.”) Eisenman even tried to get more details from Therano’s board member and former senator Bill Frist, who knew his father-in-law, Joel Gordon, a wealthy Tennessee politician. donor.

Downey pointed out that Eisenman’s 2013 contract said his investment was “highly speculative.” “I agree it’s a boiler plate,” Eisenman said. “Everyone signs it.” He added that it “contradicts everything I understood at this point” and that he felt he had no choice but to sign it.

“The company did not put a gun to your head and make you invest, did you?” asked Downey.

“Excuse me?” said Eisenman. “I do not understand the question.” He eventually admitted that he thought the “very speculative” part of the contract was meaningless.

Eisenman’s difficult exchanges with the defense were a theme of the day. In another case, Judge Edward Davila asked him if he heard Downey’s questions. “I heard it. But it’s misleading, I’m sorry,” Eisenman said.

And so it went, with Downey asking questions, and Eisenman often talked about the defense attorney or came up with his thoughts outside the scope of the question. After quoting one of the investor’s comments from the journal, Davila Eisenman recalled: “Lawyers must ask the questions and it is your privilege to answer them.”

At the cross-examination, Downey revealed that Eisenman did not obey a court order during the long weekend stay. By the end of Wednesday’s session, Eisenman was free to return to Texas on condition that he did not speak to anyone about the trial. But within 15 hours of leaving court, Eisenman sent an email to prosecutors with “some considerations” over his testimony, prompting him to make a phone call from an FBI agent telling him to turn it off. Still, Eisenman sent them again the next day (about travel arrangements, he said), forcing Bostic to call and repeat the order. The defense used these emails, coupled with his prayers to Theranos executives, to paint the investor as a guy who does not know when to let things lie.

Why not sell?

Eisenman never seemed to answer the question of why he would not sell in 2015, but “greed” is a possible cause. Eisenman said he felt his shares were worth “well above” the highest bid he received. “We had no financial information to make a rational decision,” he told the court of his decision not to sell.

Still, even with a lack of information, it’s hard to imagine anyone accusing him of having paid out when he was up over twenty times. But he did not, and as the old saying goes, “pigs get fat, pigs get slaughtered.”

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