Angry Texan who lost $1.2 million Theranos investment lights up Holmes trial


Elizabeth Holmes, founder and former CEO of Theranos, arrives for motion hearing on Monday, November 4, 2019, at the US District Courthouse in San Jose, California.
Enlarge / Elizabeth Holmes, founder and former CEO of Theranos, arrives for movement listening to on Monday, November 4, 2019, on the US District Courthouse in San Jose, California.

On Monday, on the legal trial of Elizabeth Holmes, Theranos investor Alan Eisenman walked into the courtroom and held aloft an enveloped stuffed along with his private notes. He hadn’t needed handy them over, however the protection had subpoenaed them. Here, take them, he gave the impression to be saying.

It was simply one among many theatrical moments Eisenman would ship in a short day of testimony in San Jose, California. Eisenman invested round $1.2 million within the startup solely to see his cash vanish when the corporate went belly-up in 2018. His investment is behind one of many counts of wire fraud that Holmes is dealing with. But because the court docket heard, Eisenman had loads of alternative to money out.

His first probability was in 2010, when Holmes offered to pay him at least five times his initial investment to purchase again his shares. In 2015, he had two extra possibilities: Eisenman spoke with folks at SharesPost, a marketplace for buying and selling shares in personal corporations, who stated he might in all probability promote for $14.75, which might internet him at the least $20 million. Also in 2015, he was approached by Chris Boies, the son of Theranos legal professional and board director David Boies, who supplied to pay $15 per share.

Holmes protection legal professional Kevin Downey, in cross-examination, requested Eisenman how a lot cash he might have made if he had bought. Eisenman didn’t take kindly to the query. “How is that relevant?” he asked. 

In redirect, assistant US legal professional John Bostic requested Eisenman what his understanding was of what his shares are value as we speak. “It’s not an understanding, it’s a conclusion. It’s worth zero,” Eisenman stated.

Yet, three years earlier than Theranos was dissolved, Eisenman had a chance to money out at round a 2,000 p.c return. So why didn’t he?

Seeking data

Eisenman claimed that he couldn’t make an knowledgeable resolution and that he wasn’t getting enough data from Holmes, COO Ramesh “Sunny” Balwani, or another particular person affiliated with Theranos. Part of his animus seems to stem from the truth that, after his preliminary investment, Eisenman stated he had a number of years’ value of non-public updates from Holmes herself. But then they stopped. 

When Eisenman stopped receiving private updates, he grew involved and peppered executives and the board chairman with requests for extra element. People at Theranos didn’t take it nicely. In an electronic mail, Holmes claimed that he had been “harassing our chairman.” (On the witness stand Eisenman stated this was a “total mischaracterization.”) Eisenman even tried to get extra particulars from Theranos board member and former Sen. Bill Frist, who knew his father-in-law, Joel Gordon, a rich Tennessee political donor.

Downey identified that Eisenman’s contract in 2013 stated that his investment was “highly speculative.” “I would agree it’s boilerplate,” Eisenman stated. “Everybody signs it.” He added that it “contradicts everything I understood at this point of time” and that he felt he had no selection however to signal it. 

“The company didn’t put a gun to your head and make you invest, did they?” Downey requested.

“Excuse me?” Eisenman stated. “I don’t understand the question.” He ultimately admitted that he thought the “highly speculative” a part of the contract was meaningless.

Eisenman’s testy exchanges with the protection had been a theme of the day. In one other occasion, Judge Edward Davila requested him if he heard Downey’s query. “I did hear it. But it’s misleading, I’m sorry,” Eisenman stated.

And so it went, with Downey asking questions and Eisenman continuously speaking over the protection legal professional or providing his ideas past the scope of the query. After placing one of many investor’s feedback from the document, Davila reminded Eisenman, “The lawyers get to ask the questions, and it’s your privilege to answer them.”

In cross-examination, Downey revealed that Eisenman disobeyed a court docket order over the lengthy weekend break. At the tip of Wednesday’s session, Eisenman was free to return residence to Texas on the situation that he not communicate to anybody concerning the trial. But inside 15 hours of leaving the court docket, Eisenman emailed prosecutors “some reflections” on his testimony, which received him a cellphone name from an FBI agent telling him to knock it off. Yet, the following day, Eisenman emailed them once more (about journey preparations, he stated), which compelled Bostic to name and repeat the order. The protection used these emails, juxtaposed along with his entreaties to Theranos executives, to color the investor as a man who doesn’t know when to let issues lie.

Why not promote?

Eisenman by no means appeared to reply the query of why he wouldn’t promote in 2015, however “greed” is a doable motive. Eisenman stated that he felt his shares had been value “well in excess” of the very best provide he acquired. “We had no financial information to make a rational decision,” he informed the court docket about his resolution to not promote. 

Still, even with the dearth of data, it’s onerous to think about anybody faulting him for cashing out when he was up over twenty-fold. But he didn’t, and because the outdated saying goes, “pigs get fat, hogs get slaughtered.”

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