SAN JOSE, Calif. — A key whistle-blower against Theranos, the blood testing start-up that collapsed under scandal in 2018, testified on Tuesday in the fraud trial of the company’s founder, Elizabeth Holmes.
The whistle-blower, Erika Cheung, worked as a lab assistant at Theranos for six months in 2013 and 2014 before reporting lab testing problems at the company to federal agents at the Centers for Medicare & Medicaid Services in 2015. Her first day of testimony revealed to a jury what those following the Theranos saga most likely already knew: The company’s celebrated blood testing technology did not work.
In a crowded courtroom, Ms. Cheung said she had turned down other job offers out of college to join Theranos because she was dazzled by Ms. Holmes’s charisma and inspired by her success as a woman in technology. Ms. Holmes said Theranos’s machines, called Edison, would be able to quickly and cheaply discern whether people had a variety of health ailments using just a few drops of blood.
“She was very articulate and had a strong sense of conviction about her mission,” Ms. Cheung said of Ms. Holmes.
But Ms. Cheung’s excitement faded after she witnessed actions she disagreed with in Theranos’s lab, she said. In some cases, outlier results of the blood tests were deleted to ensure that Theranos’s technology passed quality control tests. Ms. Cheung was also alarmed when she donated her own blood to Theranos and tests on the company’s machines said she had a vitamin D deficiency but traditional tests did not, she testified.
Ms. Cheung, who viewed a menu of around 90 blood tests offered by Theranos, said that despite Ms. Holmes’s promises about the Edison machines, they could process only a handful of the tests listed. The rest had to be done by traditional blood analyzers or sent out to a diagnostic company, she said.
Ultimately, Ms. Cheung resigned over her misgivings about Theranos’s testing services.
“I was uncomfortable processing patient samples,” she said. “I did not think the technology we were using was adequate enough to be engaging in that behavior.”
During Ms. Cheung’s testimony, Ms. Holmes’s lawyers objected to a wide variety of emails and other internal communications submitted by the prosecution as evidence. The two sides sparred over the rules of the arguments that could be used and the relevance of Ms. Cheung’s testimony.
“The C.E.O. is not responsible for every communication that happens within a company,” said Lance Wade, a lawyer representing Ms. Holmes.
John Bostic, a prosecutor and an assistant U.S. attorney, argued that documents showing Theranos’s internal issues were relevant to the case, regardless of whether Ms. Holmes’s name was on them.
Mr. Wade countered that Ms. Cheung had been an entry-level employee and hardly interacted with Ms. Holmes.
“To the best of our knowledge, the interview you just heard was the longest conversation she ever had with our client,” he said.
Through it all, Ms. Holmes sat quietly in a gray blazer and black dress, watching the proceedings from behind a medical mask.
Ms. Cheung’s 2015 letter to the Centers for Medicare & Medicaid Services outlining problems with Theranos’s testing triggered a surprise inspection by the agency that led the company to close its labs. Tyler Schultz, another young employee in Theranos’s lab, also shared details about the lab problems with The Wall Street Journal, which published exposés of the company. Mr. Schultz is also listed as a potential witness in the trial.
Since her role in Theranos’s demise, Ms. Cheung has become an advocate for ethics in technology. She has delivered a TED Talk about speaking truth to power and helped found Ethics in Entrepreneurship, a nonprofit that provides ethics training and workshops to start-up founders, workers and investors.
