CEO SUMMARY: THE DARK REPORT has learned – before any other lab news resource – that in the latest in a long line of Theranos news stories, the U.S. Attorney is making statements about the potential for addition criminal charges to be brought in the case beyond those filed against CEO Elizabeth Holmes and former COO Ramesh “Sunny” Balwani. Who else could be in the crosshairs? Former members of the Theranos Board of Directors? Legal and accounting consultants? Even companies that supplied instruments and other products to Theranos and did not alert authorities to illegal practices in how the lab instruments were used or how the lab tested specimens could be next.
More criminal charges may be coming in the criminal case the U.S. Department of Justice is bringing against Theranos Inc. Recent reporting also reveals new details about the financial problems that caused the failure of Theranos.
The possibility of additional criminal charges surfaced during a hearing at the U.S. District Court for the Northern District of California on Oct. 12. That is when federal prosecutors in the case against the blood-testing company said the case is broader than what has been disclosed publicly to date. In June’s Theranos news development, the DOJ filed criminal fraud charges against former Theranos Founder and CEO Elizabeth Holmes and against former company President Ramesh “Sunny” Balwani.
In June, a grand jury returned an indictment charging Holmes and Balwani with two counts each of conspiracy to commit wire fraud and nine counts each of wire fraud. (See TDR, June 18, 2018.) During that same hearing in court in San Jose, Calif., Holmes and Balwani sought to block the DOJ from going through more than 200,000 company documents. However, U.S. Magistrate Judge Susan van Keulen denied that request, according to reporting from Joel Rosenblatt of Bloomberg News.
Van Keulen ordered lawyers for both sides to find a way to review the documents while protecting confidential information from prosecutors. In her order, van Keulen referred to undisclosed “charges and activities” in the government’s broad, ongoing investigation of Theranos. This suggests the government’s case may extend beyond the activities of Holmes and Balwani.
Assistant U.S. Attorney John C. Bostic described the government’s request for the documents as part of an ongoing investigation. He also said the indictment of Holmes and Balwani in June was “just an event in the ongoing investigation” and not the end of the investigation, Rosenblatt added.
During the hearing, Bostic said, “This story is bigger than what’s captured in the indictment.” Although the DOJ does not yet have particular targets, Bostic added that the indictment “doesn’t capture all the criminal conduct” the investigation has uncovered, Rosenblatt wrote in Bloomberg’s latest Theranos news report.
“The ruling could give prosecutors additional leverage at trial or in any plea deal, including any potential agreement by one defendant of the former couple to aid the prosecution of the other,” Rosenblatt wrote.
Attorney Jeffrey B. Coopersmith, a lawyer for Balwani, spoke for both defendants when he charged that the government was abusing its investigative powers by using the grand jury to make demands for information months after the indictment was filed on June 14.
During the hearing on Oct. 12, the two sides sparred over more than 200,000 pages of Theranos’ documents and e-mails from 2016 to 2017, he added.
Van Keulen asked the lawyers to work out a way to review the documents while shielding protected information from prosecutors – and denied the defense’s motion to limit the grand jury.
“As explained by the government at the hearing, and as evident from the record in this case, the government’s investigation concerning Theranos is far-reaching, extends beyond the subject matter of the current indictments, and may extend beyond these defendants,” Judge van Keulen wrote. The scope of the grand jury’s investigation includes charges and activities that are not the subject of the Holmes and Balwani indictment, she added. Therefore, she allowed the government to continue to use the grand jury.
“These facts support a finding that the subpoena and the government’s continuing efforts to enforce the subpoena after the original and superseding indictments are proper,” Judge van Keulen added. “Defendants make much of the fact that the grand jury issued a superseding indictment in September 2018. However, defendants have failed to demonstrate that the timing of the relevant events renders the government’s ongoing efforts to enforce the Theranos subpoena improper.”
Developing Theranos News
According to Rosenblatt, among the more than 200,000 pages that the two parties will review are contracts Theranos had with dozens of companies and institutions, including:
- GlaxoSmithKline Plc
- Pfizer Inc.
- Celegene Inc.
- Novartis AG
- Bristol-Myers Squibb Co.
- Merck and Co.
- AstraZeneca Plc
- The Mayo Clinic
- Stanford University
- Johns Hopkins University
Who else do you think might be found to have committed crimes in relation to Theranos? Please share your thoughts with us in the comments below.