The family of former Education Secretary Betsy DeVos invested nearly $100 million in Theranos after a marathon meeting with the biotech startup’s founder Elizabeth Holmes, a director of the billionaire’s family office testified on Tuesday.
Lisa Peterson, who manages private equity investments for the DeVos clan’s RDV Corporation, told jurors at Holmes’ California wire fraud trial that she and members of the Michigan-based dynasty flew to Silicon Valley in 2014 to meet Holmes and Ramesh “Sunny” Balwani, the company’s former president and Holmes’ ex-boyfriend.
Peterson testified that Holmes was “hand picking” uber-wealthy families to invest in the Palo Alto company, which claimed its portable blood-testing devices could screen for scores of diseases with just the prick of a patient’s finger. (But, according to federal prosecutors, Holmes and Balwani knew their technology didn’t work as advertised, even as they peddled it to consumers and high-powered investors.)
According to Peterson, Holmes told the DeVoses that she was courting a small number of private backers to avoid pressure from larger investment firms to take Theranos public. When prosecutor Robert Leach asked whether she believed Holmes was singling out the family office as a long-term investor, Peterson answered, “Very much so.”
In October 2014, the DeVos family visited Theranos headquarters for an almost five-hour huddle which included Betsy’s sister-in-law Cheri DeVos getting a finger stick test. “To my knowledge, she received the results,” Peterson testified, adding that she didn’t personally review the lab work, according to courtroom press reports.
Shortly after this meeting, Peterson and DeVos family members gathered in the Theranos parking lot to discuss their planned $50 million investment, which they ultimately doubled, the Wall Street Journal reported. (On Tuesday, the defense presented an email from Peterson that said RDV Corporation, with the blessing of siblings Doug and Cheri DeVos, had agreed to give Theranos $100 million “on the spot.”)
The DeVoses were just one prominent investor in the now-defunct blood-testing company. As former Theranos project manager Daniel Edlin testified last week, the tech unicorn also wooed media mogul Rupert Murdoch, who invested $125 million.
Peterson took the stand during the eighth week of Holmes’ criminal trial, which has thus far heard testimony from Marine Gen. Jim Mattis, former Walgreens CFO Wade Miquelon, ex-Safeway chief executive Steven Burd, and former employees including Theranos’ onetime lab director Adam Rosendorff, who was a key whistleblower for investigative reporter John Carreyrou’s bombshell stories on the startup.
On Tuesday, Peterson testified that she and her bosses were impressed by Theranos’ revenue projections of $140 million in 2014 and $990 million in 2015, and that she didn’t realize the firm had zero income in 2012 and 2013.
Peterson said Theranos provided materials to RDV that indicated 10 of the 15 largest pharmaceutical companies had “comprehensively validated” the startup over a seven-year period and falsely claimed the devices could run up to 300 blood tests on its own machines.
Theranos also provided a copy of a study with Pfizer’s logo, which suggested the pharma giant approved of the devices, Peterson added. (Last week, Pfizer scientist Shane Weber testified that he recommended the corporation decline a partnership with Theranos in 2008, and that the startup used Pfizer’s logo without permission.)
When Holmes discussed potential risks with RDV, Peterson added, the tech wunderkind didn’t mention any issues with Theranos’ technology or disclose that the firm was using third-party machines for its blood tests. Peterson said Holmes only referred to the risk of Theranos accomplishing its rollout of kiosks in Walgreens pharmacy locations.
After Carreyrou’s Wall Street Journal reports raised questions about Theranos’ technology, Peterson and estate attorney Dan Mosley—another investor who lost $6 million in the biotech firm—discussed the bad press with Holmes and Theranos staff. Peterson testified that Theranos had “downplayed” the media reports.
Peterson told the court that she volunteered to work on the Theranos deal after learning about the firm from RDV Corporation’s CEO Jerry Tubergen, who met Holmes and her brother Christian. (Tubergen is also a potential witness on the government's list.)
During cross examination, Holmes’ attorney Lance Wade impugned Peterson’s due diligence in researching Theranos before recommending the company to the DeVos family.
Wade questioned Peterson on whether the DeVoses read the memos she had prepared on Theranos before they decided to invest, and Peterson said she didn’t know. The defense lawyer also pointed out Peterson’s memo appeared to include sentences lifted from a Fortune magazine article about Holmes.
When Wade asked whether Peterson had ever visited Theranos’ Walgreens clinics or read Theranos’ 2013 press release on this collaboration with the pharmacy chain, she answered no. That press release mentioned Theranos would use “traditional” blood draws alongside its own finger stick tests, Wade said.
Meanwhile, Peterson testified that the DeVos family office was concerned that if their investigation into Theranos was too thorough, the firm would rescind the invitation to invest in what was billed as a groundbreaking technology.
The defense also presented to jurors an email that indicated Tubergen told Rich DeVos that the Walton family, of Walmart fame, was also a major investor in Theranos.
Wade suggested that nothing stopped Peterson or RDV Corporation from enlisting any outside regulatory or medical experts to help scrutinize Theranos.
“We didn’t think we needed it,” Peterson testified.