Holmes’ communications with Boies firm fair game in trial -judge

3 minute read

Theranos founder Elizabeth Holmes exits Robert F. Peckham U.S. Courthouse after the first day of federal court hearings in San Jose, California, U.S. May 4, 2021. REUTERS/Kate Munsch

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  • Docs not privileged because firm repped company, not Holmes
  • Holmes seeks to suppress 'anecdotal' customer complaints

(Reuters) - Federal prosecutors can use communications between Theranos founder Elizabeth Holmes and the company’s law firm, Boies Schiller Flexner, in Holmes’ upcoming fraud trial, a federal judge has ruled.

U.S. Magistrate Judge Nathanael Cousins in San Jose, California, federal court ruled Thursday that the communications were not shielded by attorney-client privilege because the firm and partner David Boies represented the company, not Holmes' individual interests.

Holmes, the judge wrote, "fails to show that the substance of her conversations with Boies and (the firm) did not concern matters within the general affairs of the company," rather than specific to her.

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Lance Wade and Kevin Downey of Williams & Connolly, lawyers for Holmes, did not immediately respond to a request for comment. Nor did the office of the U.S. Attorney for the Northern District of California, which is prosecuting the case.

Prosecutors say that Holmes and former Theranos chief operating officer Ramesh "Sunny" Balwani defrauded investors and customers by falsely claiming to have developed technology that could run a wide range of tests on a single drop of blood. The defendants have pleaded not guilty.

Cousins' ruling came after Holmes' lawyers moved to keep complaints from Theranos out of the trial, which is scheduled for August. In a motion Wednesday, they said prosecutors should be barred from using the "anecdotal" evidence because they failed to preserve a database with more complete customer information.

U.S. District Judge Edward Davila had previously denied a motion by Holmes to exclude customer complaints under the federal rules of evidence, Wednesday's motion argues that the complaints must be suppressed to safeguard Holmes' constitutional rights.

The dispute concerns Theranos' so-called Laboratory Information System database, or LIS, which contained records of the tests it performed. While Theranos gave prosecutors an encrypted copy of the database, both sides agree that the password now cannot be located, rendering the data inaccessible, and the servers containing the original database have been destroyed, according to court filings.

Prosecutors have previously faulted Theranos for handing over the database in encrypted form without a password, but Holmes' lawyers on Wednesday blamed the prosecutors for its loss. They said prosecutors knew the information was important and could have seized the original servers or made efforts earlier to decrypt the copy, and were now responsible for failing to preserve evidence that Holmes could use to defend herself.

Holmes' lawyers are also trying to suppress a report released in 2016 by the U.S. Centers for Medicare and Medicaid Services finding extensive quality control issues at Theranos.

"Allowing the government to use customer complaints and testing results and the findings of the CMS report as 'evidence of the fraud' after the government failed to gather and preserve (the LIS) would violate Ms. Holmes' right to present a complete defense and to receive due process," they said.

Before its collapse, Theranos was valued at $9 billion and made Holmes, a Stanford University dropout who founded the company in 2003 at age 19, a Silicon Valley star.

The case is U.S. v. Holmes, U.S. District Court, Northern District of California, No. 18-cr-00258.

For the government: Assistant U.S. Attorney Jeff Schenk

For Holmes: Lance Wade and Kevin Downey of Williams & Connolly

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Brendan Pierson reports on product liability litigation and on all areas of health care law. He can be reached at brendan.pierson@thomsonreuters.com.