In her testimony, Cheung explained her growing concerns that the company’s devices did not pass quality control tests in the research laboratory, as well as what she said was a manipulation of data to pass quality control. This led her to question the possibilities of the startup’s proprietary testing machine, which she said was only used on a small number of tests as it was hailed as the company’s revolutionary innovation.
Sometimes, she said, Theranos employees would delete up to two out of six data points as part of a test to pass quality control. She said there was no standard protocol within Theranos for when deletion of compensation was appropriate, but noted that this was something that happened “often” in the company and said it “would normally be considered cherry picking.”
Cheung testified that she raised her concerns with higher-ups, including having a conversation with a top executive in Theranos, who she said dismissed her as unfit to weigh in. She said she was told she had low visibility in the company. Cheung quit shortly after, just six months after he first joined the blood test startup in 2013 as a newly graduated college.
Cheung first took the stand on Tuesday as the government’s second witness in the long-awaited lawsuit against Holmes, facing a dozen allegations of federal fraud and conspiracy of allegations that she deliberately misled investors, patients and doctors about the possibilities of her company’s proprietary blood test technology. Holmes, who has pleaded not guilty, risks up to 20 years in prison.
Many of the details of Cheung’s experience have been highlighted over the years as she became a prominent figure in the history of the disgraced startup. Cheung, who contacted the Medicare and Medicaid Services centers to look at Theranos in 2015, has been featured in “Bad Blood,” the final book about the company by then-Wall Street Journal reporter John Carreyrou, who first broke the story as as well as in the HBO documentary “The Inventor.” She has also received a TED Talk about her experience as a whistleblower.
She testified that she had “gathered a lot of evidence” suggesting that the company’s technology was not adequate and that she did not feel comfortable running patient tests. “I tried to tell as many people as I could, but did not seem to get through,” she said Wednesday, noting that she ended up talking to a Wall Street Journal reporter, presumably Carreyrou, as “a last resort.” he was not directly named, who contacted her about an investigation of the company.
The prosecution on Wednesday presented a form containing internal data from March 2014, which showed approximately 25% of the tests on Theranos’ proprietary units failed quality control. Cheung, who left the following month, testified that this differed drastically from the failure rate of third-party test equipment approved by the U.S. Food and Drug Administration. The latter rarely failed, she said.
During cross-examination, Holmes’ defense attorney Lance Wade tried to highlight Cheung’s lack of experience and qualifications as a freshman, whose first job was with the startup by getting her to tell names and qualifications to superiors on her team, including those with Ph.D. medical degrees.
His cross-examination of Cheung will continue when the trial resumes on Friday.
There was some direct mention of Holmes during the first hours of Cheung’s testimony on Wednesday, but towards the end of her interrogation, prosecutors asked if she had considered talking to Holmes just before she stopped over her concerns. Cheung testified that she had not referred to a close relationship with a colleague, Tyler Shultz, who was also Theranos’ whistleblower, and whose grandfather – former Secretary of State George Shultz – sat on the company’s board. Tyler Shultz, Cheung testified, had sent Holmes an email about some of the same concerns she had raised, including about quality control. (Cheung said Tyler Shultz had a closer relationship with Holmes, so she did not do it herself.)
Cheung said she and Shultz also met with her grandfather, who has since passed away, to appeal to him about their concerns. Tyler Shultz is also an expected witness.
According to a court document filed last week, Theranos spent more than $ 150,000 on a private investigator to spy on Cheung and Shultz.