Holmes Trial Witness Says Theranos Went Years Without Financial Audit

Elizabeth Holmes is connected transgression proceedings successful national tribunal successful San Jose.

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Spivey said she thought it was antithetic for a backstage institution to spell truthful agelong without having its fiscal statements audited by an extracurricular firm—a process that, portion not legally required, “gives credibility,” she said.

Holmes, the laminitis of Theranos, a institution that claimed to person revolutionized blood-sample analysis, is lasting proceedings connected conspiracy and fraud charges alleging she defrauded investors and patients. The 37-year faces a imaginable 20 years successful prison.

The erstwhile concern caput astatine Theranos highlighted a play successful 2009 erstwhile the institution struggled to marque payroll and struggled to wage vendors. Spivey had to “pick and choose” who to pay, and said the institution managed to get by aft taking retired a indebtedness backed by Ramesh “Sunny” Balwani,” Theranos’ erstwhile lawman and Holmes’ ex-boyfriend.

Holmes is expected to reason that her actions starring Theranos, which drew successful hundreds of millions of capitalist dollars, were influenced by an abusive and manipulative narration with Balwani, who volition himself basal proceedings for fraud.

Spivey besides began to sermon a illustration of Theranos’ finances from 2009 to 2011 showing the company’s nett losses ballooning—from $11.5 cardinal successful 2009 to $16.2 cardinal successful 2010 and $27.5 cardinal successful 2011.

The erstwhile fiscal controller’s grounds followed opening statements successful the Holmes trial. Federal prosecutors said that Holmes’ claims astir Theranos’ supposedly groundbreaking blood-testing instrumentality continued done the beingness of her company, drafting successful capitalist currency and tricking patients.

Holmes was touted arsenic the world’s youngest self-made billionaire erstwhile Theranos was valued astatine $9 billion—before the Journal published stories successful 2015 raising questions astir the effectiveness of the company’s technology. 

Lance Wade, Holmes’ attorney, argued that Theranos’ nonaccomplishment wasn’t the effect of fraud, saying that the institution filed 176 patents and produced humor tests cheaper than competitors.

Spivey’s grounds was chopped abbreviated erstwhile the tribunal ended astatine 2 p.m. Pacific time. Court volition beryllium backmost successful league Friday. As Barron’s reported connected Wednesday, the Holmes proceedings has brought the spectacular illness of Theranos backmost into the spotlight and raises questions astir the civilization of hopeful exaggeration successful Silicon Valley.

Write to Jack Denton astatine jack.denton@dowjones.com