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Theranos hired dermatologist Sunny Balwani as lab director in 2014

Elizabeth Holmes, founder of Theranos Inc., arrives in federal court in San Jose, California on Wednesday, October 6, 2021.

David Paul Morris | Bloomberg | Getty Images

SAN JOSE, CALIF. – As Theranos’ problems escalated in 2014, the blood testing startup hired a dermatologist with no board certification in lab science or pathology to become the lab director.

According to court testimony Thursday in connection with the criminal trial of Theranos founder Elizabeth Holmes, Sunil Dhawan was appointed temporarily by Ramesh “Sunny” Balwani, who was the chairman of the company.

Dhawan was Balwani’s longtime dermatologist. He has been called as a witness by prosecutors, who are trying to prove that Holmes stole millions of dollars from investors while knowingly deceiving patients and doctors about the company’s blood testing technology. Holmes, who faces 12 counts of wire fraud and conspiracy, has pleaded not guilty.

Dhawan testified that Balwani, who was then in a romantic relationship with Holmes, told him that “the time commitment is very minimal.” In a November 2014 email, Balwani also told him that “it will be primarily an on-call consultant role,” said Dhawan, who met federal and state requirements to be a laboratory director.

In the San Jose courtroom, Jeff Schenk, a deputy US attorney, asked Dhawan, “Did he describe to you what Theranos did?

In response, Dhawan said he searched Google to learn more about Theranos’ technology, adding that he “had a short conversation about it” with Balwani.

Dhawan testified that between November 2014 and summer 2015, he only went to the lab twice and worked a total of five to 10 hours. He told jurors that he had never met any employees, doctors or patients.

Dhawan was hired to replace Adam Rosendorff, who resigned in 2014 amid growing frustrations over inaccuracies and false blood test results. Unlike Dhawan, Rosendorff was a certified pathologist who passed inside the lab every day.

Schenk continued, “Wasn’t there a single time you spoke to a Theranos employee who worked in the lab?”

“I don’t remember any conversation during this time,” Dhawan said.

Dhawan added that he only met Holmes in September 2015. He told jurors he got more involved with the company that month as regulators planned to audit the lab.

During his cross-examination, defense attorney Lance Wade, who represents Holmes, questioned Dhawan about Balwani’s importance to the business.

“Did you understand that he was one of the two main executives of the company?” Wade asked.

“My assumption was that he was a senior executive,” Dhawan said.

“He ran the lab from an operational standpoint, didn’t he? Wade asked.

Dhawan replied, “I can’t comment on this because I was never told he ran the lab, but I assumed he was yeah.”

Balwani has been charged with the same crimes as Holmes. He also pleaded not guilty and will be tried separately next year. Dhawan’s testimony continues on Friday.

Sunny Balwani, former president and chief operating officer of Theranos Inc., leaves federal court in San Jose, Calif., October 2, 2019.

Michael Court | Bloomberg | Getty Images

“The real magic”

Earlier Thursday, a former Walgreens senior executive Nimesh Jhaveri spoke.

Jhaveri said Walgreens’ goal in its partnership with Theranos is to allow customers to get their lab results with just a few drops of blood. Providing a more efficient and less painful process than traditional labs would be “extraordinary,” Jhaveri said.

“It was changing the environment of the lab,” Jhaveri said. “Less blood required was the real magic, it was so intriguing to us at Walgreens.”

Walgreens has invested $ 140 million in the bankrupt company. Clinics with blood testing technology have been deployed to 40 pharmacies in Arizona and one in California. In August 2014, a year after starting the partnership, Walgreens reduced its target of deploying 500 Theranos wellness centers to 200.

“Cost was a barrier, training our team members was a barrier, hiring phlebotomists was a barrier,” Jhaveri said. “The whole operating model was not perfect, which is why we decided to reduce the number.”

Jhaveri said he told Balwani they need to have a detailed plan to improve the patient experience if they plan to grow. On cross-examination, Jhaveri told jurors that he had had minimal contact with Holmes, only meeting her two or three times.

Jhaveri said Walgreens took “a step backwards” when former Wall Street Journal reporter John Carreyrou first revealed that Theranos was misleading customers and investors about the accuracy of the tests. In 2016, Walgreens began to discontinue Theranos services at its pharmacies.

LOOK: Former staff and patients testify in Elizabeth Holmes trial