Elizabeth Holmes, the founder of Theranos Inc., arrives at the Federal Court in San Jose, California on Tuesday, October 12, 2021.
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San Jose, California. — Steve Burd, the former chief executive of Safeway, said on Tuesday that his company knew that it was taking a risk to work with blood testing startup Theranos, and he admitted that the deal would benefit the grocery chain’s stock price.
On the second day of his testimony in the criminal fraud trial of Theranos founder Elizabeth Holmes, Byrd told the jurors that Safeway conducted a thorough independent investigation of the company’s claims of its technology before signing the agreement in 2010.
This nearly $400 million transaction resulted in 969 Safeway stores being remodeled to prepare blood testing machines. Two years after Bird retired, Safeway terminated its partnership with Theranos in 2015.
When Byrd was called as a witness by the prosecution, the defense attorney who represented Holmes, Kevin Downey, asked the former CEO to be responsible for his knowledge of Theranos when he concluded the transaction.
“Did you know that she was a very young entrepreneur?” Downey was referring to Holmes, who was in her 20s at the time. “Correct,” Bird replied.
Downey continued, “Can you say that Safeway did hundreds of hours of due diligence during the transaction?”
“There are at least 100,” Bird said, adding that he believed he was “personally responsible” for implementing the agreement.
Holmes became famous in Silicon Valley by developing a technology that promises to perform hundreds of diagnostic tests with just one finger. But Theranos never realized these wishes, and Holmes is now charged with 12 counts of wire fraud and conspiracy related to misleading investors and patients. She has pleaded not guilty.
In the opening statement, defense attorney Lance Wade told the jurors that despite some mistakes, the failed start-up company would not make her a criminal. If convicted, Holmes will face up to 20 years in prison.
When Bird stood in the stands, the defense tried to prove Safeway, a huge national chain store, was not deceived in the negotiations.
“For more than a year, you communicated with Theranos almost every day,” Downey said to Bird. The witness replied: “We are parallel on the road of doing transactions and doing due diligence.”
Theranos has never deployed its equipment to physical stores. Later it announced a partnership with Walgreens, which also ended in failure.
A person enters the Walgreens store in San Francisco, California, USA on Tuesday, April 13, 2021.
David Paul Morris | Bloomberg | Getty Images
“So you know Safeway or Walgreens or one of the other companies they are talking to, this will be their first consumer-based technology deployment, right?” Downey asked. “So you understand that they have never expanded this technology on a broad basis, right?”
“I know they don’t have many customers,” Bird said.
Downey also pointed out the challenges faced by Safeway himself. The company’s stock price fell from $19 in January 2012 to $14 in July of that year because Safeway and Theranos are working hard to get the equipment up and running.
“Have you communicated with Ms. Holmes through text messages or other means and told her that if you can announce the launch of Theranos products in the Safeway store, do you think Safeway’s stock price will rise?” Downey asked. Bird testified that he did not remember saying this, but agreed that if the launch is successful, Safeway’s stock will rise.
Some of Bird’s emails from that period in 2012 were read in court and revealed his growing disappointment with Theranos.
In an email to Holmes, Byrd’s subject was “becoming discouraged.” He testified: “I am one of the most positive people you have ever met, and I will not be discouraged.”
Burd also told the jurors that Safeway is conducting pilot tests on employees working on the company’s campus. However, the test results are not accurate.
“I think every time you start something new, you will encounter some difficulties, but we still have some difficulties,” Bird said. “Our sample is lost, and the result is meaningless.”
Wade Miquelon, the former financial director of Walgreens, took a stand late Tuesday. He testified on a series of meetings with Holmes and his executive Ramesh “Sunny” Balwani in 2010.
Miquelon said: “This is one of the most exciting companies we have seen, not only in the laboratory, but in general,” he added, “We are very excited about establishing a partnership.”
Walgreens used to have more than 40 Theranos blood testing centers in its stores. Miquelon’s testimony continued on Wednesday.
watch: More details appear in the Theranos trial