Theranos’s Elizabeth Holmes was warned by Sunny Balwani of her abusive behavior

Ex-Theranos chief operating officer Sunny Balwani had several encounters with key executives, including co-founder Elizabeth Holmes, that they thought indicated a pattern of abuse, according to emails and testimony from Holmes at a hearing Wednesday. Balwani had resigned from Theranos three days before the hearing.

One of Holmes’ earliest warning signs: In November 2014, she learned that Theranos had lost a major contract to a competitor in Asia, according to testimony.

The news deeply concerned Holmes, according to testimony Wednesday. She ordered a broad review of all contracts in the consumer and healthcare division and placed Balwani on temporary leave of absence.

Shortly after Holmes began reviewing the contracts, Balwani emailed her that the market study was the “first step towards literally removing the word Theranos from our network of service providers,” according to testimony. “Was this in response to how you received the market data?” asked Theranos board member Ronald Smetana. “I hope not,” Holmes replied.

Theranos is a company that can’t even successfully win contracts to train police officers in some of the city’s finest precincts.

The company has been in retreat since short seller Andrew Left of Citron Research uncovered an elaborate hole in Theranos’s business model in October 2015. Theranos raised more than $700 million in venture capital in 2012, making it one of the early funds that sought to tap into the disruption of healthcare in a period that has been known as “Big Data.” In recent years, Holmes has suggested that over many years, many thousands of accidents, allergic reactions and drug reactions were avoided.

Theranos claimed that it could use a blood test that could be run in doctors’ offices over a half hour and only cost $1 out of pocket. With over $300 million of startup capital, Holmes reached headlines around the world, along with a national debate about the technology behind Theranos’s technology. Theranos insisted its technology was a game-changer. After Left published his explosive report, Theranos began to rebrand its business, saying that its products didn’t yet exist. Today, Theranos is a shell company with questionable leaders in offices throughout the country.

During the hearing, Holmes said she ended her relationship with Balwani because of the allegations and because she was “reaching a point of extreme frustration.”

Theranos gave a statement to the hearing explaining that at the time of Holmes’ concerns, she was afraid her behavior would indicate a pattern of abuse. “Ms. Holmes knew Mr. Balwani to be someone who, in the past, had a close friendship with other employees who were his ‘wives.’” It went on to explain: “She said she believed that it was more likely she would be exposed as being guilty of abusing employees and associates under his control than not.”

Holmes concluded her testimony by expressing support for an investigation into Balwani, saying he should have been fired rather than allowed to resign. Theranos did not respond to a request for comment on the relationship between Holmes and Balwani.

According to testimony from Holmes and emails provided to the hearing by Theranos, the first signs of abuse against Holmes came in early 2015. Holmes discovered that she was the subject of Balwani’s “crazy dance moves” that she knew would distract her. Holmes was annoyed. She reported it to her boss, Michael Rogers, the founder of Theranos’s first employer, Apollo Health & Medical. Rogers transferred her to a new position that required less interaction with Balwani, she said.

Shortly after, Balwani was sued for allegedly fraudulently raising employee bonuses in an email, according to testimony. Holmes said she learned through a confessional conversation that Balwani had pretended to lose control of Theranos because he wanted to hide from her that his number one financial supporter and mentor, venture capitalist Shervin Pishevar, had acquired the largest interest in Theranos.

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