This week, at the trial of Elizabeth Holmes, founder and CEO of the defunct company Theranos, Steve Burd, the former CEO of Safeway, proved to be a valuable witness for the prosecution.
If his testimony is credible, then Holmes appears appears to have been personally complicit in the fraud.
The prosecution has advanced the position that Theranos itself was a massive fraud, in which Elizabeth Holmes and those around her pretended to investors, doctors, and patients, that their black box, “Edison,” could perform a full range of blood tests with just a finger prick worth of blood, while being fully aware that it could not.
Nobody enjoys going to a lab so that a technician can search for a “good vein” to draw enough blood for customary blood work.
Some people are unfortunate enough to have tricky veins. Other people are simply afraid of needles. The whole episode is an uncomfortable one for anyone. This is what Theranos offered to disrupt.
Steve Burd’s Testimony
Steve Burd was there to testify about his business relationship with Holmes, which created a promising but unfruitful partnership between the two companies.
Burd first met Holmes in 2011 and was favorably impressed. “There are very few people I had met in the business that I would actually say are charismatic,” Steve Burd said. “She was charismatic, she was very smart and she was doing one of the hardest things you can do in a business, and that’s to create an enterprise from scratch.”
The idea that she sold him was of shoppers giving up just a finger-prick’s worth of blood as they enter the store, going about their shopping, and then getting the results as they are ready to check out. They could then have a necessary prescription called in right away.
The deal involved Safeway pouring up to $85 million into Theranos: some as equipment purchases, some as investment. The negotiations were one-on-one between Holmes and Burd, without any lawyers present.
Burd also testified that Theranos repeatedly failed to make good on its proposed timelines. He grew anxious at these delays and pressed Holmes for details.
In November 2012 he wrote to her, “I feel like a jogger running in place waiting for the stop light to turn green.”
Elizabeth Holmes personally assured him that Theranos’ finances were sound and the company was profitable. The government has already produced evidence that the company was losing money at an unsustainable rate. A juror might well conclude that Elizabeth Holmes’ assurance to Burd was a direct lie.
His Importance as a Witness
Neither Steve Burd nor Safeway makes for a sympathetic victim. From one point of view, Safeway was simply taking a chance on something it must have known from the start was a speculative venture. That chance simply did not work out. The defense counsel will likely make much of this point when it comes time to cross-examine Burd.
On the other hand, the prosecution has good reason to highlight Steve Burd’s testimony. First, Safeway is a household name. And although it is no longer an independent company (former rival Albertsons acquired Safeway in 2014), the combined corporation continues to maintain a distinct Safeway brand, and some of the jurors may in fact still shop at one of them.
More importantly, Steve Burd’s testimony is important because he had direct face-to-face negotiations with Holmes. Some of the other witnesses who have been heard from have testified to a level of duplicity at the company Holmes created, but could not tie that duplicity directly to Elizabeth Holmes herself.
So it is important that it was Holmes herself, in face-to-face meetings, whom Burd swears told him that her company was in sound financial condition.