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DeVos family was misled by Theranos founder before investing $100 million, rep says

The DeVos family office initially said it would invest $50 million but doubled it after a meeting with Elizabeth Holmes.
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The family office of former Education Secretary Betsy DeVos was given false and misleading information before investing $100 million into Theranos, whose founder and former CEO is on trial for allegedly defrauding investors and patients about the company's blood-testing technology, a representative for RDV Corp, the office’s investment arm, said.

Lisa Peterson, who oversees private equity investments for the office, testified Tuesday that she was directed to look into Theranos after one of her bosses sent an email and said he had just "had one of the most interesting meetings I can recall" with the company founder Elizabeth Holmes.

Peterson told the court that she reviewed a binder of information sent over by Theranos and that the investment office visited the company's lab where DeVos' sister-in-law Cheri DeVos received a blood test. Peterson was not sure if Cheri DeVos ever received her results from the test, she testified.

According to Peterson, RDV Corp., which manages the multibillion dollar fortunes of the cross-generational DeVos clan, became intrigued after Holmes claimed that Theranos' devices were being used on military helicopters and with pharmaceutical companies. The government indictment against Holmes asserts those claims are among several misrepresentations made as part of a “scheme to defraud investors.”

Image: Betsy DeVos
Then-Education Secretary Betsy DeVos speaks at the Conservative Political Action Conference in Oxon Hill, Md., on Feb. 22, 2018.Michael Brochstein / SOPA Images/LightRocket via Getty Images file

They were also made to believe that the devices were able to do roughly 300 blood tests and all the tests were being done on the company's machines and not third-party devices.

The DeVos family office initially said it would invest $50 million, but doubled it after meeting with Holmes, according to Tuesday's testimony. Peterson told the court that Holmes' allegedly false claims made them believe that "this was going to be a game changer for health care."

The wealth of the DeVos family began with a family members’ co-founding of Amway, a multilevel marketing company, in 1959.

Jurors, for the first time, were also shown clips of Holmes in television interviews from 2015 and 2016 as she tried to defend Theranos. “This is what happens when you work to change things,” she said in a 2015 CNBC "Mad Money" interview. “First they think you’re crazy, then they fight you, and then all of a sudden you change the world.”

In another clip, Holmes told Maria Shriver in a 2016 "TODAY" show interview that as the founder and CEO of Theranos, "anything that happens in this company is my responsibility." Holmes' defense team’s success now lies in trying to disprove that assertion.

Holmes, a Stanford University dropout, was 19 when she founded Theranos in 2003 and peddled the company's blood-testing capabilities as revolutionary, claiming that it could run a rapid battery of tests from a single finger prick.

But behind the scenes, she is accused of trying to achieve her dreams by shortcutting the checks and balances designed to protect patients and investors. Initially, Theranos did not publish what Holmes claimed was "breakthrough" technology in peer-reviewed journals and the company did not share its data with the scientific community. It also did not get approval from the Food and Drug Administration for its devices.

Instead, Holmes did magazine interviews talking about the company, gave TED Talks, claimed the devices were being deployed by the U.S. military on the battlefield and lobbied to change state laws to allow patients to get their blood tests directly and not through their doctors.

She also bypassed the usual West Coast venture capital outfits — which would have demanded to see published peer-reviewed studies — and instead sought out private investors. Besides the DeVos family office, other investors included publishing magnate Rupert Murdoch and Mexican billionaire Carlos Slim.

To rake in more money from her investors, Holmes is accused of falsely claiming that Theranos was on track to make $100 million in revenue in 2014 when in reality it was only generating about $100,000. In total, Holmes received more than $700 million from private investors and East Coast hedge funds.

Things came crashing down for Holmes when Theranos was charged in 2018 with fraud by the Securities and Exchange Commission and with wire fraud and conspiracy by the U.S. attorney for Northern California.

Holmes, along with Ramesh “Sunny” Balwani, a former boyfriend who became president of Theranos, were charged with 10 counts of wire fraud and two counts of conspiracy to commit wire fraud. Both have pleaded not guilty. If convicted, Holmes faces up to 20 years in jail.

CORRECTION (Nov. 5, 2021, 10:18 a.m. ET): An earlier version of this article misstated who was misled by Theranos founder Elizabeth Holmes. The DeVos family office’s investment arm was misled, not former Education Secretary Betsy DeVos herself.