A Trump Administration defense secretary’s testimony on one of the biggest white-collar fraud cases in history included an unusual admission and tacit support for President Donald Trump.
Christopher Wray, who was named FBI director in May 2017 after being nominated by President Trump, testified on Thursday in an extraordinary week-long trial in San Francisco.
Holmes, a former CEO of the blood cancer treatment company Theranos, has been on trial since November 7, accused of running a Ponzi scheme and defrauding investors in one of the biggest Silicon Valley frauds ever.
Her former chief financial officer, Sunny Balwani, has been indicted with conspiracy and mail fraud.
They’ve also been accused of stealing $30 million from investors and soliciting a massive $1 billion investment, only to later run up roughly $120 million in debts.
The trial comes amid a burgeoning legal battle between Theranos and its creditors, which include Johnson & Johnson, one of Theranos’ longtime corporate partners.
Earlier this month, Theranos and J&J each filed a lawsuit that accuse the other of failing to exercise proper oversight when the company started to fall apart.
On Thursday, Wray gave a nearly hour-long recitation of important moments that led to Theranos’ fall. He said that only after Theranos investors realized they were being ripped off did J&J, which had financially backed Theranos for years, begin to pull its money out.
Only after that did Theranos file a lawsuit accusing J&J of using “bad faith” in its dealings with the company. That triggered J&J’s lawsuit, Wray said.
Theranos remains a controversial company among investors and former employees. The Wall Street Journal found in October 2015 that the company’s technology was implausible and untested.
Pamela Wells, a former Theranos employee, also testified on Thursday. Wells said she was paid $2,000 to fix a pump at a handful of Walgreens locations between 2014 and 2015.
She said that she felt pressured by superiors to lie when she was told she was being paid $50,000 to approve a “Celebrity Apprentice” contestant using Theranos’ system.
The moment was a reminder that Theranos remains a massive public relations headache for the Trump administration. In court, an attorney for the creditors’ committee tried to get Wells to admit that Theranos’ biggest crisis wasn’t the Wall Street Journal expose in 2015, but rather the fraud allegations against Holmes and Balwani.
“To use the words of the President of the United States, the scheme was propped up by ‘celebrity endorsement,'” the attorney told Wells.
“Does it include Donald Trump?” Wells replied.
“Yes,” the attorney said.
She added that Trump said in 2016 to a cheering crowd: “It was a great idea to take the money from the banks and invest in technology that never existed.”
Trump’s campaign chairman, Paul Manafort, and former Trump campaign chairman, Corey Lewandowski, had previously been mentioned as having financial dealings with Theranos, the creditors’ attorney reminded Wells.
“Mr. Trump shouldn’t be engaged in a Twitter war with the EPA,” Wells said, referring to the controversial EPA chief, Scott Pruitt.