[00:00:00] Speaker 01: And I'll call the next case, it's US versus Bolani. [00:00:42] Speaker 01: When you're ready, counsel. [00:00:57] Speaker 03: Good morning, Your Honors. [00:00:58] Speaker 03: I'm Jeff Cooper Smith, and I represent Sunny Balwani. [00:01:01] Speaker 03: And may it please the Court. [00:01:03] Speaker 03: As the Court has seen from our briefing, there are three issues that require reversal in this case. [00:01:08] Speaker 03: I want to start with constructive amendment to the indictment. [00:01:12] Speaker 03: As this court knows, constructive amendment always requires reversal. [00:01:18] Speaker 03: Always requires reversal. [00:01:20] Speaker 03: So the question here is, was there a constructive amendment? [00:01:24] Speaker 03: The paramount issue, and this is a quote from Ms. [00:01:29] Speaker 03: Volcker just now in the Holmes argument, the paramount misrepresentation was the accuracy of the device. [00:01:35] Speaker 03: That's what government counsel said. [00:01:36] Speaker 03: And that's true. [00:01:37] Speaker 03: What's hanging in the air of this courtroom? [00:01:39] Speaker 03: What was at trial? [00:01:41] Speaker 03: And the whole Theranos story, the narrative told by the government, was all about, did Theranos have a device, and did they know it didn't work? [00:01:49] Speaker 03: It's not about conventional technology. [00:01:51] Speaker 03: And when you look at the indictment, you can start with paragraph 22. [00:01:55] Speaker 03: And this is in the record, the indictments at ER 6886. [00:02:00] Speaker 03: The indictment starts out by talking about the Theranos technology and the Theranos device. [00:02:08] Speaker 03: When you get to paragraph 22, which is the operative charging language for the conspiracy against patients, at lines 25 through 26, the specific way that the defendant misrepresented things is because he knew that the Theranos technology was not capable of producing reliable and accurate results. [00:02:32] Speaker 03: That's the Theranos case. [00:02:34] Speaker 03: What happened here? [00:02:36] Speaker 03: And it goes on, paragraph 16, paragraph 17c, the bill in particular, it's all about Theranos technology. [00:02:43] Speaker 03: What happened here is the government put on extremely powerful, impactful, crucial evidence from a CMS regulator, not just any witness, but a government regulator, Sarah Bennett, who testified about the immediate jeopardy which was defined at trial as creating a risk of death or serious bodily injury. [00:03:04] Speaker 03: It does not get any worse than that. [00:03:07] Speaker 04: Was that not true, though? [00:03:08] Speaker 04: Was that not true? [00:03:12] Speaker 03: Your Honor, it is true that CMS found an immediate jeopardy. [00:03:17] Speaker 03: The immediate jeopardy they found related only to commercial, conventional technology that's being used by every lab in the country and probably the world, not the Theranos device. [00:03:27] Speaker 03: The main issue [00:03:29] Speaker 03: that drove the immediate jeopardy finding was regarding a blood test called PTINR, which is a blood thinner type test. [00:03:38] Speaker 03: And that finding related to some problems in the lab with the commercial technology being used to test patients on this PTINR. [00:03:46] Speaker 04: And did CMS know whether that was Theranos technology or not at the time? [00:03:52] Speaker 03: They absolutely did, Your Honor. [00:03:53] Speaker 03: In fact, the witness, Ms. [00:03:55] Speaker 03: Bennett, had not even inspected [00:03:59] Speaker 03: the part of the Theranos lab that dealt with the proprietary technology, that used the proprietary technology. [00:04:04] Speaker 03: She was all about the commercial technology. [00:04:06] Speaker 03: That's the witness that the government presented. [00:04:08] Speaker 03: The witness who could testify that the commercial technology was inaccurate and unreliable according to their report. [00:04:17] Speaker 03: And that, under the Sterone case, which is a seminal case about constructive amendment, [00:04:24] Speaker 03: is a constructive amendment, because we now have crucial facts, a complex of facts in the words of the case law, that amend the indictment. [00:04:34] Speaker 03: And I think there could be no clearer case of that. [00:04:37] Speaker 04: So can I ask about, it's an interesting argument, pretty smart argument, de novo review, right? [00:04:44] Speaker 03: Thank you, Ron. [00:04:44] Speaker 04: Good to get us on that base. [00:04:47] Speaker 04: The problem I see with it is that, [00:04:52] Speaker 04: The facts in the indictment don't just relate to Theranos-related proprietary information. [00:05:00] Speaker 04: So I don't understand. [00:05:02] Speaker 04: At the end of the day, doesn't this boil down to did you have notice that other third-party testing would be used? [00:05:14] Speaker 04: And I'm not sure why the indictment wouldn't have put Mr. Balwani on notice [00:05:20] Speaker 04: that that was going to happen because of the statements in the indictment. [00:05:24] Speaker 03: Thank you, Your Honor. [00:05:25] Speaker 03: The indictment is absolutely not about conventional technology. [00:05:28] Speaker 03: I understand the government now and after the fact pulls out snippets where it talks about Theranos testing and they try to argue that that is a much broader principle that includes a commercial technology. [00:05:42] Speaker 03: But I think you need to look no further than what the government and the district court actually believed. [00:05:46] Speaker 03: At the time of right before the trial so in our opening brief your honor at page. [00:05:54] Speaker 03: I believe it's a page 12 I'm sorry at page 14 your argument is that the government didn't they believe this all did happen on Theranos right Yes, your honor so the government took the position of [00:06:09] Speaker 03: in the motion and limiting stage of trial, that Mr. Bawani should not be able to introduce the fact that his mother was tested at Theranos' lab because we couldn't show, the defense couldn't show, that it was on proprietary technology. [00:06:22] Speaker 03: They said it was irrelevant to the case because it's not part of the indictment. [00:06:25] Speaker 03: And then the district court, your honor, and this is at 6082 of the record, said your client is not charged with doing anything with commercial machines. [00:06:35] Speaker 03: It's about the company's machines, like they said in the indictment. [00:06:39] Speaker 01: So both the district court, but the indictment council said homes and Balwani represented to investors that there are knows conducted patient testing using Theranos manufactured analyzers. [00:06:51] Speaker 01: When in truth, they knew that there are knows purchased and used for patient testing third party commercially available and analyzers. [00:07:00] Speaker 01: So that's the whole theory is that you're basically, uh, the, [00:07:04] Speaker 01: The defendants are telling everybody that there's this proprietary technology that worked better than conventional machinery, but in fact they're using third party commercially available analyzers. [00:07:15] Speaker 01: And so that's right there in the indictment. [00:07:17] Speaker 01: that allegation. [00:07:18] Speaker 01: So why doesn't that provide sufficient notice? [00:07:21] Speaker 01: I know it's a big, sprawling, complex case. [00:07:23] Speaker 01: So you're right. [00:07:24] Speaker 01: The district court did say that this was an extensive trial. [00:07:29] Speaker 01: But you're talking about constructive amendment of the indictment. [00:07:33] Speaker 01: So when I look at the indictment and I see this allegation, along with multiple references to blood testing services, doesn't that defeat the argument here? [00:07:44] Speaker 03: Thank you, Your Honor. [00:07:45] Speaker 03: It does not. [00:07:46] Speaker 03: And the reason is because that particular allegation has to do with alleged representations to investors that Theranos wasn't actually using conventional technology. [00:07:56] Speaker 03: That's a different point than like, does the proprietary technology work or is the indictment about whether commercial technology works or not? [00:08:04] Speaker 03: The government at trial was not questioning whether the commercial technology worked. [00:08:08] Speaker 03: On the contrary, they held up commercial technology as the gold standard [00:08:12] Speaker 03: that was actually the correct technology to work, whereas the Theranos technology, according to the government, was not accurate and reliable. [00:08:20] Speaker 03: So that point is about a misrepresentation to investors about what devices the company is using. [00:08:25] Speaker 03: It has nothing to do with the accuracy and reliability point. [00:08:27] Speaker 03: And Your Honor, I think that there are occasional references in the indictment to Theranos testing, but when you read the indictment fairly, and frankly, when you read the bill of particulars fairly, SCR 201. [00:08:39] Speaker 03: It is all about Theranos technology. [00:08:42] Speaker 03: And I want to just point to paragraph 16, for example. [00:08:46] Speaker 03: Paragraph 16 of the indictment says that Theranos represented that they had accurate, fast, reliable blood tests. [00:08:55] Speaker 03: But then when it gets to, well, why is that false? [00:08:57] Speaker 03: Why is that false? [00:08:59] Speaker 03: It's because, according to the indictment, the defendant knew that the proprietary technology didn't work, and that is exactly [00:09:07] Speaker 03: The two cases we cited in the brief, the Crocker case from the Third Circuit and the Hoover case from the Fifth Circuit, both of those courts held that when the indictment alleges the manner in which the false statement is false, why it's false, and the government proves something else, that's a constructive amendment. [00:09:24] Speaker 03: And the case law. [00:09:26] Speaker 04: But the problem with the Hoover case is I read the Hoover case to hinge more on the jury instructions. [00:09:33] Speaker 04: That's where the problem came in, that the jury instructions [00:09:37] Speaker 04: in the Fifth Circuit's view seem to go beyond the indictment. [00:09:41] Speaker 04: I don't see the same thing here. [00:09:42] Speaker 04: Now, maybe you'll argue that's a distinction without a difference, but that does seem to be different than what we're dealing with here. [00:09:49] Speaker 03: Your Honor, there are certainly cases, and I think you're correct, the Hoover case I believe is one, where constructive amendment can be accomplished by jury instructions that amend the indictment. [00:09:59] Speaker 03: But the Sterrone case, the basic elements [00:10:05] Speaker 03: It can also be established by a complex of facts, by evidence introduced. [00:10:10] Speaker 03: And of course, the main case on that is the Sterone case itself, where the government's indictment charged the defendant had interfered with commerce by interfering with the shipments of sand into the state of Pennsylvania. [00:10:22] Speaker 03: And then on a trial, they proved that, but they also proved that [00:10:30] Speaker 03: the interference with commerce was accomplished by interfering with steel being shipped out of the state of Pennsylvania. [00:10:35] Speaker 03: And because a general verdict form, just like this case, you can't tell what the jury decided. [00:10:40] Speaker 03: And the standard is even more favorable than Brady. [00:10:43] Speaker 03: It's could the jury have reached a different conclusion. [00:10:48] Speaker 03: It's a more favorable standard than even Brady requires. [00:10:55] Speaker 03: What's going on here, Your Honor, is that the [00:10:58] Speaker 03: introduction of this highly impactful, powerful evidence in the form of CMS report and also two out of the four patients, a government called four patients in this case, two of the four were conventional technology patients, patient ET and patient BB. [00:11:14] Speaker 03: So this is all about [00:11:17] Speaker 03: amended the indictment with this complex. [00:11:19] Speaker 04: Yeah, I just, it seems like it might be a variance from the indictment, but amendment seems a bit of a stretch. [00:11:27] Speaker 04: And the reason I think that, and I'll allow you to push back on this, is that the whole, it seemed to me that the evidence at trial was Theranos at some point became aware that its own proprietary [00:11:42] Speaker 04: technology wasn't working correctly, and so they tried to backfill that with third-party technology, I guess under the theory that, you know, as theirs got better, they'd be able to transition it all to Theranos technology. [00:11:55] Speaker 04: It seems odd to say that when you're using this third-party technology and holding it out as your own, which was happening, that you wouldn't assume that that would come into play in the defense. [00:12:13] Speaker 03: Your Honor, at trial, the government held the conventional technology up as the gold standard. [00:12:19] Speaker 03: There was really no evidence that that was the case. [00:12:22] Speaker 03: And in fact, as I said, the government admitted the indictment was about proprietary technology until they wanted to introduce this immediate jeopardy. [00:12:30] Speaker 03: And Your Honor, in terms of variance, which was your original point of your question, I think, the cases the government cites on variance, like the Feldman case and the Kakar case, even Adamson, which found a fatal variance, [00:12:41] Speaker 03: These were trivial differences. [00:12:42] Speaker 03: In the Feldman case, for example, the charge was forgery, and the indictment said forgery, and then actually the evidence was the defendant guided, intoxicated people's hands to create signatures. [00:12:55] Speaker 03: These were trivial differences. [00:12:56] Speaker 03: I think a better example, Your Honor, is the US first Deepentino case from this court in 2001, which was, by the way, a plain error case. [00:13:04] Speaker 03: And there the court found a constructive amendment because the defendant was charged with some asbestos-related violations. [00:13:10] Speaker 03: And the indictment said the problem, the defendant, what he did wrong was he should have put the asbestos into specialized containers on the site. [00:13:19] Speaker 03: But then at trial, they proved that, well, actually the problem was he should have gone and dumped it in a safe way off site. [00:13:27] Speaker 03: And that was a constructive amendment. [00:13:28] Speaker 03: The same with the Shipsea case, which Judge Schroeder authored. [00:13:32] Speaker 03: The Shipsea case was about pension plan funds. [00:13:36] Speaker 03: The indictment said that [00:13:38] Speaker 03: way that the theft from the pension plan was accomplished was through fraud. [00:13:42] Speaker 03: The government proved at trial that it was just by basically stealing without making misrepresentations. [00:13:48] Speaker 03: That was a constructive amendment. [00:13:49] Speaker 03: What we have here is under the words of the Hart's case, this court's case from 2006, this is completely different behavior. [00:13:56] Speaker 03: That's the standard from Hart's. [00:13:58] Speaker 03: On the one hand, we have what everyone, I think, thought this case was about, apparently even the government, that this case is about misrepresentations at the [00:14:08] Speaker 03: proprietary technology was great and actually didn't work. [00:14:12] Speaker 03: But then, in fact, they proved that there's this danger to life and safety because of conventional technology. [00:14:21] Speaker 03: And that is totally different behavior. [00:14:23] Speaker 03: Are we running a bad lab? [00:14:24] Speaker 03: Is that this case? [00:14:26] Speaker 03: Or is it misrepresentations about proprietary technology? [00:14:29] Speaker 03: The Theranos case is about [00:14:30] Speaker 03: misreps about proprietary technology. [00:14:32] Speaker 03: That's what this case is. [00:14:34] Speaker 03: I think a fair reading of the indictment, going through paragraphs, especially 16, 17C, the operative charging language in 22, even the opening, is all about proprietary technology. [00:14:46] Speaker 03: And that's what this defendant, my client, Mr. Balwani, supposedly did wrong. [00:14:50] Speaker 03: The government moved the goalposts, switched gears, because they love the idea, it appears, of immediate jeopardy and danger to health. [00:14:58] Speaker 03: Problem was, it had nothing to do with Theranos. [00:15:00] Speaker 03: had to do with Siemens machines that were being run by every single lab. [00:15:04] Speaker 03: In the time I have, Your Honor, I'd like to pivot briefly to the NAPIU issue. [00:15:12] Speaker 03: This is the issue where the government put on evidence through witness testimony, especially Mr. Tolbert, that Theranos, especially Ms. [00:15:24] Speaker 03: Holmes, had said that Theranos was actively using [00:15:28] Speaker 03: its device on the battlefield with the military. [00:15:31] Speaker 03: And then what the government did there was they accounted 15 times at closing where they made this a major theme of their closing that they preyed on victims' investors' patriotism and they made misrepresentations about the military. [00:15:45] Speaker 03: The problem was at trial, at the Holmes trial, they had played the actual words, Ms. [00:15:50] Speaker 03: Holmes' voice speaking to these investors. [00:15:52] Speaker 03: And she never said in that tape, we're using the tape on the battlefield. [00:15:56] Speaker 03: She talked about the potential, [00:15:58] Speaker 03: Investors could take away from that what they will, but she never says we're using the technology on the battlefield. [00:16:03] Speaker 03: The government had experience with that. [00:16:04] Speaker 01: Was there contemporaneous objection? [00:16:06] Speaker 01: There were arguments on rule of completeness and I think potential hearsay problems you raised, but I didn't see on the record an objection that, wait a minute, the recording says one thing and now you're trying to elicit testimony on something different. [00:16:23] Speaker 03: Yes, Your Honor, there were. [00:16:26] Speaker 03: You have to understand the context, first of all, that the tape was played. [00:16:30] Speaker 03: The judge said right before the witness testified that he had gone back and reviewed the tape and the transcript. [00:16:36] Speaker 03: The government knew what it said because they had been basically burned with it because it didn't work out the way they wanted to with the Holmes case. [00:16:42] Speaker 03: Everyone understood what this tape was about. [00:16:43] Speaker 03: And we were arguing to the court, you have to let the jury hear the actual words. [00:16:48] Speaker 03: And it's extraordinary, Your Honor. [00:16:49] Speaker 03: In a fraud case, for the government not to want to have the jury hear the actual words that are supposedly the misrepresentations. [00:16:55] Speaker 03: So we did object. [00:16:58] Speaker 03: But in addition, Your Honor, even if this court will look at it under plain error review, I would point the case to the Ali case, which is cited in the briefs. [00:17:06] Speaker 03: Big difference there is that in the Ali case, which was a plain error case, the government never tried to capitalize on the false testimony. [00:17:15] Speaker 03: It backed way off, didn't argue it. [00:17:17] Speaker 03: Here, the government not only doubled down, but I counted 15 times that they not only used the [00:17:25] Speaker 03: mixed representations about the military as a major theme, but then they also used it to buttress all of the investor witnesses testimony to say, see, they're all saying the same thing. [00:17:36] Speaker 03: You could believe it because Mr. Tolbert and the other witness, Mr. Lucas, heard this tape. [00:17:42] Speaker 04: I just was looking at this statement. [00:17:44] Speaker 04: I believe it's the one you're referencing where Ms. [00:17:46] Speaker 04: Holmes says, we have been doing a lot of work for Special Operations Command in the context of missions in remote areas where not only is there no capability to do testing for certain things that need to be measured, but if situations arise, [00:18:01] Speaker 04: You sort of said, well, you could reach any conclusion for the investors. [00:18:08] Speaker 04: What are you supposed to reach from this statement of we have been doing a lot of work for Special Operations Command? [00:18:15] Speaker 03: Was that true or not? [00:18:16] Speaker 03: It was true, Your Honor. [00:18:17] Speaker 03: In fact, the statement on the tape was almost identical to the statement that was made by Theranos when it corresponded with the military. [00:18:28] Speaker 03: So the military knew that same thing, and that's at ER, [00:18:31] Speaker 03: five three four five so that that project scope and we're doing a lot of work with the military that was true and and and if you look at er five three four five i think you'll see that um so there's also a statement in that on that tape your honor about pausing the military work and then it talks about the ability to take the technology and then the potential but [00:18:51] Speaker 03: To look at it from a different perspective, Your Honor, the government clearly thought there was a difference. [00:18:56] Speaker 03: Because in a fraud case, every single time, the government's going to play the tape. [00:19:02] Speaker 03: When they have a tape and it's the words that are supposedly wrong and fraudulent, they're going to play the tape. [00:19:08] Speaker 03: And the government did that. [00:19:09] Speaker 03: At the Holmes case, it was government exhibit A. The problem was defense counsel got up and said, well, let's look at the actual words. [00:19:15] Speaker 03: And the jury hung on those counts, the Tolbert count and the Lucas count. [00:19:20] Speaker 03: The NAPU test is about, could the outcome have been different? [00:19:27] Speaker 01: Let me ask you this, counsel. [00:19:29] Speaker 01: You didn't get to play the tape, but were you, in other ways, limited in your ability to cross-examine, as the actual statements, to the extent that there was some confusion, OK, well, was this the December 2013 call? [00:19:41] Speaker 01: Was it some other call? [00:19:42] Speaker 01: Because Lucas, in particular, was in regular contact with Holmes. [00:19:49] Speaker 01: And so she was giving him various updates. [00:19:51] Speaker 01: So to the extent there's any confusion in the government's direct examination, you could have cleared it up on cross. [00:19:58] Speaker 03: Right. [00:19:59] Speaker 03: No, Your Honor. [00:19:59] Speaker 03: And that was in Ali. [00:20:00] Speaker 03: That was why the court didn't reverse in Ali, because the defense was allowed to do some things. [00:20:06] Speaker 03: Here, we were not allowed to do that. [00:20:07] Speaker 03: What happened here, and it really starts at page ER 326 of the record, and is about 30 or so pages after that where this argument is being made. [00:20:17] Speaker 03: in the morning and then in the afternoon before the witness, Mr. Tolbert, testified. [00:20:21] Speaker 03: And what's going on here is that the court says at ER 356, you're seeking to introduce the tapes. [00:20:32] Speaker 03: You would like to get the tapes in in your cross-examination. [00:20:35] Speaker 03: And then he says, I would indicate, as the record is right now, I would not permit it. [00:20:39] Speaker 03: Let me just indicate that. [00:20:40] Speaker 03: Let me just indicate that. [00:20:41] Speaker 03: And then defense counsel, actually me, starts to make an additional argument about this point. [00:20:48] Speaker 03: And the judge very sternly said he wasn't interested in hearing any more argument about this point. [00:20:53] Speaker 03: And then when you read that argument, starting on page ER 326, you see that counsel arguing the point was talking about using the tape in cross-examination. [00:21:02] Speaker 03: And the judge's answer at page 359. [00:21:03] Speaker 01: That's what I said. [00:21:04] Speaker 01: Maybe I didn't make my question clear. [00:21:05] Speaker 01: I read that portion of the transcript. [00:21:08] Speaker 01: I know the district court didn't allow you to utilize the tape. [00:21:11] Speaker 01: But in other ways, restrict your ability to cross-examine based on the content of that. [00:21:17] Speaker 03: Your honor, we wanted the jury to hear the actual words. [00:21:20] Speaker 03: And the only way to do that was to put the transcript or the tape in front of the jury. [00:21:24] Speaker 03: And the judge said no. [00:21:25] Speaker 03: As we understood it, and I think fairly, read at ER 359, the judge said he was not going to allow it. [00:21:31] Speaker 03: He wouldn't let any further argument be entertained. [00:21:33] Speaker 03: And so then we had to do the best we can. [00:21:36] Speaker 03: But we weren't going to be allowed to show the jury the actual words. [00:21:38] Speaker 03: The government fought tooth and nail. [00:21:40] Speaker 03: And to go to Judge Nelson's question, when the government fights this hard, [00:21:44] Speaker 03: to not play a tape of a co-conspirator's statements, I think that's all you need to know to realize it is very different from what's on the tape. [00:21:53] Speaker 03: It deprived the jury of the ability to make that decision. [00:21:57] Speaker 03: It had that ability in the Holmes case, and the jury was hung on those counts. [00:22:01] Speaker 03: And so we know the outcome. [00:22:03] Speaker 03: How often do you have a test jury where you know what would have happened? [00:22:06] Speaker 03: And here we have that, with the outcome most surely not only could have been different, but I think would have been different if the government [00:22:13] Speaker 03: Now, the really outrageous thing, Your Honor, is not only did the government do this when they didn't want the tape in, but then they argued this point over and over and over again at closing. [00:22:26] Speaker 03: It was a major theme of their closing argument to tie together why Theranos was so bad and they were preying on victims' patriotism and so forth. [00:22:35] Speaker 03: So very different from Ali, with the government backed way off, which is what you'd expect. [00:22:39] Speaker 03: In this case, the government went full bore [00:22:42] Speaker 03: on this false testimony that they knew was false because the tape was very much at issue in the Holmes case, and it was very much fought over in this case. [00:22:53] Speaker 04: Is there a harmlessness analysis on this argument? [00:22:56] Speaker 03: There is not, Your Honor. [00:22:59] Speaker 03: This, by the way, goes to the investor counts, I should tell you. [00:23:03] Speaker 03: The other argument, constructive amendment, of course, goes to all counts. [00:23:05] Speaker 04: This would be... But we can't look in and say, was this harmless, this particular area? [00:23:12] Speaker 04: I thought we could on this one. [00:23:14] Speaker 04: I didn't think we could on the first one, but I thought we could on this one. [00:23:17] Speaker 03: No, Your Honor. [00:23:17] Speaker 03: Any reasonably... I think the standard is under NAPU. [00:23:21] Speaker 03: Any reasonable likelihood that the false testimony could have affected the outcome. [00:23:25] Speaker 03: So in a sense, Your Honor, if the court were to conclude it couldn't have affected the outcome, impossible. [00:23:30] Speaker 03: I suppose there's your harmless error. [00:23:32] Speaker 03: It's not the same harmless error. [00:23:33] Speaker 03: Like, for example, on the evidentiary questions, the government would have to show. [00:23:37] Speaker 01: All the elements would have to be met. [00:23:39] Speaker 01: Our questions actually took you over time, but let me see if my colleagues have any additional questions. [00:23:44] Speaker 01: All right. [00:23:44] Speaker 01: Thank you very much, Council. [00:23:45] Speaker 01: Thank you. [00:23:46] Speaker 01: Let's hear from the government. [00:24:14] Speaker 02: Good morning, Your Honor. [00:24:15] Speaker 02: May it please the court. [00:24:16] Speaker 02: Kelly Volcar on behalf of the United States. [00:24:18] Speaker 02: This court should affirm Balwani's conviction and sentence because Balwani cannot show a constructive amendment occurred because there's no divergent between the essential elements that were alleged in the indictment, the unobjected to jury instructions and the evidence that was presented to the grand jury, which matched the evidence that was presented at trial. [00:24:37] Speaker 02: Balwani was on fair notice of the government's theory long before trial began and the most immediate to respond to [00:24:44] Speaker 02: my colleague across the aisles argument, is I believe you heard him say over and over again, the government didn't know that the immediate jeopardy finding in the CMS report related to testing on a non-theranos device, on a third party device. [00:24:58] Speaker 02: That is simply wrong. [00:25:00] Speaker 02: And the court can look to the grand jury transcript, which defense put into the record below and is at 2SER 314. [00:25:07] Speaker 02: to 1-6, the government put the CMS report before the grand jury and asked the grand jury about the findings, including the voiding of the tests on all of the Theranos Edison's and PTINR run on the Siemens Advia. [00:25:25] Speaker 02: At prior points before the grand jury, the government had repeatedly noted that the Siemens Advia was a conventional third-party machine. [00:25:34] Speaker 02: This was not a secret. [00:25:35] Speaker 02: This was not confusing to the government. [00:25:37] Speaker 02: This was not confusing to the grand jury. [00:25:39] Speaker 02: What was presented to the grand jury is what was presented at trial, which is that the CMS report, and specifically CMS Inspector Sarah Bennett, found systemic issues with Theranos' device, the Edison, [00:25:53] Speaker 02: In the CMS report, it's called the TPS 3.5. [00:25:56] Speaker 04: And that... Can you explain to me how the CMS report could have concluded that if she... What I just heard, I thought, was that Sarah Bennett didn't have access to the Theranos devices. [00:26:09] Speaker 04: She was only looking at the third-party devices. [00:26:12] Speaker 02: Yes, Your Honor, I believe that is a mischaracterization of the record. [00:26:16] Speaker 02: Sarah Bennett looked at the Theranos Edison device and Sarah Bennett looked at other testing as well. [00:26:23] Speaker 02: When my colleague across the aisle referred to proprietary technology, he was referring implicitly to the modified [00:26:31] Speaker 02: third-party devices, but he did not say that. [00:26:34] Speaker 04: And so, to Your Honor's point... Wait, hold on, just so I'm clear. [00:26:38] Speaker 04: Sara Bennett did not have access to the modified third-party devices, but did have access to Theranos proprietary technology? [00:26:46] Speaker 02: Your honor, if I may, Sarah Bennett had access to everything. [00:26:49] Speaker 02: However, she ran the inspection with a partner whose name was Gary Yamamoto. [00:26:55] Speaker 02: They split up the review of the Theranos lab as came out during her testimony. [00:27:01] Speaker 02: Sarah Bennett was in charge of reviewing the Theranos Edison device, the actual box that Theranos manufactured. [00:27:08] Speaker 02: and she also reviewed some other aspects of the lab as well. [00:27:13] Speaker 02: Gary Yamamoto was, if my memory serves, he did not testify at trial, but he was the person reviewing Theranos's modifications to third-party devices so that they could receive small samples. [00:27:28] Speaker 04: Would you, let's just assume that Sarah Bennett had not looked at Theranos proprietary information devices. [00:27:37] Speaker 04: Would you come to a different conclusion on this issue, or would you be making the same argument that they still had notice of everything? [00:27:46] Speaker 02: Your Honor, for the constructive amendment point, I believe that at the end of the day, calling across the aisle is challenging three pieces of evidentiary evidence that were admitted at trial, the CMS report and Bennett's accompanying testimony, and two patients. [00:28:01] Speaker 02: And I would argue that [00:28:03] Speaker 02: The elements didn't change and the facts didn't change between the grand jury and trial, and therefore there can be no constructive amendment. [00:28:10] Speaker 02: And the reason I say that is because the indictment alleges two schemes to defraud. [00:28:15] Speaker 02: The scheme to defraud investors very much centered around which device was used. [00:28:19] Speaker 02: Investors invested in this company because they believed Theranos had manufactured a device that could run any blood test on a small device about the size of a portable printer. [00:28:31] Speaker 02: However, in reality, [00:28:32] Speaker 02: Theranos was running the vast majority of its patient testing on third-party devices that any lab could purchase off the shelf. [00:28:40] Speaker 02: However, in the indictment, the second scheme to defraud for patients, that centered much more on the blood testing services. [00:28:47] Speaker 02: And that's because, as I mentioned earlier, accuracy and reliability is what was paramount to the patient counts. [00:28:54] Speaker 02: The patients just cared about getting an accurate blood test. [00:28:57] Speaker 02: They didn't necessarily care or even know [00:28:59] Speaker 02: which device it was being tested on. [00:29:02] Speaker 02: And so that's where, and the Bill of Particulars really walks through this in spades, and I'm happy to provide some examples. [00:29:10] Speaker 04: However, at the end of the day- Is it true that Bennett, the CMS, I hadn't picked up on this nuance, that the CMS report found danger to life based on the Siemens [00:29:27] Speaker 04: module not based on the Theranos module? [00:29:31] Speaker 04: Or did I get confused by the opposing counsel's argument? [00:29:36] Speaker 02: Your Honor, the CMS report identified 121 pages worth of deficiencies in the laboratory, not all of them related to Theranos' device, and not all of them related to the assays that the government identified in its indictment. [00:29:52] Speaker 02: In fact, in the Holmes trial, pre-trial, Holmes moved to exclude portions of the CMS report that fell outside of the Bill of Particulars. [00:30:01] Speaker 02: successfully and that's why in her trial only a portion of the CMS report was admitted. [00:30:07] Speaker 02: Balwani did not raise that argument at his trial and instead he just moved to exclude the CMS report whole cloth. [00:30:14] Speaker 00: But the CMS report as I understand it was on the overall operation of the lab. [00:30:19] Speaker 01: That's correct your honor. [00:30:21] Speaker 01: On the second issue, why did the government fight so hard to keep the tape out? [00:30:26] Speaker 01: It did create some confusions to which conversations Lucas, for example, was talking about. [00:30:32] Speaker 02: Thank you, Your Honor. [00:30:34] Speaker 02: On the recording issue, I first want to push back on my colleague's characterization of the government's evidence. [00:30:42] Speaker 02: The government, at each trial, tried to put in the most direct evidence related to each defendant. [00:30:47] Speaker 02: And in this case, the government presented testimony of Patrick Mendenhall, who didn't testify in the Holmes case. [00:30:53] Speaker 02: And there's the email at 7SER160204, [00:30:57] Speaker 02: where Mendenhall describes a 45 minute conversation with Balwani, directly with Balwani, and all of the misrepresentations that Balwani told him during that call. [00:31:08] Speaker 02: Tolbert and Lucas never spoke to Balwani. [00:31:11] Speaker 02: never interacted with Balwani. [00:31:13] Speaker 02: Balwani was not on the conference call. [00:31:15] Speaker 02: And so at trial, as often occurred in both trials, the defense went to admit a statement either of themselves or their co-defendant, which has mixed in some self-serving statements. [00:31:29] Speaker 02: And the government noted that there was not a hearsay exception. [00:31:32] Speaker 02: The district court in the colloquy back and forth asked repeatedly, for a hearsay exception, the entire focus of the discussion was an evidentiary ruling at that moment. [00:31:42] Speaker 02: Now defense counsel is trying to shoehorn it into a false testimony claim, but that was not on anyone's mind at that moment in time when it was being discussed. [00:31:52] Speaker 02: It was simply whether or not on an evidentiary basis the tapes could or could not be played. [00:31:57] Speaker 02: But more importantly than that, as Your Honor Judge Nguyen pointed out to my colleague, [00:32:02] Speaker 02: After that initial discussion at the beginning of the day and right before the witness testified, Balwani dropped the matter. [00:32:09] Speaker 02: Balwani changed trial tactics in that moment, as litigants do. [00:32:14] Speaker 01: Balwani chose not to cross- His hands weren't otherwise tied in other ways during cross-examination of these two witnesses? [00:32:21] Speaker 02: No, Your Honor. [00:32:22] Speaker 02: In fact, Balwani, the last thing that Judge Davila said was, I'm not sure if that was a request to admit it or not, but I would like to indicate at this time, I've not heard a hearsay exception, and I do not see an opportunity to admit it. [00:32:36] Speaker 02: That did not preclude [00:32:37] Speaker 02: Defense counsel from seeking to admit it after for example the witness testified on direct if anything had changed But that's not what defense counsel did defense counsel noted that there was a recording Noted that the defendant had not could not remember it word-for-word did not seek to refresh the witnesses recollection with the actual transcript of the recording or even attempt to impeach him and [00:32:59] Speaker 02: In fact, the defense counsel did not ask Tolbert about the military misrepresentation at all. [00:33:05] Speaker 02: There is not a single question in the cross-examination of Tolbert about what he heard about the military from Ms. [00:33:12] Speaker 02: Holmes. [00:33:13] Speaker 02: And in closing argument, we know why. [00:33:15] Speaker 02: Here before the appellate court, we know why. [00:33:18] Speaker 02: In closing argument, my colleague across the aisle repeatedly folded this into the theme of their case that they had already previewed an opening, that the government was hiding evidence from the jury. [00:33:30] Speaker 02: The main theme of that opening was the LIS database, and they just added the fact that the government had knew of this recording but did not play it for the jury. [00:33:40] Speaker 02: into that theme for closing and repeated it over and over and over again. [00:33:44] Speaker 02: Why doesn't the government want you to hear what Ms. [00:33:47] Speaker 02: Holmes had to say? [00:33:48] Speaker 02: The government is providing you with an incomplete picture. [00:33:51] Speaker 02: The defense counsel chose to use the absence of this tape to their advantage and criticized the government for not playing Holmes' actual words. [00:34:01] Speaker 02: And because of that, Your Honor, I think that this certainly doesn't meet the plain error standard [00:34:08] Speaker 02: and it cannot be material to the ultimate verdict of the jury. [00:34:28] Speaker 02: I would like to address Council's point that the government repeated the point over and over at closing. [00:34:34] Speaker 02: Your Honours have likely read the closing argument and I believe the record will show that while the government did reference Tolbert and the fact that he spoke only with Miss Holmes and that he did mention this point about the military, [00:34:48] Speaker 02: What my colleague is referencing is the number of times the government spoke about the misrepresentation that Ms. [00:34:54] Speaker 02: Holmes made about the military writ large, and that is a larger category. [00:35:00] Speaker 02: And the most obvious evidence of that is Ms. [00:35:02] Speaker 02: Holmes said similar statements to PFM and RDV, and Ms. [00:35:07] Speaker 02: Holmes in her trial was convicted on those counts. [00:35:12] Speaker 02: So while my colleague makes a big deal about the jury hung on certain counts related to Tolbert and Lucas in her trial, the jury heard the recording and still convicted on other investor counts. [00:35:26] Speaker 02: And the last point that I will make is the Holmes jury [00:35:29] Speaker 02: also hung on Eisenman, count three, who was in that same group of investors but did not hear the call. [00:35:38] Speaker 02: However, in Balwani's case, Mendenhall, that email I mentioned a moment ago, investor Mendenhall, forwarded Balwani's false misrepresentations to Eisenman, to count three, the only one of that group of three that actually had any interactions directly with Balwani. [00:36:03] Speaker 01: You're free to seat the rest of your time unless you have additional points to make. [00:36:07] Speaker 02: If this court has no further questions, the United States asks that this court affirm. [00:36:11] Speaker 02: Thank you. [00:36:11] Speaker 02: Thank you. [00:36:13] Speaker 01: Thank you very much, both sides, for your argument today. [00:36:15] Speaker 01: They were very helpful. [00:36:17] Speaker 01: The matter is submitted, and the decision will be issued in due course. [00:36:21] Speaker 01: The third case for today. [00:36:28] Speaker 01: You were actually over time, but did you want to do about it? [00:36:33] Speaker 01: Okay. [00:36:33] Speaker 01: Well, yes. [00:36:34] Speaker 01: Let's put a few minutes back on the clock. [00:36:37] Speaker 03: Thank you, Your Honor. [00:36:38] Speaker 03: I really appreciate that. [00:36:50] Speaker 03: Okay. [00:36:50] Speaker 03: Thank you, Your Honor. [00:36:51] Speaker 03: So first of all, to answer Judge Nelson's question, Ms. [00:36:55] Speaker 03: Bennett did not inspect [00:36:57] Speaker 03: the part of the lab that had proprietary technology. [00:36:59] Speaker 03: And then you can see that at our opening brief at page 12. [00:37:03] Speaker 04: And no one, neither her nor Yamamoto did either? [00:37:07] Speaker 03: No, her colleague, Mr. Yamamoto, did. [00:37:09] Speaker 03: But the government didn't call him. [00:37:10] Speaker 03: So my point was, Your Honor, they called the witness who didn't even inspect that part of the lab. [00:37:15] Speaker 03: But even more importantly. [00:37:17] Speaker 04: But the CMS report came in. [00:37:18] Speaker 04: And just so I'm clear, the CMS report, and I think Judge Schroeder clarified this in her question already, but the CMS report [00:37:25] Speaker 04: covered deficiencies across the board. [00:37:28] Speaker 04: It was not limited solely to non-Theranos proprietary. [00:37:32] Speaker 03: 90% of it, Your Honor, it was about conventional technology issues, 90%. [00:37:37] Speaker 03: We had proposed during the motion to eliminate stage a redacted version that took out all the conventional technology evidence. [00:37:42] Speaker 03: The court rejected that. [00:37:43] Speaker 03: And if you look at our opening brief at page 12, Your Honor, you'll see that the immediate jeopardy point, which was the issue that dealt with patient health and safety and possible death, [00:37:55] Speaker 03: That was all about PTI&R, which was a conventional technology test. [00:38:01] Speaker 03: And in terms of the government's argument about the grand jury, yes, they did present this CMS report to the grand jury. [00:38:06] Speaker 03: Not once, when you read that grand jury record, did the government ever tell the grand jury that it had anything to do with Theranos use of conventional technology. [00:38:15] Speaker 03: The grand jury would have no way to use that. [00:38:17] Speaker 03: And then in addition, Your Honor, when you look at the full record here, [00:38:23] Speaker 03: You see that over and over again, the government thought that tests like HIV in particular were on Theranos technology when they actually weren't. [00:38:31] Speaker 03: They presented to the grand jury an R&D, Research and Development Report, that was never used clinically. [00:38:37] Speaker 03: They admitted at page 6908 of the record and 6926 that the HIV test they thought was on a Theranos analyzer, a Theranos device, and they [00:38:50] Speaker 03: Repeatedly, they had an expert named Dr. Master, who the court has heard about, where Dr. Master was told that he should look at the HIV test on Theranos proprietary technology. [00:39:01] Speaker 03: It was just an error. [00:39:02] Speaker 03: So the government didn't know that. [00:39:03] Speaker 03: The grand jury had no way of knowing this was about conventional tech. [00:39:07] Speaker 03: The defense had no way of knowing. [00:39:09] Speaker 03: The government admitted it. [00:39:09] Speaker 03: The district court admitted it. [00:39:11] Speaker 03: The bill of particulars, when you really read it at SER 201 at SEC, [00:39:15] Speaker 03: You'll see that it's all about Theranos technology, Theranos devices. [00:39:19] Speaker 03: That's what this case is about. [00:39:21] Speaker 03: This is a constructive amendment. [00:39:22] Speaker 03: Your Honor, I would urge the court to reverse Mr. Bawani's convictions and remand for a new trial. [00:39:27] Speaker 01: Thank you very much, Counsel. [00:39:29] Speaker 01: Now the matter is submitted.