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Elizabeth Holmes will take your $1.2 million but not your phone calls

We met an investor who won’t take a hint — or even a command

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Theranos Trial
Jane Tyska/Digital First Media/The Mercury News via Getty Images

Lately I have been reflecting on Alan Eisenman, Theranos investor and human cowboy boot. He’s wealthy, the kind of character Matthew McConaughey will play in about 15 years; on the stand, his hair was almost as white as his shirt, which was unbuttoned at the top. (No tie, of course.) He seemed like someone that would be fun to drink a whiskey with, as long as he got to do all the talking.

In court, his sense of grievance was palpable: this man feels he has been done wrong. “I think there was business fraud,” Eisenman said. “I think I was lied to and taken advantage of.”

“I think I was lied to and taken advantage of.”

It is easy to laugh at these investors, who are committing a tremendous social sin: claiming a role (investor) they appear to be unqualified for (because of an inability to do proper due diligence). It is a specific type of investor I keep noticing popping up again and again: the high net worth individual or family.

Now, during the period during which Elizabeth Holmes is alleged by the government to have committed wire fraud, startups were one of the fastest-growth sectors of the economy. At the same time, there was an explosion of family offices, managing money for what one witness  (and Theranos investor, to the tune of $6 million) called “high-quality families.

Most of these family offices had no business whatsoever investing in healthcare startups, and Eisenman and his family are no exception. They didn’t know what data to ask for and couldn’t interpret the data they got. Holmes’ defense strategy, then, is to paint these investors as naifs who failed to do their due diligence. 

Eisenman invested about $1.2 million in Theranos in 2006, after a five-minute phone call with Holmes. For a while, he got quarterly updates on Theranos, though those meetings ceased in 2010, and Holmes seemed to be sick of Eisenman pestering her for information. In one email, she even told him she’d buy him out, letting him make 5x on his investment. Eisenman did not take her up on it.

Incredibly, after all this, Eisenman invested in Theranos again

In fact, Eisenman had multiple opportunities to sell his Theranos shares, including ones that would have gotten him north of $20 million on a $1.2 million investment. Each time he declined, saying he didn’t have enough information.

Incredibly, after all this, Eisenman invested in Theranos again — for $100,000 in 2013, which forms the basis for one of the government’s counts of wire fraud. By this time, former Theranos comptroller Danise Yam testified Theranos had a dispute with its auditor, and there had been no audited financial statements since 2009. This is what the children call a “red flag.”

But Eisenman didn’t come to Theranos cold. He had a social connection — he was friends with the Holmes’ family’s financial advisor, who had also invested. Plus, his wife’s father, who had also invested, was friendly with Bill Frist, the former senator, who was on the board.

Social heuristics seem to have played a heavy part in the family office investments; Henry Kissinger’s attorney alone, Daniel Mosley, introduced Holmes to a number of investors: the Walton family, the DeVos family, and the Cox family, among others. Mosley’s network invested $384 million, over half of the $730 million funding round.

Eisenman’s direct testimony went mostly smoothly, but the cross-examination was unusually obstreperous. Several times, Judge Edward Davila explained to Eisenman that the lawyers got to ask the questions, and Eisenman’s job was to answer them. Eisenman was so uncooperative that he often demanded evidence to refresh his memory, even, notably, when the evidence being discussed was right in front of him, pulled up on the court’s monitors.

“I’m a smart guy.”

One particularly memorable exchange involved Kevin Downey, attorney for Elizabeth Holmes, who was asking Eisenman about a 2015 email. In the email, Sunny Balwani made reference to a conversation he and Eisenman had in 2013 about Eisenman selling his shares. Eisenman was of the opinion that the 2015 email misrepresented his 2013 conversation with Balwani. Downey asked if Eisenman had told Balwani that, at least three and perhaps as many as five times. Eisenman somehow managed not to answer this question, seeming to be confused about what had occurred in 2013 and what had happened in 2015.

On direct examination, we’d been shown several emails of Holmes and Balwani telling Eisenman to, essentially, stop pestering them. Before we left court last week, Eisenman talked with the prosecutors to tell them about his travel plans. They discouraged him from talking to them again. Less than 15 hours later, he emailed a member of the prosecution team to ask how his testimony had gone. The agent in question called him to tell him not to talk to the government.

The next day, Eisenman emailed the government again, to tell them his travel plans, and received another scolding phone call. Eisenman said that he didn’t think the email was a big deal — he was just discussing his travel plan. The fact that he had been told at least three times not to talk to the government didn’t seem to matter to him. Downey asked whether it was up to him whether the communication violated the court’s rules.

“I’m a smart guy,” Eisenman said.

“This is what we call boilerplate, as you know as an attorney.”

In 2010, Holmes emailed Eisenman the following: “Alan. Your continued daily calls and emails after we’ve already told you multiple times that we do not have additional information we can disclose beyond what we’ve already shared with David [a fellow investor] are upsetting to us.” Eisenman moved on to contacting board members, including Frist.

The juxtaposition of Eisenman’s behavior this weekend — refusing to listen, continuing to send unwanted emails — with the emails we saw in court was striking.

Weird as his court performance was — almost a perfect demonstration of how the rich are accustomed to the world bending to their whims — and as lacking as his due diligence was, that doesn’t make him any less of a victim, if he was lied to. It may be easier to make victims of family offices, partly because they invest based on the family’s social life. And they may explain why Eisenman, when confronted with the investment contract he signed, said, “This is what we call boilerplate, as you know as an attorney.”

Eisenman’s next remark was that what was more important than the contract, was the conversations he had with the principals. The paperwork isn’t the important part, for him. He likes the social activity of being an investor. He’s not just mad about the money, although he is probably also mad about the money. He’s mad that he’s been embarrassed — and his reputation has taken a hit.

Which does explain why he’s so aggrieved: here he is, out in front of God and everyone, showing himself to be a mark. And a pesky one, at that.