Theranos Investor Accuses Holmes of Lying About Blood Tests

  • Robert Colman says blood-testing firm now in ‘free-fall’
  • Lawsuit details pitching of shares through Lucas Venture Group

Theranos Inc. was sued by a venture capital investor who claims Chief Executive Officer Elizabeth Holmes lied about its blood laboratory technology in which a pinprick of blood could be tested for hundreds of diseases.

The lawsuit, citing investigations by the U.S. Justice Department and the Securities and Exchange Commission, argues Holmes’s claims were overstated and the technology was flawed. Lead plaintiff Robert Colman, who bought shares through Menlo Park-based Lucas Venture Group XI LLC, seeks class-action status to represent investors in Theranos securities from July 29, 2013, to Oct. 2 of this year.

"The once-vaunted company is in disarray and the value of its securities are in a free-fall," according to the complaint. Colman, the co-founder of the former Silicon Valley heavyweight Robertson Stephens investment firm, said he had been unaware of the “material omissions” that led to the decline.

Theranos had claimed it could run multiple blood tests on just drops of blood at a fraction of the usual price. Now it’s under legal siege. Besides multiple patient lawsuits, it’s also been sued by Partner Fund Management, an investor, and ex-partner Walgreens Boots Alliance Inc. The startup, based in Palo Alto, California, has closed its labs after U.S. regulators found multiple failures to meet standards amid concerns about the accuracy of its testing that led to corrections of tens of thousands of patient results. The company has said it will focus on a new product.

The complaint filed Monday in federal court in San Francisco details how Colman came to own Theranos shares through Donald A. Lucas. He’s the managing partner of the fund under which Lucas Venture Group XI LLC operates and whose father, Donald L. Lucas, was the original funder of Theranos and mentored Holmes, according to the complaint. Donald A. Lucas solicited Colman’s investment “at the invitation” of Holmes, according to the suit.

Patrick Ryan, a spokesman for Theranos at Hill+Knowlton Strategies, didn’t immediately respond to a request seeking comment on the lawsuit.

‘Specter’ of Harm

The lawsuit cites an Oct. 15 Wall Street Journal story explaining that Theranos employees were uncertain of the technology’s accuracy and that some doctors didn’t trust the results. Worse, according to the complaint, were regulators’ findings forcing Theranos to void tens of thousands of blood test results, “raising the specter of patient harm.”

Another “hammer” fell when Walgreens sued Theranos this month for breach of contract, Colman’s lawyers said in his lawsuit.

The case is Colman v. Theranos, 16-cv-06822, U.S. District Court, Northern California (San Francisco).

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