Theranos Inc.'s former board members George Shultz and Gary Roughead said they did not raise objections with CEO Elizabeth Holmes when allegations emerged that the company faked laboratory tests for its blood-testing technology, Bloomberg reported, citing court documents.
The former directors reportedly admitted in depositions that they did not think to raise the issue with the CEO as they believed her claims about the capabilities of the company's technology.
Roughead, a retired U.S. Navy Admiral, said he was aware that the company's executives sometimes used the technology of other companies for the analysis of blood samples but did not have knowledge of the extent to which this practice was used until news reports emerged.
Bloomberg reported that Tyler Shultz, a former Theranos employee, said Holmes exaggerated the capabilities of the technology to George Shultz, a former U.S. secretary of state, to gain a business advantage. He reportedly stated in a deposition that the company's claims such as the ability to run multiple blood tests from a single drop of blood and being able to run multiple tests simultaneously were false.
The depositions were reportedly made as part of an investor lawsuit. Theranos recently reached a settlement with the investor Partner Fund Management LP, which had sued the California-based company for allegedly misleading it into investing in the company.
Partner Fund reportedly believed Theranos used a shell company to secretly buy commercial-lab equipment and then pretended they were using the company's technology to run "fake 'demonstrations tests' for prospective investors and business partners."
Theranos also agreed in April to pay about $4.7 million to Arizona residents, who used its services between 2013 and 2016, in consumer restitution as part of a settlement reached with the Arizona attorney general.