فصل 11

Lighting a Fuisz

The doorbell at 1238 Coldwater Canyon Drive in Beverly Hills rang at 10:15 a.m. on Saturday, October 29, 2011. The gated one-story Italian villa shrouded by palm trees belonged to Richard and Lorraine Fuisz. The couple had purchased it two years earlier to live closer to their children, who had both moved from Washington, D.C., to Los Angeles after graduating from Georgetown University.

When Richard Fuisz opened the door, a process server tried to hand him a stack of legal papers.

“I’m here to serve a lawsuit on Fuisz Technologies,” the man said.

Fuisz told him he couldn’t accept service because the company, though it bore his name, was no longer his. He had sold it more than a decade earlier. It was now part of Canadian drugmaker Valeant Pharmaceuticals, he explained. The man placed a call and repeated what Fuisz had said. The response, conveyed by someone shouting on the other end of the line, was that he was at the right address and to just serve the papers. But Fuisz continued to refuse to take them. Losing his patience, the process server threw them at his feet and left. Fuisz took out his cell phone and snapped a photo of the pile scattered across the sidewalk. He knew very well what this was about. As a codefendant in the lawsuit, he’d been personally served with a similar set of papers two days earlier. After mulling things over for a minute, he crouched down and picked up the mess. He decided he didn’t want the neighbors to see it.

The lawsuit had been filed by Theranos in federal court in San Francisco. It alleged that he had conspired with Joe and John Fuisz, his sons from his first marriage, to steal confidential patent information from the company and used it to file his own rival patent. The theft, the suit alleged, had been carried out by John on behalf of his father while he was employed at Theranos’s former patent counsel, McDermott Will & Emery.

The top of the complaint’s first page showed that Theranos had hired the famous lawyer David Boies to represent it. However, as renowned as Boies was, someone at his firm had fumbled their research and named the wrong Fuisz company. It was Fuisz Pharma, Richard and Joe’s new firm—not Fuisz Technologies—that the patent in question had been assigned to. Fuisz had refused service because he wanted to make Boies sweat his mistake.

Fuisz and his sons were angered by the suit, but they weren’t overly worried about it at first. They were confident in the knowledge that its allegations were false. The first and only time Fuisz had brought up Elizabeth Holmes’s startup with John was in an email he had sent his son in July 2006 with a link to a Theranos patent application he’d spotted in the patent office’s public database. The email, which was sent more than two months after Fuisz filed his own provisional patent, asked if John knew who at McDermott had worked on the Theranos application. John replied that McDermott was a large firm and that he had no idea. The exchange had scarcely registered with John. More than five years later, he had no memory of it. As far as he was concerned, this lawsuit was the first time he’d seen or heard the word “Theranos.”

John had no reason to wish Elizabeth or her family ill; on the contrary. When he was in his early twenties, Chris Holmes had written him a letter of recommendation that helped him gain admission to Catholic University’s law school. Later, John’s first wife had gotten to know Noel Holmes through Lorraine Fuisz and become friendly with her. Noel had even dropped by their house when John’s first son was born to bring the baby a gift.

Moreover, Richard and John Fuisz weren’t close. John thought his father was an overbearing megalomaniac and tried to keep their interactions to a bare minimum. In 2004, he’d even dropped him as a McDermott client because he was being difficult and slow to pay his bills. The notion that John had willingly jeopardized his legal career to steal information for his father betrayed a fundamental misunderstanding of their frosty relationship.

But Elizabeth was understandably furious at Richard Fuisz. The patent application he had filed in April 2006 had matured into U.S. Patent 7,824,612 in November 2010 and now stood in the way of her vision of putting the Theranos device in people’s homes. If that vision was someday realized, she would have to license the bar code mechanism Fuisz had thought up to alert doctors to patients’ abnormal blood-test results. Fuisz had rubbed that fact in her face the day his patent was issued by sending a Fuisz Pharma press release to info@theranos.com, the email address the company provided on its website for general queries. Rather than give in to what she saw as blackmail, Elizabeth had decided to steamroll her old neighbor by hiring one of the country’s best and most feared attorneys to go after him.

—

DAVID BOIES’S LEGEND preceded him. He had risen to national prominence in the 1990s when the Justice Department hired him to handle its antitrust suit against Microsoft. On his way to a resounding courtroom victory, Boies had grilled Bill Gates for twenty hours in a videotaped deposition that proved devastating to the software giant’s defense. He had gone on to represent Al Gore before the Supreme Court during the contested 2000 presidential election, cementing his status as a legal celebrity. More recently, he’d successfully led the charge to overturn Proposition 8, California’s ban on gay marriage.

Boies was a master litigator who could be ruthless when he felt the situation required it. In one case that illustrated his no-holds-barred ethos, he had escalated a business dispute between a client and the owner of a small Palm Beach lawn-care company into a federal racketeering lawsuit in which he’d accused the man and three of his gardeners of conspiracy, fraud, extortion, and—last but not least—violating antitrust law. After a judge in Miami dismissed the suit, Boies appealed the verdict to the U.S. Court of Appeals for the Eleventh Circuit in Atlanta. Only after that appeal failed did he drop the case.

Boies’s law firm, Boies, Schiller & Flexner, had gained a reputation for aggressive tactics. It didn’t take the Fuiszes long to find out why. In the weeks before Theranos sued, all three had picked up clues that they were under surveillance. Richard Fuisz noticed a car tailing him when he drove to Van Nuys Airport to board a flight to Las Vegas. Joe, who lived in Miami, was warned by his neighbor, a retired cop who acted like his block’s self-appointed captain, that someone was watching his house. John and his wife spotted a man taking pictures of their home in Georgetown. The Fuiszes now felt sure those had been private investigators hired by Boies.

The surveillance continued after the suit was filed and unnerved Fuisz’s wife, Lorraine. Cars were frequently parked across the street from their Beverly Hills house, a driver sitting idle inside. One day, Lorraine noticed that the person behind the wheel was a blond woman and became convinced that it was her old friend, Noel Holmes. Fuisz thought that was unlikely but grabbed his camera and a telephoto lens and took a picture of the car, a gray Toyota Camry, from inside the house. He then walked outside to confront the driver. As he approached the car, it sped off. When he later took a closer look at the photo, he couldn’t make out the woman’s face well enough to rule Noel out. That upset Lorraine even more. She felt sure the Holmeses were out to bankrupt them and take possession of their house. She became nearly hysterical.

Boies’s use of private investigators wasn’t just an intimidation tactic, it was the product of a singular paranoia that shaped Elizabeth and Sunny’s view of the world. That paranoia centered on the belief that the lab industry’s two dominant players, Quest Diagnostics and Laboratory Corporation of America, would stop at nothing to undermine Theranos and its technology. When Boies had first been approached about representing Theranos by Larry Ellison and another investor, it was that overarching concern that had been communicated to him. In other words, Boies’s assignment wasn’t just to sue Fuisz, it was to investigate whether he was in league with Quest and LabCorp. The reality was that Theranos was on neither company’s radar at that stage and that, as colorful and filled with intrigue as Fuisz’s life had been, he had no connection to them whatsoever.

Two months after Theranos filed its lawsuit, Keker & Van Nest, the law firm John Fuisz hired to defend him, sent Boies several documents that went a long way toward disproving Theranos’s accusations. One of them was a declaration by Brian McCauley, McDermott’s records manager, stating that a thorough search of the firm’s records management and email systems had shown that neither John nor his secretary had ever accessed any Theranos files. Attached to the declaration were exhibits showing all the steps McCauley had taken to arrive at his conclusion. But in a response five days later, Boies dismissed the documents as “self serving” and “not…very persuasive.”

Richard Fuisz tried to appeal directly to the Theranos board by sending its members several letters. In one of them, he included a photo of Elizabeth as a child to make the point that the families had once been on friendly terms and had known each other a long time. With another, he enclosed a binder filled with copies of all the emails he and his patent attorney had exchanged leading up to his April 2006 patent application to show that the patent stemmed from his own work. He also offered to meet with the board members. The only response he got was from Boies, who wrote back that Theranos was “puzzled” as to why he thought the emails proved anything.

—

ALTHOUGH HE DIDN’T have a shred of evidence to prove that John Fuisz had done what Theranos alleged, there were some things in John’s past that Boies planned to use to sow doubts in the minds of a judge or jury.

In 1992, when John was fresh out of law school, he had acted as a courier between his father and a college friend who worked at the law firm Skadden, Arps, Slate, Meagher & Flom. The college friend had given John a stack of Skadden billing documents to pass on to his dad. At the time, Richard Fuisz was in a legal battle with a Skadden client, the heavy-equipment maker Terex Corporation, which had sued him for libel for telling a congressional committee that it sold Scud missile launchers to Iraq. Even though the incident was twenty years old and the libel suit had been settled without any court finding that John had done anything wrong, Boies intended to use it to suggest he had a history of funneling stolen information to his father.

There was something else Boies planned to exploit that was both more recent and potentially more damaging: McDermott had forced John to resign in 2009 after he clashed with the firm’s brass in an unrelated matter. The cause of the dispute had been John’s insistence that the firm withdraw its reliance on a forged document in a case before the International Trade Commission in which McDermott was representing a Chinese state-owned company against the U.S. government’s Office of Unfair Import Investigations. McDermott’s leadership had agreed to withdraw the document, but the move had severely weakened the Chinese client’s defense and angered the firm’s senior partners. The firm had subsequently asked John to leave, citing a list of other incidents that it said showed a pattern of behavior unbecoming of a partner. One of the reasons cited was a complaint a client had made about John. At the time, the firm had refused to tell John who the client was or what the complaint was about, but he now figured it must have been Elizabeth’s September 2008 complaint to Chuck Work about his father’s patent.

Boies’s strategy of painting John Fuisz in a bad light was dealt a setback in June 2012 when the judge overseeing the case dismissed all the claims against John on the grounds that California’s one-year statute of limitations for legal malpractice had expired. Boies turned around and sued McDermott in state court in Washington, D.C., but that suit was soon dismissed when the court ruled that Theranos’s allegations against John and the firm were completely speculative. “Simply because attorneys within the firm had access [to the Theranos documents] does not mean the firm did not maintain confidentiality,” the judge wrote.

Yet Boies was still in business: while dismissing the claims against John, the judge in the California case had allowed many of the claims against Richard and Joe Fuisz to stand and the case to proceed to trial. John might no longer be a defendant, but Boies could still use the same narrative of collusion between father and son to argue his case against Richard and Joe.

As the litigation dragged on into the fall, John’s initial annoyance with the case morphed into full-blown fury at Elizabeth. After leaving McDermott, he had founded his own practice and the Theranos case and its allegations had cost him several clients. Opposing counsel had also brought them up to tar him in two of his cases. By the time Boies Schiller attorneys deposed John in the spring of 2013, his anger was made rawer by another source of stress: his wife, Amanda, had been diagnosed with a vasa previa, a complication of pregnancy in which the fetus’s blood vessels are exposed and at risk of rupture. She and John were in anxious limbo until the baby reached thirty-four weeks and doctors could deliver her and place her in the neonatal intensive care unit.

Even in the best of times, John had a short fuse. Growing up, he often got into fights with other boys. Under the questioning of one of Boies’s partners that day, he became combative and ornery, using foul language and letting his temper flare. At the end of the six-and-a-half-hour deposition, he made a threat that played right into Boies’s hands. Asked by one of his father’s lawyers whether the case had caused him reputational harm and, if so, whether that had affected his demeanor during the deposition, he responded:

Absolutely, I am more than pissed off at these people. I intend to seek my revenge and sue the fuck out of them when this is over, and you can guarantee I will not let Elizabeth Holmes have another fucking company as long as she lives. I will use my ability to file patents and fuck with her till she dies, absolutely.

While John Fuisz’s anger was boiling over, his father and brother were becoming concerned with how expensive the litigation was getting. They had hired the Los Angeles law firm Kendall Brill & Klieger to represent them at a cost of about $150,000 a month. Laura Brill, the partner who was handling their case, wanted to file an anti-SLAPP motion to try to get the Theranos suit thrown out as frivolous, which would have cost an additional $500,000 with little assurance that it would succeed. They decided to switch to a smaller and less expensive Northern California firm called Banie & Ishimoto and hired the George Washington University Law School professor Stephen Saltzburg, who had done legal work for Fuisz in the past, to oversee its work.

On the other side, they knew they were up against one of the most expensive lawyers in the world. Boies charged clients nearly a thousand dollars an hour and was reputed to earn more than $10 million a year. What they didn’t know, however, was that in this instance he had accepted stock in lieu of his regular fees. Elizabeth had granted his firm 300,000 Theranos shares at a price of $15 a share, which put a sticker price of $4.5 million on Boies’s services.

It wasn’t the first time Boies had worked out an alternative fee arrangement with a client and taken stock for payment. During the dot-com boom, he had accepted shares to represent WebMD, the website that provides medical information to consumers. Boies had a venture capitalist’s approach to cases and figured he and his firm stood to earn a lot more money by getting paid in stock. But it also meant he had a vested financial interest in Theranos that made him more than just its legal advocate. It helped explain why, in early 2013, Boies began attending all of the company’s board meetings.

—

EVEN THOUGH Elizabeth’s name was on all of Theranos’s patents, Richard Fuisz was highly skeptical that a college dropout with no medical or scientific training had done much real inventing. What was more likely, he thought, was that other employees with advanced degrees had done the work she’d patented.

As the two sides prepared for trial, Fuisz noticed one name that appeared as a co-inventor on many of Elizabeth’s patents: Ian Gibbons. With a little research, he learned a few basic facts about the man. Gibbons was a Brit who had a Ph.D. in biochemistry from the University of Cambridge, and he was credited as an inventor on some fifty U.S. patents, including nineteen stemming from his work at a company called Biotrack Laboratories in the 1980s and 1990s.

Fuisz presumed that Gibbons was a legitimate scientist and that, like most scientists, he was an honest person. If he could get him to admit under oath that there was nothing in his patent that borrowed from, or was similar to, Elizabeth’s early patent applications, it would deal a big blow to Theranos’s case. He and Joe had also noticed that some of Gibbons’s Biotrack patents were similar to the Theranos ones, opening the company up to charges that it had improperly recycled some of his past work. They added Gibbons’s name to the list of witnesses they wanted to depose. But then something strange happened: over the next five weeks, the Boies Schiller attorneys kept ignoring their request to schedule Gibbons’s deposition. Suspicious, the Fuiszes asked their lawyers to press the matter.