فصل 21

Trade Secrets

The Theranos delegation that came to the Journal’s offices was made up mostly of lawyers. Leading the pack was David Boies. He was flanked by Mike Brille, Meredith Dearborn, and Heather King, a former Boies Schiller partner and Hillary Clinton aide who had become Theranos’s general counsel less than two months earlier. Rounding out the group were Matthew Traub and Peter Fritsch, a former Journal reporter who was the cofounder of an opposition research firm in Washington, D.C. The lone Theranos executive was Daniel Young.

Anticipating fireworks, I had brought along my editor, Mike Siconolfi, who headed the investigations team, and Jay Conti, the deputy general counsel of the Journal’s parent company who worked closely with the newsroom on sensitive journalistic matters. I had kept both apprised of my reporting and had let them in on the secret of who my sources were.

We sat down in a conference room on the fifth floor of the Journal’s newsroom. The tone was set from the start when King and Dearborn pulled out little tape recorders and placed them at each end of the conference table. The message was clear: they were approaching the meeting as a deposition in a future legal proceeding.

At Traub’s request, I had sent a new set of eighty questions two weeks earlier that were to form the basis for our discussion. King opened the meeting by saying they were there to rebut the “false premises” embedded in those questions. Then she lobbed the first missile.

“It seems apparent to us that certainly one of your key sources is a young man named Tyler Shultz.” She looked straight at me as she said it in what was clearly a rehearsed opening salvo to try to fluster me. I kept my poker face on and said nothing. They could suspect Tyler all they wanted, but I wasn’t about to betray his confidence and give them the confirmation they were fishing for. She continued by denigrating Tyler as young and unqualified and then asserting that my other sources were disgruntled former employees who were equally unreliable. Mike interrupted her diatribe. We weren’t going to disclose who our confidential sources were nor should Theranos presume to know their identities, he said politely but firmly.

Boies chimed in for the first time, playing the good cop to King’s bad cop. “We really just want to go through this step-by-step so that you see that there just really isn’t a story here,” the seventy-four-year-old superlawyer said softly. With his bushy eyebrows and thinning gray hair, he called to mind a grandfather trying to reconcile squabbling children.

I suggested we begin addressing the questions I had sent, but, before I had time to read the first one, King’s demeanor turned aggressive again and she issued a sharp warning: “We do not consent to your publication of our trade secrets.”

We were minutes into the meeting and it had become clear to me that her main strategy was going to be to try to intimidate us, so I decided it was time to convey to her that that wasn’t going to work.

“We do not consent to waiving our journalistic privileges,” I snapped back.

My retort seemed to have the desired effect. She turned more conciliatory and we started going through my questions one by one with the understanding that Daniel Young, as the only Theranos official present, would be the one answering them. However, we were soon at loggerheads again.

After Young acknowledged that Theranos owned commercial blood analyzers, which he claimed the company used only for comparison purposes, rather than for delivering patient results, I asked if one of them was the Siemens ADVIA. He declined to comment, citing trade secrets. I then asked whether Theranos ran small finger-stick samples on the Siemens ADVIA with a special dilution protocol. He again invoked trade secrets to avoid answering the question but argued that diluting blood samples was common in the lab industry.

From there, the discussion went in circles. These questions were at the heart of my story, I said. If they weren’t prepared to answer them, what was the point of our meeting? Boies replied that they were trying to be helpful but that they would not reveal what methods Theranos employed unless we signed nondisclosure agreements. Those were secrets Quest and LabCorp were desperately trying to find out by any means possible, including industrial espionage, he claimed.

As I continued to press for more substantive answers, Boies grew angry. He was suddenly no longer the amiable grandfatherly figure. He growled and flashed his teeth like an old grizzly bear. This was the David Boies who inspired fear in his courtroom adversaries, I thought to myself. He took a swipe at my reporting methods, saying I had asked some doctors loaded questions that were damaging to Theranos. That sparked a tense exchange between us. We stared each other down from across the table.

Jay Conti jumped in to defuse the situation but was soon sparring with King and Brille. Their argument took an almost farcical turn.

“It just feels like you want us to give you the formula for Coke in order to convince you that it doesn’t contain arsenic,” King said.

“Nobody’s asked for the formula for Coke!” Jay replied, annoyed.

More arguing ensued over the issue of what legitimately constituted a trade secret. How could anything involving a commercial analyzer manufactured by a third party possibly be deemed a Theranos trade secret? I asked. Brille replied unconvincingly that the distinction wasn’t as simple as I made it out to be.

We turned to my questions about the Edison. How many blood tests did Theranos perform on the device? That too was a trade secret, they said. I felt like I was watching a live performance of the Theater of the Absurd.

Did Theranos really have any new technology? I asked provocatively.

Boies’s temper flared again. Testing tiny finger-stick samples was something no one in the laboratory industry had been able to do before, he fumed. “Theranos is doing it and, unless it’s magic, it’s a new technology!”

“It sounds like the Wizard of Oz,” Jay quipped.

We continued going around in circles, never getting a straight answer about how many tests Theranos performed on the Edison versus commercial analyzers. It was frustrating but also a sign that I was on the right track. They wouldn’t be stonewalling if they had nothing to hide.

The meeting dragged on in this manner for four more hours. As we continued going through my list of questions, Young did answer some of them without invoking trade secrets. He acknowledged problems with Theranos’s potassium test but claimed they had quickly been solved and none of the faulty results had been released to any patients. Alan Beam had told me otherwise, so I suspected Young was lying about that. Young also confirmed that Theranos conducted proficiency testing differently than most laboratories but argued this was justified by the uniqueness of its technology. He also confirmed that the CLIA inspector hadn’t seen the Normandy part of Theranos’s lab during her inspection but claimed she had been informed of its existence.

One of his answers struck me as odd. When I brought up the Hematology Reports study Holmes had coauthored, Young immediately dismissed it as outdated. It had been conducted with older Theranos technology and its data were ancient, dating back to 2008, he said. Why then had Holmes cited it to The New Yorker? I wondered. It seemed Theranos was now distancing itself from it, probably because it was conscious of its flimsiness.

I asked about Ian Gibbons. Young acknowledged that Ian had been an important contributor in the company’s early years but said his behavior had become erratic at the end of his life and implied that he was no longer in the know at that stage. King interjected, dismissing Gibbons as an alcoholic. Boies, meanwhile, attacked Rochelle Gibbons’s credibility by pointing out that she had failed to provide a sworn declaration in the Fuisz case, leading the judge to rule against allowing her testimony at trial.

Whether she’d provided a sworn statement in the Fuisz case or not was beside the point, I told him. I found her credible as a source and she was speaking to me on the record.

“She’s under oath with me,” I said.

We eventually turned to the instances of questionable test results I had gathered during my reporting. To be able to respond to my specific patient examples, King said Theranos would need to obtain signed releases from each waiving his or her patient-privacy rights. She asked me to help gather the waivers from the patients. I agreed to do so.

By the time the meeting finally broke up, it was nearly six p.m. and King looked like she wanted to plant a dagger in my chest.

—

THREE DAYS LATER, Erika Cheung was working late in the lab at her new employer, a biotech firm called Antibody Solutions, when a colleague came over to tell her that a man was asking to see her. The man had been waiting in his car in the parking lot for a long time, the colleague said.

Erika was immediately on her guard. Mona Ramamurthy, the head of human resources at Theranos, had left several messages on her cell-phone voicemail earlier in the day saying there was something urgent she needed to discuss with her. Erika hadn’t returned her calls and now some mysterious man was outside waiting to talk to her. She suspected the two were connected.

It was six p.m. on a Friday and not many people were left at Antibody Solutions’ Sunnyvale offices. To be safe, Erika asked her colleague to walk her to her car. As they exited the building, a young man stepped out of an SUV and walked toward them at a fast clip with an envelope in his hand. He handed it to Erika, then turned around and left.

When she saw the address on the envelope, Erika’s heart nearly stopped.

Via Hand Delivery

Ms. Erika Cheung

926 Mouton Circle

East Palo Alto, California 94303

The only person who knew that was where she was living was her colleague Julia. Two weeks earlier, Erika had let the lease expire on her apartment in Oakland and temporarily moved in with Julia ahead of a planned move to China in the fall. She’d been staying there only on weeknights, going camping or traveling on weekends. Not even her mother knew this address. The only way to have known it was to have followed her.

The letter inside the envelope was on Boies Schiller letterhead. As Erika read it, her sense of panic only increased:

Dear Ms. Cheung,

This firm represents Theranos, Inc. (“Theranos” or the “Company”). We have reason to believe that you have disclosed certain of the Company’s trade secrets and other confidential information without authorization. We also have reason to believe that you have done so in connection with making false and defamatory statements about the Company for the purpose of harming its business. You are directed to immediately cease and desist from these activities. Unless this matter is resolved in accordance with the terms set forth in this letter by 5:00 p.m. (PDT) on Friday, July 3, 2015, Theranos will consider all appropriate remedies, including filing suit against you.

The letter went on to say that, if Erika wished to avoid litigation, she must submit to an interview with Boies Schiller attorneys and reveal what information she had disclosed about Theranos and to whom. It was signed by David Boies. Erika drove to Julia’s house and stayed there all weekend with the blinds closed, too terrified to set foot outside.

—

BACK ON THE OTHER COAST, I was beginning to sense that things were escalating. That same Friday evening, I got a text from Alan Beam. It was the first I’d heard from him in nearly two months.

“Theranos is threatening me again,” he wrote. “Their lawyers say they suspect I’m violating my affidavit.”

We got on the phone and I filled him in on the marathon meeting with the Theranos delegation at the Journal a few days earlier. Rather than scaring him like I worried it might, Alan was fascinated by this new development. He had consulted with a new lawyer, a former federal prosecutor who had worked on the Medicare Fraud Strike Force, and felt less vulnerable to Theranos’s intimidation tactics. In fact, he seemed to have changed his mind and to want to resume helping me get the story out.

Later that night, an email from Meredith Dearborn landed in my in-box. Attached to it was a formal letter from David Boies addressed to Jay Conti, who was the email’s primary recipient. Citing several California statutes, the letter sternly demanded that the Journal “destroy or return” all Theranos trade secrets and confidential information in its possession. Even though Boies must have known there was zero chance we would do that, it was a shot across the bow.

Any remaining doubts I had that Theranos was waging an aggressive counterattack were put to rest the following Monday morning. I was sitting in my idled car listening to the radio while waiting for the street-sweeping truck to go by—one of the less pleasant aspects of life in Brooklyn—when my cell phone rang. I turned the volume down on the car radio and answered.

It was Erika and she seemed badly shaken. She told me about the man in the SUV, the address on the envelope, and the ultimatum from Boies. I tried to calm her down. Yes, it was highly likely she was under surveillance, I admitted. But I was sure that it had started only recently and that Theranos had no proof she was one of my sources. This was an attempt to smoke her out, I said. They were bluffing. I encouraged her to ignore the letter and to go about her business as usual. I could tell from her halting voice that she was still petrified, but she agreed to follow my advice.

The next day, I received an email from Dr. Sundene in Phoenix. A Theranos sales representative had come by her office to tell her that the company’s president, Sunny Balwani, was in town and wanted to meet with her. When she’d declined the invitation, he had turned hostile and suggested that her refusal would have negative consequences. I couldn’t believe it. Going after my confidential sources was one thing, but threatening a doctor who had spoken to me on the record was beyond the pale. I sent Heather King an email letting her know that I was aware of the sales representative’s visit to Dr. Sundene’s office and that, if I learned of any more such incidents, I would consider them newsworthy and would include mention of them in my story. King denied that the sales representative had done anything wrong.

Far from backing off, Theranos stepped it up a notch. Later that week, Boies sent the Journal a second letter. Unlike the first one, which was just two pages long, this one ran twenty-three pages and explicitly threatened a lawsuit if we published a story that defamed Theranos or disclosed any of its trade secrets. Much of the letter was a searing assault on my journalistic integrity. In the course of my reporting, I had “fallen far short of being fair, objective, or impartial” and instead appeared hell-bent on “producing a predetermined (and false) narrative,” Boies wrote.

His main evidence to back up that argument was signed statements Theranos had obtained from two of the other doctors I had spoken to claiming I had mischaracterized what they had told me and hadn’t made clear to them that I might use the information in a published article. The doctors were Lauren Beardsley and Saman Rezaie from the Scottsdale practice I’d visited.

The truth was that I hadn’t planned on using the patient case Drs. Beardsley and Rezaie had told me about because it was a secondhand account. The patient in question was being treated by another doctor in their practice who had declined to speak to me. But, while their signed statements in no way weakened my story, the likelihood that they had caved to the company’s pressure worried me.

I noticed there was no signed statement from Adrienne Stewart, the third doctor I had interviewed at that practice. That was a good thing because I planned on using one or both of the patient cases she had discussed with me. When I reached her by phone, she said that she was visiting family in Indiana and hadn’t been present when Theranos representatives came by the practice. I told her about her colleagues’ signed statements and warned her that the company would probably try the same heavy-handed tactics with her when she returned.

Dr. Stewart emailed a few days later to let me know that Balwani and two other men had indeed come by to speak to her as soon as she’d gotten back to Arizona. The receptionist had told them she was busy with patients, but they had refused to leave and had stayed in the waiting room for hours until she finally came out to shake their hands. They had made her agree to meet with them the following Friday morning, which was in two days. I had a bad feeling about that meeting, but there was nothing I could do about it. Dr. Stewart promised she wouldn’t bow to any pressure. She felt it was important to take a stand for her patients and the integrity of lab testing.

When Friday arrived, I tried to check in with Dr. Stewart several times in the morning but couldn’t reach her. She called back in the early evening, as I was driving out to eastern Long Island for the weekend with my wife and three kids. She sounded rattled. She told me Balwani had tried to make her sign a statement similar to the one her colleagues had signed, but she had politely refused. Furious, he had threatened to drag her reputation through the mud if she appeared in any Journal article about Theranos. Her voice trembling, she pleaded with me to no longer use her name. As I tried to reassure her that it was an empty threat, it dawned on me that there was nothing these people would stop at to make my story go away.