فصل 06

Sunny

Chelsea Burkett was burning out. It was the late summer of 2009 and she was working long hours at a Palo Alto startup, juggling what at a more established company would have been five different roles. Not that she was averse to hard work. Like most twenty-five-year-old Stanford graduates, striving was in her DNA. But she yearned for a little inspiration and she wasn’t getting any from her job: Doostang, her employer, was a career website for finance professionals.

Chelsea had been one of Elizabeth’s best friends at Stanford. As freshmen, they’d lived in adjacent dorms in Wilbur Hall, a big residential complex on the eastern edge of campus, and had immediately hit it off. Elizabeth wore a red-white-and-blue “Don’t mess with Texas” T-shirt and a big smile the first time they met. Chelsea found her sweet, smart, and fun.

Both were social and outgoing, with matching blue eyes. They did their share of drinking and partying and pledged a sorority, partly as a play for better housing. But, while Chelsea was a regular teenager still trying to find herself, Elizabeth seemed to know exactly who she wanted to be and what she wanted to do. When she returned to campus with a patent she’d written at the beginning of sophomore year, Chelsea was blown away.

The two young women had stayed in touch in the five years since Elizabeth had dropped out of school to launch Theranos. They didn’t see each other often, but they texted occasionally. During one of these exchanges, Chelsea mentioned her job blues, prompting Elizabeth to write back, “Why don’t you come work for me?”

Chelsea went to see Elizabeth at the Hillview Avenue office. It didn’t take her friend long to sell her on Theranos. Elizabeth talked fervently about a future in which the company would save lives with its technology. It sounded a lot more interesting and noble to Chelsea than helping investment bankers find jobs. And Elizabeth was so persuasive. She had this intense way of looking at you while she spoke that made you believe in her and want to follow her.

They quickly settled on a role for Chelsea: she would work in the client solutions group, which was in charge of setting up the validation studies Theranos was conducting to try to win pharmaceutical companies’ business. Chelsea’s first assignment would be to organize a study with Centocor, a division of Johnson & Johnson.

When she reported for her new job a few days later, Chelsea learned that she wasn’t the only friend Elizabeth had hired. Just a week earlier, Ramesh “Sunny” Balwani had come on board as a senior Theranos executive. Chelsea had met Sunny once or twice but didn’t know him well. She just knew he was Elizabeth’s boyfriend and that they were living together in an apartment in Palo Alto. Elizabeth hadn’t mentioned anything about Sunny joining the company, yet Chelsea now faced the reality of having to work with him. Or was it for him? She wasn’t sure whether she reported to Sunny or to Elizabeth. Sunny’s title, executive vice chairman, was both lofty and vague. Whatever his role was meant to be, he didn’t waste any time asserting himself. From the get-go, he involved himself in every aspect of the company and became omnipresent.

Sunny was a force of nature, and not in a good way. Though only about five foot five and portly, he made up for his diminutive stature with an aggressive, in-your-face management style. His thick eyebrows and almond-shaped eyes, set above a mouth that drooped at the edges and a square chin, projected an air of menace. He was haughty and demeaning toward employees, barking orders and dressing people down.

Chelsea took an immediate dislike to him even though he made an effort to be nicer to her in deference to her friendship with Elizabeth. She didn’t understand what her friend saw in this man, who was nearly two decades older than she was and lacking in the most basic grace and manners. All her instincts told her Sunny was bad news, but Elizabeth seemed to have the utmost confidence in him.

—

SUNNY HAD BEEN a presence in Elizabeth’s life since the summer before she went to college. They’d met in Beijing in her third year attending Stanford’s Mandarin program. Elizabeth had struggled to make friends that summer and gotten bullied by some of the students on the trip. Sunny, the lone adult among a group of college kids, had stepped in and come to her aid. That’s how Elizabeth’s mother, Noel, described the genesis of their relationship to Lorraine Fuisz.

Born and raised in Mumbai, Sunny first came to the United States in 1986 for his undergraduate studies. Afterward, he worked as a software engineer for a decade at Lotus and Microsoft. In 1999, he joined an Israeli entrepreneur named Liron Petrushka at a Santa Clara, California, startup called CommerceBid.com. Petrushka was developing a software program that would enable companies to pit their suppliers against one another in live online auctions to secure economies of scale and lower prices.

When Sunny joined CommerceBid, the dot-com frenzy was at its peak and the niche Petrushka’s company was in, known as business-to-business e-commerce, had become red-hot. Analysts were breathlessly predicting that $6 trillion of commerce between corporations would soon be handled via the internet.

The sector’s leader, Commerce One, had just gone public and seen its stock price triple on its first day of trading. It finished the year up more than 1,000 percent. That November, just a few months after Sunny was named CommerceBid’s president and chief technology officer, Commerce One acquired the startup for $232 million in cash and stock. It was a breathtaking price for a company that had just three clients testing its software and barely any revenues. As the company’s second-highest-ranking executive, Sunny pocketed more than $40 million. His timing was perfect. Five months later, the dot-com bubble popped and the stock market came crashing down. Commerce One eventually filed for bankruptcy.

Yet Sunny didn’t see himself as lucky. In his mind, he was a gifted businessman and the Commerce One windfall was a validation of his talent. When Elizabeth met him a few years later, she had no reason to question that. She was an impressionable eighteen-year-old girl who saw in Sunny what she wanted to become: a successful and wealthy entrepreneur. He became her mentor, the person who would teach her about business in Silicon Valley.

It isn’t clear exactly when Elizabeth and Sunny became romantically involved, but it appears to have been not long after she dropped out of Stanford. When they’d first met in China in the summer of 2002, Sunny was married to a Japanese artist named Keiko Fujimoto and living in San Francisco. By October 2004, he was listed as “a single man” on the deed to a condominium he purchased on Channing Avenue in Palo Alto. Other public records show Elizabeth moved into that apartment in July 2005.

Sunny spent the decade after his brief and lucrative stint at CommerceBid not doing much aside from enjoying his money and giving Elizabeth advice behind the scenes. He had stayed on at Commerce One as a vice president until January 2001 and then enrolled in business school at Berkeley. He later took classes in computer science at Stanford.

By the time he joined Theranos in September 2009, Sunny’s legal record contained at least one red flag. To dodge taxes on his CommerceBid earnings, he’d hired the accounting firm BDO Seidman, which arranged for him to invest in a tax shelter. The maneuver generated an artificial tax loss of $41 million that offset his CommerceBid gains, all but eliminating his tax liability. When the Internal Revenue Service cracked down on the practice in 2004, Sunny was forced to pay the millions of dollars in back taxes he owed in a settlement with the agency. He turned around and sued BDO, claiming that he had been unsophisticated in tax matters and that the firm had knowingly misled him. The suit was settled on undisclosed terms in 2008.

Tax troubles aside, Sunny was proud of his wealth and liked to broadcast it with his cars. He drove a black Lamborghini Gallardo and a black Porsche 911. Both had vanity license plates. The one on the Porsche read “DAZKPTL” in mock reference to Karl Marx’s treatise on capitalism. The Lamborghini’s plate was “VDIVICI,” a play on the phrase “Veni, vidi, vici” (“I came, I saw, I conquered”), which Julius Caesar used to describe his quick and decisive victory at the Battle of Zela in a letter to the Roman Senate.

The way Sunny dressed was also meant to telegraph affluence, though not necessarily taste. He wore white designer shirts with puffy sleeves, acid-washed jeans, and blue Gucci loafers. His shirts’ top three buttons were always undone, causing his chest hair to spill out and revealing a thin gold chain around his neck. A pungent scent of cologne emanated from him at all times. Combined with the flashy cars, the overall impression was of someone heading out to a nightclub rather than to the office.

Sunny’s expertise was software and that was where he was supposed to add value at Theranos. In one of the first company meetings he attended, he bragged that he’d written a million lines of code. Some employees thought that was preposterous. Sunny had worked at Microsoft, where teams of software engineers had written the Windows operating system at the rate of one thousand lines of code per year of development. Even if you assumed Sunny was twenty times faster than the Windows developers, it would still have taken him fifty years to do what he claimed.

Sunny was boastful and patronizing toward employees, but he was also strangely elusive at times. When Don Lucas showed up at the office once or twice a month to visit with Elizabeth, Sunny would suddenly vanish. One employee found a note on an office printer that Elizabeth had faxed to Lucas, in which she lauded Sunny’s skills and résumé, so she hadn’t concealed his hiring. But people like Dave Nelson, the engineer who had helped Tony Nugent build the first Edison prototype and who now sat across from Chelsea’s cubicle, began to suspect that Elizabeth was downplaying to the board the breadth of Sunny’s role.

There was also the murky question of what she told the board about their relationship. When Elizabeth informed Tony that Sunny was joining the company, Tony asked her point-blank whether they were still a couple. She responded that the relationship was over. Going forward, it was strictly business, she said. But that would prove not to be true.

—

CHELSEA’S CENTOCOR ASSIGNMENT took her to Antwerp, Belgium, in the fall of 2009. Daniel Young, a brainy bioengineering Ph.D. from MIT, accompanied her there. Daniel had been hired six months earlier to help add a new dimension to the Theranos blood-testing system: predictive modeling. When Elizabeth pitched pharmaceutical executives now, she told them that Theranos could forecast how patients would react to the drugs they were taking. Patients’ test results would be input into a proprietary computer program the company had developed. As more results got fed into the program, its ability to predict how markers in the blood were likely to change during treatment would become better and better, she said.

It sounded cutting-edge, but there was a catch: the blood-test results had to be reliable for the computer program’s predictions to have any value, and Chelsea started to have her doubts about that soon after she arrived in Belgium. Theranos was supposed to help Centocor assess how patients were responding to an asthma drug by measuring a biomarker in their blood called allergen-specific immunoglobulin E, or IgE, but the Theranos devices seemed very buggy to Chelsea. There were frequent mechanical failures. The cartridges either wouldn’t slot into the readers properly or something inside the readers would malfunction. Even when the devices didn’t break down, it could be a challenge coaxing any kind of output from them.

Sunny always blamed the wireless connection, and he was right in some instances. The process by which test results were generated involved a transatlantic round-trip of ones and zeros: when the blood test was completed, a cellular antenna on the reader beamed the voltage data produced by the light signal to a server in Palo Alto. The server analyzed the data and beamed back a final result to a cell phone in Belgium. When the cellular connection was weak, the data transmission would fail.

But there were other things besides the wireless connection that could interfere with the generation of a result. Nearly all blood tests require a certain amount of dilution to lower the concentration of substances in the blood that can wreak havoc on the test. In the case of chemiluminescent immunoassays—the class of tests the Edison performed—diluting the blood was necessary to filter out its light-absorbing pigments and other constituents that could interfere with the emission of the light signal. The amount of dilution the Theranos system required was greater than usual because of the small size of the blood samples Elizabeth insisted on. For the reader to have enough liquid to work with, the volume of the samples had to be increased significantly. The only way to do that was to dilute the blood more. And that in turn made the light signal weaker and harder to measure precisely. Put simply, some dilution was good, but too much dilution was bad.

The Edisons were also very sensitive to ambient temperature. To function properly, they needed to run at exactly 34 degrees Celsius. There were two 11-volt heaters built into the reader to try to maintain that temperature when a blood test was being run. But in colder settings, like certain hospitals in Europe, Dave Nelson had noticed that the little heaters didn’t keep the readers warm enough.

Sunny didn’t know or understand any of this because he had no background in medicine, much less laboratory science. Nor did he have the patience to listen to the scientists’ explanations. It was easier to just blame the cellular connection. Chelsea wasn’t much more knowledgeable about the science than Sunny was, but she was friendly with Gary Frenzel, the head of the chemistry team, and she gleaned from their conversations that the difficulties went far beyond connectivity issues.

What Chelsea didn’t know at the time was that one of their pharmaceutical partners had already walked away from the startup. Earlier that year, Pfizer had informed Theranos that it was ending their collaboration because it was underwhelmed by the results of the Tennessee validation study. Elizabeth had tried to put the best spin she could on the fifteen-month study in a twenty-six-page report she’d sent to the New York pharmaceutical giant, but the report had betrayed too many glaring inconsistencies. The study had failed to show any clear link between drops in the patients’ protein levels and the administration of the antitumor drugs. And the report had copped to some of the same snafus Chelsea was now witnessing in Belgium, such as mechanical failures and wireless transmission errors. It had blamed the latter on “dense foliage, metal roofs, and poor signal quality due to remote location.”

Two of the Tennessee patients had called the Theranos offices in Palo Alto to complain that the readers wouldn’t start because of temperature issues. “The solution,” according to the report, had been to ask the patients to move the readers “away from A/C units and possible air currents.” One patient had put the device in his RV and the other in a “very hot room” and the temperature extremes had “affected the readers’ ability to maintain desired temperature,” the report said.

The report was never shared with Chelsea. She didn’t even know of the Pfizer study’s existence.

—

WHEN SHE RETURNED to Palo Alto from her three-week stay in Antwerp, Chelsea discovered that Elizabeth and Sunny’s attention had shifted from Europe to another part of the globe: Mexico. A swine flu epidemic had been raging there since the spring and Elizabeth thought it offered a great opportunity to showcase the Edison.

The person who had planted that germ in her mind was Seth Michelson, Theranos’s chief scientific officer. Seth was a math whiz who’d once worked in the flight simulator lab at NASA. His specialty was biomathematics, the use of mathematical models to help understand phenomena in biology. He was in charge of the predictive modeling efforts at Theranos and was Daniel Young’s boss. Seth called to mind Doc Brown from the 1985 Michael J. Fox movie Back to the Future. He didn’t have Doc’s crazy white hair, but he sported a huge, frizzy gray beard that gave him a similar mad scientist look. Though in his late fifties, he still said “dude” a lot and became really animated when he was explaining scientific concepts.

Seth had told Elizabeth about a math model called SEIR (the letters stood for Susceptible, Exposed, Infected, and Resolved) that he thought could be adapted to predict where the swine flu virus would spread next. For it to work, Theranos would need to test recently infected patients and input their blood-test results into the model. That meant getting the Edison readers and cartridges to Mexico. Elizabeth envisioned putting them in the beds of pickup trucks and driving them to the Mexican villages on the front lines of the outbreak.

Chelsea was fluent in Spanish, so it was decided that she would head down to Mexico with Sunny. Getting authorization to use an experimental medical device in a foreign country is usually no easy thing, but Elizabeth was able to leverage the family connections of a wealthy Mexican student at Stanford. He got Chelsea and Sunny an audience with high-ranking officials at the Mexican Social Security Institute, the agency that runs the country’s public health-care system. IMSS approved the shipment of two dozen Edison readers to a hospital in Mexico City. The hospital, a sprawling facility called Hospital General de México, was located in Colonia Doctores, one of the city’s most crime-ridden neighborhoods. Chelsea and Sunny were discouraged from going to and from the hospital on their own. A driver dropped them off inside the gates of the facility every morning and picked them up at the end of each day.

For weeks, Chelsea spent her days cooped up in a little room inside the hospital. The Edison readers were stacked on shelves along one wall. Refrigerators containing blood samples were lined up along another. The blood came from infected patients who’d been treated at the hospital. Chelsea’s job was to warm up the samples, put them in the cartridges, slot the cartridges into the readers, and see if they tested positive for the virus.

Once again, things did not go smoothly. Frequently, the readers flashed error messages, or the result that came back from Palo Alto was negative for the virus when it should have been positive. Some of the readers didn’t work at all. And Sunny continued to blame the wireless transmission.

Chelsea grew frustrated and miserable. She questioned what she was even doing there. Gary Frenzel and some of the other Theranos scientists had told her that the best way to diagnose H1N1, as the swine flu virus was called, was with a nasal swab and that testing for it in blood was of questionable utility. She’d raised this point with Elizabeth before leaving, but Elizabeth had brushed it off. “Don’t listen to them,” she’d said of the scientists. “They’re always complaining.”

Chelsea and Sunny had several meetings with IMSS officials at the Mexican health ministry to update them on their work. Sunny didn’t speak or understand a word of Spanish, so Chelsea did all the talking. As the meetings dragged on, Sunny’s face would betray a mixture of annoyance and concern. Chelsea suspected he was worried she was telling the Mexicans that the Theranos system didn’t work. She enjoyed seeing him squirm.

Back in Palo Alto, word around the office was that Elizabeth was negotiating a deal to sell four hundred Edison readers to the Mexican government. The deal was supposed to bring in a much-needed influx of cash. The $15 million Theranos had raised in its first two funding rounds was long gone and the company had already burned through the $32 million Henry Mosley had been instrumental in bringing in during its Series C round in late 2006. The company was being kept afloat with a loan Sunny had personally guaranteed.

Meanwhile, Sunny was also traveling to Thailand to set up another swine flu testing outpost. The epidemic had spread to Asia, and the country was one of the region’s hardest hit with tens of thousands of cases and more than two hundred deaths. But unlike in Mexico, it wasn’t clear that Theranos’s activities in Thailand were sanctioned by local authorities. Rumors were circulating among employees that Sunny’s connections there were shady and that he was paying bribes to obtain blood samples from infected patients. When a colleague of Chelsea’s in the client solutions group named Stefan Hristu quit immediately upon returning from a trip to Thailand with Sunny in January 2010, many took it to mean the rumors were true.

Chelsea was back from Mexico by then and the Thailand gossip spooked her. She knew there was an anti-bribery law called the Foreign Corrupt Practices Act. Violating it was a felony that could result in prison time.

—

WHEN SHE STOPPED to think about it, there were a lot of things that made Chelsea uncomfortable about Theranos. And none more so than Sunny. He spawned a culture of fear with his intimidating behavior. Firings had always been a common occurrence at the company, but in late 2009 and early 2010 it was Sunny who took on the role of hatchet man. Chelsea even learned a new expression: to disappear someone. That’s how employees used the normally intransitive verb when someone was dismissed. “Sunny disappeared him,” they would say, conjuring up the image of a Mafia hit in 1970s Brooklyn.

The scientists, especially, were afraid of Sunny. One of the only ones who stood up to him was Seth Michelson. A few days before Christmas, Seth had gone out and purchased polo shirts for his group. Their color matched the green of the company logo and they had the words “Theranos Biomath” emblazoned on them. Seth thought it was a nice team-building gesture and paid for it out of his own pocket.

When Sunny saw the polos, he got angry. He didn’t like that he hadn’t been consulted and he argued that Seth’s gift to his team made the other managers look bad. Earlier in his career, Seth had worked at Roche, the big Swiss drugmaker, where he’d been in charge of seventy people and an annual budget of $25 million. He decided he wasn’t going to let Sunny lecture him about management. He pushed back and they got into a yelling match.

After that, Sunny seemed to have it in for Seth and frequently harassed him, which led Seth to look for another job. He found one a few months later at a company based in Redwood City called Genomic Health and walked into Elizabeth’s office, resignation letter in hand, to give his notice. Sunny, who was there, opened up the letter, read it, then threw it back in Seth’s face.

“I won’t accept this!” he shouted.

Seth shouted back, deadpan, “I have news for you, sir: in 1863, President Lincoln freed the slaves.”

Sunny’s response was to throw him out of the building. It was weeks before Seth was able to retrieve his math books, scientific journals, and the pictures of his wife on his desk. He had to enlist the company’s new lawyer, Jodi Sutton, and a security guard to help him pack his things late on a weeknight when Sunny wasn’t around.

Sunny also got into it with Tony Nugent one Friday evening. He’d been giving direct orders and putting intense pressure on a young engineer on Tony’s team, causing him to fall apart from the stress. Tony confronted Sunny about it and their argument quickly escalated. Working himself into a fury, Sunny yelled that he was doing everyone a favor by volunteering his time to the company and people should be a little more appreciative.

“I’ve made enough money to look after my family for seven generations. I don’t need to be here!” he screamed in Tony’s face.

Tony roared back in his Irish brogue, “I don’t have a cent and I don’t need to be here either!”

Elizabeth had to step in to defuse the situation. Dave Nelson thought that Tony would be fired and that he’d have a new boss by Monday morning. Yet Tony somehow survived the confrontation.

Chelsea tried to complain to Elizabeth about Sunny, but she couldn’t get through to her. Their bond seemed too strong to be shaken. Whenever Elizabeth came out of her office, which was separated from Sunny’s by a glass conference room, he would immediately pop out of his and walk with her. Often, he accompanied her all the way to the bathrooms in the back of the building, prompting some employees to wonder half jokingly if they were snorting lines of cocaine back there.

By February 2010, after six months on the job, Chelsea had lost all her enthusiasm for working at Theranos and was thinking of quitting. She hated Sunny. The Mexico and Thailand projects seemed to be losing steam as the swine flu pandemic subsided. The company was lurching from one ill-conceived initiative to another like a child with attention deficit disorder. On top of it all, Chelsea’s boyfriend lived in Los Angeles and she was flying back and forth between L.A. and the Bay Area every weekend to see him. The commute was killing her.

As she debated what to do, something happened that hastened her decision. One day, the Stanford student whose family connections Elizabeth had tapped in Mexico came by with his father. Chelsea wasn’t there to witness the visit, but the office was buzzing about it afterward. The father was going through some sort of cancer scare. Upon hearing of his health worries, Elizabeth and Sunny had convinced him to let Theranos test his blood for cancer biomarkers. Tony Nugent, who wasn’t there for the encounter either, heard about it later that day from Gary Frenzel.

“Well, that was interesting,” Gary told Tony, his voice conveying bewilderment. “We played doctor today.”

Chelsea was appalled. The validation study in Belgium and the experiments in Mexico and Thailand were one thing. Those were supposed to be for research purposes only and to have no bearing on the way patients were treated. But encouraging someone to rely on a Theranos blood test to make an important medical decision was something else altogether. Chelsea found it reckless and irresponsible.

She became further alarmed when not long afterward Sunny and Elizabeth began circulating copies of the requisition forms doctors used to order blood tests from laboratories and speaking excitedly about the great opportunities that lay in consumer testing.

I’m done, Chelsea thought to herself. This has crossed too many lines.

She approached Elizabeth and told her she wanted to resign but decided to keep her qualms to herself. Instead, she told her friend that her weekend commutes were taking too great a toll and that she wanted to move to Los Angeles full-time, which in any case was true. She offered to stay on for a transition period, but Elizabeth and Sunny didn’t want her to. If Chelsea was leaving, better she do so right away, they told her. They asked her not to say anything to the three employees who reported to her on her way out. Chelsea protested. It didn’t feel right to flee like a thief in the middle of the night. But Sunny and Elizabeth were firm: she was not to speak to them.

Chelsea walked out of the building and into the Palo Alto sunshine with conflicting emotions. The dominant one was relief. But she also felt bad that she hadn’t been able to say goodbye to her team and to tell them why she was leaving. She would have given them the official reason—that she was moving to L.A.—but Sunny and Elizabeth hadn’t trusted her to do that. They’d wanted to control the narrative of her departure.

Chelsea also worried about Elizabeth. In her relentless drive to be a successful startup founder, she had built a bubble around herself that was cutting her off from reality. And the only person she was letting inside was a terrible influence. How could her friend not see that?