فصل 27

Epilogue

In the days after my first Journal article, Holmes defiantly asserted that she would publish clinical data from her blood-testing system to disprove my reporting. “Data is a powerful thing because it speaks for itself,” she said on October 26, 2015, at a conference hosted by the Cleveland Clinic. Two years and three months later, she finally delivered on that pledge: in January 2018, Theranos published a paper about the miniLab in the peer-reviewed scientific journal Bioengineering and Translational Medicine. The paper described the device’s components and inner workings and included some data purporting to show that it held its own when compared with FDA-approved machines. But there was one major catch: the blood Theranos had used in its study was drawn the old-fashioned way, with a needle in the arm. Holmes’s original premise—fast and accurate test results from just a drop or two pricked from a finger—was nowhere to be found in the paper.

A close read revealed other significant shortcomings. For one thing, the paper included data for only a few blood tests. And results for two of those tests, HDL cholesterol and LDL cholesterol, diverged from the FDA-approved machines by a margin that Theranos itself acknowledged “exceeds recommended limits.” The company also conceded that it had run the assays one at a time, belying Holmes’s previous claim that her technology could do dozens of tests simultaneously on one tiny blood sample. Last but not least, the tests performed had required different configurations of the miniLab because Theranos hadn’t yet figured out how to fit all the components into one box. All of this was a far cry from the revolutionary breakthrough Holmes had touted when Theranos launched its tests in Walgreens stores in the fall of 2013.

Holmes’s name was listed among the paper’s coauthors but Balwani’s was not. After their breakup and his departure from the company in the spring of 2016, Balwani seemed to have dropped off the face of the earth. Holmes had moved out of the 6,555-square-foot house he owned in Atherton (acquired for $9 million in 2013 through a limited liability company), and it wasn’t clear if he continued to live there. For a time, there was speculation among former Theranos employees that he had fled the country to elude federal investigators.

Those rumors were put to rest on the morning of March 6, 2017, when Tyler Shultz entered a conference room at the offices of Gibson, Dunn & Crutcher on Mission Street in San Francisco. Standing among the half dozen lawyers present to take his deposition in the Partner Fund litigation was the familiar diminutive figure with the angry scowl who had terrorized Theranos employees. Balwani was a named defendant in the lawsuit, so his presence was unusual and seemed to have but one purpose: to intimidate the witness. If that was indeed the goal, it didn’t work. Over the next eight and a half hours, Tyler focused on giving truthful answers to the questions he was asked and blocked out the silent presence of his irascible former boss at the other end of the conference table. Seven weeks later, Theranos settled the case for $43 million on the eve of Balwani’s own deposition. (Soon after, it settled the Walgreens lawsuit for more than $25 million.)

By late 2017, Theranos was running on fumes, having burned through most of the $900 million it raised from investors, much of it on legal expenses. Several rounds of layoffs had reduced the size of its workforce to fewer than 130 employees from a high of 800 in 2015. To save on rent, the company had moved all its remaining staff to the Newark facility across San Francisco Bay. The specter of a bankruptcy filing loomed. But a few days before Christmas, Holmes announced that she had secured a $100 million loan from a private-equity firm. The financial lifeline came with strict conditions: the loan was collateralized by Theranos’s patent portfolio and the company would have to meet certain product and operational milestones to get the money.

Less than three months later, the walls began closing in again: on March 14, 2018, the Securities and Exchange Commission charged Theranos, Holmes, and Balwani with conducting “an elaborate, years-long fraud.” To resolve the agency’s civil charges, Holmes was forced to relinquish her voting control over the company, give back a big chunk of her stock, and pay a $500,000 penalty. She also agreed to be barred from being an officer or director in a public company for ten years. Unable to reach a settlement with Balwani, the SEC sued him in federal court in California. In the meantime, the criminal investigation continued to gather steam. As of this writing, criminal indictments of both Holmes and Balwani on charges of lying to investors and federal officials seem a distinct possibility.

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THE TERM “VAPORWARE” was coined in the early 1980s to describe new computer software or hardware that was announced with great fanfare only to take years to materialize, if it did at all. It was a reflection of the computer industry’s tendency to play it fast and loose when it came to marketing. Microsoft, Apple, and Oracle were all accused of engaging in the practice at one point or another. Such overpromising became a defining feature of Silicon Valley. The harm done to consumers was minor, measured in frustration and deflated expectations.

By positioning Theranos as a tech company in the heart of the Valley, Holmes channeled this fake-it-until-you-make-it culture, and she went to extreme lengths to hide the fakery. Many companies in Silicon Valley make their employees sign nondisclosure agreements, but at Theranos the obsession with secrecy reached a whole different level. Employees were prohibited from putting “Theranos” on their LinkedIn profiles. Instead, they were told to write that they worked for a “private biotechnology company.” Some former employees received cease-and-desist letters from Theranos lawyers for posting descriptions of their jobs at the company that were deemed too detailed. Balwani routinely monitored employees’ emails and internet browser history. He also prohibited the use of Google Chrome on the theory that Google could use the web browser to spy on Theranos’s R&D. Employees who worked at the office complex in Newark were discouraged from using the gym there because it might lead them to mingle with workers from other companies that leased space at the site.

In the part of the clinical lab dubbed “Normandy,” partitions were erected around the Edisons so that Siemens technicians wouldn’t be able to see them when they came to service the German manufacturer’s machines. The partitions turned the room into a maze and blocked egress. The lab’s windows were tinted, which made it nearly impossible to see in from the outside, but the company still taped sheets of opaque plastic to the inside. The doors to the corridor that led to the lab rooms, and the lab rooms themselves, were equipped with fingerprint scanners. If more than one person entered at a time, sensors set off an alarm and activated a camera that sent a photo to the security desk. As for surveillance cameras, they were everywhere. They were the kind with dark blue dome covers that kept you guessing about which way the lens was directed. All of this was ostensibly to protect trade secrets, but it’s now clear that it was also a way for Holmes to cover up her lies about the state of Theranos’s technology.

Hyping your product to get funding while concealing your true progress and hoping that reality will eventually catch up to the hype continues to be tolerated in the tech industry. But it’s crucial to bear in mind that Theranos wasn’t a tech company in the traditional sense. It was first and foremost a health-care company. Its product wasn’t software but a medical device that analyzed people’s blood. As Holmes herself liked to point out in media interviews and public appearances at the height of her fame, doctors base 70 percent of their treatment decisions on lab results. They rely on lab equipment to work as advertised. Otherwise, patient health is jeopardized.

So how was Holmes able to rationalize gambling with people’s lives? One school of thought is that she became captive to Balwani’s nefarious influence. Under this theory, Balwani was Holmes’s Svengali and molded her—the innocent ingénue with big dreams—into the precocious young female startup founder that the Valley craved and that he was too old, too male, and too Indian to play himself. There’s no question that Balwani was a bad influence. But to place all the blame on his shoulders is not only too convenient, it’s inaccurate. Employees who saw the two interact up close describe a partnership in which Holmes, even if she was almost twenty years younger, had the last say. Moreover, Balwani didn’t join Theranos until late 2009. By then, Holmes had already been misleading pharmaceutical companies for years about the readiness of her technology. And with actions that ranged from blackmailing her chief financial officer to suing ex-employees, she had displayed a pattern of ruthlessness at odds with the portrait of a well-intentioned young woman manipulated by an older man.

Holmes knew exactly what she was doing and she was firmly in control. When one former employee interviewed for a job at Theranos in the summer of 2011, he asked Holmes about the role of the company’s board. She took offense at the question. “The board is just a placeholder,” he recalls her saying. “I make all the decisions here.” Her annoyance was so palpable that he thought he’d blown the interview. Two years later, Holmes made sure that the board would never be more than a placeholder. In December 2013, she forced through a resolution that assigned one hundred votes to every share she owned, giving her 99.7 percent of the voting rights. From that point on, the Theranos board couldn’t even reach a quorum without Holmes. When he was later questioned about board deliberations in a deposition, George Shultz said, “We never took any votes at Theranos. It was pointless. Elizabeth was going to decide whatever she decided.” This helps explain why the board never hired a law firm to conduct an independent investigation of what happened. At a publicly traded company, such an investigation would have been commissioned within days or weeks of the first media revelations. But at Theranos, nothing could be decided or done without Holmes’s assent.

If anything, it was Holmes who was the manipulator. One after another, she wrapped people around her finger and persuaded them to do her bidding. The first to fall under her spell was Channing Robertson, the Stanford engineering professor whose reputation helped give her credibility when she was just a teenager. Then there was Donald L. Lucas, the aging venture capitalist whose backing and connections enabled her to keep raising money. Dr. J and Wade Miquelon at Walgreens and Safeway CEO Steve Burd were next, followed by James Mattis, George Shultz, and Henry Kissinger (Mattis’s entanglement with Theranos proved no obstacle to his being confirmed as President Donald Trump’s secretary of defense). David Boies and Rupert Murdoch complete the list, though I’ve left out many others who were bewitched by Holmes’s mixture of charm, intelligence, and charisma.

A sociopath is often described as someone with little or no conscience. I’ll leave it to the psychologists to decide whether Holmes fits the clinical profile, but there’s no question that her moral compass was badly askew. I’m fairly certain she didn’t initially set out to defraud investors and put patients in harm’s way when she dropped out of Stanford fifteen years ago. By all accounts, she had a vision that she genuinely believed in and threw herself into realizing. But in her all-consuming quest to be the second coming of Steve Jobs amid the gold rush of the “unicorn” boom, there came a point when she stopped listening to sound advice and began to cut corners. Her ambition was voracious and it brooked no interference. If there was collateral damage on her way to riches and fame, so be it.