Thu. Mar 23rd, 2023
Elizabeth Holmes, founder and CEO of Theranos.
Enlarge / Elizabeth Holmes, founder and CEO of Theranos.

If you think your Thanksgiving dinner conversation will be awkward and stressful this year, be glad you and your family weren’t involved with Theranos.

As the once highly regarded blood testing company collapses under technology scandals and regulatory sanctions, the death toll from relationships between neighbors, friends, families and long-term partners is rising. With lawsuits, investigative reports, and new whistleblower accounts, the corporate culture and inner workings — which Theranos has worked hard to cover up — are finally coming to light. And what has emerged are patterns of dishonesty, callousness and litigation – if not outright belligerence.

Test of blood

Perhaps most startling of the recent revelations is the identity and family drama of a Theranos whistleblower: Tyler Shultz, grandson of George Shultz, the former Secretary of State, who also happens to be a Theranos adviser. An explanation by The Wall Street Journal explains how over the course of eight months, Tyler Shultz went from cheerful Theranos employee to disgruntled whistleblower, personally discredited by the then president of Theranos and desperately trying to convince his grandfather to wash his hands of the doomed company .

Fresh out of college, Tyler Shultz began working with Theranos’ test validation team in 2013, responsible for monitoring the accuracy of blood test results. He noticed wild inaccuracies in some tests before being transferred to the company’s production team, where he witnessed the quality checks of the company’s blood testing machines. Both issues were flagged years later in federal inspection reports, confirming Shultz’s claims. But at the time, then-President Sunny Balwani had been pressuring workers to ignore the issues, Shultz said. (Balwani left the company earlier this year and was banned by federal regulators from running a clinical lab for two years.) Nevertheless, Tyler Shultz e-mailed his findings and concerns directly to Elizabeth Holmes, the company’s founder and CEO.

Days later, Shultz got a message back – from Balwani. “We have seen your email to Elizabeth,” Balwani wrote. “Before going into details, I want to share with you that if this email had come from someone else in the company, I would have already held them responsible for the arrogant and condescending tone and reckless remarks.” He went on to belittle Shultz’s intelligence and understanding of the company’s technology. “The only reason I’ve taken so much time off work to personally address this is because you’re Mr. Shultz’s grandson,” Balwani added.

Shultz quit Theranos that day, intending to leave professional drama behind. However, it was just the beginning of his family drama. It appears that Holmes called the elder Shultz directly to inform him of his grandson’s actions and threatened that his grandson would “lose” if he pursued the charges. While Tyler Shultz was still gathering his things to leave Theranos, his mom called and begged him to stop “whatever you’re doing!”

After that, Shultz said his relationship with his grandfather became strained — and continues to be so. Holmes made a surprising and awkward appearance at his grandfather’s house the following Thanksgiving. She also attended his next 95e birthday. Not Tyler Shultz. Meanwhile, the younger Shultz says Theranos had him tracked by private investigators and pressured by lawyers.

While visiting his grandfather’s home, Tyler Shultz said that Theranos attorneys, of Boies, Schiller & Flexner LLP, ambushed him. They accused him of leaking Theranos trade secrets and tried – unsuccessfully – to get him to sign non-disclosure agreements. Threatening Theranos to sue, Tyler’s Shultz’s parents discussed selling their home to cover costs. So far they have spent more than $400,000 in legal fees.

Smoke and mirrors

When the Shultz family got caught up in the Theranos drama in 2013, another family also struggled with Holmes – her family’s old friends and her childhood neighbors, the Fuiszes. In a nasty lawsuit filed in 2011, Holmes accused John Fuisz, his brother Joseph, his father Richard, and Fuisz Pharma of stealing a secret Theranos patent and using it to file a rival blood test patent that eventually became issued.

Holmes alleges that John Fuisz had access to the file rooms of McDermott Will & Emery LLP, the law firm she hired to help Theranos file for patents. In court, her fierce, high-profile attorney, David Boies, dramatically claimed that John Fuisz said he would “file patents and f— with her until she dies.” The Fuiszes, long-time inventors in the medical field, denied all the claims, saying they had once offered to help her with her business.

In a court statement, Richard Fuisz said he invented a body fluid analyzer, a urine testing device, “before Elizabeth Holmes was born.” And a lawyer for Fuisz Pharma warned jurors that they “will not see any evidence that John Fuisz entered the file room… You will see smoke and mirrors.”

Still, Joseph and Richard publicly acknowledged that their reputations had been damaged by the accusations made by Holmes, who was enjoying positive publicity at the time due to her promising technology at Theranos. In 2014, the two settled out of court at trial, invalidating one of their patents. The case against John Fuisz was dismissed.

Scientific suicide

However, the reputation of the Fuiszen was not the only victim of that lawsuit. Caught in the crossfire were the late Ian Gibbons and his family. Gibbons, a respected British scientist, was recruited by Holmes in 2005 as the company’s chief scientist. He quickly realized that Theranos’ blood testing technology was bullshit and worked tirelessly to come up with solutions.

During the trial, the Fuiszes’ lawyers tried to get Gibbons to testify, which he desperately wanted to avoid. In court, he faced either admitting the technology didn’t work or perjury. Gibbons’s growing anxiety and discomfort with the situation caused turmoil between him and Holmes.

But despite the legal battle and looming scientific trouble, Holmes continued to tell investors that the technology was not only sound, but also disruptive and revolutionary. She raised millions in investments. In 2012, the company had signed a high-profile $140 million deal with Walgreens to open “wellness centers” for blood testing in its stores by 2013.

Gibbons, resisting testimonials and under pressure in the lab, was reaching his limits. He warned Holmes that the technology wasn’t ready for its drugstore debut. “Ian was a real obstacle for Elizabeth,” Gibbons’ widow Rochelle told Vanity Fair in an exclusive interview. “He started to get very vocal. They kept him around to keep him quiet.

In May 2013, five months before the first wellness center opened publicly and before the Fuisz settlement, Holmes’ assistant called Gibbons’ home and told him that Holmes wanted a meeting the next day. Gibbons, who was also battling a cancer diagnosis at the time, was wracked with fear. He and his wife expected him to be fired.

The night he got that call, Gibbons attempted suicide. He died a week later.

When his widow notified Theranos of his death, instead of condolences, she received a request to immediately return all of Theranos’ confidential property.

Diagnosis of cheating

Meanwhile, Theranos’ deal with Walgreens progressed, eventually opening more than 40 wellness centers. Tens of thousands of tests performed at those centers were invalidated or corrected this year when federal regulators exposed the problems Gibbons and Tyler Shultz had warned about. The deal with Walgreens also collapsed and the drugstore giant is now suing Theranos.

In their damning $140 million lawsuit, Walgreens claims that in 2010, while Gibbons was frantically trying to get the company’s technology to work, Holmes and Balwani assured Walgreens that the technology had been “fully validated” for seven years by “10 of the 15 largest pharmaceutical companies.” They even claimed that biopharmaceutical companies, “prominent research institutions, and U.S. and foreign government health and military organizations” had already used the technology.

In addition to the Walgreens lawsuit, Theranos faces several former customers and a criminal investigation by federal investigators.

This week, longtime Theranos legal defender David Boies severed ties with the company, citing a disagreement over strategy.

Theranos did not respond to Ars’ request for comment on Shultz’s story. In an earlier statement, the company said it will “vigorously” fight Walgreens’ lawsuit.

This post has been updated to reflect that Theranos’ case against John Fuisz has been dismissed. He didn’t settle for Theranos.

By akfire1

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