Bad Blood: Secrets and Lies in a Silicon Valley Startup

Carreyrou goes beyond gossip by making us take a hard look at the "fake it 'til you make it" mentality of the Bay Area. While Holmes may have been at the extreme end of the pathological ambition spectrum, her attitude and tactics were not unusual.

Bad Blood: Secrets and Lies in a Silicon Valley Startup

"Bad Blood" has been on my list for my 2018 "Year of Crime and Punishment" since it was announced last year. Wall Street Journal investigative journalist John Carreyrou shreds the legend of Silicon Valley darling Elizabeth Holmes but doesn't have access to quite enough of the picture to make this takedown a true slam dunk. It will probably be years before the full story comes to light, filling in the gaps in Carreyrou's reporting. How did Elizabeth think she could possibly get away with this? Why were so many otherwise reputable people (Shultz, Mattis, etc.) so taken with Holmes? And what the hell is the deal with the supposedly nefarious Sunny Balwani, who has almost no internet presence?

I particularly enjoyed this book because I'm currently living in Palo Alto, the epicenter of the Theranos saga. Although I've never seen Elizabeth Holmes (or her security detail!) in town or on campus, I often bike by Coupa Cafe, the Hoover Institution and other landmarks that Carreyrou references in the book. The story feels very alive and we're still reading about the Theranos fallout daily. Carryrou delves deep into Holmes's personal history to illustrate his vivid tale, and there's some truth to the criticism that this book is a bunch of Silicon Valley gossip.

But Carreyrou goes beyond gossip by making us take a hard look at the "fake it 'til you make it" mentality of the Bay Area. While Holmes may have been at the extreme end of the pathological ambition spectrum, her attitude and tactics were not unusual. In fact, a milder version of Holmes's approach is actually good. The whole idea of the "Lean Startup" philosophy is that you should try to get as much market validation with as little actual financial/engineering investment as you possibly can. One of the underlying assumptions is that solving product/market fit is far more difficult than getting the engineering right - and for many software companies, this is true. Holmes's problem was that the engineering turned out to be far more difficult than anticipated and that she leaned way too far out ahead of her team's technical capabilities. But when was the right time for her to admit the technical problems? I can easily imagine being in her situation and thinking, "just one more month... just one more..." But at some point, she crossed the line from "lean startup" to felonious fraud and Carreyrou forces us to contemplate where that blurry line lies.

The most surprising thing to me (besides Carreyrou's frequent mentions of how unusual Holmes's voice is... and it really is) is how long Holmes managed to get away with it. Her Jobs-esque "reality distortion field" somehow persuaded the Theranos board to flip from nearly firing her to give her complete control and convinced investors to pour hundreds of millions of dollars into her venture with apparently very little due diligence. Carreyrou himself says he was nearly blinded by Holmes's magnetism, but he never manages to convey quite exactly how she cast her spell (I suppose that's what makes it magic!). He does point out that the Theranos story was one that everyone wanted to believe, that:

"In Elizabeth Holmes, the Valley had its first female billionaire tech founder."

Holmes's name will surely go down in fraud history. Unfortunately, she has plenty of company, including Madoff, Ponzi, and Krueger. If you enjoy stories like this, I'd also recommend "The Dictator's Handbook" and "The Billionaire's Apprentice".

My highlights below.


Another board member with a sterling reputation was Channing Robertson, the associate dean of Stanford’s School of Engineering. Robertson was one of the stars of the Stanford faculty. His expert testimony about the addictive properties of cigarettes had forced the tobacco industry to enter into a landmark $6.5 billion settlement with the state of Minnesota in the late 1990s. Based on the few interactions Mosley had had with him, it was clear Robertson thought the world of Elizabeth.

Elizabeth’s expression suddenly changed. Her cheerful demeanor of just moments ago vanished and gave way to a mask of hostility. It was like a switch had been flipped. She leveled a cold stare at her chief financial officer. “Henry, you’re not a team player,” she said in an icy tone. “I think you should leave right now.” There was no mistaking what had just happened. Elizabeth wasn’t merely asking him to get out of her office. She was telling him to leave the company—immediately. Mosley had just been fired.

ONE | A Purposeful Life

On her father’s side, she was descended from Charles Louis Fleischmann, a Hungarian immigrant who founded a thriving business known as the Fleischmann Yeast Company. Its remarkable success turned the Fleischmanns into one of the wealthiest families in America at the turn of the twentieth century.

Aided by the political and business connections of his wife’s wealthy family, Dr. Holmes established Cincinnati General Hospital and the University of Cincinnati’s medical school.

In high school, Elizabeth wasn’t part of the popular crowd. By then, her father had moved the family to Houston to take a job at the conglomerate Tenneco. The Holmes children attended St. John’s, Houston’s most prestigious private school. A gangly teenage girl with big blue eyes, Elizabeth bleached her hair in an attempt to fit in and struggled with an eating disorder.

In Elizabeth’s senior year, two Stanford Ph.D. students were beginning to attract attention with another little startup called Google.

Elizabeth already knew Stanford well. Her family had lived in Woodside, California, a few miles from the Stanford campus, for several years in the late 1980s and early 1990s. While there, she had become friends with a girl who lived next door named Jesse Draper. Jesse’s father was Tim Draper, a third-generation venture capitalist who was on his way to becoming one of the Valley’s most successful startup investors.

Elizabeth incorporated the company as Real-Time Cures, which an unfortunate typo turned into “Real-Time Curses” on early employees’ paychecks. She later changed the name to Theranos, a combination of the words “therapy” and “diagnosis.”

To raise the money she needed, she leveraged her family connections. She convinced Tim Draper, the father of her childhood friend and former neighbor Jesse Draper, to invest $1 million. The Draper name carried a lot of weight and helped give Elizabeth some credibility: Tim’s grandfather had founded Silicon Valley’s first venture capital firm in the late 1950s, and Tim’s own firm, DFJ, was known for lucrative early investments in companies like the web-based email service Hotmail.

TWO | The Gluebot

Ed had noticed a quote on her desk cut out from a recent press article about Theranos. It was from Channing Robertson, the Stanford professor who was on the company’s board. The quote read, “You start to realize you are looking in the eyes of another Bill Gates, or Steve Jobs.”

As obstinate as Elizabeth was, Ed knew there was one person who had her ear: a mysterious man named Sunny. Elizabeth had dropped his name enough times that Ed had gleaned some basic facts about him: he was Indian, he was older than Elizabeth, and they were a couple. The story was that Sunny had made a fortune from the sale of an internet company he’d cofounded in the late 1990s.

She had brunch with Don Lucas every Sunday at his home in Atherton, the ultrawealthy enclave north of Palo Alto. Larry Ellison, whom she’d met through Lucas, was also an influence.

THREE | Apple Envy

To anyone who spent time with Elizabeth, it was clear that she worshipped Jobs and Apple.

Ana’s first meeting with Elizabeth was at Coupa Café, a hip coffee and sandwich place in Palo Alto that had become her favorite haunt outside the office.

Ana would arrive early every morning for a daily seven-thirty meeting with Elizabeth to update her on design issues. When she pulled her car into the parking lot, Ana would find her jamming to loud hip-hop music in her black Infiniti SUV, the blond streaks in her hair bouncing wildly.

Avie was on Theranos’s board of directors... was one of Steve Jobs’s oldest and closest friends. They’d worked together at NeXT, the software company Jobs created after being ousted from Apple in the mid-1980s. When Jobs returned to Apple in 1997 he’d brought Avie over with him and made him the head of software engineering.

FOUR | Goodbye East Paly

Unionized moving companies were all mob controlled, the person said. What Theranos was proposing to do risked devolving into violence.

There was one case in particular that Matt regretted helping her with: that of Henry Mosley, the former chief financial officer. After Elizabeth fired Mosley, Matt had stumbled across inappropriate sexual material on his work laptop as he was transferring its files to a central server for safekeeping. When Elizabeth found out about it, she used it to claim it was the cause of Mosley’s termination and to deny him stock options.

After some discussion, the four men reached a consensus: they would remove Elizabeth as CEO. She had proven herself too young and inexperienced for the job. Tom Brodeen would step in to lead the company for a temporary period until a more permanent replacement could be found. They called in Elizabeth to confront her with what they had learned and inform her of their decision. But then something extraordinary happened. Over the course of the next two hours, Elizabeth convinced them to change their minds. She told them she recognized there were issues with her management and promised to change. She would be more transparent and responsive going forward. It wouldn’t happen again.

He was reminded of an old saying: “When you strike at the king, you must kill him.” Todd Surdey and Michael Esquivel had struck at the king, or rather the queen. But she’d survived.

FIVE | The Childhood Neighbor

In 2001, Chris Holmes hit a rough patch in his career. He had left Tenneco to take a position at Enron, Houston’s most prominent corporation. When Enron’s fraudulent practices were exposed and it went bankrupt in December of that year, he lost his job like thousands of other employees.

Chris and Noel Holmes did eventually move back to Washington four years later when Chris got a job at the World Wildlife Fund.

He was leading a double life as an undercover CIA agent by then, having volunteered his services to the agency a few years earlier after coming across one of its ads in the classified pages of the Washington Post. Fuisz’s work for the CIA involved setting up dummy corporations throughout the Middle East that employed agency assets, giving them a non-embassy cover to operate outside the scrutiny of local intelligence services.

For most people, this would have been ample vindication. But not for Fuisz. It irked him that Loucks had survived the scandal and remained CEO of Baxter. So he decided to subject his foe to one last indignity. Loucks was a Yale alumnus and served as a trustee of the Yale Corporation, the university’s governing body. He was also chairman of its fund-raising campaign. As he did every year in his capacity as a trustee, he was scheduled to attend Yale’s commencement exercises in New Haven, Connecticut, that May. Through his son Joe, who had graduated from Yale the year before, Fuisz got in touch with a student named Ben Gordon, who was the president of the Yale Friends of Israel association. Together, they organized a graduation day protest featuring “Loucks Is Bad for Yale” signs and leaflets. The crowning flourish was a turboprop plane Fuisz hired to fly over the campus trailing a banner that read, “Resign Loucks.” Three months later, Loucks stepped down as a Yale trustee.

By then, the Holmeses and the Fuiszes were no longer on speaking terms and Fuisz was referring to his patent filing in conversations with his wife as “the Theranos killer.”

SIX | Sunny

Just a week earlier, Ramesh “Sunny” Balwani had come on board as a senior Theranos executive.

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.

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.

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.

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.

The company was being kept afloat with a loan Sunny had personally guaranteed.

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.”


A new luxury hotel on Sand Hill Road called the Rosewood was always full, despite room rates that reached a thousand dollars a night. With its imported palm trees and proximity to the Stanford campus, it had quickly become the destination of choice for venture capitalists, startup founders, and out-of-town investors who flocked to its restaurant and poolside bar to discuss deals and be seen.

All of this might not have been enough to ignite the new boom, however, if it hadn’t been for another key ingredient: rock-bottom interest rates. To rescue the economy, the Federal Reserve had slashed rates to close to zero, making traditional investments like bonds unattractive and sending investors searching for higher returns elsewhere. One of the places they turned to was Silicon Valley.

He was referring to a pilot project the companies had agreed to. It would involve placing Theranos’s readers in thirty to ninety Walgreens stores no later than the middle of 2011. The stores’ customers would be able to get their blood tested with just a prick of the finger and receive their results in under an hour. A preliminary contract had already been signed, under which Walgreens had committed to prepurchase up to $50 million worth of Theranos cartridges and to loan the startup an additional $25 million. If all went well with the pilot, the companies would aim to expand their partnership nationwide.

Van den Hooff listened with a pained look on his face. “We can’t not pursue this,” he said. “We can’t risk a scenario where CVS has a deal with them in six months and it ends up being real.” Walgreens’s rivalry with CVS, which was based in Rhode Island and one-third bigger in terms of revenues, colored virtually everything the drugstore chain did. It was a myopic view of the world that was hard to understand for an outsider like Hunter who wasn’t a Walgreens company man. Theranos had cleverly played on this insecurity. As a result, Walgreens suffered from a severe case of FoMO — the fear of missing out.

EIGHT | The miniLab

Nepotism at Theranos took on a new dimension in the spring of 2011 when Elizabeth hired her younger brother, Christian, as associate director of product management. Christian Holmes was two years out of college and had no clear qualifications to work at a blood diagnostics company, but that mattered little to Elizabeth. What mattered far more was that her brother was someone she could trust.

Christian soon recruited four of his fraternity brothers from Duke: Jeff Blickman, Nick Menchel, Dan Edlin, and Sani Hadziahmetovic. They were later joined by a fifth Duke friend, Max Fosque. They rented a house together near the Palo Alto country club and became known inside Theranos as “the Frat Pack.”

A month or two after Jobs’s death, some of Greg’s colleagues in the engineering department began to notice that Elizabeth was borrowing behaviors and management techniques described in Walter Isaacson’s biography of the late Apple founder. They were all reading the book too and could pinpoint which chapter she was on based on which period of Jobs’s career she was impersonating.

Sunny was a tyrant. He fired people so often that it gave rise to a little routine in the warehouse downstairs. John Fanzio, the affable supply-chain manager, worked down there, and it had become the trusted place where employees came to vent or gossip. Every few days, Edgar Paz, the head of Theranos’s security team, would come down with a mischievous look on his face, a badge hidden in his hand. At the sight of him, John and the logistics team would gather in excitement, knowing what was coming. As Paz drew closer, he would slowly spin the badge from its necklace and reveal the face on the front, eliciting gasps of surprise. It was Sunny’s latest victim.

NINE | The Wellness Play

After Burd’s departure, the communication channel to Elizabeth was lost. Anyone from Safeway who wanted to talk to Theranos had to go through Sunny or the Frat Pack. Sunny acted put-off whenever Safeway executives asked for status updates, as if his time was too precious to waste and they had no idea what it took to produce an innovation of this magnitude. His arrogance was infuriating. And yet Safeway was still hesitant to walk away from the partnership. What if the Theranos technology did turn out to be game-changing? It might spend the next decade regretting passing up on it. The fear of missing out was a powerful deterrent.

TEN | “Who Is LTC Shoemaker?”

The idea of using Theranos devices on the battlefield had germinated the previous August when Elizabeth had met James Mattis, head of the U.S. Central Command, at the Marines’ Memorial Club in San Francisco.

When General Mattis retired from the military in March 2013, the study using leftover de-identified samples hadn’t begun. When Colonel Edgar took on a new assignment as commander of the Army Medical Research Institute of Infectious Diseases a few months later, it still hadn’t started. Theranos just couldn’t seem to get its act together.

ELEVEN | Lighting a Fuisz

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 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.

TWELVE | Ian Gibbons

Ian nodded. “It’s a folie à deux,” he said. Tony didn’t know any French, so he left to go look up the expression in the dictionary. The definition he found struck him as apt: “The presence of the same or similar delusional ideas in two persons closely associated with one another.”

While doing so, she noticed that Elizabeth’s name was on all the company’s patents, often in first place in the list of inventors. When Ian told her that Elizabeth’s scientific contribution had been negligible, Rochelle warned him that the patents could be invalidated if this was ever exposed.

Ian spent the next eight days hooked up to a ventilator at Stanford Hospital. He had taken enough acetaminophen, the active ingredient in painkillers like Tylenol, to kill a horse. Combined with the wine he’d consumed, the drug had destroyed his liver. He was pronounced dead on May 23. As an expert chemist, Ian knew exactly what he was doing.

THIRTEEN | Chiat\Day

Elizabeth had chosen Chiat\Day because it was the agency that represented Apple for many years, creating its iconic 1984 Macintosh ad and later its “Think Different” campaign in the late 1990s.

FOURTEEN | Going Live

Sunny had elevated a group of ingratiating Indians to key positions. One of them was Sam Anekal, the manager in charge of integrating the various components of the miniLab who had clashed with Ian Gibbons. Another was Chinmay Pangarkar, a bioengineer with a Ph.D. in chemical engineering from the University of California, Santa Barbara. There was also Suraj Saksena, a clinical chemist who had a Ph.D. in biochemistry and biophysics from Texas A&M. On paper, all three had impressive educational credentials, but they shared two traits: they had very little industry experience, having joined the company not long after finishing their studies, and they had a habit of telling Elizabeth and Sunny what they wanted to hear, either out of fear or out of desire to advance, or both. For the dozens of Indians Theranos employed, the fear of being fired was more than just the dread of losing a paycheck. Most were on H-1B visas and dependent on their continued employment at the company to remain in the country. With a despotic boss like Sunny holding their fates in his hands, it was akin to indentured servitude. Sunny, in fact, had the master-servant mentality common among an older generation of Indian businessmen.

However, as Elizabeth saw it, she didn’t have several years. Twelve months earlier, on June 5, 2012, she’d signed a new contract with Walgreens that committed Theranos to launching its blood-testing services in some of the pharmacy chain’s stores by February 1, 2013, in exchange for a $100 million “innovation fee” and an additional $40 million loan. Theranos had missed that deadline—another postponement in what from Walgreens’s perspective had been three years of delays. With Steve Burd’s retirement, the Safeway partnership was already falling apart, and if she waited much longer, Elizabeth risked losing Walgreens too. She was determined to launch in Walgreens stores by September, come hell or high water.

The resignations infuriated Elizabeth and Sunny. The following day, they summoned the staff for an all-hands meeting in the cafeteria. Copies of The Alchemist, Paulo Coelho’s famous novel about an Andalusian shepherd boy who finds his destiny by going on a journey to Egypt, had been placed on every chair. Still visibly angry, Elizabeth told the gathered employees that she was building a religion. If there were any among them who didn’t believe, they should leave. Sunny put it more bluntly: anyone not prepared to show complete devotion and unmitigated loyalty to the company should “get the fuck out.”

FIFTEEN | Unicorn

For a heretofore unknown startup, coverage this flattering in one of the country’s most prominent and respected publications was a major coup. What had made it possible was Elizabeth’s close relationship with Shultz — a connection she’d made two years earlier and carefully cultivated. The former statesman, who in addition to crafting the Reagan administration’s foreign policy also served as secretary of labor and secretary of the treasury under President Nixon, had joined the Theranos board of directors in July 2011 and become one of Elizabeth’s biggest champions. A distinguished fellow at the Hoover Institution, the think tank housed on the Stanford campus, Shultz remained a revered and influential figure in Republican circles despite his advancing age (he was ninety-two). That made him a friend of the Journal’s famously conservative editorial page, to which he occasionally contributed op-eds.

What he didn’t know was that Elizabeth was planning to use the Walgreens launch and his accompanying article containing her misleading claims as the public validation she needed to kick-start a new fund-raising campaign, one that would propel Theranos to the forefront of the Silicon Valley stage.

Instead of rushing to the stock market like their dot-com predecessors had in the late 1990s, the unicorns were able to raise staggering amounts of money privately and thus avoid the close scrutiny that came with going public.

Following his retirement from the military earlier that year, James Mattis had joined the Theranos board and, on his recommendation, Elizabeth had hired Jim Rivera, the head of his Pentagon security detail.

Besides Theranos’s supposed scientific accomplishments, what helped win James and Grossman over was its board of directors. In addition to Shultz and Mattis, it now included former secretary of state Henry Kissinger, former secretary of defense William Perry, former Senate Arms Services Committee chairman Sam Nunn, and former navy admiral Gary Roughead. These were men with sterling, larger-than-life reputations who gave Theranos a stamp of legitimacy. The common denominator between all of them was that, like Shultz, they were fellows at the Hoover Institution. After befriending Shultz, Elizabeth had methodically cultivated each one of them and offered them board seats in exchange for grants of stock.

Little did they know that Sunny had fabricated these numbers from whole cloth. Theranos hadn’t had a real chief financial officer since Elizabeth had fired Henry Mosley in 2006.

On February 4, 2014, Partner Fund purchased 5,655,294 Theranos shares at a price of $17 a share — $2 a share more than the Lucas Venture Group had paid just four months earlier. The investment brought in another $96 million to Theranos’s coffers and valued it at a stunning $9 billion. This meant that Elizabeth, who owned slightly more than half of the company, now had a net worth of almost $5 billion.

SIXTEEN | The Grandson

One type of experiment he and Erika were tasked with doing involved retesting blood samples on the Edisons over and over to measure how much their results varied. The data collected were used to calculate each Edison blood test’s coefficient of variation, or CV. A test is generally considered precise if its CV is less than 10 percent. To Tyler’s dismay, data runs that didn’t achieve low enough CVs were simply discarded and the experiments repeated until the desired number was reached.


When Underhill came back with the printed settlement, Richard and Joe read it and signed it. Afterward, Richard Fuisz looked utterly defeated. The proud and pugnacious former CIA agent broke down and sobbed.

Boies himself chimed in from his iPad a few minutes later: Those who the gods would destroy, they first make mad.

Since he didn’t have the expertise to vet her scientific claims, Parloff interviewed the prominent members of her board of directors and effectively relied on them as character witnesses. He talked to Shultz, Perry, Kissinger, Nunn, Mattis, and to two new directors: Richard Kovacevich, the former CEO of the giant bank Wells Fargo, and former Senate majority leader Bill Frist. Before going into politics, Frist had been a heart and lung transplant surgeon. All of them vouched for Elizabeth emphatically. Shultz and Mattis were particularly effusive.

Mattis went out of his way to praise her integrity. “She has probably one of the most mature and well-honed sense of ethics — personal ethics, managerial ethics, business ethics, medical ethics that I’ve ever heard articulated,” the retired general gushed.

There was also the now-familiar comparison to Steve Jobs and Bill Gates. This time it came not from George Shultz but from her old Stanford professor Channing Robertson. (Had Parloff read Robertson’s testimony in the Fuisz trial, he would have learned that Theranos was paying him $500,000 a year, ostensibly as a consultant.)

President Obama appointed her a U.S. ambassador for global entrepreneurship, and Harvard Medical School invited her to join its prestigious board of fellows.

In Elizabeth Holmes, the Valley had its first female billionaire tech founder.

It was true that Elizabeth’s uncle, Ron Dietz, had died eighteen months earlier from skin cancer that had metastasized and spread to his brain. But what she omitted to disclose was that she had never been close to him. To family members who knew the reality of their relationship, using his death to promote her company felt phony and exploitative.

Another was from Theodore Roosevelt: “Far and away the best prize that life has to offer is the chance to work hard at work worth doing.”

Elizabeth’s new corner office was designed to look like the Oval Office.

EIGHTEEN | The Hippocratic Oath

Elizabeth loved to throw company parties. And none more so than the one she organized every year for Halloween. It was a Theranos tradition for which no expense was spared.


At the Journal, we had a cardinal rule called “No surprises.” We never went to press with a story without informing the story subject of every single piece of information we had gathered in our reporting and giving them ample time and opportunity to address and rebut everything.

The new Theranos headquarters on Page Mill Road was less than two miles away on land that was also owned by Stanford. In a strange twist, Phyllis told me the site used to be a Wall Street Journal printing plant.

TWENTY-TWO | La Mattanza

Theranos continued to operate in a regulatory no-man’s-land. By using its proprietary devices only within the walls of its own laboratory and not seeking to commercialize them, it was able to continue to avoid close FDA scrutiny. At the same time, it gave the appearance of cooperating with the agency by publicly supporting its drive to regulate laboratory-developed tests and voluntarily submitting some of its own LDTs, like the herpes test, to it for approval.

He pointed out how chummy Holmes had gotten with the Obama administration. He had seen her at the launch of the president’s precision medicine initiative earlier in the year, one of several White House appearances she’d made in recent months.

Balwani had tasked a Theranos software engineer named Michael Craig to write an application for the miniLab’s software that masked test malfunctions. When something went wrong inside the machine, the app kicked in and prevented an error message from appearing on the digital display. Instead, the screen showed the test’s progress slowing to a crawl.

Negative Glassdoor reviews about the company weren’t unusual. Balwani made sure they were balanced out by a steady flow of fake positive reviews he ordered members of the HR department to write.

Holmes took the vice president on a tour of the facility and showed him the fake automated lab. Afterward, she hosted a roundtable about preventive health care on the premises with a half dozen industry executives, including the president of Stanford Hospital. During the roundtable discussion, Biden called what he had just seen “the laboratory of the future.” He also praised Holmes for proactively cooperating with the FDA. “I know the FDA recently completed favorable reviews of your innovative device,” he said. “The fact that you’re voluntarily submitting all of your tests to the FDA demonstrates your confidence in what you’re doing.”

TWENTY-THREE | Damage Control

In March, a month after I had started digging into the company, Theranos had closed another round of funding. Unbeknownst to me, the lead investor was Rupert Murdoch, the Australian-born media mogul who controlled the Journal’s parent company, News Corporation. Of the more than $430 million Theranos had raised in this last round, $125 million had come from Murdoch. That made him the company’s biggest investor.

Theranos was by far the single biggest investment Murdoch had ever made outside of the media assets he controlled, which included the 20th Century Fox movie studio, the Fox broadcast network, and Fox News. He was won over by Holmes’s charisma and vision but also by the financial projections she gave him. The investment packet she sent forecast $330 million in profits on revenues of $1 billion in 2015 and $505 million in profits on revenues of $2 billion in 2016. Those numbers made what was now a $10 billion valuation seem cheap.

In late September, as we were getting close to publication, Holmes met with Murdoch a fourth time in his office on the eighth floor of the News Corporation building in Midtown Manhattan. My desk in the Journal’s newsroom was just three floors below, but I had no idea she was on the premises. She brought up my story with renewed urgency, hoping Murdoch would offer to kill it. Once again, despite the substantial investment he had at stake, he declined to intervene.

The story was published on the Journal’s front page on Thursday, October 15, 2015. The headline, “A Prized Startup’s Struggles,” was understated but the article itself was devastating.

TWENTY-FOUR | The Empress Has No Clothes

As the tug-of-war with Heather King over the inspection report dragged on, news surfaced that Holmes would be hosting a fund-raiser for Hillary Clinton’s presidential campaign at Theranos’s headquarters in Palo Alto. She had long cultivated a relationship with the Clintons, appearing at several Clinton Foundation events and forging a friendship with their daughter. The fund-raiser was later relocated to the home of a tech entrepreneur in San Francisco, but a photo from the event showed Holmes holding a microphone and speaking to the assembled guests with Chelsea Clinton at her side. With the election eight months away and Clinton considered the front-runner, it was a reminder of how politically connected Holmes was. Enough to make her regulatory problems go away? Anything seemed possible.

Not long afterward, Theranos contacted Tyler’s lawyers and told them it knew about our meeting. Since neither of us had told a soul about it, we deduced that Holmes was having one or both of us followed. Fortunately, Tyler didn’t seem too worried about it. “Next time maybe I’ll take a selfie with you and send it her way to save her the trouble of hiring PIs,” he quipped in an email. I now suspected Theranos had had both of us under continuous surveillance for a year.

Holmes had told Maria Shriver on the Today show that she took responsibility for the Newark lab’s failings, but it was Balwani who suffered the consequences. Rather than take the fall herself, she sacrificed her boyfriend. She broke up with him and fired him. In a press release, Theranos dressed up his departure as a voluntary retirement.

In another crippling blow, CMS followed through on its threat to ban Holmes and her company from the lab business in early July. More ominously, Theranos was now the subject of a criminal investigation by the U.S. Attorney’s Office in San Francisco and of a parallel civil probe by the Securities and Exchange Commission.

The odds that Holmes could pull off this latest Houdini act while under criminal investigation were very long, but watching her confidently walk the audience through her sleek slide show helped crystallize for me how she’d gotten this far: she was an amazing saleswoman. She never once stumbled or lost her train of thought. She wielded both engineering and laboratory lingo effortlessly and she showed seemingly heartfelt emotion when she spoke of sparing babies in the NICU from blood transfusions. Like her idol Steve Jobs, she emitted a reality distortion field that forced people to momentarily suspend disbelief.

After her appearance was panned and the Zika fiasco made headlines, one of them decided it had had enough: Partner Fund, the San Francisco hedge fund that had invested close to $100 million in the company in early 2014, sued Holmes, Balwani, and the company in Delaware’s Court of Chancery, alleging that they had deceived it with “a series of lies, material misstatements, and omissions.”

Most of the other investors opted against litigation, settling instead for a grant of extra shares in exchange for a promise not to sue. One notable exception was Rupert Murdoch. The media mogul sold his stock back to Theranos for one dollar so he could claim a big tax write-off on his other earnings. With a fortune estimated at $12 billion, Murdoch could afford to lose more than $100 million on a bad investment.

David Boies and his law firm, Boies, Schiller & Flexner, stopped doing legal work for Theranos after falling out with Holmes over how to handle the federal investigations. Another big law firm, WilmerHale, took their place.


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.

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.”

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.

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.