Theranos Whistleblower Tells All On Intimidation And Coercion Tactics Employed To Silence Him

Tyler Durden's picture

2016 has not been too kind to Elizabeth Holmes, the Steve-Jobs wannabe in charge of fraudulent Theranos. She has thus far been banned for 2 years from operating labs, removed from hosting fundraisers for Hillary and lost her entire net worth.  And now, the Wall Street Journal has published the "tell-all" story of the whistle-blower, 26 year old Tyler Shultz, who brought the the whole Theranos farce crashing down.  It's a sordid tale complete with all the expected twists and turns of a Jason Bourne thriller including intimidation, coercion and private detectives.

Tyler Shultz is the grandson of George Shultz, 95, who was President Richard Nixon’s Treasury and labor secretary and secretary of state for President Ronald Reagan, with whom he had a close relationship.  The elder Shultz also happened to be a Theranos board member in 2013 when his grandson accepted a full time position there. 

Fresh out of Stanford with a degree in biology, it didn't take long for Shultz to discover deficiencies in the accuracy of Theranos' testing equipment.  After Shultz's complaints to Theranos executives, including Elizabeth Holmes, fell on deaf ears, he decided to blow the whistle to a state regulator instead.  Using an alias, Tyler Shultz contacted New York state’s public-health lab and alleged Theranos had manipulated a process known as proficiency testing, relied on by federal and state regulators to monitor the accuracy of lab tests.

After working at Theranos Inc. for eight months, Tyler Shultz decided he had seen enough. On April 11, 2014, he emailed company founder Elizabeth Holmes to complain that Theranos had doctored research and ignored failed quality-control checks.

 

The reply was withering. Ms. Holmes forwarded the email to Theranos President Sunny Balwani, who belittled Mr. Shultz’s grasp of basic mathematics and his knowledge of laboratory science, and then took a swipe at his relationship with George Shultz, the former secretary of state and a Theranos director.

 

“The only reason I have taken so much time away from work to address this personally is because you are Mr. Shultz’s grandson,” wrote Mr. Balwani to his employee in an email, a copy of which was reviewed by The Wall Street Journal.

 

Mr. Shultz quit the same day. As he was leaving Theranos’s headquarters in Palo Alto, Calif., he says he got a frantic cellphone call from his mother, who told him Ms. Holmes had just called the elder Mr. Shultz to warn that his grandson would “lose” if he launched a vendetta against the blood-testing startup.

Tyler Shultz

 

It all started in the summer of 2012, Shultz accepted an internship at Theranos.  Impressed by Elizabeth Holmes, Shultz decided to change his major at Stanford and accepted a full-time position a year later.  By chance, or maybe not, Shultz was assigned to the "assay vaildation team, which was responsible for verifying and documenting the accuracy of blood tests run on Edison machines before they were deployed in the lab for use with patients."  It didn't take long for Shultz to realize deficiencies in the accuracy of the Edison machines.

Mr. Shultz interned at Theranos that summer and went to work there full-time in September 2013. He had just graduated after changing his major to biology to better prepare for a career at the startup, he says.

 

Theranos began offering blood tests to the public in late 2013. The company soon achieved a valuation of $9 billion from investors, with Ms. Holmes owning a majority stake. She also is chief executive of Theranos.

 

The new employee was assigned to the assay validation team, which was responsible for verifying and documenting the accuracy of blood tests
run on Edison machines
before they were deployed in the lab for use with patients.

 

Mr. Shultz says he found that results varied widely when tests were rerun with the same blood samples. To reduce that variability, Theranos routinely discarded outlying values from validation reports it compiled, he says.

 

One validation report about an Edison test to detect a sexually-transmitted infectious disease said the test was sensitive enough to detect the disease 95% of the time. But when Mr. Shultz looked at the two sets of experiments from which the report was compiled, they showed sensitivities of 65% and 80%.

After voicing his concerns internally, Shultz received a startling response from Theranos' President, Sunny Balwani.

Then Mr. Balwani’s response arrived. It began: “We saw your email to Elizabeth. Before I get into specifics, let me share with you that had this email come from anyone else in the company, I would have already held them accountable for the arrogant and patronizing tone and reckless comments.”

 

Ms. Holmes never replied, says Mr. Shultz, who decided it was time to quit his job. He says his mom called while he was on his way out and implored: “Stop whatever you’re about to do!

 

Mr. Shultz says he was startled. He went directly to his grandfather’s office. George Shultz had his assistant photocopy the email from Mr. Balwani and put it in an office safe but seemed skeptical of his grandson’s story, says Tyler Shultz.

Holmes

 

After making the decision to quit, Theranos went all-in with their efforts to silence Shultz by releasing an army of lawyers and even hiring private investigators to have him followed. 

He says he was told by his parents that Ms. Holmes called the elder Mr. Shultz in the summer of 2015 to complain that their son was being unreasonable. Tyler Shultz says he also got a tip that private investigators were watching him.

 

In a conversation in his parents’ kitchen, they pleaded with him to agree to whatever Theranos wanted, he says. Even though his heart sank when they discussed selling their house to cover the costs of defending him against a potential Theranos lawsuit, Mr. Shultz didn’t make a deal with the company.

 

His grandfather asked if he would sign a one-page confidentiality agreement to give Theranos peace of mind. According to Tyler Shultz, when he said yes, his grandfather revealed that two lawyers were waiting upstairs with the agreement.

 

Michael Brille and Meredith Dearborn, partners at the law firm Boies, Schiller & Flexner LLP, then came downstairs, says the younger Mr. Shultz. Mr. Brille said he was trying to identify the Journal’s sources. He handed the young man a temporary restraining order, a notice to appear in court and a letter signed by Mr. Boies alleging the former employee had leaked Theranos trade secrets.

 

Tyler Shultz says his grandfather protested to the lawyers that this wasn’t what he and Ms. Holmes had agreed to earlier, but that Mr. Brille kept pressing the younger Mr. Shultz to admit he had spoken to the Journal.

 

He wouldn’t. “This conversation needs to end,” the young man eventually declared. He says his grandparents ushered the two lawyers out of the house.

Of course, Shultz was ultimately proven right as independent researchers have confirmed that "Theranos’s proprietary Edison machines frequently failed quality-control checks and produced widely varying results."  Meanwhile, Theranos is the subject of criminal and civil investigations by the U.S. attorney’s office in San Francisco and the Securities and Exchange Commission.

Tyler Shultz is cooperating with an investigation of Theranos by federal prosecutors, according to people familiar with the matter. Theranos is the subject of criminal and civil investigations by the U.S. attorney’s office in San Francisco and the Securities and Exchange Commission, which are trying to determine if the company misled investors and regulators about its technology and operations. Theranos has said it is cooperating.

 

Mr. Shultz’s allegations that Theranos’s proprietary Edison machines frequently failed quality-control checks and produced widely varying results were corroborated in inspection results released in March by the federal Centers for Medicare and Medicaid Services. In April, Theranos told regulators it had voided all test results from Edison machines for 2014 and 2015, as well as some other tests it ran on conventional machines.

That said, Tyler's decision to speak out against Theranos has caused a rift within his family as he and his grandfather only speak through lawyers and his parents have been forced to spend $400,000 on legal fees.

In the past year and a half, the grandson and grandfather have rarely spoken or seen one another, communicating mainly through lawyers, says Tyler Shultz. He and his parents have spent more than $400,000 on legal fees, he says. He didn’t attend his grandfather’s 95th birthday celebration in December. Ms. Holmes did.

 

“Fraud is not a trade secret,” says Mr. Shultz, who hoped his grandfather would cut ties with Theranos once the company’s practices became known. “I refuse to allow bullying, intimidation and threat of legal action to take away my First Amendment right to speak out against wrongdoing.”

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Cluster_Frak's picture

Like father (enron) like daughter (theranos).

 

Good this shit was not IPOed, otherwise public would lose. This time it was just a bunch of rich dudes. 

jcaz's picture

Bad Grandpa sucks.

Die, Bad Grandpa.....

InjectTheVenom's picture

 

>>>  I'd hit that.

>>>  Not.

BennyBoy's picture

 

Fuck George Shultz, that Bechtel bitch.

hedgeless_horseman's picture

 

I also burned a Golden Ticket at an early age, similar to Tyler Schultz.

My brother-in-law at the time, coincidentally another Stanford grad, gave me the excellent advice to cut the ties that bind and try to make it on my own.

The family members came after us far more aggressively than it appears Grandpa Schultz has in this story.

It was very costly to my wife and I, monetarily and socially, but I was fortunately able to go on and make a small fortune of my own accord. 

One of the best choices mrs_horseman and I have ever made, and I shall certainly never regret it.

Stuck on Zero's picture

Elizabeth Holmes is a Chelsea look-alike. A little better looking but clearly of the same stock.

Reginald Blome's picture

hh, 

Beat Cal! I'm class of 00. You?

Bastiat's picture

I thought when women were in charge we get past all this nasty bullying.   Jeez..

Vatican_cameo's picture

 

Maybe he should have take a lesson from his great-uncle Sgt. Shultz;

https://www.youtube.com/watch?v=kp9BJxFHDYI

 

 

sun tzu's picture

Get it right. 

 

You go girrrrrrrlllllllllll

Normalcy Bias's picture

Don't look into her eyes too long, she'll steal your soul!

Yars Revenge's picture

Holmes does have most unusual eyes doesn't she?

Sofa King's picture

I believe the proper term for them is "Crazy-Eyes".

Orly's picture

She could have easily run a test on herself and determined that she has thyroid disease.

:/

hedgeless_horseman's picture

 

I haven't see you around here for quite a long time, Orly. 

Hope you are doing well.

Oh regional Indian's picture

Just a shout out to an old friend. Hope you're good Orly!

norecovery's picture

The ring flash used by the photographer did that.

Usura's picture

She looks line Dana Bash.............a jew with a nose-job.

RaceToTheBottom's picture

Introduction to Photography 101 has as lesson 5 how to get liights to produce that effect.  Of course it is easier if the subject of the photo takes some eye drugs first....

richsob's picture

Sounds like Grandpa could learn something about ethics from his grandson.

gregga777's picture

Politician and ethics are mutually exclusive concepts. Sociopaths and psychopaths have no concept of ethics.

swmnguy's picture

The real question is how his grandson learned any ethics.  George Schultz spent his entire career scraping the bottoms of barrels.

Omen IV's picture

true but i would bet Shultz got many of the other lumineres on the board of directors - so he got a lot of heat - fraud charges affects the directors liabilities potentially - while they may have Directors Insurance (D & O Coverage)  - the amounts involved are huuuuge! so the directors thought they had a huge Billions $$$ score but they now have huge liabilities and legal fees instead

 

have the old man pissed at his grandson makes no sense except for the above or he lied which he didnt

TheFreeLance's picture

Meredith Dearborn and Michael Brille. Clip-n-save.

Fish Gone Bad's picture

Next time, get another job first, then turn in your resignation.  That way you do not look like a disgruntled employee and attract attention. 

gregga777's picture

Theranos: nothing but a corrupt, conporate enterprise. Why did Federal regulators let them get away with committing such massive fraud for so long? That's the real question.

e_goldstein's picture

Because the Board of Directors is a who's who list for the MIC, that's why.

silverer's picture

Nice job. Never cave in. Go Mr. Shultz!

lex parsimoniae's picture

I detect a shift in the force.

Little by little, this country is regaining it's conscience.

I am a Man I am Forty's picture

this woman is so creepy, think she's cute?  check out one of her videos

InjectTheVenom's picture

i do thinka she is a cute, i want make sexy time with her, yes.

Paul Kersey's picture

The young Mr Shultz, Grandson of Deep State George Shultz, now knows two things:  Blood my be thicker than water, but it is not thicker than Deep State, and "The nail that stands up, gets hammered".  I wish Tyler Shultz the best of luck, and wish that his grandfather wasn't living proof that "only the good die young". 

swmnguy's picture

And speaking of hammers and nails, young Tyler Schultz should give a wide berth to nailguns.

hooligan2009's picture

holmes = blowflake!

how come he has any legal expenses at all? what is he paying his lawyer to do?

swmnguy's picture

The story doesn't say, but he's probably gotten hundreds of requests for documents, numerous lawsuits, all compiled by literally dozens of $1000/hr. corporate lawyers.  He has to respond to everything or be on the wrong side of a summary judgement of default and owe them every penny he even dreams of for the next 8 lifetimes.

My youngest brother is a small-town attorney and he had a client go up against some heavy-hitters in the ESOP appraisal business, and their white-shoe attorneys.  He had a receptionist and that's it, so they figured they could swamp him.  They almost did, but he's a clever little dude and mean AF.  He didn't get to beat them in court because at the courthouse steps, literally, they coughed up nearly 8 figures to his client in return for Non-Disclosure Agreements.  He was well over $500,000 in billings by that time, as he'd had to hire a whole staff to deal with the paper-blizzard tactics.

Yeah, this Schultz kid could get into 7 figures defending himself.

hooligan2009's picture

hmm...seems odd when Theranos has already admitted he was right by discarding all 2014 and 2015 tes results because of malpractise.

i guess he gets all the money he has spent back if he "wins" though.

swmnguy's picture

They're claiming the kid stole trade secrets and dispersed them.  Believe it or not.  This sort of thing takes an almost incalculable amount of gall.  But they have no intention of letting this get to court.  They'll just drop proceedings if it looks like it might get to court.   

Sure, he could countersue, but what exactly would Theranos pay him with?

An interesting factor to observe is how long Theranos's attorneys continue to believe they'll be paid, and with what, and how they know how much money is where.

Ex-Oligarch's picture

That's what retainers are for.

JustPastPeacefield's picture

The young Schultz was clearly correct in his accusation of fraud, yet the legal system is used to persecute him. Corrupt to the core.

LetThemEatRand's picture

It sounds like he's defending against claims that he violated confidentiality agreements regarding company trade secrets.  This is what corporate America does -- they make their employees sign agreements, and if they try to whistleblow they sue the living shit out of them for revealing trade secrets.  Because our Congress is bought and paid for by these same companies, there are no laws that effectively protect against this kind of behavior.

hooligan2009's picture

uh huh...so fraud and endangerment of life is a trade secret... vomit worthy - i thought whistle blowers were protected by law, if proven accurate (theranos admitted fault in testing already) ? looks like an anti-whistle blower legal system - those scumbag lawyers must really love themselves to death - ethics of a concnetration camp guard

Yes We Can. But Lets Not.'s picture

Stanford.  Check.

Drop out.  Check.

Gubmint connections.  Check.

Jobsian turtlenecks.  Check.

Visionary gaze photo-shoots.  Check.

Viable product.  Bzzzzzzzzzttttttttt. <trap-door activated>

Fish Gone Bad's picture

Doesn't she look (a lot) craycray?

Frito's picture

My dog looks like that sometimes... when she's being a crazy bitch