60 minutes rewind elizabeth holmes was just 19 years old when she dropped out of
stanford university with a dream of creating a company that would revolutionize blood testing
she founded the startup theranose it boasted her technology could take a pinprick worth
of blood from the finger and perform hundreds of laboratory tests it was she claimed quote
the most important thing humanity has ever built added zenith theranos was worth nearly 10 billion
dollars and elizabeth holmes became the youngest self-made female billionaire in the world she
was also as the wall street journal uncovered at the center of a massive multi-year fraud you're
about to hear from insiders how the theranose deception hoodwinked gullible investors and
worse endangered unsuspecting patients our work is in being able to make testing more accessible
elizabeth holmes built her company theranose on this invention she named the edison a miniaturized
blood analyzer that would disrupt the 60 billion lab testing industry dominated by giants labcorp
and quest diagnostics holmes called her invention the ipod of healthcare and it made her a celebrity
she graced magazine covers and was praised by politicians and the press alike
you founded this company 12 years ago right tell them how old you were i was 19.
she sold her vision with grandiose claims that her blood tests would cost a fraction of current
prices homes biotech startup was backed by an illustrious board packed with national security
heavyweights like henry kissinger and james mattis the current defense secretary the board was filled
with friends of george p schultz the former secretary of state who helped end the cold war
he introduced his grandson tyler to holmes dazzled tyler schultz became a believer and joined the
company soon after getting his degree in biology from stanford university when you met her and
you heard about elizabeth holmes vision what did you think i was totally sold on it tyler schultz
began working at theranos in september 2013. it was a pivotal moment as the company announced a
partnership with walgreens the deal would put an edison machine in every store elizabeth holmes
claimed the edison performed all the tests big lab machines like these could from cholesterol to
cancer all from a painless finger prick but tyler schultz says the edison he saw just didn't work
was it a sophisticated piece of machinery no there were components that would kind of fall off in the
middle of testing that you would have to then fish out they had doors that wouldn't close they
would get too hot and then they would get too cold when i was there we could not complete any
test accurately on the devices that we were manufacturing in 2000 doug matchy joined
theranos in 2012 after getting his doctorate in biochemistry his job was to adapt blood tests for
the edison tests which holmes told investors were ready to use on patients but elizabeth holmes had
told walgreens in 2010 that it had developed this device that was capable of running any blood test
from a few drops pricked from a finger in real time and less than half the cost of traditional
labs was that true no certainly not do you think she was lying to walgreens i do yeah are you a
clinical lab specialist no erica chung was fresh out of berkeley with a degree in molecular and
cell biology when she went to work at theranos she was just 22 but even the novice lab tech
suspected something was very wrong when she saw faulty test results sent to walgreens patients
when did you think i probably shouldn't be doing this pretty pretty soon in the process especially
when we started to pick up more patient samples and when those samples were retested she says
there were often contradictory results did you ever alert the patient no we didn't let them
know hey we re-ran your patient sample and we're not actually positive about what the diagnosis is
this is someone's health information exactly this isn't an app crashing this isn't
you know someone's food delivery coming late it's just a different ball game it's not the
only game elizabeth holmes was playing theranos employees told us they were instructed to stage
fake demonstrations for investors who visited company headquarters it was kind of a show all
they would see was their blood getting collected they didn't see what was going on behind closed
doors about how it was processed they would get their finger pricked with a small amount of blood
then they'd be let out of the room they'd go have a meeting go have lunch whatever and at
which point an engineer would run in the room grab the cartridge bring it out to the lab so was the
edison doing the testing no absolutely not who was doing the testing it was scientists at the bench
by hand by hand yeah it was a bait and switch for investors that kept the money rolling in
theranos raised nearly 900 million dollars from those investors
who now say they were swindled by elizabeth holmes and company president ramesh sunny bolwani
the pair claimed in investor documents obtained by 60 minutes that theranos technology was validated
by the fda pharmaceutical companies and was deployed on the battlefield by the u.s military
in afghanistan those claims were fabricated and in one public appearance after another holmes pitch
became even more fantastic and reckless we've done some work with people at hopkins who have
developed and demonstrated that in blood you can see the onset of pancreatic cancer 17 years before
a tumor forms we called johns hopkins medicine they told us they never collaborated with theranos
and doug mache says test data he compiled for the food and drug administration was falsified there
was so much pressure from above to get good looking results that are going to be able to
pass fda guidelines that people were pressured into making things disappear the bad results
bad results that's deceptive yeah for sure did you ever go to your boss and say this isn't right
absolutely all the time but you know he was under a lot of pressure from the people above him and he
was trying to do his best to make to make everyone happy this invention is going to be way up there
with the discovery of antibiotics day-to-day operations were run by company president sunny
balwani balwani is a millionaire software engineer with no training in the biological sciences
but he did have a powerful connection to elizabeth holmes sonny balwani was her secret boyfriend some
people are here because of the mission the cause some people are hopefully here for the science
balwani was also home's enforcer firing employees on the spot and berating scientists for failed
tests after a year and a half machi quit i saw that there was potentially fraud taking
place there was far too much illegitimate things going on there i talked to sunny decided i didn't
want to be there anymore and i left tyler schultz was also becoming disillusioned i had a personal
relationship with elizabeth she was close to my family and i felt like she was deceiving
my family and the public and almost every media outlet including us here at cbs bought into
the theranos myth a healthcare pioneer is being compared to visionaries like bill gates and steve
jobs do you think she wanted to be the next steve jobs she just really idolized him so she wore the
black turtleneck i think she created a world where she was steve jobs for a little bit as her wealth
and reputation sword elizabeth holmes took on the trappings of power she bragged bulletproof
windows were installed in her office and she traveled with a full-time security detail theranos
employees told us they were closely watched and required to sign non-disclosure agreements
all reinforced they said by a threatening team of lawyers and private investigators
that's why when tyler schultz alerted authorities in the spring of 2014 he used a fake name
why did you come up with an alias i knew how seriously theranos protected their trade secrets
i knew they would not take it well if they knew that i was talking to regulators in his email to
new york state department of health regulators schultz outlined questionable lab practices and
said he believed test results were being switched i just said this happened in my laboratory and
i just want to know if this is okay and they responded and said no this is cheating this is
not how it's supposed to be done tyler schultz was ready to resign but first he sent elizabeth holmes
an email about his concerns he got a response from sonny balwani that i was arrogant ignorant
patronizing reckless and i was lacking the basic understanding of math science and statistics
that if i had any other last name that i would have already been held accountable to the
strongest extent tyler schultz quit in april 2014 and soon after erica chung did too by february
2015 the theranose fairy tale was about to unravel publicly the story will continue after this
at the wall street journal pulitzer prize-winning reporter john kerry roo who has written a book
about the theranos saga got a call it was a tipster casting doubt about the edison
theranos and its charismatic founder elizabeth holmes she is a pathological liar she wanted to be
a celebrated tech entrepreneur she wanted to be rich and famous and she wouldn't let anything get
in the way of that what kind of job did the board do in holding homes accountable this is one of
the most epic failures in corporate governance in the annals of american capitalism they did nothing
to verify that her scientific claims were true careyroo's first article appeared in october 2015
and revealed theranos did less than 10 percent of its tests on edison machines what do you think is
going on here homes struck back this is what happens when you work to change things and
first they think you're crazy then they fight you and then all of a sudden you change the world
but skeptics were no longer buying the theranos deception what i'm showing you now is the result
of hundreds of engineers and scientists work holmes repeatedly insisted she would present
proof at a major industry conference that her technology worked you can see the tray dropping
into the detection module there it was proof that never came and the evidence that you presented
fell far short of that in 2016 after a series of surprise inspections federal regulators shut
down the company's laboratory saying it posed immediate jeopardy to patient health and safety
nearly one million theranose test results were invalidated when she started using
this technology on the blood samples taken from consumers in walgreens stores that was
an unauthorized medical experiment there's no other way to put it
theranos was on the brink of collapse big name investors found their stock was worthless
education secretary betsy devos and her family and media mogul rupert murdoch each lost more
than a hundred million dollars walgreens sued theranos and settled for less than a quarter of
their 140 million dollar investment why do you think this was outright fraud as opposed to any
other silicon valley startup that just wasn't able to deliver on lofty goals well because she raised
money hundreds of millions of dollars on the basis of this technology not only being ready
and working but being commercially rolled out you're also lying to the public you're lying to
patients you're lying to doctors you're lying to regulators most people would call that fraud as
well the securities and exchange commission called it massive fraud when they charged
elizabeth holmes and sonny balwani in march holmes settled the sec case without admitting guilt
and paid a half a million dollar fine balwani who left theranos two years ago calls the sec charges
unwarranted and is fighting them at its height how much was theranos worth 10 billion there
was a period of several months where it was more valuable than uber more valuable than airbnb more
valuable than spotify and how much is it worth now zero elizabeth holmes remains ceo of theranos
she would not comment for our story but last month she wrote to investors asking them to put in even
more where the company would soon run out of cash a federal criminal investigation is ongoing