- The question the community has is, does this work?
If you believe that it does, I'd like to hear you say that.
- I know it does.
- [Narrator] This is Elizabeth Holmes.
Six years ago, she was one of the most celebrated CEOs
in Silicon Valley.
Her biotech startup Theranos,
which promised to revolutionize blood testing
was once valued at more than $9 billion.
And Forbes held her
as the youngest self-made female billionaire.
But then Theranos's well-crafted story
began to fall apart
just days before Holmes took to the stage
at this 2015 conference.
"The Wall Street Journal" published two articles
that cast serious doubts on the effectiveness
of Theranos's technology.
- Do you feel now, in hindsight that
maybe you went to market a little too quickly?
- We're the exact same company that we were last Wednesday
before these two articles were published,
nothing has changed.
Just because some guy reports false stuff about us
doesn't mean that it changes our business.
- We knew she was blatantly prevaricating.
And it's interesting that the government
has used many of the facts that we uncovered in our stories
as a basis for the criminal complaint
that's now pending against Elizabeth.
- [Narrator] Today Theranos has been dissolved
and Holmes faces a federal indictment
of 12 different charges,
two counts of conspiracy to commit wire fraud
and 10 counts of wire fraud.
- The case has two parts.
The prosecutors alleged she defrauded both investors
who gave hundreds of millions of dollars to Theranos
and also patients who paid for tests.
- [Narrator] Now with her trial about to begin
on August 31st, we revisit Theranos's story
and Holmes's fall from grace.
To understand what we can expect from a case
that is shaping up to be one of the biggest trials
in recent years.
- The woman who I will be interviewing
needs no introduction.
- First, they think you're crazy, then they fight you
and then all of a sudden you change the world.
- [Reporter] Almost every media outlet, including us,
here at CBS bought into the Theranos myth.
- Breaking news right now,
Elizabeth Holmes is stepping down as CEO of Theranos.
- [Narrator] The Theranos saga
has been one of Silicon Valley's biggest scandals,
and as such, it's attracted a lot of attention.
To date, the Theranos story has been chronicled
in a best-selling book, an HBO documentary, a podcast,
and two still to come Hollywood adaptations.
- Before "The Journal's" stories,
Elizabeth was a darling of Silicon Valley.
She was, you know, viewed as
potentially the next Steve Jobs.
- [Narrator] Theranos promised to revolutionize
blood testing with a new technology
that could diagnose everything from cholesterol to HIV
using only a few drops of blood.
- We'd like to see a world in which every person
gets access to this type of basic testing
- [Narrator] From an early age,
Elizabeth Holmes had aspirations to be an engineer.
- I first met her when she came to my office
when she was a freshman at Stanford
and I believe it was the fall of 2002.
- [Narrator] In this deposition interview,
one of Holmes' earliest backers,
Stanford University professor Channing Robertson,
recall that by the next year,
Holmes had decided to drop out and launch Theranos.
- She asked me, if I would be on her board and I said, yes.
- [Narrator] Holmes started Theranos in 2003,
after dropping out as a 19 year old sophomore.
Over the next 12 years,
she raised hundreds of millions from investors,
and Theranos's valuation ballooned to more than $9 billion.
Two former Secretaries of State,
Henry Kissinger and George Schultz
were members of the board of directors.
- And how did you first become involved with Theranos?
- Secretary Schultz mentioned the company
that he reached out shortly,
maybe several years after I left the Senate.
- [Narrator] In this deposition taken in a civil case
brought by investors,
former Theranos board member
and former Senate Majority Leader Bill Frist
recalled the first time he met Elizabeth Holmes.
- They had a box there, a machine there
and told the history, her individual history
and the stage of the company at that point.
I do remember actually at that meeting doing a finger prick,
the technology and the results came back at that meeting.
- So you did test the technology
right at that first meeting?
- Yes.
- And it was analyzed right there and then?
- Yes.
- And the results were given to you.
- Yes.
- Right there and then?
- [Narrator] Investors like the Walton Family
and Rupert Murdoch, executive chairman of NewsCorp,
"The Journal's" parent company,
each invested over $100 million.
Others like former education secretary, Betsy Devos's family
invested $100 million.
And Mexican tycoon Carlos Slim, invested $30 million.
- If this technology truly worked,
it could have uppended the entire blood testing industry,
it could have made them a lot of money.
- [Narrator] But after the publication
of two "Wall Street Journal" articles in October 2015,
Holmes's claims began to unravel.
- You're now at the point
where you're only testing for one thing, herpes
using your proprietary technology, is that correct?
- It's not correct.
And there's a lot of different elements of our work
that have been conflated through these two pieces.
- [Narrator] "The Journal" reported that Theranos
wasn't using its own technology
for the vast majority of its tests
and it was instead using commercially available machines.
The company's Edison machine,
the lab instrument touted as the linchpin of its strategy
handled just a small fraction of tests
that were sold to consumers.
And former employees told "The Journal",
the accuracy of Edison's tests was poor.
- So if I went to one of the centers and I got a pinprick
and I only gave that much blood, right,
what tests are you currently able to perform for that blood
using anything other than
commercially available lab equipment?
- So we have never used commercially available lab equipment
for finger-stick based tests.
Every finger stick tests that we have ever done
uses proprietary Theranos technology
that is not commercially available.
- Well, it sounded great for her to say that
they never used third-party commercially available
blood testing technology.
Unfortunately, it's not grounded in facts.
- [Narrator] In this 2018 deposition interview,
former Theranos product manager, Daniel Edlin,
recalled a company meeting
in which the use of third-party analyzers was discussed.
- I heard discussion about certain Theranos tests being
lab developed tests that were run on third party machines.
- [Narrator] The 2016 "Journal" article
found that Theranos failed to maintain basic safeguards
to ensure consistent results.
What's more because of the company's
many questionable tests, some patients adjusted
the amount of medicine they were taking.
Others like breast cancer survivors, Sherry Eckard panicked
as seen here in this 2016 "Wall Street Journal" video.
- When I went online and got the results,
I printed them off,
it looks like they're normal
and then I thought I better go back and look at that again.
Okay, what's the range, the reference range?
And I noticed that it's for premenopausal women.
Okay, well, that's not me.
- [Narrator] Eckard, who could be called
to testify in the trial
received blood test results from Theranos
that showed estrogen levels many times higher
than is normal for a post-menopausal woman.
Her oncologist told "The Journal"
a high estrogen level could cause cancer to recur
or could be a sign of a rare tumor.
- Either they made a mistake,
they tested somebody else's blood,
or their controls don't work, or I have a tumor somewhere.
- The patients where the pawns in all this.
Many of them who had gotten tests
and the tests seemed to be wildly off.
They would sometimes have repeated tests at Theranos,
and then when those were wildly off,
they would go to a traditional, you know, Quest or Lab Corp.
When they complained,
oftentimes they would not get any kind of a response.
- You have no concerns about where you are today.
- What we've done for the last few days is listen, right?
And try to understand
what are the questions that the community has,
and we've been preparing material
to be able to answer that for them,
because that matters hugely to me.
- [Narrator] At this event, Holmes promised to publish data
proving the accuracy of Theranos' more than 240 tests,
but Theranos was never able to provide that data.
The records of the millions of blood tests,
that Theranos performed were stored on a database.
But in 2018, Theranos' employees dismantled the servers
containing the original database.
Meanwhile, prosecutors didn't realize for months
that a copy they received
was missing a necessary encryption code.
- At this point, neither the government nor Theranos
or Elizabeth Holmes have access to this database anymore.
- Kind of extraordinary that it just sort of disappeared.
- [Narrator] Prosecutors believe
that even without the database,
a successful prosecution can be carried out
with the anecdotal evidence available.
- Holmes's defense team has argued
that without this database and broader data
prosecutors shouldn't be able to call
patients and doctors to the stand
who said they got inaccurate test results.
So they've put a lot of stake in this lost database.
- [Narrator] Prosecutors first indicted Holmes
and former Theranose executive Ramesh Sunny Balwani.
In June 2018 Holmes settled civil charges
filed by the SEC in 2018.
- Prosecutors say that from 2010 to 2015 in investor pitches
that Elizabeth Holmes did,
she basically told investors
that they had this revolutionary technology,
but they say that in reality, that wasn't true
and she knew it.
- [Narrator] Prosecutors say investors were told,
Theranos would generate
over $100 million in revenue in 2014
and that Theranos had lucrative contracts
with the Department of Defense that didn't exist.
In the indictment prosecutors point to
six specific wire transfers from unnamed investors
that they say were the result of allegedly fraudulent acts,
including a nearly $100 million deposit
to a Theranos account sent in October, 2014.
- The intent is what matters in showing
that someone intended to deceive and so
if Elizabeth Holmes' lawyers can say
that she believed in the technology,
that could be one line of defense.
Elizabeth Holmes's lawyers could also argue
that also all Silicon Valley startups
embellish to investors
and that what Theranos did was no different.
- [Narrator] It's unclear if Holmes
will testify in the trial
or what the defense's strategy will be.
- To me, the most interesting element,
is Elizabeth Holmes gonna testify on her own behalf?
I mean, it's always the big question and I tend to doubt it,
but you know, it it's unclear, we don't know that,
we also don't know
who definitively the witnesses are going to be.
- [Narrator] Choosing an impartial jury
is expected to be a major undertaking
because of the substantial coverage Theranos has received.
- I think it could take a while and be an intensive process
to pick the jury.
Elizabeth Holmes's side is very concerned
about finding jurors that aren't
already prejudiced against her and the company.
- [Narrator] Holmes has pleaded not guilty.
Each wire fraud count
carries a maximum prison sentence of 20 years.
(upbeat music)