American Scandal - Encore: Theranos | The Walgreens Deal | 2

Episode Date: September 24, 2024

Theranos prepares to go public with its blood-testing devices. But the company faces increased scrutiny, as problems with its technology—and its leadership—add up.Need more American Scandal? With Wondery+, enjoy exclusive seasons, binge new seasons first, and listen completely ad-free. Start your free trial in the Wondery App, Apple Podcasts, Spotify or visit wondery.app.link/IM5aogASNNb now.  See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

Hi, this is Lindsey Graham, host of American Scandal. Our back catalog has moved behind a paywall. Recent episodes remain free, but older ones will require a Wondery Plus subscription. With Wondery Plus, you get access to the full American Scandal archive, ad-free, plus early access to new seasons and more. Join Wondery Plus in the Wondery app or on Apple Podcasts. A listener note, this episode originally aired in 2021. It's February 2010 in Palo Alto, California.

Inside Theranos headquarters, a column of sunlight streams through the windows, landing on Chelsea Burkett, one of the company's employees. Burkett shades her pale blue eyes as she rounds a corner. And when she arrives at the office of the company's CEO, Elizabeth Holmes, Burkett pauses. Today is not going to be easy. Burkett and Holmes have been friends for years, and just six months ago, Holmes hired Burkett to come work at Theranos. At first, it seemed like a dream job. Burkett would set up studies with the company's blood testing devices. She would get to travel the world, helping develop a new piece of medical technology that could save people's lives.

But these last few months, Burkett has grown deeply pessimistic. Theranos' company culture has grown toxic under the leadership of Sonny Balwani, a senior executive. Balwani is a harsh and cruel leader, and he also happens to be Elizabeth Holmes' boyfriend. But bad leadership isn't the only problem. There is also all the gossip that's circulating among employees. Inflated revenue projections, mysterious firings, bribes to foreign governments. All of that has been upsetting for Burkett, but then came the breaking point. Holmes convinced a man having a health scare to let Theranos test his blood for cancer. The implication was that he should use the results to make medical decisions

with life or death consequences. Burkett was shocked. Theranos' technology is still far from ready, but it was clear that Holmes and Theranos would continue to act recklessly. So now, as Burkett hovers outside Holmes' office, she gathers her courage and gets ready to deliver some uncomfortable news. Inside her office, Elizabeth Holmes hangs up the phone and waves Burkett to come inside. Burkett enters, where she finds Holmes sitting behind her desk with a smile. Hey, Chels. Sorry, I was on the phone with the board. Come on in. Burkett nods, taking a seat across from Holmes.

As she looks at her old college friend, she can't help but notice how tired she looks. And thin. Oh, thanks, Liz. How are you? Do you do anything except work? Are you getting any sleep? Well, we're growing fast, so being tired comes with the territory. But what's up? What's on your mind? The reason I'm here is...

Well, this is hard. I can't tell you how much I appreciate working for you. Oh? Is this bad news? Yeah, I'm sorry. This job isn't working for me. Holmes leans forward, her hands clutched together. Is this a joke?

No, Liz, I'm serious. I'm giving my notice. Chelsea, I handed you an incredible position. You've traveled the world, making a difference. This is the kind of stuff that we dreamed about at Stanford. Yes, yeah, I know. Then what is it? Burkett pauses. She needs to be discreet.

The tech world is a small place, and she doesn't want to say anything that could hurt her own future. So she's only going to share part of the truth. Well, you know my boyfriend's in L.A., so every weekend I'm flying back and forth, and, you know, it's just, it's getting exhausting. I can't keep doing it. Ugh.

So it's not the problems with the studies you've been leading? No, no. Because Chelsea, we're fixing the tech. I know you've hit some rough patches, but that's what happens when you work at a startup. No, it's not the tech. It's not the studies. I just can't do it. I miss my boyfriend. Back and forth is killing me. It's just what I need. There's a flash of anger behind Holmes' eyes. Chelsea, you've been here six months. No one gets a dream job in the valley and then throws it away because they're annoyed by a flight to LA that takes just an hour. You're not telling me everything. No, that's it. You don't even have the courage to admit the truth. Well, whatever it is, you can just leave. Just go. We'll be fine without you, believe me.

Liz, and on your way out, don't say anything to your direct reports. We're done here. Burkett wants to protest, to plead her case and win back her friend's approval. But it's too late for that. Holmes has turned away, her back to Burkett now, and begins typing something on her computer. Burkett had heard the stories about Holmes, how she could be ruthless and ignore people who disagreed with her. But she never experienced this side of her old friend. It's painful to witness. So without saying another word, Burkett rises and walks out of Theranos headquarters.

Burkett steps into the blinding Palo Alto sun, her emotions whirling. Part of her is relieved to be done with Theranos. Still, Burkett worries about Holmes. She seems more isolated, more deluded than she's ever been. Theranos is a deeply troubled company, and yet Holmes refuses to address the underlying problems. Burkett is no visionary, no titan of the tech industry.

But you don't have to be to see the truth. Theranos is on a dangerous course. And if Holmes doesn't make some radical changes, and make them soon, her company could soon fall apart. In the past decade, Boeing has been involved in a series of scandals and deadly crashes that have dented its once sterling reputation. At the center of it all, the 737 MAX. The latest season of Business Wars explores how Boeing allowed things to turn deadly

and what, if anything, can save the company's reputation. Make sure to listen to Business Wars wherever you get your podcasts. wherever you get your podcasts. From Wondery, I'm Lindsey Graham, and this is American Scandal. At the age of 19, Elizabeth Holmes set out to build a product that would revolutionize healthcare. Her company, Theranos, worked to develop new blood testing technology, which could diagnose a wide variety of medical issues using just the smallest drop of blood. To build her company, Holmes courted a number of Silicon Valley investors. Her pitch relied on a mixture of charisma and inflated projections about the company's growth. Holmes also hid some of the problems with the technology itself. But as Theranos prepared to go public with its blood testing devices, Holmes and her

company faced increasing scrutiny. And with opposition mounting, Holmes found herself in a desperate scramble to stay ahead of her critics. This is Episode 2, The Walgreens Deal. It's late August 2010 at Theranos headquarters in Palo Alto, California. Elizabeth Holmes steps into a conference room where she finds a group of executives sitting at a long table. They're members of a delegation from Walgreens, and they're here today to discuss a partnership between the drugstore chain and Theranos. Holmes smiles as she greets the group. Theranos may soon be able to place its blood testing devices inside Walgreens stores. The two sides are currently working to launch a pilot program,

and if all goes well, Walgreens will expand this partnership nationwide. The revenue stream could be massive and cement Theranos' reputation as a leader in tech. It would be a validation of Holmes' vision and exhausting work. Theranos' blood testing devices aren't yet ready for the public, but for Holmes, that's not a deal-breaker. They'll be ready when it's time. For now, though, she just needs to win over this group and deflect any concerns they may have about Theranos' technology. Inside the conference room, Holmes turns and launches a PowerPoint presentation. Welcome, everyone, and thanks for being here.

Before we jump into things, I want you to just let yourself dream. Imagine what this partnership would actually look like. Maybe there's a little girl who's been tired and lethargic. She and her mom live out in rural Alabama. Not a lot of hospitals out there, but there are Walgreens. So they go in, and the little girl gets a test with just a pinprick of blood. In less than an hour, they get the result. The girl has a deficiency in vitamin B, a simple, treatable condition. And now the family can go back to living their lives. And the girl can get back to laughing and playing in the yard.

Holmes clicks forward to the next slide. That's the promise of this partnership. Together, Walgreens and Theranos can fill a huge gap left by our health care system and give regular people the care they need and the care they deserve at a price that won't drain their savings. There's nodding approval from the executives, and Holmes grins with pride. So far, so good. So she turns back to her presentation. But then a voice from the corner interrupts her. Excuse me, Ms. Holmes, quick question. Holmes turns to Kevin Hunter, a thick-set man who runs a consulting firm. Hunter is an expert in clinical lab work, and he's helping Walgreens evaluate the partnership.

Well, first, I just want to say thank you for having us. Your vision is incredible. But I wanted to ask, you mentioned that you have a commercially ready lab? That's right. State of the art. That's cool. That's cool. I'm a science geek myself. But I was coming back from the bathroom. I didn't see anything that looked like a lab. Holmes freezes.

The fact is their labs are far from commercially ready. But in Silicon Valley, sometimes you have to sell a story that makes people dream, even if it bends the truth. Well, Kevin, of course you didn't see the lab. It's downstairs, and I promise it's all that it's hyped up to be. Now, back to the presentation. Holmes clicks to the next slide, but Hunter interjects again. Miss Holmes, I really do want to see the lab. Is that possible? Yes, of course, if we have the time. Well, time shouldn't be an issue. I know we plan to end early. Go to dinner.

Why don't we take a detour? Check out the lab first. Well, I'm afraid our schedule's a little tighter than that. The restaurant has an incredibly strict reservation policy. We can't be late. Ah, well, then we'll find another time to see the lab. Holmes puts on a genial smile. You know, Kevin, I do appreciate the interest. Let's get through the important stuff first, and after that, we'll see if we can do fun tours and all that, all right?

Hunter leans back in his chair, his arms folded. Holmes knows she has to quickly redirect the conversation, so she won't get any more questions about the lab or their product, because Holmes made a large promise, claiming that Theranos' technology could run 192 different kinds of blood tests, but so far it can only accomplish about a half that number. But it's just an engineering problem, one that Holmes is certain they'll soon fix. The employees will work harder, and soon Theranos will be ready for a national rollout of its blood testing devices. It's just a matter of time and working out a few kinks.

And Walgreens doesn't need to know everything going on in the background anyways. So Holmes clasps her hands together, and smiling brightly, she begins telling the group about Theranos' new research in Mexico. There have been a number of findings that should be exciting for Walgreens. As executives chatter over the news, Holmes steadies herself, remaining poised. She knows that Theranos will get there. Eventually, they will achieve the impossible. But in the meantime, she can't let this deal with Walgreens fall through. She can't let this deal with Walgreens fall through. A few months later, Kevin Hunter squeezes into a boardroom at the Walgreens corporate headquarters in Deerfield, Illinois. The conference table is littered with turkey sandwiches, and the other executives are getting ready for their weekly video call with Theranos.

As Hunter waits for the call to begin, his mind races as he remembers his first visit to Theranos at their Palo Alto headquarters. Hunter is a consultant working for Walgreens, helping to evaluate the partnership with Theranos. And when he flew out to California, he wanted to vet the company's actual technology. He wasn't interested in the PowerPoint presentations, but in the devices themselves, in their ability to test blood. That was the only way he could tell if Theranos was the real deal. But in that visit to Palo Alto, Hunter hit roadblock after roadblock. Elizabeth Holmes deflected all of his requests. He wasn't allowed to see Theranos' lab or to witness a demonstration of a live test of Theranos' device. On top of that, Theranos' executive, Sonny Balwani, trailed him when he

went to the bathroom. It was like they were trying to hide something, and it left Hunter deeply suspicious of Holmes and her biotech company. So, sitting around the board table with the Walgreens executives, Hunter thinks through his plan. Somehow, he must stop this deal from moving forward. A moment later, the video call begins, and Elizabeth Holmes' face appears on a large screen. In her distinctive low voice, Holmes says she'd like to start the meeting with some housekeeping. Theranos is changing the way it deals with government regulators. From now on, Theranos will designate their tests in a legal category known as Laboratory Developed. Holmes flips a page, and then Breesley moves on to the next topic.

But Kevin Hunter's ears prick up. Did Holmes really just say that? This new designation means that Theranos' devices will be less closely regulated by the FDA, and it could present a major liability for Walgreens. Hunter is shaken, and when the call finally ends, he pulls aside Renat van den Hoof, the Walgreens executive who's leading the pilot project. Hunter explains that he's very concerned about what Holmes just said. Theranos's legal maneuvering could put Walgreens in a precarious position,

and alongside all of Hunter's other worries, this seems to add up to something bad. Walgreens needs to get to the bottom of this before it's too late and they have a lawsuit on their hands. Vandenhoof's expression is pained. He admits that he hears what Hunter is saying, but at this point, they can't put the brakes on the deal. Walgreens is battling CVS to be the dominant drugstore chain across the country. If Walgreens doesn't take this opportunity, CVS will. Vandenhoof then gives a shrug and says he knows this isn't what Hunter wants to hear, but it's the way things are. Vandenhoof turns to leave, but before he can, Hunter grabs his arm and begins pleading. He says there's another way to vet Theranos' technology.

He could open up one of the devices the company left behind. They could pull back the curtain and see what Holmes is really working with. Vandenhoof's eyes widen in alarm. He reminds Hunter that their contract prohibits any reverse engineering of Theranos' devices. Cracking one open is out of the question. Vandenhoof turns, tosses his half-eaten sandwich in the trash, and walks away. Hunter is left standing in a daze. He understands why the situation is difficult. Walking away from a deal with Theranos could cost Walgreens millions,

billions over the long term. But there is a bigger cost to consider. Theranos' products could be defective. And if this partnership goes forward, Walgreens could cost lives. Hunter sighs. At this point, there's little he can do. He's just a consultant from a small firm. And trying to upend a major corporate deal like this? There's just too much momentum to stop it. It's September 2013, and three years later at Theranos' headquarters in Palo Alto. The company's lab director, Alan Beam, makes his way through the office,

surveying a landscape of exhausted employees. Engineers, product developers, researchers, everyone looks depleted. It's no shock that the company appears to be staffed by zombies. For the last three years, Theranos employees have suffered through a relentless workload, as Theranos has prepared a commercial launch of its blood testing technology. The company's deal with Walgreens could be a game changer. By getting their technology in drugstores across the country, Theranos will be able to reach millions of people and make an incredible amount of money. The stakes couldn't be greater for Theranos. In just a few days, they'll open its first wellness center inside a Walgreens

in Palo Alto. But there's a problem, one that Beam just learned. Theranos' devices still aren't ready for the public. Theranos may be under incredible pressure, but Beam knows he has to stop the partnership from moving forward. Only one person can make this excruciating decision, the company's founder and CEO, Elizabeth Holmes. Beam approaches Holmes' office and knocks on the door. But when she looks up, he notices that her eyes are ringed with dark circles. Beam has heard rumors that Holmes sleeps only four hours a night, that she lives on chocolate-covered coffee beans.

Now, looking at Holmes rock back and forth in her seat, Beam sees that the rumors could be true. So Beam gingerly steps into the office and takes a seat. But before he can share his deep concerns, Holmes begins talking rapidly, saying that this Walgreens launch is going to change everything. And not just for Theranos. People everywhere are going to find that they can get medical tests as easily as shopping for groceries. Beam looks down. He doesn't know why he's getting the pitch that Holmes saves for investors. Maybe all her frantic energies just cover for her true feelings.

Maybe she's also scared. Because the truth is that if Theranos launches in Walgreens, it will have to not just use its own technology to test blood. It'll have to rely on devices manufactured by Siemens, the industrial giant. And even those tests have proven problematic. So despite all of Theranos' promises and years of work, the partnership with Walgreens isn't ready. Beam knows he has to tread carefully. So meeting Holmes' gaze, he agrees that the Walgreens partnership has big potential.

And it's for that reason that they have to postpone the launch and work to fix the long list of problems. Hearing this suggestion, Holmes looks away, shakes her head. She tells Beam that it's not an option. They cannot delay. They're going to have to fix this airplane as they fly it. Beam shudders at the analogy. He could be held personally liable for any faulty test results. He can't risk that, so he leans forward and issues a demand. It's not just that she should delay the launch. Holmes must call it off. But Holmes shakes her head again, looking bitter and weary. She explains that Theranos' only currency is its promise.

Postponing the launch could damage their reputation beyond repair. It's not a decision she's willing to make. Beam begins to try again, but Holmes raises her hand to silence him. With her voice quivering, she tells Beam that somehow everything will be fine. Holmes ushers Beam out of her office and into the hallway. For a moment, Beam just stands there, watching Holmes through her glass door. She puts on a pair of headphones, and soon as nodding along to music, her eyes closed. Beam stares in disbelief. Holmes' habit of sticking her head in the sand is more than naive.

It's dangerous. Theranos is careening toward outright fraud. Patients' lives are at stake. Someone has to speak up and put a stop to this. The only question is whether Beam himself has the strength to take on Theranos and Elizabeth Holmes. He was hip-hop's biggest mogul, the man who redefined fame, fortune, and the music industry. The first male rapper to be honored on the Hollywood Walk of Fame, Sean Diddy Combs. Diddy built an empire and lived a life most people only dream about.

Everybody know ain't no party like a Diddy party, so. Yeah, that's what's up. But just as quickly as his empire rose, it came crashing down. Today I'm announcing the unsealing of a three-count indictment, charging Sean Combs with racketeering conspiracy, sex trafficking, interstate transportation for prostitution. I was f***ed up. I hit rock bottom. But I made no excuses. I'm disgusted. I'm so sorry. Until you're wearing an orange jumpsuit, it's not real. Now it's real. From his meteoric rise to his shocking fall from grace, from law and crime, this is the rise and fall of Diddy.

Listen to the rise and fall of Diddy exclusively with Wondery Plus. On January 5th, 2024, an Alaska Airlines door plug tore away mid-flight, leaving a gaping hole in the side of a plane that carried 171 passengers. This heart-stopping incident was just the latest in a string of crises surrounding the aviation manufacturing giant, Boeing. In the past decade, Boeing has been involved in a series of damning scandals and deadly crashes that have chipped away at its once sterling reputation. At the center of it all, the 737 MAX, the latest season of Business Wars, explores how Boeing, once the gold standard of aviation engineering, descended into a nightmare of

safety concerns and public mistrust. The decisions, denials, and devastating consequences bringing the Titan to its knees and what, if anything anything can save the company's reputation now follow business wars on the wondery app or wherever you get your podcasts you can binge business wars the unraveling of boeing early and ad free right now on wondery plus It's the summer of 2013 in Palo Alto, California, and the Theranos cafeteria is bustling. Employees grab their lunch trays as they laugh and blow off steam, their conversation echoing off the walls. One of those employees is Tyler Schultz, who grabs his food and looks for a place to sit.

For Schultz, the lunch scene is a bit overwhelming. He's a recent graduate from Stanford with dark blonde hair and an easy smile. This is his first job out of college. And looking around the cafeteria, he can admit that he feels intimidated to be in a room with so many brilliant people. But Schultz is no stranger to success himself.

His grandfather is George Schultz, the former U.S. Secretary of State and now a Theranos board member. It was through his grandfather that Schultz met Elizabeth Holmes and built a relationship that would lead to this job. Schultz walks through the cafeteria, searching for a place to sit. As he gazes across the wide room, it hits him just how confident and comfortable everyone seems to look. Schultz wishes he could say the same for himself. He has a good job working with a team that tests blood samples for specific antibodies, but it's not the team he was hired to work with.

On top of that, his supervisor just quit abruptly. According to rumors, she had a fallout with Elizabeth Holmes. There's something that feels chaotic and out of control about Theranos. Schultz sighs as he grabs a seat by himself and starts eating. He shouldn't entertain these kinds of thoughts. Theranos is an exciting company, and his grandfather wouldn't lead him astray. Still, his short time here has left Schultz wondering whether he made the right decision in taking the job. As Schultz works his way through his lunch, the cafeteria suddenly goes quiet. Schultz sets down his fork and looks over his shoulder. Elizabeth Holmes has just entered. She steps onto a raised platform, and right away,

a group of employees gather around her. It looks like she has an announcement to make. Surveying the quiet room, Holmes bites her lower lip and tells the employees that they've just opened their first Theranos Wellness Center at the Walgreens in Palo Alto. Holmes is beaming, saying she's proud of every single person in this room. All the hard work, all the sweat, tears, and of course all the blood. It all led to this moment. Every employee should give themselves a round of applause. The cafeteria erupts in cheers, and although he's still new to the company,

Schultz joins in, smile forming on his face. Then Holmes begins to tear up, and the cafeteria goes quiet once again. Her voice quivering, Holmes begins talking about her uncle, who died from a cancer that could have been prevented if he'd gotten an early warning sign. That's what Theranos is ridding the world of. Holmes' voice rises in passion as she reminds everyone that this is what she's been working for, to prevent these kinds of losses, to be able to hold on to the people in our lives who we love the most. Holmes wipes her eye,

and without saying another word, she steps down from the raised platform. The crowd's response is immediate. Employees cheer and applaud, and as Schultz watches this rapturous celebration, he feels something stirring inside him. This mission, this feeling, is why he joined Theranos. Schultz dips his head and smiles. He's aware that he's still young. He'd been scared, uncertain how to make sense of his first days on the job. But after hearing Holmes' speech, he feels restored. It's time to set aside any worries and get to the business of changing the world. Several months later, Tyler Schultz sets down a glass pipette and yawns into his gloved hand.

The day has gotten late, but Schultz is still at work in Theranos' lab. And it doesn't look like his work is going to end anytime soon. For hours, Schultz has been standing here, evaluating the accuracy of Theranos' blood testing technology. But no matter what he does, he keeps getting the same problematic results. Schultz quints his eyes in exhaustion. Maybe he's doing something wrong. Everyone says that Theranos has the most cutting-edge technology, so how could he keep failing? But Schultz doesn't know what he can do differently, so he returns to his work, ready to pick up where he left off. But as he reaches for another pipette, Schultz overhears a quiet conversation from across the room.

He scoots his chair back and spots the clinical lab team, another work group sharing this space. They're whispering among themselves as they process patient samples. Schultz knows he's supposed to ignore them, but it's late, and with no barrier between them, Schultz can't help but eavesdrop. It sounds like they're talking about Theranos' devices. One person says that they've been flunking quality control tests. Someone else adds that Sonny Balwani, a Theranos executive, has been pressuring him to ignore these failures and just keep running tests. Schultz is shocked. He's heard that Theranos' blood testing devices have been seeing some problems, and he's experienced issues first hand.

But ignoring failures in quality control on real patients' tests, that level of dishonesty is something else entirely. As he debates what to do, Schultz suddenly catches the eye of someone in the clinical lab team. Quickly, he turns back to his lab station, pretending to focus. He hopes he wasn't just caught snooping. But even if he was, there's a bigger issue here. It sounds like there may be something fraudulent happening at Theranos.

And if that's true, he has to tell Elizabeth Holmes. As CEO, she has a right to know. It's early 2014, and Elizabeth Holmes is in her office staring at a large calendar on the wall. It's covered with notes about all the big events coming up soon. There's the opening of Theranos Wellness Centers, clinics hosting the company's blood testing devices. There are partnerships with pharmaceutical companies, and meeting after meeting with investors. Holmes turns away from the calendar, a giant grin on her face. Years ago, she set out to build Theranos into a juggernaut. She wanted to revolutionize medicine, to make a name for herself as a pioneer in the tech industry.

And as it stands now, Holmes is on track to achieve those lofty ambitions. Theranos' technology could be in a hundred clinics by next year. Holmes has the world's attention. The only thing left to do is fix the remaining issues with the technology itself. And it's not a minor problem. But it is fixable, and Holmes is eager to get past these issues in engineering. As Holmes returns to her desk, she notices Tyler Schultz approaching from the hallway, his dirty blonde hair pushed back. Holmes gathers her thoughts.

Schultz recently sent an email that sounded like he was planning to sound an alarm about Theranos' blood testing devices. For any other employee, she would quickly dismiss the concerns and turn to something else more pressing. But Schultz's grandfather sits on Theranos' board, so Holmes has to tread carefully. Holmes waves in Schultz, and he steps into her office. Hey, Tyler. Thanks for stopping by. I was hoping we'd get a chance to talk. Well, I'm glad to hear that. Here, have a seat.

I read your email. I could tell you were alarmed about something. But I just want to assure you, I have my eye on this entire company. Nothing gets past me, and everything's going to be fine. I have my eye on this entire company. Nothing gets past me, and everything's going to be fine. One thing we cannot do, though, is raise unfounded concerns with the investors or the board. And as we both know, you have a direct line.

No, honestly, I wasn't planning to talk with my grandfather or anything. Well, that's the right call. Board members, they're not involved in the day-to-day kinds of stuff that goes on here. It's just not their responsibility. Oh, I understand. But that's not what's on my mind. I wanted to talk to you to tell you about some issues I found. Okay, Tyler?

Well, for one thing, there are some very big variations in the test results. Testing people's blood, the results are supposed to be consistently accurate, but these variations have been more than 10%, and that's way more than we claim. I don't know what you mean. We would never make that kind of claim. But we do. Oh, I don't think so. Come over here. Take a look. Schultz approaches the desk, and Holmes clicks over to the Theranos website.

As she scrolls through it, Schultz stops her. Look, right there. Coefficient of variation less than 10%. Oh, Tyler, you're not reading the fine print. Look, when you scroll down further, there. That claim refers to our vitamin D test. It's not a blanket promise. Tyler, you've got nothing to worry about. We're not breaking our promises to our partners or our customers. Now, if that's all you wanted to bring up, I'm glad we had the chance to talk, but I do have a very busy day. Holmes starts to usher Schultz to the door,

but then he stops. Liz, before I go, I just want to be clear that I'm concerned our company is exaggerating the accuracy of our technology. Tyler, I understand your concern, and frankly, that's good. It shows you care. But look, this would take me's good. It shows you care.

But look, this would take me a long time to walk you through all the intricacies of it. And I don't have the time. Talk with Daniel Young, our VP of Biomathematics. He should be able to clear things up. But look at me. Everything's going to be okay. I promise. Schultz looks like he's about to protest, but then he catches himself and nods.

Holmes smiles and takes a deep breath as Schultz exits the office. He was raising serious red flags, and with his grandfather on Theranos' board, this could have been some sort of crisis. Still, Holmes isn't convinced that this is the last you'll hear from Tyler Schultz. So from now on, she'll have to keep a careful eye on her young employee. I'm Jake Warren, and in our first season of Finding, I set out on a very personal quest

to find the woman who saved my mum's life. You can listen to Finding Natasha right now, exclusively on Wondery+. In season two, I found myself caught up in a new journey to help someone I've never even met. But a couple of years ago, I came across a social media post by a person named Loti.

It read in part, Three years ago today that I attempted to jump off this bridge, but this wasn't my time to go. A gentleman named Andy saved my life. I still haven't found him. This is a story that I came across purely by chance, but it instantly moved me and it's taken me to a place where I've had to consider some deeper issues around mental health. This is season two of Finding, and this time, if all goes to plan, we'll be finding Andy. You can listen to Finding Andy and Finding Natasha exclusively and ad-free on Wondery Plus.

Join Wondery Plus in the Wondery app, Apple Podcasts, or Spotify. It's early 2014, and Tyler Schultz is heading down a hallway at Theranos headquarters. He's on his way to a meeting with Daniel Young, the company's head of biomathematics, and the two are planning to discuss Tyler's concerns about Theranos' technology. For Schultz, there's an alarming disconnect between what he sees as an employee and what the rest of the world believes about the company. Whenever he Googles Theranos, he finds euphoric articles claiming that Theranos blood tests are cheaper,

faster, and more accurate than conventional technologies. But that's not what Schultz has found working in the lab. So he wants to get some answers, to figure out if his concerns are actually justified. Schultz reaches Young's office and gives a quick knock. Yeah, come in. Schultz enters the office, where he finds Young sitting at a computer, typing. Tyler, Elizabeth said you had some questions for me. Yes, yes I do, and thank you for making the time. I'm hoping you can explain some of the weird results I've been seeing.

Well, I can't promise that, but I'll try. Go on. Schultz takes out his notepad, which is covered in equations. Oh, I see you've done your homework, Tyler. Well, yeah, I've been looking at our test for syphilis. And when we tested samples that were known to be positive, we were only correct 65% of the time. Now, the number does go up to 80% if we run a second test,

but in our reports, we say we're 95% accurate. Oh, can I see? Schultz hands Young his notebook. Oh, yeah, okay, I see what's going on. So you have to understand that sometimes tests are inconclusive, and so those results aren't factored in. And that's the discrepancy in your calculations and the reports. Wait, so inconclusive tests are just thrown out?

So our results will look better? Young shifts in his seat, his expression remaining inscrutable. I think you're misunderstanding, Tyler. But we're claiming Theranos' tests aren't just cheaper and faster. We're also saying that they're more accurate than conventional technologies. I mean, that's what we told the Wall Street Journal. But you're saying it's not true. Tyler, that's just Elizabeth.

She does some embellishing when she's talking to reporters. And that doesn't concern you at all? Frankly, some of us don't have time to be concerned. Well, do you have the time to be concerned about the proficiency tests? We're running them using other companies' equipment. We're not even reporting results from our own technology. I'm sorry, Tyler, what's the issue? The issue is that it's illegal. It has to be.

We're running tests using other people's technology, making it seem like we're actually using Theranos' devices. Now, Tyler, that's just what we have to do right now. Proficiency tests, they require labs to compare their results to their peers. But our devices are cutting edge. We don't have any peers, so we can't use conventional methods. That doesn't make any sense. I'm sorry, but frankly, that's why you're not working on regulatory issues.

It's complicated. Now, look, I can't offer anything more, so what I think is that you should head back to your desk and focus on what you do best, engineering, biology. If you've got other concerns, though, you know where to find me. Schultz sighs as he looks away. It's no use pressing this any further, so he rises and leaves the office. A few minutes later, Schultz is back at his desk. He's supposed to keep working, but after that meeting with Young, his stomach is in knots. Young is one of the top employees at Theranos,

but he's casually dismissing a series of obvious concerns. The company's leaders are not telling the truth about the accuracy of their technology. And if they're willing to lie about something so basic, Schultz can only imagine what else they're hiding. He feels shaken. At first, he doesn't know what to do. But slowly, his head grows clear, and Schultz realizes that he has an obligation.

It's time to start talking, both to his co-workers and to people outside Theranos. It's March 31, 2014, in Palo Alto, California. Sunlight peeks through the blinds of a bedroom where everything is silent and still. But suddenly there's a ding announcing the arrival of a new email. Tyler Schultz shoots up in bed and opens his bloodshot eyes. His mouth is hot and his body aches after a long night of tossing and turning. He probably got a few hours of sleep, but that wasn't enough to shake

the feeling of panic. Schultz has raised concerns with both Daniel Young and Elizabeth Holmes, and both times he got the sense that they didn't want to hear his warnings. He's afraid that by raising red flags, he could be the next person fired at Theranos. But Schultz is even more afraid of what will happen if he does nothing. He was brought up to do the right thing. And in the case of Theranos, the right thing means protecting innocent patients from a medical technology that is not ready for the public. So Schultz escalated his campaign. He began by setting up an anonymous email account. Then he emailed a director at the New York State Department of Health. In his email, Schultz described how a

lab he works at may not have been properly assessing whether its technology actually works. He wanted to get an expert's opinion of the matter. He's been waiting for a reply. Schultz gets out of bed and sits down at his computer. When he checks his inbox, his heart skips a beat. There's a message from Stephanie Shulman, the director at the New York State Department of Health. According to Shulman, Schultz is right. The practices that he described are, in fact, a form of cheating that violates state and federal rules. Schultz has two choices. He can come forward and name the lab that he described,

or he can file an anonymous complaint with the state. Schultz's fingers hover over the keyboard. If he goes forward with either of these choices, if he names Theranos in a complaint, he could destroy the company that he works for, and he could humiliate his grandfather, who's one of Elizabeth Holmes' strongest supporters. But if Schultz does nothing, the consequences could be dire for countless people across the country. That's something he can't let happen. So Schultz begins typing.

He will file a complaint, and he will blow the whistle on Theranos. From Wondery, this is Episode 2 of Theranos from American Skin. two of Theranos from American Skin. On the next episode, news of fraud and corruption inside Theranos reaches an investigative reporter at the Wall Street Journal. With the press closing in, Elizabeth Holmes does everything

she can to keep the facts from leaking out. If you're enjoying American Scandal, you can unlock exclusive seasons on Wondery Plus. Binge new seasons first and listen completely ad-free when you join Wondery Plus in the Wondery app, Apple Podcasts, or Spotify. And before you go, tell us about yourself by filling out a survey at wondery.com slash survey.

If you'd like to learn more about Theranos, we recommend the book Bad Blood, Secrets and Lies in a Silicon Valley Startup by John Carreyrou. A quick note about our reenactments. In most cases, we can't know exactly what was said, but all our dramatizations are based on historical research. American Scandal is hosted, edited, and executive produced by me, Lindsey Graham, for Airship. Audio editing by Molly Bach. Sound design by Derek Behrens. This episode is written by Samantha Charlotte, edited by Christina Malsberg. Our senior producer is Gabe Riven.

Executive producers are Stephanie Jens, Jenny Lauer-Beckman, and Hernán López for OneTree.