The blood testing startup Theranos was once valued at $9 billion, but when it came to light that its revolutionary technology was a lie hidden from most all who worked there, the jig was up. It came down to Erika Cheung and Tyler Shultz, two former Theranos employees turned whistleblowers, to speak up about the fraud perpetrated by the company. Its chief executive officer (CEO) Elizabeth Holmes went from being touted as the youngest self-made billionaire to criminal, along with former chief operating officer (COO) Ramesh “Sunny” Balwani. Holmes is now facing up to 20 years in prison and potentially millions in fines and restitution.
This article is going to illuminate how Cheung and Shultz contributed to Theranos’ crumbling facade, and the effects they experienced. Both were enamored with Holmes’ vision for the company and its technology, along with a long list of influential investors who lost millions in the process. These included the likes of Henry Kissinger, George Shultz (Tyler’s grandfather), Betsy DeVos and a slew of others who believed in Elizabeth’s tall tale of revolutionising blood sample testing.
Erika Cheung worked at Theranos for six months in the mid-2010s. A lab assistant for the company, she was pulled in by Holmes’ charisma and success in the industry. Unfortunately, she quickly realised that Theranos’ Edison device, which was supposed to test for various medical conditions from a small sample of only a few drops of blood, did not work as advertised.
Cheung first realised practices at Theranos were not up to snuff when she witnessed data outliers from the blood testing results were being deleted. This was done to ensure that the tech passed quality-control tests, despite being utterly inaccurate. Erika revealed that of the approx. 90 blood tests offered by Theranos, only a few could be processed. She also used her own blood to test on the company’s machines. The results indicated a vitamin D deficiency which was not corroborated using traditional methods of blood sample analysis.
Erika left the company when she understood she could not in good conscience support its use of fraudulent technology. In 2015 she sent a letter to the Center for Medicare & Medicaid Services detailing the problems she witnessed at the company. Her disclosure led to a surprise inspection by the agency, culminating in the company shutting its laboratories down. Cheung testified to all this in the 2018 trial which led to Holmes’ conviction.
Similar to Erika Cheung, Tyler Shultz was dazzled by Elizabeth Holmes’ vision. The two met through his grandfather, who ended up investing in and eventually joining the Theranos board. The younger Shultz started working at the company in 2013, immediately struck by the contrast of what Holmes told investors and the reality. At Theranos Tyler encountered a culture of secrecy and low morale, stone-walling and locked doors.
Schultz described what was going on at the company as a scheme to keep the scientists unaware of what really went on in the labs. What he witnessed corroborates Erika Cheung’s account of data mismanagement. They called it the ‘repeat and delete’ methodology, which is not a valid method of scientific inquiry. If it were, anyone could cherry-pick the precise data points they are fond of and repeat experiments until they achieve the desired result. Tyler’s manager Aruna Ayer, who was not satisfied with the situation either, acknowledged that this is not how science is supposed to work.
In 2014 Shultz revealed to the New York State Department of Health Theranos’ dodgy testing procedures. Sadly he never heard back despite eventually giving them the company’s name. Then, in 2015 while working with his former Theranos manager Aruna Ayer, Tyler became aware of John Carreyrou from the Wall Street Journal and his interest in the company. About a month after the two talked, Tyler’s grandfather George Shultz (by then a member of the Theranos board) expressed that he wanted to speak with his grandson about his conversations with the press.
When the younger Shultz agreed to the meeting, with the stipulation no lawyers would be present, he was ambushed by precisely that. They handed him an application for a temporary restraining order, a notice to appear in court and a letter alleging that he had leaked Theranos trade secrets. The elder Shultz blamed the lawyers on Holmes and maintained he did not agree with how they treated his grandson. Still, he continued to support Elizabeth, believing in the technology.
After Carreyrou published the story, it was over for Theranos. What becomes apparent is that it took both Erika and Tyler speaking up on separate occasions, several times, and to different levels of authority to truly expose the company. Tyler expressed his concerns internally too, but could not effect change until the story hit the newspapers. Thankfully, Erika Cheung’s complaint to the Centers for Medicare & Medicaid Services triggered the surprise inspection, coinciding with Carreyrou’s publication.
A last significant point is that Tyler Shultz did not even realise he was a whistleblower until the newspapers called him one. Had he conceived of the situation differently, his approach may have been more systematic, allowing the authorities to intervene earlier. However, this can serve as a learning opportunity for future whistleblowers who find themselves in a similar position.
Griffith E (2021) Theranos whistleblower testifies she was alarmed by company’s blood tests. The Irish Times, 15 September. Available at: https://www.irishtimes.com/business/health-pharma/theranos-whistleblower-testifies-she-was-alarmed-by-company-s-blood-tests-1.4674626
Primeaux E (2019) Whistleblower helped dismantle biotech juggernaut Theranos in his 'zero-strategy' defense. Fraud Magazine, September/October. Available at: https://www.fraud-magazine.com/cover-article.aspx?id=4295006794