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Interesting BooksBad Blood by John Carreyou

Elizabeth Anne Holmes knew she wanted to be a successful entrepreneur from a young Age. When she was 9 or 10, one of her relatives asked her at a family gathering, “What do you want to do when you grow up ?” Without skipping a beat, she replied, “I want to be a billionaire.” A relative asked “Wouldn’t you rather be president ?” She replied “No, the president would marry me because I’ll have a billion dollars.”

Elizabeth’s ambition was nurtured by her parents. Both had high exceptions for their daughter rooted in a distinguished family history. They schooled her not just on the outsized success of its older generations but also in the failings of its younger ones who lived large but flawed lives, cycling through marriages and struggling with alcoholism, and squandered the family fortune.

The afternoons were whiled away playing Monopoly with the cousins. When Elizabeth was ahead, which was most of the time, she would insist on playing on to the bitter end, piling on the houses and hotels for as long as it took for David and Christian to go broke. When she occasionally lost, she stormed off in a fury and, more than once, ran right through the screen of the condos front door. It was an early glimpse of her intense competitive streak.

During her sophomore year, she threw herself into her schoolwork, often staying up late at night to study, and became a straight-A student. It was the start of a lifelong pattern: work hard and sleep little. As she excelled academically, she also managed to find her footing socially and dated the son of a respected Houston orthopaedic surgeon.

As college drew closer, Elizabeth set her sights on Stanford. The internet boom was in full swing then and some of its biggest stars, like Yahoo, had been founded on the Stanford campus. In Elizabeths senior year, two Stanford Ph.D. students were beginning to attract attention with another little startup called Google.Elizabeth already knew Stanford well. Her family had lived in Woodside, California, a few miles from the Stanford campus, for several years in the late 1980s and early 1990s.

Elizabeth had another connection to Stanford: Chinese. Her father had traveled to China a lot for work and decided his children should learn Mandarin, so he and Noel had arranged for a tutor to come to the house in Houston on Saturday mornings. Midway through high school, Elizabeth talked her way into Stanfords summer Mandarin program.

ELIZABETH WAS ACCEPTED to Stanford in the spring of 2002 as a Presidents Scholar, a distinction bestowed on top students that came with a three-thousand-dollar grant she could use to pursue any intellectual interest of her choosing.

Her father had drilled into her the notion that she should live a purposeful life. During his career in public service, Chris Holmes had overseen humanitarian efforts like the 1980 Mariel boatlift, in which more than one hundred thousand Cubans and Haitians migrated to the United States. There were pictures around the house of him providing disaster relief in war-torn countries. The message Elizabeth took away from them is that if she wanted to truly leave her mark on the world, she would need to accomplish something that furthered the greater good, not just become rich. Biotechnology offered the prospect of achieving both. She chose to study chemical engineering, a field that provided a natural gateway to the industry.

The face of Stanfords chemical engineering department was Channing Robertson. Elizabeth took Robertsons Introduction to Chemical Engineering class and a seminar he taught on controlled drug-delivery devices. She also lobbied him to let her help out in his research lab. Robertson agreed and farmed her out to a Ph.D. student who was working on a project to find the best enzymes to put in laundry detergent.

She’d only been in college for a few months, but she was already entertaining thoughts of dropping out. During Christmas dinner, her father floated a paper airplane toward her end of the table with the letters P.H.D. written on its wings. Elizabeth’s response was blunt, according to a family member in attendance: No, Dad, I’m not interested in getting a Ph.D., I want to make money.

That spring, she showed up one day at the door of Batson’s dorm room and told him she couldn’t see him anymore because she was starting a company and would have to devote all her time to it. Batson, who had never been dumped before, was stunned but remembers that the unusual reason she gave took some of the sting out of the rejection.

Elizabeth didn’t actually drop out of Stanford until the following fall after returning from a summer internship at the Genome Institute of Singapore. Asia had been ravaged earlier in 2003 by the spread of a previously unknown illness called severe acute respiratory syndrome, or SARS, and Elizabeth had spent the summer testing patient specimens obtained with old low-tech methods like syringes and nasal swabs. The experience left her convinced there must be a better way.

When she got back home to Houston, she sat down at her computer for five straight days, sleeping one or two hours a night and eating from trays of food her mother brought her. Drawing from new technologies she had learned about during her internship and in Robertson’s classes, she wrote a patent application for an arm patch that would simultaneously diagnose medical conditions and treat them.

She showed Robertson and Shaunak Roy, the Ph.D. student she was assisting in his lab, her proposed patent. In court testimony years later, Robertson recalled being impressed by her inventiveness: She had somehow been able to take and synthesise these pieces of science and engineering and technology in ways that I had never thought of. He was also struck by how motivated and determined she was to see her idea through. Shaunak was more skeptical. Raised by Indian immigrant parents in Chicago, far from the razzle-dazzle of Silicon Valley, he considered himself very pragmatic and grounded. Elizabeths concept seemed to him a bit far-fetched. But he got swept up in Robertsons enthusiasm and in the notion of launching a startup.

AT FIRST, Elizabeth and Shaunak holed up in a tiny office in Burlingame for a few months until they found a bigger space. The place was far from glamorous and shootings remained frequent. One morning, Elizabeth showed up at work with shards of glass in her hair. Someone had shot at her car and shattered the drivers-side window, missing her head by inches. Elizabeth incorporated the company as Real-Time Cures, which an unfortunate typo turned into Real-Time Curses on early employees paychecks. She later changed the name to Theranos, a combination of the words “therapy” and “diagnosis.”

To raise the money she needed, she leveraged her family connections. She convinced Tim Draper, the father of her childhood friend and former neighbor Jesse Draper, to invest $1 million. The Draper name carried a lot of weight and helped give Elizabeth some credibility: Tims grandfather had founded Silicon Valleys first venture capital firm in the late 1950s, and Tims own firm, DFJ, was known for lucrative early investments in companies like the web-based email service Hotmail. Another family connection she tapped for a large investment, the retired corporate turnaround specialist Victor Palmieri, was a longtime friend of her fathers. The two had met in the late 1970s during the Carter administration when Chris Holmes worked at the State Department and Palmieri served as its ambassador at large for refugee affairs.

Elizabeth impressed Draper and Palmieri with her bubbly energy and her vision of applying principles of nano-and microtechnology to the field of diagnostics. In a twenty-six-page document she used to recruit investors, she described an adhesive patch that would draw blood painlessly through the skin using microneedles. The TheraPatch, as the document called it, would contain a microchip sensing system that would analyze the blood and make a process control decision about how much of a drug to deliver. It would also communicate its readings wirelessly to a patients doctor. The document included a colored diagram of the patch and its various components.

Not everyone bought the pitch. Elizabeth met with MedVenture Associates, a venture capital firm that specialized in medical technology investments. Sitting across a conference room table from the firms five partners, she spoke quickly and in grand terms about the potential her technology had to change mankind. But when the MedVenture partners asked for more specifics about her microchip system and how it would differ from one that had already been developed and commercialized by a company called Abaxis, she got visibly flustered and the meeting grew tense. Unable to answer the partners probing technical questions, she got up after about an hour and left in a huff.

MedVenture Associates wasn’t the only venture capital firm to turn down the nineteen-year-old college dropout. But that didn’t stop Elizabeth from raising a total of nearly $6 million by the end of 2004 from a grab bag of investors. In addition to Draper and Palmieri, she secured investments from an aging venture capitalist named John Bryan and from Stephen L. Feinberg, a real estate and private equity investor who was on the board of Houstons MD Anderson Cancer Center. She also persuaded a fellow Stanford student named Michael Chang, whose family controlled a multibillion-dollar distributor of high-tech devices in Taiwan, to invest. Several members of the extended Holmes family, including Noel Holmes sister, Elizabeth Dietz, chipped in too.

As the money flowed in, it became apparent to Shaunak that a little patch that could do all the things Elizabeth wanted it to do bordered on science fiction. It might be theoretically possible, just like manned flights to Mars were theoretically possible. But the devil was in the details. In an attempt to make the patch concept more feasible, they pared it down to just the diagnostic part, but even that was incredibly challenging.

Elizabeth wanted the Theranos device to be portable like those glucose monitors, but she wanted it to measure many more substances in the blood than just sugar, which would make it a lot more complex and therefore bulkier.

The compromise was a cartridge-and-reader system that blended the fields of microfluidics and biochemistry. The patient would prick her finger to draw a small sample of blood and place it in a cartridge that looked like a thick credit card. The cartridge would slot into a bigger machine called a reader. Pumps inside the reader would push the blood through tiny channels in the cartridge and into little wells coated with proteins known as antibodies. On its way to the wells, a filter would separate the bloods solid elements, its red and white blood cells, from the plasma and let only the plasma through. When the plasma came into contact with the antibodies, a chemical reaction would produce a signal that would be read by the reader and translated into a result.

Elizabeth envisioned placing the cartridges and readers in patients homes so that they could test their blood regularly. A cellular antenna on the reader would send the test results to the computer of a patients doctor by way of a central server. This would allow the doctor to make adjustments to the patients medication quickly, rather than waiting for the patient to go get his blood tested at a blood-draw center or during his next office visit.

By late 2005, eighteen months after he’d come on board, Shaunak was beginning to feel like they were making progress. The company had a prototype, dubbed the Theranos 1.0, and had grown to two dozen employees. It also had a business model it hoped would quickly generate revenues: it planned to license its blood-testing technology to pharmaceutical companies to help them catch adverse drug reactions during clinical trials.

Edmond, who went by Ed, felt himself drawn in by the young woman sitting across from him who was staring at him intently without blinking. The mission she was describing was admirable, he thought. Elizabeth described a world in which drugs would be minutely tailored to individuals thanks to Theranos blood-monitoring technology. To illustrate her point, she cited Celebrex, a painkiller that was under a cloud because it was thought to increase the risk of heart attacks and strokes. There was talk that its maker, Pfizer, would have to pull it from the market. With the Theranos system, Celebrexs side effects could be eliminated, allowing millions of arthritis sufferers to keep taking the drug to alleviate their aches and pains, she explained. Elizabeth cited the fact that an estimated one hundred thousand Americans died each year from adverse drug reactions. Theranos would eliminate all those deaths, she said. It would quite literally save lives.

Ed was a quiet engineer who had gained a reputation in the Valley as a fix-it man. Tech startups stymied by a complex engineering problem called him and, more often than not, he found a solution. It didn’t take Ed long to realize that Theranos was the toughest engineering challenge he’d ever tackled. His experience was in electronics, not medical devices. And the prototype he’d inherited didn’t really work. It was more like a mock-up of what Elizabeth had in mind. He had to turn the mock-up into a functioning device. The main difficulty stemmed from Elizabeth’s insistence that they use very little blood.

Her obsession with miniaturization extended to the cartridge. She wanted it to fit in the palm of a hand, further complicating Ed’s task. He and his team spent months reengineering it, but they never reached a point where they could reliably reproduce the same test results from the same blood samples. The quantity of blood they were allowed to work with was so small that it had to be diluted with a saline solution to create more volume. That made what would otherwise have been relatively routine chemistry work a lot more challenging. Adding another level of complexity, blood and saline weren’t the only fluids that had to flow through the cartridge. The reactions that occurred when the blood reached the little wells required chemicals known as reagents. Those were stored in separate chambers. All these fluids needed to flow through the cartridge in a meticulously choreographed sequence, so the cartridge contained little valves that opened and shut at precise intervals.Ed and his engineers tinkered with the design and the timing of the valves and the speed at which the various fluids were pumped through the cartridge. Another problem was preventing all those fluids from leaking and contaminating one another. They tried changing the shape, length, and orientation of the tiny channels in the cartridge to minimize the contamination. They ran countless tests with food coloring to see where the different colors went and where the contamination occurred.

Each cartridge cost upward of two hundred dollars to make and could only be used once. They were testing hundreds of them a week. Elizabeth had purchased a $2 million automated packaging line in anticipation of the day they could start shipping them, but that day seemed far off. Having already blown through its first $6 million, Theranos had raised another $9 million in a second funding round to replenish its coffers.

The chemistry work was handled by a separate group made up of biochemists. The collaboration between that group and Ed’s group was far from optimal. Both reported up to Elizabeth but weren’t encouraged to communicate with each other. Elizabeth liked to keep information compartmentalised so that only she had the full picture of the system’s development. As a result, Ed wasn’t sure if the problems they were encountering were due to the microfluidics he was responsible for or the chemistry work he had nothing to do with. He knew one thing, though: they’d have a much better chance of success if Elizabeth allowed them to use more blood. But she wouldn’t hear of it.

ED WAS WORKING late one evening when Elizabeth came by his workspace. She was frustrated with the pace of their progress and wanted to run the engineering department twenty-four hours a day, seven days a week, to accelerate development. Ed thought that was a terrible idea. His team was working long hours as it was. He had noticed that employee turnover at the company was already high and that it wasn’t confined to the rank and file. Top executives didn’t seem to last long either. Henry Mosley, the chief financial officer, had disappeared one day. There was a rumor circulating around the office that head been caught embezzling funds. No one knew if there was any truth to it because his departure, like all the others, wasn’t announced or explained. It made for an unnerving work environment: a colleague might be there one day and gone the next and you had no idea why. Ed pushed back against Elizabeth proposal. Even if he instituted shifts, a round-the-clock schedule would make his engineers burn out, he told her. “I don’t care. We can change people in and out” she responded. The company is all that matters.”

Ed didn’t think she meant it to sound as callous as it did. But she was so laser focused on achieving her goals that she seemed oblivious to the practical implications of her decisions. Ed had noticed a quote on her desk cut out from a recent press article about Theranos. It was from Channing Robertson, the Stanford professor who was on the company’s board. The quote read, “You start to realize you are looking in the eyes of another Bill Gates, or Steve Jobs.” She slept four hours a night and popped chocolate-coated coffee beans throughout the day to inject herself with caffeine. He tried to tell her to get more sleep and to live a healthier lifestyle, but she brushed him off.

It was hard to know how much Elizabeth’s approach to running Theranos was her own and how much she was channeling Ellison, Lucas, or Sunny, but one thing was clear: she wasn’t happy when Ed refused to make his engineering group run 24/7. From that moment on, their relationship cooled. Before long, Ed noticed that Elizabeth was making new engineering hires, but she wasn’t having them report to him. They formed a separate group. A rival group. It dawned on him that she was pitting his engineering team and the new team against each other in some corporate version of survival of the fittest.

Elizabeth had convinced Pfizer to try out the Theranos system in a pilot project in Tennessee. Under the agreement, Theranos 1.0 units were going to be placed in people’s homes and patients were going to test their blood with them every day. The results would be sent wirelessly to Theranos’s office in California, where they would be analyzed and then forwarded to Pfizer. They had to somehow fix all the problems before the study started. She’d already scheduled a trip to Tennessee to begin training some of the patients and doctors in how to use the system.

In early August 2007, Ed accompanied Elizabeth to Nashville. Sunny picked them up from the office in his Porsche and drove them to the airport. It was the first time Ed met him in person. The extent of their age gap suddenly became apparent. Sunny looked to be in his early forties, nearly twenty years older than Elizabeth. There was also a cold, businesslike dynamic to their relationship. When they parted at the airport, Sunny didn’t say Goodbye or Have a nice trip. Instead, he barked, Now go make some money!

When they got to Tennessee, the cartridges and the readers they’d brought weren’t functioning properly, so Ed had to spend the night disassembling and reassembling them on his bed in his hotel room. He managed to get them working well enough by morning that they were able to draw blood samples from two patients and a half dozen doctors and nurses at a local oncology clinic. The patients looked very sick. Ed learned that they were dying of cancer. They were taking drugs designed to slow the growth of their tumors, which might buy them a few more months to live. On their return to California, Elizabeth pronounced the trip a success and sent one of her cheerful emails to the staff. Ed didn’t feel as upbeat. Using the Theranos 1.0 in a patient study seemed premature, especially now that he knew the study involved terminal cancer patients.

TO BLOW OFF STEAM, Ed went out for beers with Shaunak on Friday evenings at a raucous sports bar called the Old Pro in Palo Alto. Often, Gary Frenzel, the head of the chemistry team, would join them. Then one day, Gary stopped coming to the Old Pro. Ed and Shaunak weren’t sure why at first but they soon had their answer. Michael Esquivel was a fast-talking lawyer hired by Theranos to sue three former employees for stealing its intellectual property. Their names were Michael O’Connell, Chris Todd, and John Howard. Howard had overseen all research and development and interviewed Ed before he was hired. Todd was Ed’s predecessor and had led the design of the 1.0 prototype. Theranos had contacted FBI to assist them in the case. Ed figured out that Gary was probably freaked out by these events as he was good friends with Chris Todd, Ed’s predecessor. Gary had worked with Todd for five years at two previous companies before following him to Theranos. After Todd had left Theranos in July 2006, he and Gary had remained in frequent contact, talking often on the phone and exchanging emails. Elizabeth and Esquivel must have found out and read Gary the riot act.

O’Connell, who had a postdoctorate in nanotechnology from Stanford, thought he had solved the microfluidic problems that hampered the Theranos system and had talked Todd into forming a company with him. They’d called it Avidnostics. O’Connell also held discussions with Howard, who’d provided some help and advice but declined to join their venture. Avidnostics was very similar to Theranos, except they planned on marketing their machine to veterinarians on the theory that regulatory approvals would be easier to obtain for a device that performed blood tests on animals rather than humans.

They’d pitched a few VCs, unsuccessfully, at which point O’Connell had lost patience and emailed Elizabeth to ask her if she wanted to license their technology which was a big mistake. Elizabeth had always worried about proprietary company information leaking out, to an extent that sometimes felt overblown. She required not just employees to sign nondisclosure agreements, but anyone else who entered Theranos’s offices or did business with it. Even within the company, she kept tight control over the flow of information. In the ensuing weeks and months, the atmosphere at the office became oppressive. Document retention emails landed in employee’s inboxes with regularity and Theranos went into lockdown. The head of IT, a computer technician named Matt Bissel, deployed security features that made everyone feel under surveillance. You couldn’t put a USB drive into an office computer without Bissel knowing about it. One employee got caught doing just that and was fired.

The new group competing with Ed’s was headed by Tony Nugent. Tony was a gruff, no-nonsense Irishman who’d spent eleven years at Logitech, the maker of computer accessories, followed by a stint at a company called Cholestech that made a simpler version of what Theranos was trying to build. Its handheld product, the Cholestech LDX, could perform three cholesterol tests and a glucose test on small samples of blood drawn from a finger.

Tony decided that part of the Theranos value proposition should be to automate all the steps that bench chemists followed when they tested blood in a laboratory. In order to automate, Tony needed a robot. But he didn’t want to waste time building one from scratch, so he ordered a three-thousand-dollar glue-dispensing robot from a company in New Jersey called Fisnar. It became the heart of the new Theranos system. The Fisnar robot was a pretty rudimentary piece of machinery. It was a mechanical arm fixed to a gantry that had three degrees of motion: right and left; forward and back; and up and down. Tony fastened a pipette— a slender translucent tube used to transfer or measure out small quantities of liquid to the robot and programmed it to make the movements that a chemist would make in the lab. With the help of another recently hired engineer named Dave Nelson, he eventually built a smaller version of the glue robot that fit inside an aluminum box a little wider and a little shorter than a desktop computer tower. Tony and Dave borrowed some components from the 1.0, like the electronics and the software, and added them to their box, which became the new reader.

With the help of another recently hired engineer named Dave Nelson, he eventually built a smaller version of the glue robot that fit inside an aluminum box a little wider and a little shorter than a desktop computer tower. Tony and Dave borrowed some components from the 1.0, like the electronics and the software, and added them to their box, which became the new reader. The new cartridge was a tray containing little plastic tubes and two pipette tips. Like its microfluidic predecessor, it could only be used once. You placed the blood sample in one of the tubes and pushed the cartridge into the reader through a little door that swung upward. The reader’s robotic arm then went to work, replicating the human chemist’s steps.

First, it grabbed one of the two pipette tips and used it to aspirate the blood and mix it with diluents contained in the cartridge’s other tubes. Then it grabbed the other pipette tip and aspirated the diluted blood with it. This second tip was coated with antibodies, which attached themselves to the molecule of interest, creating a microscopic sandwich.The robot’s last step was to aspirate reagents from yet another tube in the cartridge. When the reagents came into contact with the microscopic sandwiches, a chemical reaction occurred that emitted a light signal. An instrument inside the reader called a photomultiplier tube then translated the light signal into an electrical current.

The molecule’s concentration in the blood—what the test sought to measure—could be inferred from the power of the electrical current, which was proportional to the intensity of the light.

This blood-testing technique was known as a chemiluminescent immunoassay. The technique was not new: it had been pioneered in the early 1980s by a professor at Cardiff University. But Tony had automated it inside a machine that, though bigger than the toaster-size Theranos 1.0, was still small enough to make Elizabeth’s vision of placing it in patients homes possible. And it only required about 50 microliters of blood. That was more than the 10 microliters Elizabeth initially insisted upon, but it still amounted to just a drop. By September 2007, four months after he’d started building it, Tony had a functioning prototype. One that performed far more reliably than the balky system Ed Ku was still laboring on in another part of the office.

Tony asked Elizabeth what she wanted to call it. We tried everything else and it failed, so let’s call it the Edison she said.

The decision to abandon the microfluidic system in favor of the Edison was ironic given that Theranos had just filed a lawsuit to protect the intellectual property underpinning the former. It was also bad news for Ed Ku. One morning a few weeks before Thanksgiving, Ed and his engineers were called into a conference room one after the other. When it was Ed’s turn, Tony, a human resources manager named Tara Lencioni, and the lawyer Michael Esquivel informed him that he was being let go. The company was heading in a new direction and it didn’t involve what he was working on, they said. Ed would have to sign a new nondisclosure and nondisparagement agreement if he wanted to get his severance. Lencioni and Esquivel walked him to his workspace to retrieve a few personal belongings and then escorted him out of the building.

The Edison was at its core a converted glue robot and that was a pretty big step down from the lofty vision Elizabeth had originally sold to investors and engineers. Theranos’s product might no longer be the groundbreaking, futuristic technology she’d envisioned, but Elizabeth remained as committed as ever to her company. In fact, she was so excited about the Edison that she started taking it out of the office almost immediately to show it off.

For a young entrepreneur building a business in the heart of Silicon Valley, it was hard to escape the shadow of Steve Jobs. To anyone who spent time with Elizabeth, it was clear that she worshipped Jobs and Apple. She liked to call Theranos’s blood-testing system “the iPod of health care” and predicted that, like Apple’s ubiquitous products, it would someday be in every household in the country. From that point on, she came to work in a black turtleneck and black slacks most days.

Elizabeth wanted a software touchscreen similar to the iPhone’s and a sleek outer case for the machine. The case, she decreed, should have two colors separated by a diagonal cut, like the original iMac. But unlike that first iMac, it couldn’t be translucent. It had to hide the robotic arm and the rest of the Edison’s innards. She’d contracted out the case’s design to Yves Behar, the Swiss-born industrial designer whose reputation in the Valley was second only to Apple’ Jony Ive. Behar came up with an elegant black-and-white design that proved difficult to build. Tony Nugent and Dave Nelson spent countless hours molding sheet metal in an attempt to get it right.

Having an idealistic boss wasn’t a bad thing, but there were other aspects of working at Theranos that were less pleasant. One of them was having to do daily battle with Matt Bissel, the head of IT, and his sidekick, Nathan Lortz. Bissel and Lortz had the company’s computer network set up in such a way that information was split into silos, hampering communication between employees and departments. You couldn’t even exchange instant messages with a coworker. The chat ports were blocked. It was all in the name of protecting proprietary information and trade secrets, but the end result was hours of lost productivity.

The situation got so frustrating that Justin stayed up late one night and wrote a long email screed to Ana about it—“We have lost sight of our business objective. Did this company set out to put a bunch of people in a room and prevent them from doing illegal things, or did it set out to do something amazing with the best people, as quickly as possible he fumed.” Justin and Mike also got the distinct impression that Bissel and Lortz were spying on them and reporting their findings back to Elizabeth. The IT team always wanted to know what programs they were running on their computers and at times turned suspiciously friendly in what felt like transparent attempts to elicit seditious gossip.

The snooping wasn’t confined to the IT guys. Elizabeth’s administrative assistants would friend employees on Facebook and tell her what they were posting there. One of the assistants kept track of when employees arrived and when they left so that Elizabeth knew exactly how many hours everyone put in. To entice people into working longer days, she had dinner catered every evening. The food often didn’t arrive until eight or eight thirty, which meant that the earliest you got out of the office was ten. The strange atmosphere got even stranger when the Theranos board convened once a quarter. Employees were instructed to appear busy and not to make eye contact with the board members when they walked through the office. In case they hadn’t noticed yet, people were constantly getting fired at Theranos, Aaron told them. Ana and Justin had definitely noticed. The Ed Ku layoffs had just taken place. In addition to Ed, twenty other people had lost their jobs. It happened so fast that Ed had left a bunch of work tools behind, including a nice set of X-Acto precision cutting knives that Justin had fished out of a wastebasket and claimed as his own.

Aaron mentioned that he was also troubled by the study with cancer patients in Tennessee. They’d never gotten the microfluidic system anywhere close to working properly and certainly not well enough to use on live patients, and yet Elizabeth had pushed ahead with the study. The shift to the new machine Tony built was an improvement, but Aaron felt they still didnt have a good read on its performance.

The engineering and chemistry groups weren’t communicating. Each was running tests on the parts of the system it was responsible for, but no one was conducting overall system tests. Ana listened with rising unease. She’d assumed Theranos had perfected its blood-testing technology if it was going to be used on patients. Now Aaron was telling her it was still very much a work in progress. Ana knew the Tennessee study involved people dying of cancer. It bothered her to think they might be used as guinea pigs to test a faulty medical device. What Ana and Aaron didn’t know and what might have allayed their concerns somewhat is that the test results Theranos generated from the cancer patients blood would not be used to make any changes to their treatments. They were to be used only for research purposes, to help Pfizer assess the effectiveness of Theranos technology. But that was never clear to most Theranos employees because Elizabeth never explained the terms of the study.

AVIE WAS ONE of Steve Jobs’s oldest and closest friends. They’d worked together at NeXT, the software company Jobs created after being ousted from Apple in the mid-1980s. When Jobs returned to Apple in 1997 he’d brought Avie over with him and made him the head of software engineering. A grueling decade later, Avie had called it quits. He’d made more money than he knew what to do with and wanted to enjoy more time with his wife and two kids. A few months into his retirement, a headhunter recruiting new directors for Theranos had approached him. Like Ana, Avie’s first meeting with Elizabeth had been at Coupa Cafe. She’d come across as a bright young lady who was passionate about what she was doing, exactly the qualities you looked for in an entrepreneur. Her eyes had lit up when he volunteered some pieces of management wisdom he’d learned at Apple. His long association with Jobs seemed an object of fascination to her. After their encounter, Avie had agreed to join the Theranos board and bought $1.5 million of company stock in its late 2006 offering.

The first couple of board meetings Avie attended had been relatively uneventful, but, by the third one, he’d begun to notice a pattern. Elizabeth would present increasingly rosy revenue projections based on the deals she said Theranos was negotiating with pharmaceutical companies, but the revenues wouldn’t materialize. It didn’t help that Henry Mosley, the chief financial officer, had been fired soon after Avie became a director. At the last board meeting he’d attended, Avie had asked more pointed questions about the pharmaceutical deals and been told they were held up in legal review. When he’d asked to see the contracts, Elizabeth had said she didn’t have any copies readily available.

There were also repeated delays with the product’s rollout and the explanation for what needed to be fixed kept changing. Avie didn’t pretend to understand the science of blood testing; his expertise was software. But if the Theranos system was in the final stages of fine-tuning as he’d been told, how could a completely different technical issue be the new holdup every quarter? That didn’t sound to him like a product that was on the cusp of commercialization.

In late October 2007, he attended a meeting of the board’s compensation committee. Don Lucas, the board’s chairman, told the committee members that Elizabeth planned to create a foundation for tax-planning purposes and wanted the committee to approve a special grant of stock to it. Avie didn’t think it was good corporate governance to do what Elizabeth wanted. Since she would control the foundation, she would also control the voting rights associated with the new stock, which would increase her overall voting stake. Avie didn’t think it was in other shareholder’s interest to give the founder more power. So he objected.

Two weeks later, he received a call from Don asking if they could meet. Avie drove to the old mangers office on Sand Hill Road. Elizabeth was really upset, Don informed him when he got there. She felt he was behaving unpleasantly during ‘board meetings and didn’t think he should be on the board anymore. Don asked if he wanted to resign. When he got back to his house in Palo Alto, he decided to go back and look at all the documents he’d been given over the previous year as a board member, including the investment materials he’d received before he bought his shares. As he read them over, he realized that everything about the company had changed in the space of a year, including Elizabeth’s entire executive team.

DON LUCAS DIDN’T USE EMAIL. He’d seen his share of litigation over the years, including a wave of class-action lawsuits targeting Oracle in the early 1990s, and didn’t like the idea of leaving behind an electronic paper trail that might one day be used against him in court. If Avie wanted Don to see what he’d found, he’d have to show it to him in person. He reached out to Don’s two assistants and set up another meeting. Elizabeth needed the board to waive the company’s rights to repurchase the stock. Avie didn’t think that was a good idea but told Don to have the board vote the motion without him since he was resigning. “One more thing, Avie” Don said. “I need you to waive your own rights to buy the shares.”

When the documents arrived, Avie read them carefully and concluded that, once the company itself waived its rights to repurchase Shaunak’s shares, it was entirely within his and other shareholders rights to buy some of them.He also noticed that Elizabeth had negotiated a sweetheart deal: Shaunak was willing to part with his 1.13 million shares for $565,000. That translated to 50 cents a share, an 82 percent discount to what he and other investors had paid more than a year earlier in Theranos’s last funding round. Some discount was warranted because Avie’s shares were preferred shares with higher claims on the company’s assets and earnings while Shaunak’s shares were common ones, but a discount that big was unheard of.

Avie decided to exercise his rights and told Esquivel he wanted to acquire the pro-rata portion of Shaunak’s stock he was entitled to. The request did not go down well. A tense email exchange ensued between the two men that stretched into the Christmas holiday. At 11:17 p.m. on Christmas Eve, Esquivel sent Avie an email accusing him of acting in “bad faith” and warned him that Theranos was giving serious consideration to suing him for breach of his fiduciary duties as a board member and for public disparagement of the company. Avie was astonished. Not only had he done no such things, in all his years in Silicon Valley he had never come close to being threatened with a lawsuit. All over the Valley, he was known as a nice guy. A teddy bear. He didn’t have any enemies. What was going on here? He tried getting in touch with other members of the board, but none would respond to his calls.

Unsure what to do, Avie consulted a friend who was a lawyer. Thanks to his Apple wealth, his personal balance sheet was bigger than Theranos’s, so the prospect of costly litigation didn’t really scare him. But after he filled his friend in on everything that had happened, the friend asked a question that helped him put the situation in perspective: “Given everything you now know about this company, do you really want to own more of it?” When Avie thought about it, the answer was no. Besides, it was the season of giving and rejoicing. He decided to let the matter rest and to put Theranos behind. But before doing so, he wrote a parting letter to Don and emailed it to his assistants, along with a copy of the waiver the company had pressured him to sign. The brutal tactics used to get him to sign the waiver, he wrote, had confirmed “some of the worse concerns” he’d raised with Don about the way the company was being run.

Appearances in the Valley are paramount and for three years Theranos had been operating on the wrong side of the tracks. The tracks in this case were Route 101, otherwise known as the Bayshore Freeway. It separates Palo Alto, one of the most affluent towns in America, from its poorer sibling East Palo Alto, which once held the dubious distinction of being the country’s murder capital.

The move was not fun for the person who had to make it happen, however. That job fell to Matt Bissel, the head of IT. Bissel was one of Elizabeth’s most trusted lieutenants. He’d joined Theranos in 2005 as employee number 17 and took his duties seriously. In addition to being responsible for the company’s IT infrastructure, his role also included security. He was the one who’d done the forensic analysis of the computer evidence for the Michael O’Connell lawsuit.

But at four that afternoon, Matt got pulled into a conference room with Michael Esquivel and Gary Frenzel. Elizabeth was conferenced in by phone from Switzerland, where she was conducting a second demonstration for Novartis some fourteen months after the faked one that had led to Henry Mosley’s departure. She’d just learned that the landlord would charge them rent for the month of February if they didn’t clear the premises by midnight. There was no way she was going to let that happen, she said. Unionized moving companies were all mob controlled, the person said. What Theranos was proposing to do risked devolving into violence.

Matt and Gary tried to reason with her by citing other obstacles. Gary raised the issue of their stockpile of blood samples. Supposing they managed to get a crew to come that day; the movers wouldn’t unload everything at the new address until tomorrow, he pointed out. How would they keep the blood at the proper temperature in the meantime? Elizabeth said they could use refrigerated trucks and keep them running in the parking lot overnight. After several crazed hours, Matt was finally able to talk some sense into her by pointing out that even if they somehow cleared the building by 11:59 p.m. that night, they would still have to conduct walkthroughs with state officials to demonstrate that they had properly disposed of any hazardous materials. Theranos was a biotech company, after all. Those walkthroughs would take weeks to schedule and no new tenant would be able to move in until they had occurred.

In Matt’s two and a half years at Theranos, he had seen her fire some thirty people, not counting the twenty or so employees who lost their jobs at the same time as Ed Ku when the microfluidic platform was abandoned. Every time Elizabeth fired someone, Matt had to assist with terminating the employee. Sometimes, that meant more than just revoking the departing employee’s access to the corporate network and escorting him or her out of the building. In some instances, she asked him to build a dossier on the person that she could use for leverage.

There was one case in particular that Matt regretted helping her with: that of Henry Mosley, the former chief financial officer. After Elizabeth fired Mosley, Matt had stumbled across inappropriate sexual material on his work laptop as he was transferring its files to a central server for safekeeping. When Elizabeth found out about it, she used it to claim it was the cause of Mosley’s termination and to deny him stock options. Matt had reported to Mosley until he left and thought he’ done an excellent job of helping Elizabeth raise money for Theranos. He clearly shouldn’t have browsed porn on a work-issued laptop, but Matt didn’t think it was a capital offense that merited blackmailing him. And besides, it had been found “after” the fact. Saying it was the reason Mosley was fired simply wasn’t true.

Matt had long wanted to start his own IT consulting firm and he decided this was the time to walk away and do it. When he informed Elizabeth of his decision, she looked at him in utter disbelief. She couldn’t comprehend how he could possibly trade in a job at a company that was going to revolutionize health care and change the world for that. She tried to entice him to stay with a raise and a promotion, but he turned her down.

During his last couple of weeks at Theranos, what Matt had seen happen to numerous other employees started happening to him. Elizabeth wouldn’t speak to him anymore or even look at him. She offered one of his IT colleagues, Ed Ruiz, his position if Ed agreed to dig through Matt’s files and emails. But Ed was good friends with Matt and refused. In any case, there was nothing to find. Matt was squeaky-clean. Unlike Henry Mosley, he was able to keep his stock options and to exercise them. He left Theranos in February 2008 and started his own firm. Ed Ruiz joined him a few months later.

Someone took the ad down and brought it to Elizabeth, who thought it was real. She convened an emergency meeting of the senior managers and the lawyers. She was treating it as a full-blown case of industrial espionage and wanted an immediate investigation to find the culprit.

As the days progressed, it became apparent that one pinprick often wasn’t enough to get the job done.Transferring the blood to the cartridge wasn’t the easiest of procedures. The person had to swab his finger with alcohol, prick it with the lancet, apply the transfer pen to the blood that bubbled up from the finger to aspirate it, and then press on the transfer pen’s plunger to expel the blood into the cartridge. Few people got it right on their first try. Aaron and Mike kept having to ask their test subjects to prick themselves multiple times. It got messy. There was blood everywhere.

These difficulties confirmed what Aaron already suspected: the company was underestimating this part of the process. To assume that a fifty-five-year-old patient in his or her home was going to immediately master it was wishful thinking. And if you didn’t get this part right, it didn’t matter how well the rest of the system functioned; you weren’t going to get good results. When they got back to the office, Aaron passed on his findings to Tony and Elizabeth, but he could tell they didn’t think they were a priority.

Aaron printed out the mock ad and took it with him to work the next day. When Justin and Mike spotted it on his desk, they thought it was hilarious. Mike decided it deserved a bigger audience and posted it on the wall in the men’s room. Then all hell broke loose. Someone took the ad down and brought it to Elizabeth, who thought it was real. She convened an emergency meeting of the senior managers and the lawyers. She was treating it as a full-blown case of industrial espionage and wanted an immediate investigation to find the culprit.

Todd’s two sales subordinates were based on the East Coast, where all the big pharmaceutical companies were headquartered. One of them was Susan DiGiaimo, an employee who operated out of her home in New Jersey and had worked for Theranos for nearly two years. Susan had accompanied Elizabeth on numerous sales pitches to drugmakers and had listened uncomfortably as she promised them the moon. When the drugmakers executives asked if the Theranos system could be customized to suit their needs, Elizabeth would always answer, “Absolutely.” Soon after he started, Todd began asking Susan a lot of questions about the revenues Elizabeth was projecting from her deals with the drugmakers. She kept a spreadsheet with detailed revenue forecasts. The numbers were big, in the tens of millions of dollars for each deal. Susan told Todd that, based on what she knew, they were vastly overinflated.

The 2007 study in Tennessee was the validation phase of the Pfizer contract. Its objective was to prove that Theranos could help Pfizer gauge cancer patients response to drugs by measuring the blood concentration of three proteins the body produces in excess when tumors grow. If Theranos failed to establish any correlation between the patients protein levels and the drugs, Pfizer could end their partnership and any revenue forecast Elizabeth had extrapolated from the deal would turn out to be fiction.

Susan also shared with Todd that she had never seen any validation data. And when she went on demonstrations with Elizabeth, the devices often malfunctioned. A case in point was the one they’d just conducted at Novartis.After the first Novartis demo in late 2006 during which Tim Kemp had beamed a fabricated result from California to Switzerland, Elizabeth had continued to court the drugmaker and had arranged a second visit to its headquarters in January 2008.

The night before that second meeting, Susan and Elizabeth had pricked their fingers for two hours in a hotel in Zurich to try to establish some consistency in the test results they were getting, to no avail. When they showed up at Novartis’s Basel offices the next morning, it got worse: all three Edison readers produced error messages in front of a room full of Swiss executives. Susan was mortified, but Elizabeth kept her composure and blamed a minor technical glitch.

Brodeen wasn’t exactly dying to come out of retirement to run a startup in a field in which he had no expertise, so he took a neutral stance and watched as Elizabeth used just the right mix of contrition and charm to gradually win back his three board colleagues.

He was reminded of an old saying: When you strike at the king, you must kill him. Todd Surdey and Michael Esquivel had struck at the king, or rather the queen. But she’d survived. THE QUEEN DIDN’T WASTE any time putting down the rebellion. Elizabeth fired Surdey first and Esquivel a few weeks later.

The firings caused Justin to further sour on Theranos. The staff turnover was like nothing he’d ever experienced before and he was troubled by what he saw as a culture of dishonesty at the company. The worst offender was Tim Kemp, the head of the software team. Tim was a yes-man who never leveled with Elizabeth about what was feasible and what wasn’t. For instance, he’d contradicted Justin and assured her they could write the Edison software’s user interface faster in Flash than in JavaScript. The very next morning, Justin had spotted a Learn Flash book on his desk.

There was one incident involving Elizabeth herself that also didn’t sit well with Justin. During an email exchange one evening, he asked her for a piece of information he needed to write a section of software. She responded that she’d look for it when she was back at work the next morning. The clear implication was that she had gone home. But minutes later, he stumbled on her in Tony Nugent’s office down the hall. Justin got angry and stormed off.

Money was indeed a sore point in the Holmes household. Chris’s grandfather, Christian Holmes II, had depleted his share of the Fleischmann fortune by living a lavish and hedonistic lifestyle on an island in Hawaii, and Chris’s father, Christian III, had frittered away what was left during an unsuccessful career in the oil business.

Richard Fuisz was a vain and prideful man. The thought that the daughter of longtime friends and former neighbors would launch a company in his area of expertise and that they wouldn’t ask for his help or even consult him deeply offended him. FUISZ HAD A HISTORY of taking slights personally and bearing grudges. The lengths he was willing to go to get even with people he perceived to have crossed him is best illustrated by his long and protracted feud with Vernon Loucks, the CEO of hospital supplies maker Baxter International.

Throughout the 1970s and early 1980s, Fuisz traveled a lot to the Middle East, which had become the biggest market for Medcom, his medical film business. On his way back, he usually spent a night in Paris or London and from there took the Concorde, the supersonic passenger jet operated by British Airways and Air France, back to New York.

In 1989, Baxter was taken off the Arab boycott list which banned companies that did business with Israel, giving Fuisz an opening to seek his revenge. He was leading a double life as an undercover CIA agent by then, having volunteered his services to the agency a few years earlier after coming across one of its ads in the classified pages of the Washington Post. Fuis’s work for the CIA involved setting up dummy corporations throughout the Middle East that employed agency assets, giving them a non-embassy cover to operate outside the scrutiny of local intelligence services. One of the companies supplied oil-rig operators to the national oil company of Syria, where he was particularly well connected.

As much as he was annoyed by what he perceived as the Holmeses ingratitude, Fuisz was also an opportunist. He made his money patenting inventions he anticipated other companies would someday want. One of his most lucrative plays involved repurposing a cotton candy spinner to turn drugs into fast-dissolving capsules. The idea came to him when he took his daughter to a country fair in Pennsylvania in the early 1990s. He later sold the public corporation he formed to house the technology to a Canadian pharmaceutical company for $154 million and personally pocketed $30 million from the deal.

But as a trained physician, he also spotted a potential weakness he could exploit. If patients were going to test their blood at home with the Theranos device to monitor how they were tolerating the drugs they were taking, there needed to be a built-in mechanism that would alert their doctors when the results came back abnormal. He saw a chance to patent that missing element, figuring there was money to be made down the road, whether from Theranos or someone else. His thirty-five years of experience patenting medical inventions told him such a patent might eventually command up to $4 million for an exclusive license.

The proposed patent didn’t purport to invent groundbreaking new technology. Rather, it combined existing ones— wireless data transmission, computer chips, and bar codes—into a physician alert mechanism that could be embedded in at-home blood-testing devices made by other companies. Patent applications don’t become public until eighteen months after they’re filed, so neither Elizabeth nor her parents were initially aware of what Fuisz had done. Lorraine Fuisz and Noel Holmes continued to see each other regularly.

As they nibbled on a meal Lorraine had picked up from a McLean gourmet shop, Fuisz suggested to Noel in a syrupy singsong voice he employed when he turned on the charm that he could be of assistance to Elizabeth. It was easy for a small company like Theranos to be taken advantage of by bigger ones, he noted. He didn’t reveal his patent filing, but the comments may have been enough to put the Holmeses on alert. From that point on, interactions between the two couples became fraught.

Fuisz’s patent application became available about a week later, on January 3, 2008, to anyone who performed a search in the USPTO’s online database. However, Theranos didn’t learn of its existence for another five months until Gary Frenzel, the head of Theranos’s chemistry team, came across it and called it to Elizabeth’s attention. By then, the Holmeses and the Fuiszes were no longer on speaking terms and Fuisz was referring to his patent filing in conversations with his wife as “the Theranos killer.”

That was precisely the subject of Chris Holmes’s visit on that summer day in 2008. Chris was agitated. He told Chuck someone named Richard Fuisz had stolen Elizabeth’s idea and patented it. Fuisz, Chris noted pointedly, had a son who worked at McDermott named John. Chuck vaguely knew who John Fuisz was. Their paths had crossed once or twice at the firm when they’d overlapped on a case.

Elizabeth got straight to the point. She wanted to know if McDermott would agree to represent Theranos against Richard Fuisz. Ken said they could look into filing a patent interference case if that’s what she had in mind. Interference cases are contests adjudicated by the Patent and Trademark Office to determine who of two rival applicants vying to patent the same invention came up with it first. The winner’s application gets priority even if it was filed later. Ken specialized in these types of cases.

Fuisz had a son who was a partner at the firm, which made the situation awkward, he said. Elizabeth didn’t blink at the mention of John Fuisz. It was the opening she was waiting for. She asked whether it was possible that John had accessed confidential information from McDermott’s Theranos file and leaked it to his father. That seemed far-fetched to Chuck. It was the sort of thing that would get an attorney fired and disbarred. John was a patent litigator. He wasn’t part of McDermott’s separate patent prosecution team that drafted and filed patents. He had no reason or justification for accessing Theranos’s file. Besides, he was a partner at the firm. Why would he commit career suicide? It didn’t make sense. What’s more, Theranos had moved all its patent work to the Silicon Valley law firm Wilson Sonsini two years earlier, in 2006. Chuck remembered Chris calling him and telling him apologetically at the time that Larry Ellison insisted Elizabeth use that firm. McDermott had obliged and transferred everything over to them. There was nothing for a McDermott attorney left to access.

Both Elizabeth and Chelsea, her best friend, were social and outgoing, with matching blue eyes. They did their share of drinking and partying and pledged a sorority, partly as a play for better housing. But, while Chelsea was a regular teenager still trying to find herself, Elizabeth seemed to know exactly who she wanted to be and what she wanted to do. When she returned to campus with a patent she’d written at the beginning of sophomore year, Chelsea was blown away. Elizabeth talked fervently about a future in which the company would save lives with its technology. Elizabeth was so persuasive. She had this intense way of looking at you while she spoke that made you believe in her and want to follow her.

Sunny was a force of nature, and not in a good way. Though only about five foot five and portly, he made up for his diminutive stature with an aggressive, in-your-face management style. His thick eyebrows and almond-shaped eyes, set above a mouth that drooped at the edges and a square chin, projected an air of menace. He was haughty and demeaning toward employees, barking orders and dressing people down.

Born and raised in Mumbai, Sunny first came to the United States in 1986 for his undergraduate studies. Afterward, he worked as a software engineer for a decade at Lotus and Microsoft. In 1999, he joined an Israeli entrepreneur named Liron Petrushka at a Santa Clara, California, startup called Sign in – Google Accounts. Petrushka was developing a software program that would enable companies to pit their suppliers against one another in live online auctions to secure economies of scale and lower prices.

When Sunny joined CommerceBid, the dot-com frenzy was at its peak and the niche Petrushka’s company was in, known as business-to-business e-commerce, had become red-hot. The sector’s leader, Commerce One, had just gone public and seen its stock price triple on its first day of trading. It finished the year up more than 1,000 percent. That November, just a few months after Sunny was named CommerceBid’s president and chief technology officer, Commerce One acquired the startup for $232 million in cash and stock. It was a breathtaking price for a company that had just three clients testing its software and barely any revenues. As the company’s second-highest-ranking executive, Sunny pocketed more than $40 million.

His timing was perfect. Five months later, the dot-com bubble popped and the stock market came crashing down. Commerce One eventually filed for bankruptcy.

Yet Sunny didn’t see himself as lucky. In his mind, he was a gifted businessman and the Commerce One windfall was a validation of his talent. When Elizabeth met him a few years later, she had no reason to question that. She was an impressionable eighteen-year-old girl who saw in Sunny what she wanted to become: a successful and wealthy entrepreneur. He became her mentor, the person who would teach her about business in Silicon Valley.

By the time he joined Theranos in September 2009, Sunny’s legal record contained at least one red flag. To dodge taxes on his CommerceBid earnings, he’d hired the accounting firm BDO Seidman, which arranged for him to invest in a tax shelter. The maneuver generated an artificial tax loss of $41 million that offset his CommerceBid gains, all but eliminating his tax liability. When the Internal Revenue Service cracked down on the practice in 2004, Sunny was forced to pay the millions of dollars in back taxes he owed in a settlement with the agency.

Tax troubles aside, Sunny was proud of his wealth and liked to broadcast it with his cars. He drove a black Lamborghini Gallardo and a black Porsche 911. Both had vanity license plates. The one on the Porsche read DAZKPTL in mock reference to Karl Marx’s treatise on capitalism. The Lamborghini’s plate was VDIVICI, a play on the phrase Veni, vidi, vici (“I came, I saw, I conquered”), which Julius Caesar used to describe his quick and decisive victory at the Battle of Zela in a letter to the Roman Senate.

Sunny’s expertise was software and that was where he was supposed to add value at Theranos. In one of the first company meetings he attended, he bragged that he’d written a million lines of code. Some employees thought that was preposterous. Sunny had worked at Microsoft, where teams of software engineers had written the Windows operating system at the rate of one thousand lines of code per year of development. Even if you assumed Sunny was twenty times faster than the Windows developers, it would still have taken him fifty years to do what he claimed.

Sunny always blamed the wireless connection, and he was right in some instances. The process by which test results were generated involved a transatlantic round-trip of ones and zeros: when the blood test was completed, a cellular antenna on the reader beamed the voltage data produced by the light signal to a server in Palo Alto. The server analyzed the data and beamed back a final result to a cell phone in Belgium. When the cellular connection was weak, the data transmission would fail.

Nearly all blood tests require a certain amount of dilution to lower the concentration of substances in the blood that can wreak havoc on the test. In the case of “chemiluminescent immunoassays”the class of tests the Edison performed— diluting the blood was necessary to filter out its light-absorbing pigments and other constituents that could interfere with the emission of the light signal. The amount of dilution the Theranos system required was greater than usual because of the small size of the blood samples Elizabeth insisted on. For the reader to have enough liquid to work with, the volume of the samples had to be increased significantly. The only way to do that was to dilute the blood more. And that in turn made the light signal weaker and harder to measure precisely. Put simply, some dilution was good, but too much dilution was bad.

The Edisons were also very sensitive to ambient temperature. To function properly, they needed to run at exactly 34 degrees Celsius. There were two 11-volt heaters built into the reader to try to maintain that temperature when a blood test was being run. But in colder settings, like certain hospitals in Europe, Dave Nelson had noticed that the little heaters didn’t keep the readers warm enough.

Getting authorization to use an experimental medical device in a foreign country is usually no easy thing, but Elizabeth was able to leverage the family connections of a wealthy Mexican student at Stanford. He got Chelsea and Sunny an audience with high-ranking officials at the Mexican Social Security Institute, the agency that runs the country’s public health-care system. IMSS approved the shipment of two dozen Edison readers to a hospital in Mexico City. The hospital, a sprawling facility called Hospital General de Mexico, was located in Colonia Doctores, one of the city’s most crime-ridden neighborhoods. Chelsea and Sunny were discouraged from going to and from the hospital on their own. A driver dropped them off inside the gates of the facility every morning and picked them up at the end of each day.

There were a lot of things that made Chelsea uncomfortable about Theranos. And none more so than Sunny. He spawned a culture of fear with his intimidating behavior. Firings had always been a common occurrence at the company. But in late 2009 and early 2010 it was Sunny who took on the role of hatchet man. Chelsea even learned a new expression: to disappear someone. That’s how employees used the normally intransitive verb when someone was dismissed. “Sunny disappeared him,” they would say, conjuring up the image of a Mafia hit in 1970s Brooklyn.

After that, Sunny seemed to have it in for Seth and frequently harassed him, which led Seth to look for another job. He found one a few months later at a company based in Redwood City called Genomic Health and walked into Elizabeth’s office, resignation letter in hand, to give his notice. Sunny, who was there, opened up the letter, read it, then threw it back in Seth’s face. “I won’t accept this!” he shouted. Seth shouted back, deadpan, “I have news for you, sir: in 1863, President Lincoln freed the slaves.” Sunny’s response was to throw him out of the building. It was weeks before Seth was able to retrieve his math books, scientific journals, and the pictures of his wife on his desk. He had to enlist the company’s new lawyer, Jodi Sutton, and a security guard to help him pack his things late on a weeknight when Sunny wasn’t around.

The validation study in Belgium and the experiments in Mexico and Thailand were one thing. Those were supposed to be for research purposes only and to have no bearing on the way patients were treated. But encouraging someone to rely on a Theranos blood test to make an important medical decision was something else altogether. Chelsea found it reckless and irresponsible.

Chelsea also worried about Elizabeth. In her relentless drive to be a successful startup founder, she had built a bubble around herself that was cutting her off from reality. And the only person she was letting inside was a terrible influence. How could her friend not see that?

As the calendar turned from 2009 to 2010, America remained mired in a deep economic malaise. Over the previous two years, nearly 9 million people had lost their jobs in the worst downturn since the Great Depression. Millions more had been hit with foreclosure notices. While the rest of the country licked its wounds from the devastating financial crisis, a new technology boom was getting under way, fueled by several factors. One of them was the wild success of Facebook. In June 2010, the social network’s private valuation rose to $23 billion. Six months later, it jumped to $50 billion. Every startup founder in the Valley wanted to be the next Mark Zuckerberg and every VC wanted a seat on the next rocket ship to riches. The emergence of Twitter, which was valued at more than $1 billion in late 2009, added to the excitement. All of this might not have been enough to ignite the new boom, however, if it hadn’t been for another key ingredient: rock-bottom interest rates. To rescue the economy, the Federal Reserve had slashed rates to close to zero, making traditional investments like bonds unattractive and sending investors searching for higher returns elsewhere. One of the places they turned to was Silicon Valley.

In January 2010, Theranos had approached Walgreens with an email stating that it had developed small devices capable of running any blood test from a few drops pricked from a finger in real time and for less than half the cost of traditional laboratories. Bringing the startup’s machines inside Walgreens stores could open up a big new revenue stream for the retailer. It wasn’t just the business proposition that appealed to Dr. J. A health nut who carefully watched his diet, rarely drank alcohol, and was fanatical about getting a swim in every day, he was passionate about empowering people to live healthier lives. The picture Elizabeth presented at the meeting of making blood tests less painful and more widely available so they could become an early warning system against disease deeply resonated with him.

Theranos had told Walgreens it had a commercially ready laboratory and had provided it with a list of 192 different blood tests it said its proprietary devices could handle. In reality, although there was a lab downstairs, it was just an R&D lab where Gary Frenzel and his team of biochemists conducted their research. Moreover, half of the tests on the list couldn’t be performed as chemiluminescent immunoassays, the testing technique the Edison system relied on. They required different testing methods beyond the Edison’s scope.

Hunter was beginning to grow suspicious. With her black turtleneck, her deep voice, and the green kale shakes she sipped on all day, Elizabeth was going to great lengths to emulate Steve Jobs, but she didn’t seem to have a solid understanding of what distinguished different types of blood tests. Theranos had also failed to deliver on his two basic requests: to let him see its lab and to demonstrate a live vitamin D test on its device.

There was something else that bothered Hunter: Sunny’s attitude. He acted both superior and cavalier. When the Walgreens side had broached bringing its IT department in on the pilot preparations, Sunny had dismissed the idea out of hand by saying, “IT are like lawyers, avoid them as long as possible.” That kind of approach sounded to Hunter like a recipe for problems.

When they reconvened at the Theranos office the next morning, they were joined by Wade Miquelon, the Walgreens CFO. Wade had negotiated the pilot contract directly with Elizabeth. He too seemed to be a big fan of hers. Midway through that day’s meeting, Elizabeth made a big show of giving Miquelon an American flag that she said had been flown over a battlefield in Afghanistan. She’d written a dedication to Walgreens on it. Hunter thought the whole thing was bizarre. Walgreens had brought him here to vet Theranos’s technology, but he hadn’t been allowed to do so. The only thing they had to show for their visit was an autographed flag. And yet, Dr. J and Miquelon didn’t seem to mind. As far as they were concerned, the visit had gone swimmingly.

The red flags were piling up. First, Elizabeth had denied him access to their lab. Then she’d rejected his proposal to embed someone with them in Palo Alto. And now she was refusing to do a simple comparison study. To top it all off, Theranos had drawn the blood of the president of Walgreens’s pharmacy business, one of the company’s most senior executives, and failed to give him a test result! Van den Hooff listened with a pained look on his face. “We cannot not pursue this,” he said. “We can’t risk a scenario where CVS has a deal with them in six months and it ends up being real.”

Walgreens’s rivalry with CVS, which was based in Rhode Island and one-third bigger in terms of revenues, colored virtually everything the drugstore chain did. It was a myopic view of the world that was hard to understand for an outsider like Hunter who wasn’t a Walgreens company man. Theranos had cleverly played on this insecurity. As a result, Walgreens suffered from a severe case of FOMO ”the fear of missing out.”

Hunter pleaded with Van den Hooff to at least let him peek inside the one black-and-white reader Theranos had left with them after the Project Beta kickoff party. He was dying to tear the strips of security tape off its case and crack it open. Van den Hooff said no. In addition to signing confidentiality agreements, they’d been sternly warned not to tamper with the reader. The contract the companies had signed stated that Walgreens agreed “not to disassemble or otherwise reverse engineer the Devices or any component thereof.”

Theranos always invoked two things as proof that its technology had been vetted. The first was the clinical trial work it did for pharmaceutical companies. Documents it gave Walgreens stated that the Theranos system had been “comprehensively validated over the last seven years by ten of the largest fifteen pharma companies.” The second was a review of its technology Dr. J had supposedly commissioned from Johns Hopkins University’s medical school.

Hunter had placed calls to pharmaceutical companies and hadn’t been able to get anyone on the phone to confirm what Theranos was claiming, though that was hardly proof of anything. He now asked Van den Hooff to show him the Johns Hopkins review. After some hesitation, Van den Hooff reluctantly handed him a two-page document.

When Hunter was done reading it, he almost laughed. It was a letter dated April 27, 2010, summarizing a meeting Elizabeth and Sunny had had with Dr. J and five university representatives on the Hopkins campus in Baltimore. It stated that they had shown the Hopkins team “proprietary data on test performance” and that Hopkins had deemed the technology “novel and sound.” But it also made clear that the university had conducted no independent verification of its own. In fact, the letter included a disclaimer at the bottom of the second page: “The materials provided in no way signify an endorsement by Johns Hopkins Medicine to any product or service.”

With Walgreens and Safeway on board as retail partners, Elizabeth suddenly faced a problem of her own making: she had told both companies her technology could perform hundreds of tests on small blood samples. The truth was that the Edison system could only do immunoassays, a type of test that uses antibodies to measure substances in the blood. Immunoassays included some commonly ordered lab tests such as tests to measure vitamin D or to detect prostate cancer. But many other routine blood tests, ranging from cholesterol to blood sugar, required completely different laboratory techniques.

Elizabeth christened the machine she assigned them to build the “miniLab.” As its name suggested, her overarching concern was its size: she still nurtured the vision of someday putting it in people’s homes and wanted something that could fit on a desk or a shelf. This posed engineering challenges because, in order to run all the tests she wanted, the miniLab would need to have many more components than the Edison. In addition to the Edison’s photomultiplier tube, the new device would need to cram three other laboratory instruments in one small space: a spectrophotometer, a cytometer, and an isothermal amplifier.

Laboratories all over the world had been using these instruments for decades. In other words, Theranos wasn’t pioneering any new ways to test blood. Rather, the miniLab’s value would lie in the miniaturization of existing lab technology. While that might not amount to groundbreaking science, it made sense in the context of Elizabeth’s vision of taking blood testing out of central laboratories and bringing it to drugstores, supermarkets, and, eventually, people’s homes.

To be sure, there were already portable blood analyzers on the market. One of them, a device that looked like a small ATM called the Piccolo Xpress, could perform thirty-one different blood tests and produce results in as little as twelve minutes. It required only three or four drops of blood for a panel of a half dozen commonly ordered tests. However, neither the Piccolo nor other existing portable analyzers could do the entire range of laboratory tests. In Elizabeth’s mind, that was going to be the miniLab’s selling point.

Instead of building new instruments from scratch to fit the arbitrary dimensions Elizabeth had laid out, Greg felt they would do better to take the off-the-shelf components they were laboring to miniaturize and integrate them together to test how the overall system worked. Once they had a working prototype, they could then worry about shrinking it. Emphasizing the system’s size first and how it worked later was putting the cart before the horse. But Elizabeth wouldn’t budge.

Like most people, Greg had been taken aback by Elizabeth’s deep voice when he’d first met her. He soon began to suspect it was affected. One evening, as they wrapped up a meeting in her office shortly after he joined the company, she lapsed into a more natural-sounding young woman’s voice. “I’m really glad you’re here,” she told him as she got up from her chair, her pitch several octaves higher than usual. In her excitement, she seemed to have momentarily forgotten to turn on the baritone. When Greg thought about it, there was a certain logic to her act: Silicon Valley was overwhelmingly a man’s world. The VCs were all male and he couldn’t think of any prominent female startup founder. At some point, she must have decided the deep voice was necessary to get people’s attention and be taken seriously.

Sunny was constantly questioning employees commitment to the company—the number of hours a person put in at the office, whether he or she was doing productive work or not, was his ultimate gauge of that commitment. At times, he would sit in the big glass conference room and stare out at the rows of cubicles trying to identify who was slacking off.

Several members of the Frat Pack joined Greg and two of his colleagues from the engineering department for lunch on the big terrace overlooking the parking lot one day. A discussion about the low IQs of some of the world’s top soccer players led them to debate the question, Would you rather be smart and poor or dumb and rich? The three engineers all chose smart and poor, while the Frat Pack voted unanimously for dumb and rich. Greg was struck by how clearly the line was drawn between the two groups. They were all in their mid-to late twenties with good educations, but they valued different things.

Greg had been aware of Elizabeth’s fascination with Jobs. She referred to him as “Steve” as if they were close friends. At one point, she’d told him that a documentary espousing a 9/11 conspiracy theory wouldn’t have been available on iTunes if “Steve” hadn’t believed there was something to it. Greg thought that was silly. He was pretty sure Jobs hadn’t personally screened all the movies for rent or sale on iTunes. Elizabeth seemed to have this exaggerated image of him as an all-seeing and all-knowing being.

A month or two after Jobs’s death, some of Greg’s colleagues in the engineering department began to notice that Elizabeth was borrowing behaviors and management techniques described in Walter Isaacson’s biography of the late Apple founder. They were all reading the book too and could pinpoint which chapter she was on based on which period of Jobs’s career she was impersonating.

Kent was the chief architect of the miniLab. A talented engineer who loved to build stuff, he was also dabbling with a side project in his spare time: bicycle lights that lit up both wheels and the road, providing improved visibility and safety for the rider at night. He’d pitched the concept on Kickstarter and, much to his surprise, was able to raise $215,000 in forty-five days. It was the seventh-largest sum raised on the crowdfunding platform that year. What had been a hobby suddenly looked like it could become a viable business.

Kent told Elizabeth about his successful Kickstarter campaign, thinking she wouldn’t mind. But he badly miscalculated: she and Sunny were furious. They viewed it as a major conflict of interest and asked him to transfer his bike-lights patent to Theranos. The paperwork Kent had signed when he joined the company entitled them to any intellectual property he produced while employed there, they contended.

In December 2011, Theranos chartered several buses to transport its employees, which now numbered more than one hundred, to the Thomas Fogarty Winery in Woodside. The occasion was the company’s annual Christmas party. As employees sipped drinks from an open bar inside the winery’s main building before sitting down to dinner, Elizabeth gave a speech. The miniLab is the most important thing humanity has ever built. If you don’t believe this is the case, you should leave now she declared, scanning her audience with a dead serious look on her face. “Everyone needs to work as hard as humanly possible to deliver it.” At another company meeting she once remarked, “If anyone here believes you are not working on the best thing humans have ever built or if you’re cynical, then you should leave,” she said, reprising the themes of her Christmas speech.”


One of the more surreal incidents involved a burly software engineer named Del Barnwell. Big Del, as people called him, was a former Marine helicopter pilot. Sunny was on his case about not working long-enough hours. He’d gone as far as to review security footage to track Big Del’s comings and goings and confronted him in a meeting in his office, claiming the tapes showed he worked only eight hours a day. “I’m going to fix you” Sunny told him, as if Del were a broken toy. Sunny called the cops. Twenty minutes later, a police cruiser quietly pulled up to the building with its lights off. A highly agitated Sunny told the officer that an employee had quit and departed with company property. When the officer asked what he’d taken, Sunny blurted out in his accented English, “He stole property in his mind.”

Safeway”s business was doing poorly. The supermarket chain had just announced a 6 percent drop in its profits for the last three months of 2011, a disappointing performance its longtime CEO Steve Burd was struggling to explain to the dozen analysts who had dialed in to the company’s quarterly earnings call. By reducing the number of shares it had outstanding, buybacks could artificially raise a company’s earnings per shareâ—the headline number investors focused on—even if its actual earnings fell. It was an old trick that astute Wall Street analysts versed in corporate sleights of hand saw right through.

What really set off Bradley’s alarm bells, though, was when some otherwise healthy employees started coming to him with concerns about abnormal test results. As a precaution, he sent them to get retested at a Quest or LabCorp location. Each time, the new set of tests came back normal, suggesting the Theranos results were off. Then one day, a senior Safeway executive got his PSA result back. The acronym stands for “prostate-specific antigen,” which is a protein produced by cells in the prostate gland. The higher the protein’s concentration in a man’s blood, the likelier he is to have prostate cancer. The senior Safeway executive’s result was very elevated, indicating he almost certainly had prostate cancer. But Bradley was skeptical. As he had done with the other employees, he sent his worried colleague to get retested at another lab and, lo and behold, that result came back normal too. Bradley put together a detailed analysis of the discrepancies. Some of the differences between the Theranos values and the values from the other labs were disturbingly large. When the Theranos values did match those of the other labs, they tended to be for tests performed by ARUP.

Had Steve Burd been allowed inside the East Meadow Circle lab, a network of rooms located in the center of the low-slung building, he would have noticed that it didn’t contain a single Theranos proprietary device.That’s because the miniLab was still under development and nowhere near ready for patient testing. What the lab did contain was more than a dozen commercial blood and body-fluid analyzers made by companies such as Chicago-based Abbott Laboratories, Germany’s Siemens, and Italy’s DiaSorin.

The main problem was the lab’s dearth of experienced personnel. One of the CLSs, a fellow by the name of Kosal Lim, was so sloppy and poorly trained that one of his counterparts, Diana Dupuy, was convinced he was jeopardizing the accuracy of test results. To Dupuy, Lim’s blunders were inexcusable. They included ignoring manufacturers instructions for how to handle reagents; putting expired reagents in the same refrigerator as current ones; running patient tests on lab equipment that hadn’t been calibrated; improperly performing quality-control runs on an analyzer; doing tasks he hadn’t been trained to do; and contaminating a bottle of Wright’s stain, a mixture of dyes used to differentiate blood cell types.

SAFEWAY OF COURSE had no knowledge of any of this. It continued to let Theranos handle the blood testing at its Pleasanton clinic throughout 2012 and into 2013. It also began hiring phlebotomists to staff the wellness centers it had built in dozens of its stores in Northern California. But as the months went by, Theranos continued to push back the date for a launch.

While they sat idle, the wellness centers occupied valuable real estate inside the stores that could have been put to other, profitable uses. Fed up with waiting, Renda and Bradley put together various ideas for how the space could be utilized. One of them was to staff the centers with nutritionists who would offer dietary advice. Another was to turn them into full-fledged medical clinics run by nurse practitioners. Yet another was to offer telemedicine services. They lobbied Burd to let them implement these plans but, after discussing the matter with Elizabeth, he turned them down. She didn’t want to surrender the space, he said.

Sunny acted put-off whenever Safeway executives asked for status updates, as if his time was too precious to waste and they had no idea what it took to produce an innovation of this magnitude. His arrogance was infuriating. And yet Safeway was still hesitant to walk away from the partnership. What if the Theranos technology did turn out to be game-changing? It might spend the next decade regretting passing up on it. The fear of missing out was a powerful deterrent.

Shoemaker and the little military delegation he was leading had been invited to Palo Alto on this morning in November 2011 to bless Theranos’s plans to deploy its devices in the Afghan war theater, not to raise objections about its regulatory strategy. The idea of using Theranos devices on the battlefield had germinated the previous August when Elizabeth had met James Mattis, head of the U.S. Central Command, at the Marines Memorial Club in San Francisco. Elizabeth’s impromptu pitch about how her novel way of testing blood from just a finger prick could help diagnose and treat wounded soldiers faster, and potentially save lives, had found a receptive audience in the four-star general.

Shoemaker wasn’t your average military bureaucrat. He had a Ph.D. in microbiology and had spent years doing medical research on vaccines for meningitis and tularemia, a dangerous bacterium found in cottontail rabbits that was weaponized by the United States and the Soviet Union during the Cold War. He’d also been the first army officer to complete a one-year fellowship at the Food and Drug Administration, making him the army’s resident expert on FDA regulations. There was no way the agency would allow Theranos to use untested technology on army personnel without going through its review process, he told her. Elizabeth disagreed forcefully, citing advice Theranos had received from its lawyers. She was so defensive and obstinate that Shoemaker quickly realized that prolonging the argument would be a waste of time. She clearly didn’t want to hear anything that contradicted her point of view. As he looked around the table, he noted that she had brought no regulatory affairs expert to the meeting. He suspected the company didn’t even employ one. If he was right about that, it was an incredibly naive way of operating. Health care was the most highly regulated industry in the country and for good reason— the lives of patients were at stake.

IN HIS EIGHTEEN-YEAR CAREER in the army, Shoemaker had come across a lot of people who seemed to think the military was exempt from civilian regulations and free to conduct medical research as it pleased. If Theranos wanted to try out its blood-testing machines on troops in Afghanistan, Shoemaker felt certain that it would need to put together an IRB-approved study protocol. He decided to bring in Jeremiah Kelly, an army lawyer who’d previously worked at the FDA. He scheduled another meeting with Elizabeth so Kelly could hear from her directly and provide a second opinion.

Elizabeth came to the meeting alone with a single-page document outlining the same regulatory approach Shoemaker had heard her present a few weeks before in Palo Alto. He had to give it to her— the structure she laid out was creative. One might even call it sneaky. The document explained that Theranos’s devices were merely remote sample-processing units. The real work of blood analysis would take place in the company’s lab in Palo Alto, where computers would analyze the data the devices transmitted to it and qualified laboratory personnel would review and interpret the results. Hence, only the Palo Alto lab needed to be certified. The devices themselves were akin to “dumb” fax machines and exempt from regulatory oversight.There was a second wrinkle Shoemaker found equally hard to swallow: Theranos maintained that the blood tests its devices performed were laboratory-developed tests and therefore beyond the FDA’s purview.

The Theranos devices were more than just dumb fax machines. They were blood analyzers and, like all other blood analyzers on the market, they would eventually need to be reviewed and approved by the FDA. Until then, Theranos would need to consult with an institutional review board and come up with a study protocol that the agency could live with. It was a process that typically took six to nine months. The meeting ended with Shoemaker reiterating that he would need to see something in writing from the FDA backing up Theranos’s regulatory stance before he signed off on any experiment in Afghanistan. Elizabeth agreed to get such a letter. She acted as if it was a formality. Shoemaker very much doubted so, but at least things were now clear: the ball was in Theranos’s court.

After some back-and-forth, Gutierrez, Yost, and Keller all reached the same conclusion: the Theranos model didn’t comply with federal regulations. Yost and Keller decided it wouldn’t hurt to send someone to Palo Alto to see what exactly this company that none of them had heard of before was up to and to correct its misconceptions. The job fell to Gary Yamamoto, a veteran field inspector in CMS’s regional office in San Francisco. He asked to see Theranos’s lab, and they couldn’t deny him access the way they had to Kevin Hunter. This was the representative of a federal regulatory agency, not some private lab consultant they could thumb their noses at. ELIZABETH WASN’T ONE to sit still and quietly take it when she felt her company was under attack. In a blistering email to General Mattis, she hit back against the person who had dared to put hurdles in her way. Shoemaker, she wrote, had communicated “blatantly false information” to the FDA and CMS about Theranos.

Boies’s law firm, Boies, Schiller & Flexner, had gained a reputation for aggressive tactics. It didn’t take the Fuiszes long to find out why. In the weeks before Theranos sued, all three had picked up clues that they were under surveillance. Richard Fuisz noticed a car tailing him when he drove to Van Nuys Airport to board a flight to Las Vegas. Joe, who lived in Miami, was warned by his neighbor, a retired cop who acted like his block’s self-appointed captain, that someone was watching his house. John and his wife spotted a man taking pictures of their home in Georgetown. The Fuiszes now felt sure those had been private investigators hired by Boies. Boies’s use of private investigators wasn’t just an intimidation tactic, it was the product of a singular paranoia that shaped Elizabeth and Sunny’s view of the world. That paranoia centered on the belief that the lab industry’s two dominant players, Quest Diagnostics and Laboratory Corporation of America, would stop at nothing to undermine Theranos and its technology.

They knew they were up against one of the most expensive lawyers in the world. Boies charged clients nearly a thousand dollars an hour and was reputed to earn more than $10 million a year. What they didn’t know, however, was that in this instance he had accepted stock in lieu of his regular fees. Elizabeth had granted his firm 300,000 Theranos shares at a price of $15 a share, which put a sticker price of $4.5 million on Boies’s services.

It wasn’t the first time Boies had worked out an alternative fee arrangement with a client and taken stock for payment. During the dot-com boom, he had accepted shares to represent WebMD, the website that provides medical information to consumers. Boies had a venture capitalist’s approach to cases and figured he and his firm stood to earn a lot more money by getting paid in stock. But it also meant he had a vested financial interest in Theranos that made him more than just its legal advocate. It helped explain why, in early 2013, Boies began attending all of the company’s board meetings.

EVEN THOUGH Elizabeth’s name was on all of Theranos’s patents, Richard Fuisz was highly skeptical that a college dropout with no medical or scientific training had done much real inventing. What was more likely, he thought, was that other employees with advanced degrees had done the work she’d patented.

Ian Gibbons was the first experienced scientist Elizabeth had hired after launching Theranos. He came recommended by her Stanford mentor, Channing Robertson. Ian and Robertson had met at Biotrack in the 1980s, where they had invented and patented a new mechanism to dilute and mix liquid samples. As a biochemist, Ian’s specialty was immunoassays, which was the main reason Theranos had focused its early efforts on that class of test. He was passionate about the science of blood testing and loved to teach it. In the company’s early years, he would sometimes hold little lectures to educate the rest of the staff about the fundamentals of biochemistry. He also did presentations about how to create various blood tests that were recorded and stored on the company’s servers.

Ian also had issues with Elizabeth’s management, especially the way she siloed the groups off from one another and discouraged them from communicating. The reason she and Sunny invoked for this way of operating was that Theranos was “in stealth mode, “but it made no sense to Ian. At the other diagnostics companies where he had worked, there had always been cross-functional teams with representatives from the chemistry, engineering, manufacturing, quality control, and regulatory departments working toward a common objective. That was how you got everyone on the same page, solved problems, and met deadlines.

Ian was a proud man and he took the demotion hard. The humiliation he felt was compounded when, eighteen months later, the company moved to the old Facebook building and he lost the private office he’d had at the Hillview Avenue headquarters. To be sure, he wasn’t the only one being marginalized by then: Gary Frenzel and Tony Nugent too were being sidelined as Elizabeth and Sunny hired and promoted newer recruits over them. It was as if the company’s old guard ”the people who had gotten Elizabeth to this point” was being mothballed.

Folie a deux— The presence of the same or similar delusional ideas in two persons closely associated with one another.

IN APRIL, Theranos informed Ian that he had been subpoenaed to testify in the Fuisz case. The prospect of being deposed made him nervous. He and Rochelle discussed the lawsuit several times. Rochelle had once done work as a patent attorney, so Ian asked her to review Theranos’s patent portfolio in the hope that she could give him some advice. While doing so, she noticed that Elizabeth’s name was on all the company’s patents, often in first place in the list of inventors. When Ian told her that Elizabeth’s scientific contribution had been negligible, Rochelle warned him that the patents could be invalidated if this was ever exposed. That only served to make him more agitated.

The thought of going back to the office made him sick, he said. Rochelle told him he should quit if the job made him that miserable. But resigning didn’t seem like an option to him. At age sixty-seven, he didn’t think he would be able to find another job. He also clung to the idea that he could still help the company fix its problems.

WHEN ROCHELLE GOT UP around seven thirty a.m. on May 16, she saw that the bathroom light was on and the door closed. She assumed Ian was getting ready to go to the doctor’s. But when he failed to come out after a while and didn’t answer her calls, she pushed the bathroom door open. She found her husband hunched over in a chair unconscious and barely breathing. Panicked, she called 911. Ian spent the next eight days hooked up to a ventilator at Stanford Hospital. He had taken enough acetaminophen, the active ingredient in painkillers like Tylenol, to kill a horse. Combined with the wine he’d consumed, the drug had destroyed his liver. He was pronounced dead on May 23.

Rochelle was overwhelmed with grief but she found the strength to call Elizabeth’s office and left a message with her assistant informing her about Ian’s passing. Elizabeth didn’t call back. Instead, later that day, Rochelle received an email from a Theranos lawyer requesting that she immediately return Ian’s company laptop and cell phone and any other confidential information he might have retained. Inside Theranos, Ian’s death was handled with the same cold, businesslike approach. Most employees weren’t even informed of it.

The famous portrait photographer Martin Schoeller was softly whispering directions to Elizabeth in his thick German accent to elicit a range of emotions from her as he snapped her picture. She was wearing a thin black turtleneck and red lipstick, her hair brushed back in a loose bun that covered her ears. Two vertical lamps were set on either side of the chair she was sitting in to flatly illuminate her narrow face and create the white lights in her pupils that were a trademark of Schoeller’s photographs.

Hiring Schoeller had been the idea of Patrick O’Neill, the creative director of advertising agency TBWA\Chiat\Day’s Los Angeles office. Chiat\Day was working on a secret marketing campaign for Theranos. The assignment ranged from creating a brand identity to building a new website and a smartphone app for the company ahead of the commercial launch of its blood-testing services in Walgreens and Safeway stores.

Patrick was drawn in by her charisma and her singular drive to put a dent in the universe. The company would soon be coming out of “stealth mode” as Elizabeth called it, and that’s where he came in: his job was to make its commercial launch as impactful as possible. The photographer had spent most of the two-day shoot at a studio in Culver City taking pictures of models posing as patients. They were of different ages, genders, and ethnicities: children under five, children between five and ten, young men and women, middle-aged folks, and seniors. Some were white, some black, others Hispanic or Asian. The message was that Theranos’s blood-testing technology would help everyone.

Elizabeth and Patrick spent hours choosing which patient photos to use from the shoot. Elizabeth wanted the faces displayed on the website to communicate empathy. She talked movingly about the sadness people felt when they found out that a loved one was sick and that it was too late to do anything about it. Theranos’s painless blood tests would change that by catching diseases early, before they became a death sentence, she said.

Real blood tended to turn purple after a while when it was exposed to air, so they filled one of the nanotainers with fake Halloween blood and took pictures of it against a white background. Patrick then made a photo montage showing it balancing on the tip of a finger. As he’d anticipated, it made for an arresting visual. Mike Yagi tried out different slogans to go with it, eventually settling on two that Elizabeth really liked: “One tiny drop changes everything” and “The lab test, reinvented.” They blew the photo up and turned it into a mock full-page ad in the Wall Street Journal.

Patrick also worked with Elizabeth on a new company logo. Elizabeth believed in the Flower of Life, a geometric pattern of intersecting circles within a larger circle that pagans once considered the visual expression of the life that runs through all sentient beings. It was later adopted by the 1970s New Age movement as “sacred geometry” that provided enlightenment to those who spent time studying it.

WHILE PATRICK REMAINED entranced with Elizabeth, Stan Fiorito was more circumspect. A gregarious ad industry veteran with reddish blond hair and freckles, Stan thought there was something odd about Sunny. He used a lot of software engineering jargon in their weekly meetings that had no applicability whatsoever to their marketing discussions. And when Stan tried to get him to walk him through how he’d arrived at what seemed like extremely aggressive sales targets, Sunny gave vague and boastful answers. Normally, companies did research to determine the size of the audience they were marketing to and then worked out what percentage of that audience they could realistically hope to convert into customers. But such basic concepts seemed lost on Sunny. Stan tried to look him up on the internet but couldn’t find anything. He thought it was strange that someone with his background ”a tech entrepreneur who had sold a company during the dot-com boom and made a lot of money in the process” had left no trace on the web. He wondered if Sunny had hired someone to scrub it for him.

It was also highly unusual for an obscure startup to hire a big ad agency like Chiat\Day. With their overhead and staffing, the big agencies were expensive. Chiat\Day was charging Theranos an annual retainer of $6 million a year. Where was this company nobody had heard of before getting the money to pay these types of fees? Elizabeth had stated on several occasions that the army was using her technology on the battlefield in Afghanistan and that it was saving soldiers lives. Stan wondered if Theranos was funded by the Pentagon because of their secrecy. Per Sunny’s instructions, any materials Theranos provided to Chiat\Day had to be numbered, logged, and kept in a locked room that only the team assigned to work on the account had access to. Any printing had to be done on a dedicated printer inside the room. Discarded materials couldn’t just be thrown away, they had to be shredded. Computer files had to be stored on a separate server and could only be shared among the team via a dedicated intranet.

Elizabeth wanted the website and all the various marketing materials to feature bold, affirmative statements. One was that Theranos could run “over 800 tests” on a drop of blood. Another was that its technology was more accurate than traditional lab testing. She also wanted to say that Theranos test results were ready in less than thirty minutes and that its tests were “pproved by FDA” and “endorsed by key medical centers” such as the Mayo Clinic and the University of California, San Francisco’s medical school, using the FDA, Mayo Clinic, and UCSF logos.

There were laws against misleading advertising. Elizabeth had mentioned a report several hundred pages long supporting Theranos’s scientific claims. Kate and Mike repeatedly asked to see it, but Theranos wouldn’t produce it. Instead, the company sent them a password-protected file containing what it said were excerpts from the report. It stated that the Johns Hopkins University School of Medicine had conducted due diligence on the Theranos technology and found it “novel and sound” and capable of “accurately” running “a wide range of routine and special assays.”

Elizabeth had wanted all those sweeping claims to be true, but just because you badly wanted something to be real didn’t make it so, Mike thought. He and Kate were beginning to question whether Theranos had any technology at all. Did its vaunted “black box,” as people at Chiat\Day referred to the Theranos device, even exist ?

But in Patrick’s experience, all tech startups were chaotic and secretive. He saw nothing unusual or worrisome in that.

The biggest problem of all was the dysfunctional corporate culture in which the minilab was being developed. Elizabeth and Sunny regarded anyone who raised a concern or an objection as a cynic and a naysayer. Employees who persisted in doing so were usually marginalized or fired, while sycophants were promoted. Sunny had elevated a group of ingratiating Indians to key positions.

For the dozens of Indians Theranos employed, the fear of being fired was more than just the dread of losing a paycheck. Most were on H-1B visas and dependent on their continued employment at the company to remain in the country. With a despotic boss like Sunny holding their fates in his hands, it was akin to indentured servitude. Sunny, in fact, had the master-servant mentality common among an older generation of Indian businessmen. Employees were his minions. He expected them to be at his disposal at all hours of the day or night and on weekends. He checked the security logs every morning to see when they badged in and out.

As Elizabeth saw it, she didn’t have several years. Twelve months earlier, on June 5, 2012, she’d signed a new contract with Walgreens that committed Theranos to launching its blood-testing services in some of the pharmacy chain’s stores by February 1, 2013, in exchange for a $100 million “innovation fee” and an additional $40 million loan.

Theranos had missed that deadline— another postponement in what from Walgreens’s perspective had been three years of delays. With Steve Burd’s retirement, the Safeway partnership was already falling apart, and if she waited much longer, Elizabeth risked losing Walgreens too. She was determined to launch in Walgreens stores by September, come hell or high water. Since the miniLab was in no state to be deployed, Elizabeth and Sunny decided to dust off the Edison and launch with the older device. That, in turn, led to another fateful decision—the decision to cheat.

The protocol Daniel and Sam had come up with meant that the blood would be diluted twice, once before it went into the machine and a second time inside it. Any lab director worth his salt knew that the more you tampered with a blood sample, the more room you introduced for error.

Two of the assays performed on the hacked Siemens analyzers were giving the lab particular trouble: sodium and potassium. Alan suspected the cause of the latter was a phenomenon known as “hemolysis,” which occurs when red blood cells burst and release extra potassium into the sample. Hemolysis was a known side effect of finger-stick collection. Milking blood from a finger put stress on red blood cells and could cause them to break apart.

After eight years at the company, Anjali felt she was at an ethical crossroads. To still be working out the kinks in the product was one thing when you were in R&D mode and testing blood volunteered by employees and their family members, but going live in Walgreens stores meant exposing the general population to what was essentially a big unauthorized research experiment. That was something she couldn’t live with. She decided to resign.

On her way out, Anjali printed the email she had sent to Elizabeth and Daniel. She had a feeling this wasn’t going to end well and she needed something to protect herself, something that would show she had disagreed with the decision to launch. Forwarding the email to her personal Yahoo account would have been easier, but she knew Sunny closely monitored employees email activity. So she hid the printout in her bag and smuggled it out. Anjali wasn’t the only one with misgivings. Tina Noyes, her deputy in the immunoassay group who had worked at Theranos for more than seven years, also quit.

The resignations infuriated Elizabeth and Sunny. The following day, they summoned the staff for an all-hands meeting in the cafeteria. Copies of The Alchemist, Paulo Coelho’s famous novel about an Andalusian shepherd boy who finds his destiny by going on a journey to Egypt, had been placed on every chair. Still visibly angry, Elizabeth told the gathered employees that she was building a religion. If there were any among them who didn’t believe, they should leave. Sunny put it more bluntly: anyone not prepared to show complete devotion and unmitigated loyalty to the company should “get the fuck out.”

For a heretofore unknown startup, coverage this flattering in one of the country’s most prominent and respected publications was a major coup. What had made it possible was Elizabeth’s close relationship with George Shultz— a connection she’d made two years earlier and carefully cultivated. Shultz was credited with winning the Cold War and he remained a revered and influential figure in Republican circles despite his advancing age (he was ninety-two). And Elizabeth’s message of bringing disruption to an old and inefficient industry was bound to play well with the Journal editorial page’s pro-business, anti-regulation ethos.

A few weeks later, on the afternoon of September 9, 2013, Mike received an email from Don with the subject line “Theranos-time sensitive” that contained more details. The email, which went out to people who like Mike had previously invested in Don’s funds, provided links to the Wall Street Journal article and to the Theranos press release from that morning. The Lucas Venture Group, it said, had been “invited” to invest up to $15 million in Theranos. The discounted price Elizabeth was offering the firm valued the company at $6 billion. Mike took a deep breath. That was a huge valuation. He couldn’t help but be annoyed with Don. When his friend had brushed aside his suggestion that they invest seven years before, Theranos had been valued around $40 million, he remembered ruefully.

Granted, the company seemed like a much surer bet now. Don’s email said Theranos had signed contracts and partnerships with very large retailers and drug stores as well as various pharmaceutical companies, HMO’s, insurance agencies, hospitals, clinics and various government agencies.” It also said the company had been “cash flow positive “ since 2006. Mike and ten of his family members had pooled their money together in a limited liability company so they could invest in these types of venture deals. After conferring with them, he decided to pull the trigger on the investment and sent Don $790,000. Dozens of other Lucas Venture Group investors, known in industry parlance as “limited partners,” did the same, cutting checks of varying amounts. They ranged from Robert Colman, a cofounder of the defunct San Francisco investment bank Robertson Stephens & Co., to a retired Palo Alto psychotherapist.

BY THE FALL of 2013, money was flowing into the Valley ecosystem at such a dizzying pace that a new term was coined to describe the new breed of startups it was spawning. In an article published on the technology news website TechCrunch on November 2, 2013, a venture capitalist named Aileen Lee wrote about the proliferation of startups valued at $1 billion or more. She called them “unicorns.” Despite their moniker, these tech unicorns were no myth: by Lee’s count, there were thirty-nine of them—a number that would soon soar past one hundred.

Instead of rushing to the stock market like their dot-com predecessors had in the late 1990s, the unicorns were able to raise staggering amounts of money privately and thus avoid the close scrutiny that came with going public. The poster child of the unicorns was Uber, the ride-hailing smartphone app cofounded by the hard-charging engineer Travis Kalanick. A few weeks before Elizabeth’s Journal interview, Uber had raised $361 million at a valuation of $3.5 billion. There was also Spotify, the music streaming service that in November 2013 raised $250 million at a price per share that valued the whole company at $4 billion. These companies valuations would keep rising over the next few years, but for now they had been leapfrogged by Theranos. And the gap was about to get bigger.

The Journal article caught the attention of Christopher James and Brian Grossman, two seasoned investment professionals who ran a hedge fund based in San Francisco called Partner Fund Management. With about $4 billion in assets, Partner Fund had a successful track record, having notched up average annual returns of nearly 10 percent since James had founded it in 2004. Part of that success could be credited to its large health-care portfolio, which was overseen by Grossman. After they reached out to her, Elizabeth invited James and Grossman over for a meeting on December 15, 2013. When they arrived at Theranos’s headquarters, a sprawling beige structure built into the side of a hill a stone’s throw from the Stanford campus, the first thing they both noticed was the heavy security. There were multiple guards at the entrance and they had to sign nondisclosure agreements just to be allowed into the building. Once inside, guards escorted them everywhere, even to the bathroom. Parts of the building couldn’t be accessed without special key cards and were off-limits to them.

Elizabeth and Sunny had always been security conscious, but their level of paranoia had reached a new peak with the launch in Walgreens stores. They had convinced themselves that Quest and LabCorp viewed Theranos as a mortal threat to their cozy oligopoly and that they would try to quash their new competitor by any means available. There was also the matter of the promise John Fuisz had made in his deposition to “fuck with” Elizabeth until she died. She took that threat very seriously. Following his retirement from the military earlier that year, James Mattis had joined the Theranos board and, on his recommendation, Elizabeth had hired Jim Rivera, the head of his Pentagon security detail. Rivera was a grizzled pro who had protected Mattis during his frequent trips to Iraq and Afghanistan. He wore a gun holstered under his jacket or around his ankle at all times and led a team of a half dozen guards who were dressed in black suits and wore earpieces.

During that first meeting, Elizabeth and Sunny told their guests that Theranos’s proprietary finger-stick technology could perform blood tests covering 1,000 of the 1,300 codes laboratories used to bill Medicare and private health insurers, according to a lawsuit Partner Fund later filed against the company. At a second meeting three weeks later, they showed them a PowerPoint presentation containing scatter plots purporting to compare test data from Theranos’s proprietary analyzers to data from conventional lab machines. Each plot showed data points tightly clustered around a straight line that rose up diagonally from the horizontal x-axis. This indicated that Theranos’s test results were almost perfectly correlated with those of the conventional machines. In other words, its technology was as accurate as traditional testing. The rub was that much of the data in the charts wasn’t from the miniLab or even from the Edison. It was from other commercial blood analyzers Theranos had purchased, including one manufactured by a company located an hour north of Palo Alto called Bio-Rad.

Sunny also told James and Grossman that Theranos had developed about three hundred different blood tests, ranging from commonly ordered tests to measure glucose, electrolytes, and kidney function to more esoteric cancer-detection tests. Sunny and Elizabeth’s boldest claim was that the Theranos system was capable of running seventy different blood tests simultaneously on a single finger-stick sample and that it would soon be able to run even more. The ability to perform so many tests on just a drop or two of blood was something of a Holy Grail in the field of microfluidics. Thousands of researchers around the world in universities and industry had been pursuing this goal for more than two decades.

Besides Theranos’s supposed scientific accomplishments, what helped win James and Grossman over was its board of directors. In addition to Shultz and Mattis, it now included former secretary of state Henry Kissinger, former secretary of defense William Perry, former Senate Arms Services Committee chairman Sam Nunn, and former navy admiral Gary Roughead. These were men with sterling, larger-than-life reputations who gave Theranos a stamp of legitimacy. The common denominator between all of them was that, like Shultz, they were fellows at the Hoover Institution. After befriending Shultz, Elizabeth had methodically cultivated each one of them and offered them board seats in exchange for grants of stock. The presence of these former cabinet members, congressmen, and military officials on the board also lent credence to Elizabeth and Sunny’s assertions that Theranos’s devices were being used in the field by the U.S. military. James and Grossman thought that Theranos’s finger-stick offerings in Walgreens and Safeway stores were likely to be a hit with consumers and to capture a large share of the U.S. blood-testing market. A contract with the Department of Defense would add another big source of revenues.

A spreadsheet with financial projections Sunny sent the hedge fund executives supported this notion. It forecast gross profits of $165 million on revenues of $261 million in 2014 and gross profits of $1.08 billion on revenues of $1.68 billion in 2015. Little did they know that Sunny had fabricated these numbers from whole cloth. Theranos hadn’t had a real chief financial officer since Elizabeth had fired Henry Mosley in 2006. The closest thing the company had to one was a corporate controller named Danise Yam. Six weeks after Sunny sent Partner Fund his projections, Yam sent very different ones to an advisory firm called Aranca for the purpose of pricing stock options for employees. Yam forecast a profit of $35 million in 2014 and of $100 million in 2015 ($130 million and $980 million less, respectively, than what Sunny projected to Partner Fund). The gap in revenues was even bigger: she predicted revenues of $50 million in 2014 and of $134 million in 2015 ($211 million and $1.55 billion less than the projections given to Partner Fund). As it would turn out, even Yam’s numbers were wildly optimistic.

James and Grossman of course had no way of knowing that Theranos’s internal projections were five-to twelvefold lower than the ones they were shown. It didn’t occur to them that anything untoward could be going on at a company with such a prestigious board. Not to mention the fact that this board had a special adviser named David Boies who attended all of its meetings. With one of the country’s top lawyers keeping watch, what could possibly go wrong? On February 4, 2014, Partner Fund purchased 5,655,294 Theranos shares at a price of $17 a share—$2 a share more than the Lucas Venture Group had paid just four months earlier. The investment brought in another $96 million to Theranos’s coffers and valued it at a stunning $9 billion. This meant that Elizabeth, who owned slightly more than half of the company, now had a net worth of almost $5 billion.

Standing in the middle of a crowd of his new colleagues in the cafeteria of the old Facebook building, Tyler Shultz listened to an emotional speech Elizabeth was giving. She was talking about her uncle’s premature death from cancer and how an early warning from Theranos’s blood tests could have prevented it. That was what she had spent the past ten years tirelessly working toward, she said teary-eyed, her voice catching: a world in which no one would have to say goodbye to a loved one too soon. Tyler found the message deeply inspiring. He had started working at Theranos less than a week earlier, after graduating from Stanford the previous spring and taking the summer off to backpack around Europe. There had been a lot to absorb in the space of a few days, not least of which was the news Elizabeth had called this all-employee meeting to announce: the company was going live with its technology in Walgreens stores.

THE FIRST THING that dampened Tyler’s enthusiasm for working at Theranos was seeing the inside of an Edison. During his internship the previous summer, he hadn’t been allowed near one, so his anticipation was high when a Chinese scientist named Ran Hu showed him one of the machines with its black-and-white case removed. Standing next to Tyler was Aruna Ayer, his supervisor. Aruna was just as curious as he was: in her previous role as head of the protein engineering group, she had never seen an Edison either. As Ran did a quick demonstration, Tyler and Aruna weren’t sure what to think. The device seemed to consist of nothing more than a pipette fastened to a robotic arm that moved back and forth on a gantry. Both had envisioned some sort of sophisticated microfluidic system. But this seemed like something a middle-schooler could build in his garage.

Under the protocol Sunny and Daniel had established, the way Theranos generated a result from the Edisons was unorthodox to say the least. First, the little finger-stick samples were diluted with the Tecan liquid handler and split into three parts. Then the three diluted parts were tested on three different Edisons. Each device had two pipette tips that dropped down into the diluted blood, generating two values. So together, the three devices produced six values. The final result was obtained by taking the median of those six values.

Following this protocol, Erika had tested two quality-control samples across three devices, generating six values during each run for a total of twelve values. Without bothering to explain her rationale to Erika, Do deleted two of those twelve values, declaring them outliers. She then went ahead and tested the patient sample and sent out a result. This wasn’t how you were supposed to handle repeat quality-control failures. Normally, two such failures in a row would have been cause to take the devices off-line and recalibrate them. Moreover, Do wasn’t even authorized to be in the clinical lab. Unlike Erika, she didn’t have a CLS license and had no standing to process patient samples. The episode left Erika shaken.

Elizabeth and Sunny had decided to make Phoenix their main launch market, drawn by Arizona’s pro-business reputation and its large number of uninsured patients, who they believed would be especially receptive to the low prices Theranos offered. So, in addition to its one Palo Alto location, the company had just opened two wellness centers in Walgreens stores in the Phoenix area, with plans for several dozen more. Elizabeth planned to open a second lab in Phoenix, but for now the finger-stick samples collected in the Arizona stores were being FedExed back to Palo Alto for testing. The arrangement was far from ideal: the nanotainers were shipped in coolers, but the coolers heated up when they sat baking in the sun for hours on the airport tarmac. This caused the blood in the little tubes to clot.

Daniel may have technically been correct, but Tyler had put his finger on a central weakness of the Edison device: its pipette tips were terribly imprecise. Generating six measurements during each test and then selecting the median was a way to correct for that imprecision. If the tips had been reliable in the first place, there would have been no need for such contortions.

All clinical laboratories must submit three times a year to something called “proficiency testing,” an exercise designed to ferret out labs whose testing isn’t accurate. Accredited bodies like the College of American Pathologists send laboratories samples of preserved blood plasma and ask them to test them for various analytes. During its first two years of operation, the Theranos lab had always tested proficiency-testing samples on commercial analyzers. But since it was now using the Edisons for some patient tests, Alan Beam and his new lab codirector had been curious to see how the devices fared in the exercise. Beam and the new codirector, Mark Pandori, had ordered Erika and other lab associates to split the proficiency-testing samples and run one part on the Edisons and the other part on the lab’s Siemens and DiaSorin analyzers for comparison. The Edison results had differed markedly from the Siemens and DiaSorin ones, especially for vitamin D.

Tyler had looked up the CLIA regulations and they seemed to bear that out: they stated that proficiency-testing samples must be tested and analyzed “in the same manner” as patient specimens “using the laboratory’s routine methods.” Theranos tested patient samples for vitamin D, PSA, and the two thyroid hormones on the Edisons, so it followed that the proficiency-testing results for those four analytes should have come from the Edisons. Tyler told Daniel he didn’t see how what Theranos had done could be legal. Daniel’s response followed a tortuous logic. He said a laboratory’s proficiency-testing results were assessed by comparing them to its peers results, which wasn’t possible in Theranos’s case because its technology was unique and had no peer group. As a result, the only way to do an apples-to-apples comparison was by using the same conventional methods as other laboratories. Besides, proficiency-testing rules were extremely complicated, he argued. Tyler could rest assured that no laws had been broken. Tyler didn’t buy it.

Tyler had reached out to the New York health department because it ran one of the proficiency-testing programs Theranos had participated in. He still suspected that the way the company conducted proficiency testing was improper and he wanted an expert opinion. After exchanging a few emails with Shulman, Tyler had his answer. In response to a description he gave her of Theranos’s practices, she wrote back that they amounted to “a form of PT cheating” and were “in violation of the state and federal requirements.” Shulman gave Tyler two options: he could give her the name of the offending laboratory, or he could file an anonymous complaint with New York State’s Laboratory Investigative Unit. He chose to do the latter.

Tyler thought he might be getting through this time, but he wasn’t sure. The old man was hard to read. His years as a senior member of the president’s cabinet, facing down threats like the Soviet Union at the height of the Cold War, had made him a cipher. He absorbed information but rarely volunteered any. They agreed to meet again for dinner that evening at his grandfather’s house. As they parted, George told Tyler, “They’re trying to convince me that you’re stupid. They can’t convince me that you’re stupid. They can, however, convince me that you’re wrong and in this case I do believe that you’re wrong.”

Giving patients inaccurate vitamin D results was one thing, but the stakes got a lot higher when you were testing for infectious diseases. Tyler had noticed how much he doted on Elizabeth. His relationship with her seemed closer than their own. Tyler also knew that his grandfather was passionate about science. Scientific progress would make the world a better place and save it from such perils as pandemics and climate change, he often told his grandson. This passion seemed to make him unable to let go of the promise of Theranos.

The next morning, Erika quit too. She wrote up a short resignation letter and gave it to Mark Pandori to pass on to Elizabeth and Sunny. It said she disagreed with running patient samples on the Edisons and that she didn’t think she and the company shared “the same standards in patient care and quality.” Mona made Erika sign a new confidentiality agreement and warned her against writing anything about Theranos on Facebook, LinkedIn, or any other forum. “We have ways of tracking that,” she said. “We’ll see it if you post anything anywhere.”

Richard and Joe Fuisz sat warily across from David Boies and one of his partners at a table in the lobby lounge of San Jose’s Fairmont hotel. Joe feared his brother John’s upcoming testimony might turn into another liability. The death of Ian Gibbons had also been a big setback. It briefly looked like they might be able to make up for it by calling his widow, Rochelle, as a witness. After Richard managed to make contact with her, Rochelle told him that Elizabeth had tried to bully Ian into not testifying and that Ian thought she was dishonest. But the judge overseeing the case had denied the Fuiszes late motion to call Rochelle to the stand.

Boies knew John had a bad temper and would no doubt find ways to press his buttons in front of the jury. He had already brought up the fact that John had threatened Elizabeth during his deposition. When he added it all up in his mind, Joe knew they were in trouble. And with a courtroom defeat looking like a very real possibility, he was haunted by a terrifying thought: What if they not only lost, but the judge made them cover Theranos’s legal expenses? He shivered to think how much money their opponent was spending on the case. He worried it might be enough to bankrupt him and his father both. They had already spent more than $2 million on their defense. It didn’t take long for an agreement to take shape: the Fuiszes would withdraw their patent in exchange for Theranos withdrawing its suit. No money would change hands; each party would remain responsible for its legal costs. It amounted to a complete capitulation on the Fuiszes part. Elizabeth had won.

The story on Wired magazine disclosed Theranos’s valuation for the first time as well as the fact that Elizabeth owned more than half of the company. There was also the now-familiar comparison to Steve Jobs and Bill Gates. This time it came not from George Shultz but from her old Stanford professor Channing Robertson. (Had Parloff read Robertson’s testimony in the Fuisz trial, he would have learned that Theranos was paying him $500,000 a year, ostensibly as a consultant.) Parloff also included a passage about Elizabeth’s phobia of needles— a detail that would be repeated over and over in the ensuing flurry of coverage his story unleashed and become central to her myth.

There was something unusual in the way Elizabeth embraced the limelight. She behaved more like a movie star than an entrepreneur, basking in the public adulation she was receiving. Each week brought a new media interview or conference appearance. Other well-known startup founders gave interviews and made public appearances too but with nowhere near the same frequency. The image of the reclusive, ascetic young woman Parloff had been sold on had overnight given way to that of the ubiquitous celebrity.

Elizabeth was also quick to embrace the trappings of fame. The Theranos security team grew to twenty people. Two bodyguards now drove her around in a black Audi A8 sedan. Their code name for her was “Eagle One.” (Sunny was “Eagle Two.”) The Audi had no license plates— another nod to Steve Jobs, who used to lease a new Mercedes every six months to avoid having plates. Elizabeth also had a personal chef who prepared her salads and green vegetable juices made of cucumber, parsley, kale, spinach, lettuce, and celery. And when she had to fly somewhere, it was in a private Gulfstream jet.

In September 2014, three months after the Fortune cover story, she made that message more poignant during a speech at the TEDMED conference in San Francisco by adding a personal dimension to it: for the first time, she told the story in public of her uncle who had died of cancer”the same story Tyler Shultz had found so inspiring when he’d started working at Theranos. It was true that Elizabeth’s uncle, Ron Dietz, had died eighteen months earlier from skin cancer that had metastasized and spread to his brain. But what she omitted to disclose was that she had never been close to him. To family members who knew the reality of their relationship, using his death to promote her company felt phony and exploitative. Of course, no one in the audience at San Francisco’s Palace of Fine Arts knew this. Most of the one thousand spectators in attendance found her performance mesmerizing.

One of the people watching from a seat halfway up the auditorium was Patrick O’Neill, whom Elizabeth had hired away from TBWA\Chiat\Day and appointed Theranos’s chief creative officer. Patrick had become instrumental in honing Elizabeth’s image and raising her profile. He had helped her prepare for the conference and before that had worked with Fortune’s photographer on the magazine’s cover shoot. Patrick wasn’t just Elizabeth’s style and decor consultant. He also spearheaded a big marketing push Theranos was making in Arizona, where its wellness centers had expanded to forty Walgreens stores. He hired Errol Morris, an Academy Award—winning documentary filmmaker who moonlighted as a producer and director of commercials, to make video ads the company ran on TV stations in the Phoenix area and on its website and YouTube channel. One of the spots was a close-up of Elizabeth in her customary black turtleneck staring into the camera and talking about what she called people’s “basic human right” to access their own health information through blood tests. Her eyes looked so big and she spoke so slowly and deliberately that the video had a hypnotic quality to it.

Elizabeth loved to throw company parties. And none more so than the one she organized every year for Halloween. It was a Theranos tradition for which no expense was spared. The company’s senior executives all played along. Sunny was dressed as an Arab sheik. Daniel Young was Walter White, the high school chemistry teacher turned drug dealer from the show Breaking Bad. Christian Holmes and the Frat Pack were characters from Quentin Tarantino’s Kill Bill movies.

Alan felt like a pawn in a dangerous game being played with patients, investors, and regulators. At one point, he’d had to talk Sunny and Elizabeth out of running HIV tests on diluted finger-stick samples. Unreliable potassium and cholesterol results were bad enough. False HIV results would have been disastrous.

Alan was reaching his own breaking point. A few weeks earlier, he’d started forwarding dozens of work emails to his personal Gmail account. He knew forwarding the emails was a risky move because the company monitored everything, but he wanted to keep a record of the concerns he’d repeatedly raised with Sunny and Elizabeth. He’d gone a step further two days earlier and called a law firm in Washington, D.C., that specialized in representing corporate whistleblowers, but the person who answered the phone was a “client services specialist.” He opted to keep the reason for his call vague, wanting to speak only to an attorney. He did send them one of his email exchanges with Sunny, but he worried it was hard to understand without additional context and a good understanding of how clinical laboratories operate.

Alan read the bold heading at the top: “AFFIDAVIT OF ALAN BEAM.” It stated, under penalty of perjury under the laws of California, that he promised to never disclose any proprietary or confidential information learned during his employment at the company. And it included this line: “I do not have any electronic or hard copy information relating to Theranos in my possession in any location including personal email accounts, any personal laptops or desktops, trash/deleted folders, USB drives, home, car, or any other location.” Before Alan had time to finish reading, he heard Sunny say in an icy tone, “We know you sent yourself a bunch of work emails. You have to let Mona access your Gmail account so that she can go through them and delete them.”

Over the next few days, the messages piled up in his voicemail box. Some were from Sunny, others from Mona. They all said the same thing, in increasingly threatening tones: he needed to come back to the office, let Mona delete the emails from his personal email account, and sign the affidavit. Or else the company would sue him. As his new lawyer saw it, Alan didn’t have much of a choice. Theranos could make a case that his actions did breach his confidential obligations. And even if it failed to do so, it could tie him up in court for months, if not years. This was one of the most valuable private companies in Silicon Valley, one of the fabled unicorns. Its financial resources were virtually limitless. The litigation could bankrupt him. Did he really want to take that risk?

The New Yorker article did strike some skeptical notes. It included quotes from a senior scientist at Quest who said he didn’t think finger-stick blood tests could be reliable, and it noted Theranos’s lack of published, peer-reviewed data. Among the arguments she marshaled to rebut the latter point, Elizabeth cited a paper she had coauthored in a medical journal called Hematology Reports. Clapper had never heard of Hematology Reports before, so he looked into it. He learned that it was an online-only publication based in Italy that charged scientists who wanted to publish in it a five-hundred-dollar fee. He then looked up the paper Holmes had coauthored and was shocked to see that it included data for just one blood test from a grand total of six patients.

Clapper agreed that this changed everything. The story now had legs. But he decided he couldn’t take it on himself. For one thing, he couldn’t shoulder the legal liability of going up against a $9 billion Silicon Valley company with a litigious track record that was represented by David Boies. For another, he was just an amateur blogger. He didn’t have the journalistic know-how to tackle something like this. Not to mention the fact that he had a full-time medical practice to tend to. This, he thought, was a job for an investigative reporter. In the three years since he’d launched Pathology Blawg, Clapper had spoken to several about lab-industry abuses. There was one in particular who came to mind. He worked for the Wall Street Journal.

My phone rang. It was Adam from Pathology Blawg. I’d sought his help eight months earlier when I was trying to understand the complexities of laboratory billing for one of my stories in the Medicare series. He’d patiently explained to me what lab procedures certain billing codes corresponded to—knowledge I’d later used to expose a scam at a big operator of cancer treatment centers. People often come to journalists with tips. Nine times out of ten, they don’t pan out, but I always took the time to listen. You never knew. Besides, at this particular moment, I was like a dog without a bone. I needed a new bone to chew on.

Now that he mentioned it, there were some things I’d read in that article that I’d found suspect. The lack of any peer-reviewed data to back up the company’s scientific claims was one of them. I’d reported about health-care issues for the better part of a decade and couldn’t think of any serious advances in medicine that hadn’t been subject to peer review. I’d also been struck by a brief description Holmes had given of the way her secret blood-testing devices worked: A chemistry is performed so that a chemical reaction occurs and generates a signal from the chemical interaction with the sample, which is translated into a result, which is then reviewed by certified laboratory personnel.

I found it hard to believe that a college dropout with just two semesters of chemical engineering courses under her belt had pioneered cutting-edge new science. Sure, Mark Zuckerberg had learned to code on his father’s computer when he was ten, but medicine was different: it wasn’t something you could teach yourself in the basement of your house. You needed years of formal training and decades of research to add value. There was a reason many Nobel laureates in medicine were in their sixties when their achievements were recognized.

Two weeks after our initial conversation, Adam put me in touch with Richard and Joe Fuisz, Phyllis Gardner, and Rochelle Gibbons. It was disappointing at first to hear that the Fuiszes had been involved in litigation with Theranos. Even if they insisted they’d been wrongly accused, the lawsuit gave them a big ax to grind and made them useless as sources.

It took me a while to understand the dilution part. Why would they do that and why was it bad? I asked. Alan explained that it was to make up for the fact that the Edison could only do a category of tests known as immunoassays. Theranos didn’t want people to know its technology was limited, so it had contrived a way of running small finger-stick samples on conventional machines. This involved diluting the finger-stick samples to make them bigger. The problem, he said, was that when you diluted the samples, you lowered the concentration of analytes in the blood to a level the conventional machines could no longer measure accurately.

Alan also said that Holmes was evangelical about revolutionizing blood testing but that her knowledge base in science and medicine was poor, confirming my instincts. He said she wasn’t the one running Theranos day-to-day. A man named Sunny Balwani was. Alan didn’t mince his words about Balwani: he was a dishonest bully who managed through intimidation. Then he dropped another bombshell: Holmes and Balwani were romantically involved. I knew from reading the New Yorker and Fortune articles and from browsing the Theranos website that Balwani was the company’s president and chief operating officer. If what Alan was saying was true, this added a new twist: Silicon Valley’s first female billionaire tech founder was sleeping with her number-two executive, who was nearly twenty years her senior.

Alan was worried that he would be held personally responsible if there was ever a government investigation. To protect himself, he told me he’d forwarded dozens of his email exchanges with Balwani to his personal email account. But Theranos had found that out and threatened to sue him for breaching his confidentiality agreement. What worried him even more than any personal liability he might face was the potential harm patients were being exposed to. He described the two nightmare scenarios false blood-test results could lead to. A false positive might cause a patient to have an unnecessary medical procedure. But a false negative was worse: a patient with a serious condition that went undiagnosed could die.

Diluting finger-stick samples and running them on Siemens machines was supposed to be a temporary solution, but it had become a permanent one because the 4S had turned into a fiasco. It was all beginning to make sense: Holmes and her company had overpromised and then cut corners when they couldn’t deliver. It was one thing to do that with software or a smartphone app, but doing it with a medical product that people relied on to make health decisions was unconscionable.

One former high-ranking lab employee did agree to talk to me but only off the record. This was an important journalistic distinction: Alan and the other two former employees had agreed to speak to me on deep background, which meant I could use what they told me while keeping their identities confidential. Off the record meant I couldn’t make any use of the information. The conversation was nonetheless helpful because this source confirmed a lot of what Alan had told me, giving me the confidence to forge on. He summed up what was going on at the company with an analogy: “The way Theranos is operating is like trying to build a bus while you’re driving the bus. Someone is going to get killed.”

Alan had mentioned a nurse in Arizona named Carmen Washington who worked at a clinic owned by Walgreens and had complained about Theranos’s blood tests. After trying to track her down for several weeks, I finally got her on the phone. She told me three of her patients had received questionable results from the company. One was a sixteen-year-old girl with a sky-high potassium result that suggested she was at risk of a heart attack. The result hadn’t made sense given that she was a teenager and in good health, Carmen said. Two other patients had received results showing abnormally high levels of thyroid-stimulating hormone, or TSH. Carmen had called them back in to the clinic and redrawn their blood. The second time, their results had come back abnormally low. After that, Carmen had lost faith in Theranos’s finger-stick tests. These incidents tracked with Alan’s claims. TSH was one of the immunoassays Theranos performed on the Edison that had failed proficiency testing.

I had dropped Tyler Shultz a note through LinkedIn’s InMail messaging feature after noticing that he had viewed my profile on the site. I figured he must have heard from other former employees that I was poking around. It had been more than a month since I’d made the overture and I was losing hope that he would reply when my phone rang. It was Tyler and he seemed eager to talk. However, he was extremely worried that Theranos would come after him. He was calling me from a burner phone that couldn’t be traced back to him. After I agreed to grant him confidentiality, he told me in broad strokes the story of his eight months at the company. Tyler’s motivation for talking to me was twofold. Like Alan, he was worried about patients getting inaccurate test results. He was also concerned for his grandfather’s reputation. Although he felt certain Theranos would eventually be exposed, he wanted to hasten the process to give his grandfather the chance to clear his name. George Shultz was ninety-four and might not be around all that much longer. On his way out the door, Tyler had printed his email to Holmes and Balwani’s response and smuggled them out under his shirt. He also still had the emails he’d exchanged with the New York State Health Department about proficiency testing. This was music to my ears. I asked him to send me everything, which he promptly did.

I NEEDED TO PROVE that the company was producing inaccurate blood-test results. I had another lead, though, after scanning Yelp to see if anyone had complained about a bad experience with Theranos. Sure enough, a woman who appeared to be a doctor and went by Natalie M. had. Yelp has a feature that allows you to send messages to reviewers, so I sent her a note with my contact information. She called me the next day. Natalie M’s real name was Nicole Sundene. She was a family practitioner in the Phoenix suburb of Fountain Hills and she was very unhappy with Theranos. The previous fall, she had sent one of her patients to the emergency room because of a frightening lab report from the company only to find out it was a false alarm.

Dr. Sundene’s patient, Maureen Glunz, agreed to meet at a Starbucks near her home. A petite woman in her mid-fifties, she was Exhibit A for one of the two scenarios Alan Beam worried about. The lab report she’d received from Theranos had shown abnormally elevated results for calcium, protein, glucose, and three liver enzymes. Since she had complained of ringing in her ear (later determined to be caused by lack of sleep), Dr. Sundene had worried she might be on the cusp of a stroke and sent her straight to the hospital. Glunz had spent four hours in the emergency room on the eve of Thanksgiving while doctors ran a battery of tests on her, including a CT scan. She’d been discharged after a new set of blood tests performed by the hospital’s lab came back normal. That hadn’t been the end of it, however. As a precaution, she’d undergone two MRIs during the ensuing week. She said she’d finally stopped worrying when those had come back normal too. Glunz’s case was compelling because it showed both the emotional and the financial toll of a health scare brought on by inaccurate results. As an independent real estate broker, she was self-insured and had a health plan with a high deductible. The ER visit and subsequent MRIs had cost three thousand dollars—a sum she’d had to pay out of her own pocket.

I had planned on contacting the company as soon as I got back to New York. At the Journal, we had a cardinal rule called “No surprises.” We never went to press with a story without informing the story subject of every single piece of information we had gathered in our reporting and giving them ample time and opportunity to address and rebut everything.

Tyler and Erika were both very young and had been junior employees at Theranos, but I found them credible as sources because so much of what they told me corroborated what Alan Beam had said. I was also impressed by their sense of ethics. They felt strongly that what they had witnessed was wrong and were willing to take the risk of speaking to me to right that wrong.

I next met up with Phyllis Gardner, the Stanford medical school professor Holmes had consulted about her original patch idea when she’d dropped out of college twelve years earlier. Phyllis gave me a tour of the Stanford campus and its surroundings. As we drove around in her car, I was struck by how small and insular Palo Alto was. Phyllis’s home was just down the hill from George Shultz’s big shingled house, and both were on land owned by Stanford. When Phyllis walked her dog, she sometimes ran into Channing Robertson. The Hoover Institution building where George Shultz and the other Theranos board members had offices was right in the middle of the campus. The new Theranos headquarters on Page Mill Road was less than two miles away on land that was also owned by Stanford. In a strange twist, Phyllis told me the site used to be a Wall Street Journal printing plant.

“Have you been speaking to an investigative journalist about Theranos?” his father asked accusingly.

“Yes,” Tyler responded.

“Are you kidding me? How stupid could you be? Well, they know.”

Tyler learned that his grandfather had just called to say that Theranos was aware he was in contact with Wall Street Journal reporter. If he wanted to get out of what George had described as “a world of trouble,” he would need to meet with the company’s lawyers the next day to sign something.

The lawyers handed him three documents: a temporary restraining order, a notice to appear in court two days later, and a letter stating Theranos had reason to believe Tyler had violated his confidentiality obligations and was prepared to file suit against him.

Tyler placed the call from the backyard. He quickly explained the situation to Anders. Still digesting all the information, the lawyer asked who was representing Theranos. Tyler had the letter threatening to sue him that Brille had given him the night before in his hand. He told Anders it was signed by a “David Boy-zee,” mispronouncing the famous lawyer’s last name.

“Holy shit! Do you know who that is?”

Boies was one of the most powerful and prominent lawyers in America, Anders explained. This was a serious situation, he said. He recommended that Tyler come see him at his office in San Francisco that afternoon. Brille let it be known that if Tyler didn’t sign the affidavit and name the Journal’s sources, the firm would make sure to bankrupt his entire family when it took him to court. Tyler also received a tip that he was being surveilled by private investigators. His lawyer tried to make light of it.

One evening, Tyler’s parents received a call from his grandfather. George said Holmes had told him that Tyler was responsible for most of the information the Journal had and was being completely unreasonable. Tyler’s parents sat him down in their kitchen and pleaded with him to sign whatever Theranos wanted him to sign at the next opportunity. Otherwise, they would have to sell their house to pay for his legal costs. It wasn’t that simple, Tyler replied, unable to say much more. He badly wanted to explain to them what was going on, but he was under instructions not to discuss the negotiations with Theranos with anyone.

To allow Tyler to update his parents about where things stood, he arranged for them to have their own legal counsel. That way he could communicate with them through attorneys and those conversations would be protected by attorney-client privilege. This led to an incident that rattled both Tyler and his parents. Hours after his parents new lawyer met with them for the first time, her car was broken into and a briefcase containing her notes from the meeting was stolen. Although it could have been a random act of theft, Tyler couldn’t shake his suspicion that Theranos had something to do with it.

The Theranos delegation that came to the Journal’s offices was made up mostly of lawyers. Leading the pack was David Boies. He was flanked by Mike Brille, Meredith Dearborn, and Heather King, a former Boies Schiller partner and Hillary Clinton aide who had become Theranos’s general counsel less than two months earlier. Rounding out the group were Matthew Traub and Peter Fritsch, a former Journal reporter who was the cofounder of an opposition research firm in Washington, D.C. The lone Theranos executive was Daniel Young.

It seems apparent to us that certainly one of your key sources is a young man named Tyler Shultz. She looked straight at me as she said it in what was clearly a rehearsed opening salvo to try to fluster me. I kept my poker face on and said nothing. They could suspect Tyler all they wanted, but I wasn’t about to betray his confidence and give them the confirmation they were fishing for. She continued by denigrating Tyler as young and unqualified and then asserting that my other sources were disgruntled former employees who were equally unreliable.

Boies replied that they were trying to be helpful but that they would not reveal what methods Theranos employed unless we signed nondisclosure agreements. Those were secrets Quest and LabCorp were desperately trying to find out by any means possible, including industrial espionage, he claimed.

“It just feels like you want us to give you the formula for Coke in order to convince you that it doesn’t contain arsenic,” King said. “Nobody’s asked for the formula for Coke!” Jay replied, annoyed.

More arguing ensued over the issue of what legitimately constituted a trade secret. How could anything involving a commercial analyzer manufactured by a third party possibly be deemed a Theranos trade secret? I asked. Brille replied unconvincingly that the distinction wasn’t as simple as I made it out to be.

We continued going around in circles, never getting a straight answer about how many tests Theranos performed on the Edison versus commercial analyzers. It was frustrating but also a sign that I was on the right track. They wouldn’t be stonewalling if they had nothing to hide.

When I brought up the Hematology Reports study Holmes had coauthored, Young immediately dismissed it as outdated. It had been conducted with older Theranos technology and its data were ancient, dating back to 2008, he said. Why then had Holmes cited it to The New Yorker? I wondered. It seemed Theranos was now distancing itself from it, probably because it was conscious of its flimsiness.

We have reason to believe that you have disclosed certain of the Company’s trade secrets and other confidential information without authorization. We also have reason to believe that you have done so in connection with making false and defamatory statements about the Company for the purpose of harming its business. You are directed to immediately cease and desist from these activities.

Erika seemed badly shaken. She told me about the man in the SUV, the address on the envelope, and the ultimatum from Boies. I tried to calm her down. Yes, it was highly likely she was under surveillance, I admitted. But I was sure that it had started only recently and that Theranos had no proof she was one of my sources. This was an attempt to smoke her out, I said. They were bluffing. I encouraged her to ignore the letter and to go about her business as usual. I could tell from her halting voice that she was still petrified, but she agreed to follow my advice.

Far from backing off, Theranos stepped it up a notch. Later that week, Boies sent the Journal a second letter. Unlike the first one, which was just two pages long, this one ran twenty-three pages and explicitly threatened a lawsuit if we published a story that defamed Theranos or disclosed any of its trade secrets. Much of the letter was a searing assault on my journalistic integrity. In the course of my reporting, I had “fallen far short of being fair, objective, or impartial” and instead appeared hell-bent on “producing a predetermined (and false) narrative,” Boies wrote.

Dr. Stewart emailed a few days later to let me know that Balwani and two other men had indeed come by to speak to her as soon as she’d gotten back to Arizona. The receptionist had told them she was busy with patients, but they had refused to leave and had stayed in the waiting room for hours until she finally came out to shake their hands. She told me Balwani had tried to make her sign a statement similar to the one her colleagues had signed, but she had politely refused. Furious, he had threatened to drag her reputation through the mud if she appeared in any Journal article about Theranos. Her voice trembling, she pleaded with me to no longer use her name. As I tried to reassure her that it was an empty threat, it dawned on me that there was nothing these people would stop at to make my story go away.

Theranos touted the herpes test approval as proof that its technology worked, but I remained deeply skeptical. In laboratory parlance, the herpes test was a qualitative test. Such tests provided simple yes-or-no answers to the question of whether a person had a certain disease. They were technically much easier to get right than quantitative tests designed to measure the precise amount of an analyte in the blood. Most routine blood tests were quantitative ones.

Part of the problem was that, three years after Holmes’s clash with the now-retired Lieutenant Colonel David Shoemaker, Theranos continued to operate in a regulatory no-man’s-land. By using its proprietary devices only within the walls of its own laboratory and not seeking to commercialize them, it was able to continue to avoid close FDA scrutiny. At the same time, it gave the appearance of cooperating with the agency by publicly supporting its drive to regulate laboratory-developed tests and voluntarily submitting some of its own LDTs, like the herpes test, to it for approval.

Balwani had tasked a Theranos software engineer named Michael Craig to write an application for the miniLab’s software that masked test malfunctions. When something went wrong inside the machine, the app kicked in and prevented an error message from appearing on the digital display. Instead, the screen showed the test’s progress slowing to a crawl.

In the absence of real validation data, Holmes used these demos to convince board members, prospective investors, and journalists that the miniLab was a finished, working product. Michael Craig’s app wasn’t the only subterfuge used to maintain the illusion. During demos at headquarters, employees would make a show of placing the finger-stick sample of a visiting VIP in the miniLab, wait until the visitor had left the room, and then take the sample out and bring it to a lab associate, who would run it on one of the modified commercial analyzers.

Not only was the lab leaderless but its morale was at rock bottom. Two months earlier, Balwani had terrorized its members after a scathing critique of Theranos appeared on Glassdoor, the website where current and former employees reviewed companies anonymously.

How to make money at Theranos:

1.Lie to venture capitalists

2.Lie to doctors, patients, FDA, CDC, government. While also committing highly unethical and immoral (and possibly illegal) acts.

Negative Glassdoor reviews about the company weren’t unusual. Balwani made sure they were balanced out by a steady flow of fake positive reviews he ordered members of the HR department to write. But this particular one had sent him into a rage. After getting Glassdoor to remove it, he’d launched a witch hunt in Newark, conducting interrogations of employees he suspected of having written it. He was so mean to one of them, a woman named Brooke Bivens, that he made her cry. He never found the culprit.

Holmes and Balwani wanted to impress the vice president with a vision of a cutting-edge, completely automated laboratory. So instead of showing him the actual lab, they created a fake one. They made the microbiology team vacate a third, smaller room, had it repainted, and lined its walls with rows of miniLabs stacked up on metal shelves. Since most of the miniLabs that had been built were in Palo Alto, they had to be transported back across the bay for the stunt. The members of the microbiology team weren’t sure why they were being moved at first, but they figured it out when a Secret Service advance team showed up a few days before Biden arrived.

A FEW DAYS LATER, on July 28, I opened that morning’s edition of the Journal and nearly spit out my coffee: as I was leafing through the paper’s first section, I stumbled across an op-ed written by Elizabeth Holmes crowing about Theranos’s herpes-test approval and calling for all lab tests to be reviewed by the FDA. She’d been denying me an interview for months, her lawyers had been stonewalling and threatening my sources, and here she was using my own newspaper’s opinion pages to perpetuate the myth that she was regulators best friend.

Alan Beam was coming under renewed pressure from Boies’s henchmen. They were threatening to report him for violations of HIPAA, the federal health privacy law, on the grounds that some of the emails he had forwarded to his Gmail account before resigning contained patient information. His new lawyer had to fend them off from London, where he was on vacation with his wife. Balwani was also beginning to harass some of the patients I had talked to, insisting that they get on the phone with him and giving them the third degree when they did.

la mattanza was an ancient Sicilian ritual in which fishermen waded into the Mediterranean Sea up to their waist with clubs and spears and then stood still for hours on end until the fish no longer noticed their presence and then attacked them with a spear. Eventually, when enough fish had gathered around them, someone gave an imperceptible signal and in a split second the scene went from preternatural quiet to gory bloodbath as the fishermen struck viciously at their unsuspecting quarry. What we were doing was the journalistic version of la mattanza, Mike said. We were patiently lying in wait until we were ready to publish and then, at some time of our choosing, we would strike. As he said this, he mimicked a Sicilian fisherman violently wielding his spear, which made me laugh. I told him that I was on board with the mattanza approach as long as the story ran before Holmes’s appearance at the Journal’s annual technology conference in Laguna Beach in October. I had recently gotten wind that she was on the conference’s list of guest speakers and felt that it would put the paper in an impossible position if my article hadn’t been published by then. Mike agreed. The conference was two and a half months away. That gave us ample time, he said.

In March, a month after I had started digging into the company, Theranos had closed another round of funding. Unbeknownst to me, the lead investor was Rupert Murdoch, the Australian-born media mogul who controlled the Journal’s parent company, News Corporation. Of the more than $430 million Theranos had raised in this last round, $125 million had come from Murdoch. That made him the company’s biggest investor.

Over a lunch served by the ranch’s staff, Holmes pitched Murdoch on an investment, emphasizing that she was looking for long-term investors. Don’t expect any quarterly reports for a while, she warned him, and certainly not an initial public offering. The investment packet that was later delivered to Murdoch’s Manhattan office reiterated that message. Its cover letter stated in the first paragraph that Theranos planned to remain private for the “long term” and went on to repeat those two words no fewer than fifteen times.

Murdoch was known to dabble in Silicon Valley startup investments. He’d been an early investor in Uber, turning a $150,000 bet into some $50 million. But unlike the big venture capital firms, he did no due diligence to speak of. The eighty-four-year-old mogul tended to just follow his gut, an approach that had served him well on his way to building one of the world’s biggest media and entertainment empires.

The investment packet she sent forecast $330 million in profits on revenues of $1 billion in 2015 and $505 million in profits on revenues of $2 billion in 2016. Those numbers made what was now a $10 billion valuation seem cheap. Murdoch also derived comfort from some of the other reputable investors he heard Theranos had lined up. They included Cox Enterprises, the Atlanta-based, family-owned conglomerate whose chairman, Jim Kennedy, he was friendly with, and the Waltons of Walmart fame. Other big-name investors he didn’t know about ranged from Bob Kraft, owner of the New England Patriots, to Mexican billionaire Carlos Slim and John Elkann, the Italian industrialist who controlled Fiat Chrysler Automobiles.

WHILE HOLMES TRIED unsuccessfully to sway the Journal’s owner, Theranos continued its scorched-earth campaign against my sources. In a last-ditch effort to prevent publication, Boies sent the Journal a third lengthy letter, reiterating his threat to sue the paper and dismissing my reporting as an elaborate fantasy concocted by a fertile mind. Holmes would later appear on Jim Cramerâ Mad Money program that evening to rebut the allegations.

The FDA had recently conducted a surprise inspection of Theranos’s facilities in Newark and Palo Alto. Dealing a severe blow to the company, the agency had declared its nanotainer an uncleared medical device and forbidden it from continuing to use it, he said. He explained that the FDA had targeted the little tube because, as a medical device, it clearly fell under its jurisdiction and gave it the most solid legal cover to take action against the company. But the underlying reason for the inspection had been the poor clinical data Theranos had submitted to the agency in an effort to get it to approve its tests. When the inspectors had failed to find any better data on-site, the decision had been made to shut down the company’s finger-stick testing by taking away the nanotainer, he said.

Dressed in her usual all-black attire and sporting a strained smile, she played the role of the visionary Silicon Valley innovator who was being smeared by entrenched interests trying to thwart progress. “This is what happens when you work to change things,” she said. “First they think you’e crazy, then they fight you, and then all of a sudden you change the world.” But, when Jim Cramer asked her about specific elements of the article, such as the company’s use of third-party analyzers for most of its tests, she turned defensive and gave evasive and misleading answers.

Many people had assumed she would back out of the paper’s WSJ D.Live conference the following week. But on the appointed day and at the appointed time, she appeared at the beachfront Montage hotel and resort in Laguna Beach with her platoon of guards and joined Jonathan Krim, the Journal’s technology editor, onstage. The audience of more than one hundred— a mixture of venture capitalists, startup founders, bankers, and public-relations executives who had paid five thousand dollars each to attend the three-day conference— buzzed in anticipation.

Holmes came out swinging almost from the start. That was no surprise: we had expected her to be combative. What we hadn’t fully anticipated was her willingness to tell bald-face lies in a public forum. Not just once, but again and again during the half-hour interview. In addition to continuing to insist that the nanotainer withdrawal had been voluntary, she said the Edison devices referred to in my stories were an old technology that Theranos hadn’t used in years. She also denied that the company had ever used commercial lab equipment for finger-stick tests. And she claimed that the way Theranos conducted proficiency testing was not only perfectly legal, it had the express blessing of regulators.

The biggest lie, to my mind, was her categorical denial that Theranos diluted finger-stick samples before running them on commercial machines. From there, Holmes turned her sights on the former employees who had spoken to me, calling them “confused” and seizing on their anonymity to discredit them. She claimed that one of them had worked at Theranos for only two months back in 2005, which was a complete fabrication. All our confidential sources had worked at the company in recent times.

In an interview with Wired, Boies suggested that a defamation suit was likely. “I think enough has now been put on the record so people are chargeable with being knowledgeable with what the facts are,” he told the magazine. Taking King and Boies at their words, the Journal’s legal department dispatched a technician to copy the contents of my laptop and phone in preparation for litigation.

In a windowless war room set up on the second floor of the Page Mill Road building in Palo Alto, Holmes and her communications consultants discussed strategies for how to hit back against my reporting. One approach she favored was to portray me as a misogynist. To generate further sympathy, she suggested she reveal publicly that she had been sexually assaulted as a student at Stanford. Her advisers counseled against going that route, but she didn’t abandon it entirely. In an interview with Bloomberg Businessweek, she suggested she was the victim of sexism. “Until what happened in the last four weeks, I didn’t understand what it means to be a woman in this space,” she told the magazine. Every article starting with, “A young woman.” Right? Someone came up to me the other day, and they were like, “I have never read an article about Mark Zuckerberg that starts with “A young man.”

In the same story, her old Stanford professor, Channing Robertson, dismissed questions about the accuracy of Theranos’s testing as absurd, saying the company would have to be “certifiable” to go to market with a product that people’s lives depended on knowing that it was unreliable. He also maintained that Holmes was a once-in-a-generation genius, comparing her to Newton, Einstein, Mozart, and Leonardo da Vinci.

ERIKA CHEUNG AND I had remained in sporadic contact after her parking lot scare in late June, but I didn’t know she’d gathered the courage to reach out to a federal regulator. When I first heard about the CMS inspection, I had no idea it had been triggered by her.

Theranos continued to minimize the seriousness of the situation. In a statement, it claimed to have already addressed many of the deficiencies and that the inspection findings didn’t reflect the current state of the Newark lab. It also claimed that the problems were confined to the way the lab was run and had no bearing on the soundness of its proprietary technology. It was impossible to disprove these claims without access to the inspection report. CMS usually made such documents public a few weeks after sending them to the offending laboratory, but Theranos was invoking trade secrets to demand that it be kept confidential. Getting my hands on that report became essential.

As the tug-of-war with Heather King over the inspection report dragged on, news surfaced that Holmes would be hosting a fund-raiser for Hillary Clinton’s presidential campaign at Theranos’s headquarters in Palo Alto. She had long cultivated a relationship with the Clintons, appearing at several Clinton Foundation events and forging a friendship with their daughter. The fund-raiser was later relocated to the home of a tech entrepreneur in San Francisco, but a photo from the event showed Holmes holding a microphone and speaking to the assembled guests with Chelsea Clinton at her side. With the election eight months away and Clinton considered the front-runner, it was a reminder of how politically connected Holmes was. Enough to make her regulatory problems go away? Anything seemed possible.

I called a longtime source of mine in the federal government who had access to it. The most he was willing to do was read some passages over the phone. To try to force CMS to release the inspection report, I filed a Freedom of Information Act request for any and all documents connected to the Newark lab inspection and requested that it be expedited. Running 121 pages long, the document was as damning as one could expect. For one thing, it proved that Holmes had lied at the Journal’s tech conference the previous fall: the proprietary devices Theranos had used in the lab were indeed called “Edison,” and the report showed it had used them for only twelve of the 250 tests on its menu. Every other test had been run on commercial analyzers.

Tyler seemed in good spirits. He told me he was part of a small group of researchers at Stanford that had teamed up with a Canadian company to compete in the multimillion-dollar Qualcomm Tricorder XPRIZE competition. They were trying to build a portable device capable of diagnosing a dozen diseases from a person’s blood, saliva, and vital signs. For the next forty-five minutes, I listened dismayed as Tyler told me about the ambush at his grandfather’s house and the months of legal threats he’d endured. Despite it all, he had never buckled. He had steadfastly refused to sign any document Boies Schiller had put to him. If not for his courage and the more than $400,000 his parents had spent on his attorneys, I might never have been able to get my first article published, I realized. I felt pangs of guilt for having put him through such an ordeal. Not long afterward, Theranos contacted Tyler’s lawyers and told them it knew about our meeting. Since neither of us had told a soul about it, we deduced that Holmes was having one or both of us followed. Fortunately, Tyler didn’t seem too worried about it. “Next time maybe I’ll take a selfie with you and send it her way to save her the trouble of hiring PIs,” he quipped in an email.

HOLMES HAD TOLD Maria Shriver on the Today show that she took responsibility for the Newark lab’s failings, but it was Balwani who suffered the consequences. Rather than take the fall herself, she sacrificed her boyfriend. She broke up with him and fired him. In a press release, Theranos dressed up his departure as a voluntary retirement. A week later, we reported that Theranos had voided tens of thousands of blood-test results, including two year’s worth of Edison tests, in an effort to come back into compliance and avoid the CMS ban. In other words, it had effectively admitted to the agency that not a single one of the blood tests run on its proprietary devices could be relied upon. Once again, Holmes had hoped to keep the voided tests secret, but I found out about them from my new source, the one who had leaked to me CMS’s letter threatening to ban Holmes from the lab industry. In another crippling blow, CMS followed through on its threat to ban Holmes and her company from the lab business in early July. More ominously, Theranos was now the subject of a criminal investigation by the U.S. Attorney’s Office in San Francisco and of a parallel civil probe by the Securities and Exchange Commission.

The invitation the association had extended to Holmes was highly controversial among its members. Some had argued forcefully that it should be withdrawn given the events of recent months. But the association’s leadership had seen a chance to generate publicity and buzz for the normally staid scientific conference. The odds that Holmes could pull off this latest Houdini act while under criminal investigation were very long, but watching her confidently walk the audience through her sleek slide show helped crystallize for me how she’d gotten this far: she was an amazing saleswoman. She never once stumbled or lost her train of thought. She wielded both engineering and laboratory lingo effortlessly and she showed seemingly heartfelt emotion when she spoke of sparing babies in the NICU from blood transfusions. Like her idol Steve Jobs, she emitted a reality distortion field that forced people to momentarily suspend disbelief.

Partner Fund, the San Francisco hedge fund that had invested close to $100 million in the company in early 2014, sued Holmes, Balwani, and the company in Delaware’s Court of Chancery, alleging that they had deceived it with “a series of lies, material misstatements, and omissions. Another set of investors led by the retired banker Robert Colman filed a separate lawsuit in federal court in San Francisco. It also alleged securities fraud and sought class-action status. Most of the other investors opted against litigation, settling instead for a grant of extra shares in exchange for a promise not to sue. One notable exception was Rupert Murdoch. The media mogul sold his stock back to Theranos for one dollar so he could claim a big tax write-off on his other earnings. With a fortune estimated at $12 billion, Murdoch could afford to lose more than $100 million on a bad investment.

Walgreens, which had sunk a total of $140 million into Theranos, filed its own lawsuit against the company, accusing it of failing to meet the “most basic quality standards and legal requirements” of the companies contract. During an inspection of the Arizona facility days before it was shuttered, CMS found a multitude of problems there too.

Under a settlement with Arizona’s attorney general, Theranos subsequently agreed to pay $4.65 million into a state fund that reimbursed the 76,217 Arizonans who ordered blood tests from the company.

By late 2017, Theranos was running on fumes, having burned through most of the $900 million it raised from investors, much of it on legal expenses. Several rounds of layoffs had reduced the size of its workforce to fewer than 130 employees from a high of 800 in 2015. To save on rent, the company had moved all its remaining staff to the Newark facility across San Francisco Bay. The specter of a bankruptcy filing loomed. But a few days before Christmas, Holmes announced that she had secured a $100 million loan from a private-equity firm. The financial lifeline came with strict conditions: the loan was collateralized by Theranos’s patent portfolio and the company would have to meet certain product and operational milestones to get the money.

On March 14, 2018, the Securities and Exchange Commission charged Theranos, Holmes, and Balwani with conducting “an elaborate, years-long fraud.” To resolve the agency’s civil charges, Holmes was forced to relinquish her voting control over the company, give back a big chunk of her stock, and pay a $500,000 penalty. She also agreed to be barred from being an officer or director in a public company for ten years. Unable to reach a settlement with Balwani, the SEC sued him in federal court in California. In the meantime, the criminal investigation continued to gather steam. As of this writing, criminal indictments of both Holmes and Balwani on charges of lying to investors and federal officials seem a distinct possibility.

THE TERM “VAPORWARE” was coined in the early 1980s to describe new computer software or hardware that was announced with great fanfare only to take years to materialize, if it did at all. It was a reflection of the computer industry’s tendency to play it fast and loose when it came to marketing. Microsoft, Apple, and Oracle were all accused of engaging in the practice at one point or another. Such overpromising became a defining feature of Silicon Valley. The harm done to consumers was minor, measured in frustration and deflated expectations.

By positioning Theranos as a tech company in the heart of the Valley, Holmes channeled this fake-it-until-you-make-it culture, and she went to extreme lengths to hide the fakery. Many companies in Silicon Valley make their employees sign nondisclosure agreements, but at Theranos the obsession with secrecy reached a whole different level. Employees were prohibited from putting “Theranos” on their LinkedIn profiles. Instead, they were told to write that they worked for a “private biotechnology company.” Some former employees received cease-and-desist letters from Theranos lawyers for posting descriptions of their jobs at the company that were deemed too detailed. Balwani routinely monitored employees emails and internet browser history. He also prohibited the use of Google Chrome on the theory that Google could use the web browser to spy on Theranos’s R&D. Employees who worked at the office complex in Newark were discouraged from using the gym there because it might lead them to mingle with workers from other companies that leased space at the site.

Hyping your product to get funding while concealing your true progress and hoping that reality will eventually catch up to the hype continues to be tolerated in the tech industry. But it’s crucial to bear in mind that Theranos wasn’t a tech company in the traditional sense. It was first and foremost a health-care company. Its product wasn’t software but a medical device that analyzed people’s blood. As Holmes herself liked to point out in media interviews and public appearances at the height of her fame, doctors base 70 percent of their treatment decisions on lab results. They rely on lab equipment to work as advertised. Otherwise, patient health is jeopardized.

A sociopath is often described as someone with little or no conscience. I’ll leave it to the psychologists to decide whether Holmes fits the clinical profile, but there’s no question that her moral compass was badly askew. I’m fairly certain she didn’t initially set out to defraud investors and put patients in harm’s way when she dropped out of Stanford fifteen years ago. By all accounts, she had a vision that she genuinely believed in and threw herself into realizing. But in her all-consuming quest to be the second coming of Steve Jobs amid the gold rush of the “unicorn” boom, there came a point when she stopped listening to sound advice and began to cut corners. Her ambition was voracious and it brooked no interference. If there was collateral damage on her way to riches and fame, so be it.