60 Minutes Rewind Elizabeth Holmes was just 19 years old when she dropped out of Stanford University with a dream of creating a company that would revolutionize blood testing. She founded the startup Theranos and boasted her technology could take a pinprick worth of blood from the finger and perform hundreds of laboratory tests. It was, she claimed, quote, the most important thing humanity has ever built.
At its zenith, Theranos was worth nearly $10 billion, and Elizabeth Holmes became the youngest self-made female billionaire in the world. She was also, as the Wall Street Journal uncovered, at the center of a massive multi-year fraud. You're about to hear from insiders how the Theranos deception hoodwinked gullible investors and, worse, endangered unsuspecting patients. Our work is in being able to make testing more accessible.
Elizabeth Holmes built her company Theranos on this invention she named the Edison, a miniaturized blood analyzer that would disrupt the $60 billion lab testing industry dominated by giants LabCorp and Quest Diagnostics. Holmes called her invention the iPod of healthcare, and it made her a celebrity. She graced magazine covers and was praised by politicians and the press alike. You founded this company 12 years ago, right?
Tell them how old you were. I was 19. She sold her vision with grandiose claims that her blood tests would cost a fraction of current prices. Holmes Biotech's startup was backed by an illustrious board packed with national security heavyweights like Henry Kissinger and James Mattis, the current defense secretary.
The board was filled with friends of George P. Schultz. the former Secretary of State who helped end the Cold War. He introduced his grandson, Tyler, to Holmes. Dazzled, Tyler Schultz became a believer and joined the company soon after getting his degree in biology from Stanford University. When you met her and you heard about Elizabeth Holmes' vision, what did you think?
I was totally sold on it. Tyler Schultz began working at Theranos in September 2013. It was a pivotal moment as the company announced a partnership with Walgreens. The deal would put an Edison machine in every store. Elizabeth Holmes claimed the Edison performed all the tests big lab machines like these could, from cholesterol to cancer, all from a painless finger prick.
But Tyler Schultz says the Edison he saw just didn't work. Was it a sophisticated piece of machinery? No, there were components that would kind of fall off in the middle of testing that you would have to then fish out.
They had doors that wouldn't close. They would get too hot and then they would get too cold. When I was there, we could not complete any test accurately on the devices that we were manufacturing. Doug Macci joined Theranos in 2012 after getting his doctorate in biochemistry.
His job was to adapt blood tests for the Edison. Tests which Holmes told investors were ready to use on patients. But Elizabeth Holmes had told Walgreens in 2010 that it had developed this device that was capable of running any blood test from a few drops pricked from a finger in real time and less than half the cost of traditional labs. Was that true? No, certainly not.
Do you think she was lying to Walgreens? I do, yeah. Are you a clinical lab specialist? No. Erica Chung was fresh out of Berkeley with a degree in molecular and cell biology when she went to work at Theranos.
She was just 22, but even the novice lab tech suspected something was very wrong when she saw faulty test results sent to Walgreens patients. When did you think, I probably shouldn't be doing this? Pretty soon in the process, especially when we started to pick up more patient samples. And when those samples were retested, she says, there were often contradictory results. Did you ever alert the patient?
No. We didn't let them know, hey, we re-ran your patient sample, and we're not actually positive about what the diagnosis is. This is someone's health information.
Exactly. This isn't an app crashing. This isn't...
You know, someone's food delivery coming late. It's just a different ballgame. It's not the only game Elizabeth Holmes was playing. Theranos employees told us they were instructed to stage fake demonstrations for investors who visited company headquarters. It was kind of a show.
All they would see was their blood getting collected. They didn't see what was going on behind closed doors about how it was processed. They would get their finger pricked with a small amount of blood. Then they'd be let out of the room, they'd go have a meeting, go have lunch, whatever.
And... At which point an engineer would run in the room, grab the cartridge, bring it out to the lab. So was the Edison doing the testing? No, absolutely not. Who was doing the testing?
It was scientists at the bench. By hand? By hand, yeah. It was a bait and switch for investors that kept the money rolling in.
Theranos raised nearly $900 million from those investors, who now say they were swindled by Elizabeth Holmes and company president Ramesh Sunny Bulwani. The pair claimed in investor documents obtained by 60 Minutes that Theranos technology was validated by the FDA, pharmaceutical companies, and was deployed on the battlefield by the U.S. military in Afghanistan. Those claims were fabricated. And in one public appearance after another, Holmes' pitch became even more fantastic and reckless.
We've done some work with people at Hopkins. who have developed and demonstrated that in blood you can see the onset of pancreatic cancer 17 years before a tumor forms. We called Johns Hopkins Medicine. They told us they never collaborated with Theranos. And Doug Macci says test data he compiled for the Food and Drug Administration was falsified.
There was so much pressure from above to get. good-looking results that are going to be able to pass FDA guidelines that people were pressured into making things disappear. The bad results. The bad results. That's deceptive.
Yeah, for sure. Did you ever go to your boss and say, this isn't right? Absolutely, all the time.
But, you know, he was under a lot of pressure from the people above him, and he was trying to do his best to make everyone feel better. unhappy. This invention is going to be way up there with the discovery of antibiotics. Day-to-day operations were run by company president Sonny Balwani.
Balwani is a software engineer with no training in the biological sciences, but he did have a powerful connection to Elizabeth Holmes. Sonny Balwani was her secret boyfriend. Some people are here because of the mission, because some people are hopefully here for the science.
Balwani was also Holmes' enforcer, firing employees on the spot and berating scientists for failed tests. After a year and a half, Macci quit. I saw that there was potentially fraud taking place. There was far too much illegitimate things going on there.
I talked to Sonny, decided I didn't want to be there anymore, and I left. Tyler Schultz was also becoming disillusioned. I had a personal relationship with Elizabeth. She was close to my family, and I felt like she was deceiving my family and the public.
And almost every media outlet, including us here at CBS, bought into the Theranos myth. A health care pioneer is being compared to visionaries like Bill Gates and Steve Jobs. Do you think she wanted to be the next Steve Jobs? She just really idolized him, so she wore the black turtleneck. I think she created a world where she was Steve Jobs for a little bit.
As her wealth and reputation soared, Elizabeth Holmes took on the trappings of power. She bragged bulletproof windows were installed in her office, and she traveled with a full-time security detail. Theranos employees told us they were closely watched and required to sign nondisclosure agreements. All reinforced, they said, by a threatening team of lawyers and private investigators.
That's why when Tyler Schultz alerted authorities in the spring of 2014, he used a fake name. Why did you come up with an alias? I knew how seriously Theranos protected their trade secrets. I knew they would not take it well if they knew that I was talking to regulators. In his email to New York State Department of Health regulators, Schultz outlined questionable lab practices and said he believed test results were being switched.
I just said, this happened in my laboratory and I just want to know if this is okay. And they responded and said, no, this is cheating. This is not how it's supposed to be done. Tyler Schultz was ready to resign, but first he sent Elizabeth Holmes an email about his concerns.
He got a response from Sonny Balwani. That I was arrogant, ignorant, patronizing, reckless, and I was lacking the basic understanding of math, science, and statistics, that if I had any other last name, that I would have already been held accountable to the strongest extent. Tyler Schultz quit in April 2014, and soon after, Erica Chung did too. By February 2015, the Theranos fairy tale was about to unravel publicly.
The story will continue after this. At the Wall Street Journal, Pulitzer Prize-winning reporter John Carreyrou, who has written a book about the Theranos saga, got a call. It was a tipster casting doubt about the Edison, Theranos, and its charismatic founder, Elizabeth Holmes.
She is a pathological liar. She wanted to be a celebrated tech entrepreneur. She wanted to be rich and famous, and she wouldn't let anything get in the way of that.
What kind of job did the board do in holding Holmes accountable? This is one of the most epic failures in corporate governance in the annals of American capitalism. They did nothing to verify that her scientific claims were true. Kerry Rue's first article appeared in October 2015 and revealed Theranos did less than 10 percent of its tests on Edison machines. What do you think's going on here?
Holmes struck back. This is what happens when you work to change things. And first they think you're crazy, then they fight you, and then all of a sudden you change the world. But skeptics were no longer buying the Theranos deception. What I'm showing you now is the result of hundreds of engineers and scientists' work.
Holmes repeatedly insisted she would present proof at a major industry conference that her technology worked. You can see the tray dropping into the detection module there. It was proof that never came. And the evidence that you presented fell far short of that.
In 2016, after a series of surprise inspections, federal regulators shut down the company's laboratory, saying it posed immediate jeopardy to patient health and safety. Nearly one million Theranos test results were invalidated. When she started using this technology, On the blood samples taken from consumers in Walgreens stores, that was an unauthorized medical experiment. There's no other way to put it.
Theranos was on the brink of collapse. Big-name investors found their stock was worthless. Education Secretary Betsy DeVos and her family and media mogul Rupert Murdoch each lost more than $100 million.
Walgreens sued Theranos and settled for less than a quarter. quarter of their $140 million investment. Why do you think this was outright fraud, as opposed to any other Silicon Valley startup that just wasn't able to deliver on lofty goals? Well, because she raised money, hundreds of millions of dollars, on the basis of this technology not only being ready and working, but being commercially rolled out.
You're also lying to the public. You're lying to patients, you're lying to doctors, you're lying to regulators. Most people would call that fraud as well.
The Securities and Exchange Commission called it massive fraud when they charged Elizabeth Holmes and Sonny Balwani in March. Holmes settled the SEC case without admitting guilt and paid a half a million dollar fine. Balwani, who left Theranos two years ago, calls the SEC charges unwarranted and is fighting them.
At its height. How much was Theranos worth? $10 billion. There was a period of several months where it was more valuable than Uber, more valuable than Airbnb, more valuable than Spotify. And how much is it worth now?
Zero. Elizabeth Holmes remains CEO of Theranos. She would not comment for our story, but last month she wrote to investors asking them to put in even more, or the company would soon run out of cash.
A federal criminal investigation. is ongoing.