John Carreyrou on Breaking Open the Theranos Scandal

the book absolutely fascinating. I plowed through it on Labor Day weekend and really really enjoyed it, not just because of how revealing it is of what turned out to be a giant pick pick the metaphor and Ron Bertie made off whatever, a giant fraud, but it reads like a thriller. It's a real page turner. There are some giant surprises throughout the book. Lots of people see their

reputation damaged and destroyed. It's amazing, and as somebody who is also an investor, I can't help but notice how many times there's red flag after red flag after red flag that are excused, rationalized, ignored, somehow put shunted aside, instead of hey, that's a big, big red flag. Maybe we shouldn't put a billion dollars into this nonsensical company that doesn't do any of the things it promises it can do. Anyway, I highly recommend the book. Whether you've

read the book or not, you're gonna find this conversation fascinating. So, with no further ado, my conversation with John carry Rout. My extra special guest this week is John Carrrew. He began his career in journalism in after he graduated from Duke, he joined the Dow Jones Newswires. Shortly after, he moved to European version of the Wall Street Journal in Brussels, event a sually going to Paris to cover French business, terrorism, and everything in between. He was appointed deputy Bureau chief

for Southern Europe and OH three. Eventually he became the Wall Street Journals Health and Science Bureau chief in New York. He has won numerous awards in journalism, including the Pulitzer Prize twice. If this sounds like the perfect background for any writer curious about the blood testing start up, there no, nos, Well, it turned out that is exactly right. Uh. The Unicorn turned out to be a fraud, which was broken by

Carrirew in the pages of the Wall Street Journal. He has written a best selling book, Bad Blood, Secrets and Lies in Silicon Valley about the entire Elizabeth Holmes and thearaph O saga. John Carrirew, Welcome to Bloomberg. Thank you for having me my pleasure. I have to start out by saying I love the book. It was on my list of ten to read this summer and I just plowed through it over Labor Day week. Again, there's so much material to cover. It's such a fascinating story. Let's

just go back to the beginning. How does Sara nos and Elizabeth Holmes out in Silicon Valley first come on

your radar? It was mid December two thousand fourteen, and I was on the subway UH commuting back from UH my office in Midtown Manhattan to Brooklyn where I live, reading the New Yorker magazine, and in that issue was a long profile of Elizabeth Holmes by Ken all Letta and um, it was a color glowing It was mostly mostly glowing, with some, I have to say, with some skeptical passages that I immediately picked up on, and UM,

you know that it was. It was an entertaining read and interesting that there were, as I just said some some things that struck me as odd in that story. UM. One of the ways she she described, you know, how her blood testing technology work, or how she worked, how she summed it up, UH, sounded to me like a high school chemistry student as opposed to sophisticated you know

lab scientists slash inventor um. But more than any particular thing, it was this notion that a college dropout, someone who had had two semesters of chemical engineering, had dropped out and then gone on and invented groundbreaking new science that was going to revolutionize you know, lab testing. So let me jump in right here. So she goes to Stanford, finishes,

drops out after her freshman year. She's got no medical training, she's got no organic chemistry, biology, um, blood chemistry, none of the things one would normally think would go into complex medical device manufacturing. This isn't a software startup where you could just hey, anybody could code, and whether you have the academic credentials or not as irrelevant. This is a serious science, isn't it right. She she had zero qualifications.

I mean she had had literally had two undergraduate UH courses with the same professor Channing Robertson, who ended up being you know, her first enabler. Uh, that's an interesting choice of words. Why did you select enabler? Well, so he was for those listening who aren't familiar with him, Channing Robertson was a star, rock star star of this

of the Stanford Engineering School faculty. Had been an expert witness in the late nineties for the state of Minnesota and its tobacco litigation, and um, you know, also was really popular with students. He had a way with students, he connected with them, and um, she had taken to two courses with him, and then you know, came back with this cockamami patent in UM after her her summer

in Singapore working at a lab in Singapore. Uh. So we're now in in the fall of two thousand three, and the patent was for this device that she envisioned, which was essentially a wrist band that would have micro needles that would come out and insert themselves into your wrist and draw micro amounts of blood and and then

uh diagnosed whatever ailed you and cure you simultaneously. Um. And it was clear, I mean, this was science fiction to anyone involved an engineer or a lab scientist clear that it was not feasible and probably ever feasible, at least not for for decades. And uh you know, he he chose to um go along with it and and encouraged her to drop out, or at least didn't discourage her to drop out, and then accompanied her on pitches

to vcs and so he gave her credibility. At that point, she's nineteen years old, um, and he's the star of the Stanford faculty. And then he joins the board and he stays on there with her, accompanies her for the next twelve years. Uh you know, he is for sure her her original enabler. So one of the questions I was going to ask you, but you kind of hinted at the answer. Ready, you know, when did you first

start to smell that something was amiss? But it's pretty clear you're you're saying right from the beginning, Well, this struck you as a little off, Yes, But to be honest, I probably would not have done anything with my intuition had I not gotten approached by his source, who was a pathologist in the Midwest who had gotten to know the year before he moonlighted as the writer of this obscure blog called Pathology Blog, which he spelled b L A w G. And I had gotten him a year

prior to explain to me some of the complexities of lab billing for a series on Medicare Medicare fraud had been doing at the time. And he had read the New Yorker story about Elizabeth Holmes too, and had immediately been dubious even more than me. Uh in that you know, he was much more familiar with with the intricacies of lab science than I was. And he wrote a skeptical

item on his block. And uh, this guy named Richard Fuse, who's a pretty big character in my book, by the way, had been a childhood neighbor of Elizabeth and her parents immediately got in touch with the Pathology blogger and told him, you're on the right track. I think the areness as a scam. You should keep digging into this. And Fuse

had been involved in litigation with Elizabeth Holmes. He had patented a part of her vision that had caused her to sue him, and she had steamrolled him with David Boys. David Boys had become her attorney and thereness attorney, and and they really steamrolled Fuse in this litigation, and during the course of the lime atient, Fuse had become convinced, as a actually trained doctor and medical inventor that thereon us was a scam. Hold that thought, we're gonna come

back to that. Let's talk about some of those secrets and lies. The question that I still haven't come to a solid answer was simply this with was this a scam from day one or did this eventually morph into a scam? What it was the latter it wasn't a scam from day one, and that she didn't drop out of Stanford at nineteen and late two thousand three premeditating a long con that would defraud investors and eventually put patients in harm's way. That that was not in her

thoughts back then. Even though she's never spoken to me, um, I know that she dropped out wanting to become a successful Silicon Valley entrepreneur. Her idol was Steve Jobs. She worshiped Apple and she wanted to follow in his footsteps.

And she also had this, you know, this notion that she should do good for society because her her father had worked at the State Department and various other government agencies and and uh provided um, you know, help and and disaster torn areas, and there were photos of him and and he had raised her, uh with this notion that she should live a life of purpose and and that she should make her mark and not just by

getting rich. And so biotechnology, in her mind, was was the gateway to achieving both becoming rich like her ancestors, the Fleishman's had once been, and also doing good. And so that's the way in which she was different from Steve's jobs. She wanted a product that would that would do good for society. Um. And uh, you know, so it wasn't it wasn't a fraud. From the beginning she

had she had good intentions. It became a fraud with the years as she confronted uh, you know, failures and difficulties. Because science is hard. Medicine is hard. Science is hard. So let let me ask you about that. A number of people that you write about in the book point out that the reason we do venus drawing, the reason we take blood from your arm and fill three big vials is that's a clean sample of blood. When you do a pin prick, you're damaging tissue. Even if you

clean the surface of the skin. It's not as clean a sample of of blood. So it makes makes me raise the question, isn't it kind of reckless to say, oh, I could you know, I could run into medicine and figure this out despite lacking a background. I mean, it's hubris and arrogance. It's incredibly naive to think that people

hadn't tried capillary blood draws. They had, and and one of the problems with them, The biggest problem is is what you say, which is that the risk UH that basically capillary drop capillary blood is not as pure as venus blood. It's polluted by tissue from cells and and from skin, and UH that that stuff interferes with the blood tests and so UH one of the biggest problems

when you try to do a blood test. UH, the biggest problem is the potassium blood test, because what happens is when you milk blood from the finger, you cause the red blood cells in the blood to burst, and the bursting UH causes a release of potassium, and so

it increases the concentration of potassium in your sample. And and the concentration of potassium becomes artificially high, and that little blood sample and In fact, that is one of the problems that UH the ants ran into when it started going live with its blood tests and Walgreen stores in late two thou thirteen, was this hemolysis problem. And this is in hindsight bias that was well known for decades.

This is not a new discovery, right, I mean, the problems with capillary blood draws were well known among lab scientists for sure. And then there's another problem that you haven't talked about, which doesn't have to do necessarily with the fact that it was blood pricked from the finger that her vision revolved around. It's it's the how small the sample was. She she wanted, you know, to be able to do hundreds of tests from a drop or two of blood, and no one had figured out how

to do that many tests from that small sample. The basic reason is that there are about half half a dozen big classes of blood tests, and each one of these classes blood tests requires completely different laboratory techniques and laboratory instruments. And so once you've done a couple of blood tests that are saying immuno assays, and you try to do blood tests from a different category, such as

general assays or hematasergy tests. You no longer have any blood left because you've used your small sample to do the test, and then you need more blood because the other tests required completely different methods and completely different instruments. And so no one had been able to crack that nut.

They've been trying to do so for more than two decades an industry and uh in universities, and she came along and claimed that she had solved all these problems, even though she hadn't solved a single one of these problems. She just stated her intention to solve them, and money flowed in. Is that is that a fair? Well? She not, I mean it's not quite. I mean that that would that would be more accurate than what she did. Had had she stated her intention to solve them, she asserted

that she had solved them. She said, I have solved this nut that no one on earth has solved until now. I have cracked it. And it was it was completely untrue. So back to the question about not a fraud From the beginning, when did it become clear that none of their products worked? And they started lying to partners, potential investors, even employees that hey, we we got a dead parrot on our hands here right, So the lying actually started

very early on. I mean the book opens the prologue is a scene that takes place in late two thousand and six, and it's the CFO, the chief financial officer if there on us at the time, learning that these demos that he's bringing, he's been bringing perspective investors around four for about eight months, are not really real. There's a fake machine, it spits out a fake piece of paper. Right.

Part of the demo is real, the micro fluid ix part of the demo is real, but then the result at the end as a prerecorded results, so it's essentially not the result from the blood that you see flowing through the cartridge. And so he goes to her and he says, you know, we can't keep doing this. The investors I'm bringing around are under the impression that this is totally real, and it's not. It's half fake. So you know, that's essentially securities fraud. That's lying to investors.

We have to stop. And she turns ice cold and says to him, you know you're not a team player. I think you should leave right now. And it's very clear from her demeanor and from her tone of voice that she doesn't just mean leave leave her office, she means leave the company. And he's just been fired, and and so the the the unethical behavior, and the line goes back as far as easily two thousand six, meaning you know, less than two years into the life of

the company. And just to to elaborate a little bit the technology, there were three iterations of the technology. There was a real attempt at micro using micro fluid ix, which is uh the repurposing of the micro fabrication techniques that the computer computer chip industry pioneered. Lab scientists realized they could use those microfabrication techniques to create tiny channels

through which you could put minute amounts of liquids. She she made a real effort in the early years of her company at doing a my micro fluidic device and hit a wall. They just needed many more years, and she didn't have the patients, and she was probably under pressure from investors, and so they stopped that effort about a year after that scene where she fires the CFO and pivoted to the second iteration of the technology, which

was a converted glue dispensing robot. It was it was a glue dispensing robot that a Theranos engineer had had purchased from a company called piston Or in New Jersey and essentially repurposed to be a blood testing machine. He affixed a pipette to the robotic arm which had three degrees of motion, and then he reprogrammed it to to mimic what a lab scientist would do to test blood

at the bench. And she disguised it with the sleek black and white case that she got a well known industrial engineer to design, and that was called She called it the Edison, named it after Thomas Edison, and um the instrumentation basically the techniques of the editor and were there was nothing new. It was something you know, uh kemmy Luminescent immuno essays was a lab testing technique that had been pioneered in the early eighties and that was

what the Edison did. And the third generation so the Edison could only do immuno essays, which are this one class of blood test. And of course, you know, she wanted something because she was beginning to claim that she had something that could do all the blood tests, so she needed a machine that could do more than just one class of blood tests. So the work on what she called the Mini Lab, began in late two thousand ten, and that work, you know, continued until recently. Um and

they've never gotten the mini lab to work. It's it's a bigger machine than the Edison, and it's an attempt to miniaturize all these laboratory instruments that are used to do these different classes of blood tests. And they've not never gotten it to work. What about the commercial stuff?

They were buying the commercial machines and then deluding the full blood samp And so that became necessary because think normal people if they haven't gotten their device to work yet or will wait until they get it to work to commercialize it. Right when you agree that that most most people would do that, especially especially in the realm of medicine where where your product actually you know, has an impact on people's lives. Well, she didn't do that.

She went live with her vaunted fingerstick blood tests in the fall of two thirteen in Walgreen stores in northern California and Arizona. And because the mini Lab was just a prototype that didn't work at the time, what she did, what she and her boyfriend ordered Thereness employees to do, was her boyfriend, her number two executives. They ordered people in the lab to to hack machines made by the German company siemens Um and UH to adapt them to

small fingerstick samples. And one of the steps that was needed to to do this hacking was to dilute the tiny fingerstick samples to create more volume in the cup. Because these regular machines from from good old Seamans could only test a normal sized sample of blood, and so you need a lot more sample for the machine to work. And so they diluted the fingerstick blood to create more volume,

which itself caused all sorts of problems. Let's talk a little bit about the process that it took to get people to speak to you, and the threats of litigation and everything against the journal. Um. How challenging was it to bring this story to light and ultimately to get it in print at the Wall Street Journal? By far the toughest story that I've ever done in twenty years, twenty plus years of reporting. Um that the challenge was twofold.

It was getting sources to trust me and to talk to me, Um, which was was very hard because uh, uh Elizabeth Holmes. Uh, they knew that Elizabeth Holmes and her company were very litigious, and they knew that the company's outside council was was David Boys, America's premier litigated. And and when you say litigious, not just you know, everybody knows people who litigious. These people were seemed to be extremely aggressive and used all sorts of questionable approaches. Right.

Elizabeth Holmes had sued former employees early on in two as far back as two thousand seven for supposedly stealing trade secrets. And then she had sued her childhood neighbor, Richard Fuse, who had patented a part of her vision um that and that infuriated her, so she came up with a story that he and his son had had basically colluded to steal proprietary thereinos patent information from a

law firm where where the Sun was working. But there was never any proof whatsoever uh that that that ever happened. And and personally, based on all my report, I believe that it never did happen and that those were false accusations. When you mentioned trade secrets, what trade secrets that they had nothing? No, technically was what were there any trade secrets? And by the way, I'm relying primarily on your book. When I say I don't see any trade secrets here,

am I rong? No? There were There weren't really any trade trade secrets. Was is a technical definition of that is it was basically a way to to say, you know, a, we can't tell you what we have because if we tell you about it, our big competitors, Quest and lap Corps are going to copy us um and and be uh, you know, you all of your reporting. You have to either destroy it or or return it to us. Uh, you know, because it's sensitive and it could do us

great harm. These were the arguments that that Saronis and David Boys used to try to get us to kill my reporting and to not publish the story. Well, they were right, it was sense of and it could do

them great harm. However, there were no It doesn't seem like there was anything other than the bad behavior and fraud in the company that you revealed, right, And so it gave rise to a surreal five hour showdown at one point in in June of two fifteen at the journal's offices in a conference room, uh pitting me and my editor of mix A Canolfi and and our lawyer Jake Conty on one side of the table, and David Boys and two of his associates, and and his former

boys Schiller partner Heather King, who had become the General council of Theonis, And we went around in circles for hours because um, you know, I had sent them a list of questions ahead of time, and I was trying to get answers to these questions, and they would say, well, we can't answer that question because it's a trade secret, covers trade secrets, and and of course, uh, my questions went to the essence of weather THEONIS really had technology

and really was using proprietary technology to do it's blood tests based on my sources, my confidential sources, it wasn't. So I would ask things like, how many of the blood tests on your menu are you doing right now with para nos proprietary technology? And they would say, we can't answer that. That's a trade secret. And I said, well, are you and using any third party machines by the likes of Semens to do any of these tests? We

can't answer that, that's a trade secret. And it got to a point where I said, well, you know, how can how can you using a third party machine made by another company? And modifying it be a trade secret. That's not inventing anything, that's not doing anything new. And again,

you know, we'd go around in circles. I described the scene in the book, and I think it's chapter twenty one, and I felt like I was watching a performance of the theater of the absurd um And and towards the end of that meeting, Boys let us know that that he'll he would be sending us correspondence written correspondence. Oh, I've gotten written a correspondence from him. Let me share

a quick story. So I write a review of the book, and I talked about all the red flags for investors, not really concerned so much about um the details of the litigation. Now, I do say that some people's reputation shafferd. I mentioned George Schultz, I mentioned David Boyce. We get a nasty graham from Boys and his legal um firm. And I have to tell you, I was genuinely shocked that my opinion column based on your book, uh, generated this intellectually disingenuous thing full of like you made all

that stuff up. I had to go through your book page by page. This is page to seventy eight. This is page to sixty three is a page. It was a very bizarre experience. What was the rest of your experiences? Like fighting boys. He's got a reputation as literally the

premier litigator in the country, right. And so after that five hours showdown, we got a first letter that hinted at litigation threats if we didn't immediately return or destroy the supposed trade secrets that I had obtained through my reporting. And then a few days later a I believe it was a twenty six page letter that was just this this assault on my journalistic integrity and this attempt to portray me as a rogue reporter, that that the journal

should disown and um. And at the end of that letter, it was very explicit that if we continued to proceed with my reporting that the journal would be sued. And even as these increasingly threatening letters land, um, some of my sources start either going dark or calling me petrified because they tell me they're being followed um and they're

being threatened as well. One of my sources, it has since emerged, was Tyler Schultz, a young man who was the grandson of the former Secretary of State George Schultz, who was a member of the theraness board. Tyler is essentially the hero of He's a hero. I wouldn't say he's the only hero, Okay, I would I would say another guy whom I referred to as Alan Beam in the book, who's the ex lab director. That's a pseudonym.

I would say he's arguably the bigger hero because he was the first to to talk to me and to and to launch my investigation. But Tyler is absolutely a

hero in this. And Tyler had worked at the company for eight months, become convinced during his stint there, based on what he saw, seen and heard, that the company was a fraud, tried to alert his grandfather, tried to talk sense into him, hadn't been able to and then had had had to keep that all bottled up for a year until I came along and made contact with him,

and then he became croberating source. And after that five hour meeting um or in fact it was, it was a little bit before even but unbeknownst to me, uh, two boys Schiller attorneys ambushed Tyler at his grandfather, George's house off the Stanford campus and tried to get him to sign documents. Essentially, uh, you know, acknowledging that he had been a source for the journal and naming other

journal sources. And at that point began a a three or four month campaign of threats and intimidation against Tyler Um. He had to hire his own counsel up him. They at one point, a a lawyer for boys Schiller named Mike Brill, threatened to uh bankrupt Tyler Schultz's entire family if he didn't sign the documents that Sarons wanted him

to sign. And the documents were an affidavit where he basically acknowledged having talked to me and and and said it was an essentially essentially a recanting of everything he told me. And then they also wanted him to to name my sources. And and Tyler never signed any of these documents despite these these outrageous threats uh that were made, and uh, you know, stood firm and in large part thanks to him, I was able to go to print months later with my first story which broke the scandal

open that Yet, let's continue discussing the fall. So you have a couple of people who were insiders, Um, George Schultz's grandson Tyler. There was a woman who worked with him who worked in the lab. Chung who who apparently was scared out of her mind? Right, what what happened with her? What did she do? What was she sharing with you? And what happened? Why? What were the intimidation attempts? So boys and his henchmen came to the Journal's offices.

I think I believe it was on Tuesday in late June, and that Friday, three days later, h Erica was working at her new employer. She had left the as she had left Aaroness in fact, the day after Tyler had left Theariness a year prior, and she was now working

at a new company. So it's a year after she quit, right, and she's working late at this new company, and I think it was Sunny Veil, California, and one of her colleagues taps around the shoulder and says, you know, there's a man who's been waiting outside for a long time,

saying he wants to talk to you. And so her sort of alarm bell start ringing in her head because the the head of human resources at UH, Saraonis Uh, this woman Mona, who was uh you know, part of the inner circle UH with with Elizabeth Holmes and Sunny Bowani had been trying to reach her and leaving increasingly frantic messages that day, and so immediately Erica was on her guards, and so she asked the colleague who had tapped her on the shoulder, to accompany her to her

car as she left the office, which the colleague did, and when they walked out of the building, a young man came out of a black suv and made a beeline toward them and handed to Erica an envelope uh and the envelope contained a letter, very aggressive letter assigned by David Boys, threatening to sue her for disclosing trade secrets and giving her an ultimatum, which is that she had to meet with him and his boy scheller associates by a certain day and a certain time or she

would be sued. But before she even got to the letter, what freaked her out the most was that the envelope had her name and an addressed typed on it, and the address was a house in East Palo Alto of a colleague at her new company that she had been staying at for less than two weeks. Because Erica had planned on moving to China and so she had given up the lease on her place in Oakland just a couple of weeks prior, and started staying with a colleague,

basically shocking at a colleague's house. UH and niece Palo Alto, and no one knew she was staying there except for the colleague. Her mother didn't even know she was staying there, so there was absolutely no way to have known this were this was her new address without having followed her. And so so she goes home that that evening Friday evening petrified and stays inside this this house in East Palo Alta with the blind closed all weekend, doesn't dare

go out. And then first thing on Monday morning, she calls me and she's terrified, and she tells me what has happened, And UM, I'm in my car at that point, double parked on a street in Brooklyn, waiting for the street sweeping truck to go by. That's one of the better aspects of UH living in New York City. Uh, I'm being ironic. Um, And uh so I answered the phone and it's her and we talk and I realized

that she's right. There's no way. I try to run through the scenarios and the permutations, there's no way anyone could have known that was her address without having her followed. How many people in the book felt like they were being followed? How many participants in the book or that you didn't might not have printed? At least three? Alan Beam,

the ex lab director Again that's a pseudonym. Uh, Tyler, Schultz and Erica all either got word that they were being followed or strongly suspected they were being followed, or had evidence or had reason to believe that they were being followed. And what about the fuses did was there any any suspicions? Right? The Fuses had been had come to the conclusion that they were being followed by p I s. But that was several years prior, during the

patent litigation that had pitted them against their nos. So something interesting that was brought up from that boys won the patent litigation and was paid not in cash but in pharan no stock. I was very surprised by that. Is that common in legal circles or Silicon I know in Silicon Valley it's not unusual, but in patent litigation how how common or common is that? I mean, I don't think it's very common. Um and uh for me

when I learned about it. I learned about it. I think it was in the in the winter of two thousand sixteen, a couple of months after my first story was published. I thought it was a huge conflict of interest because here you had a lawyer and his law firm that owned almost five million shares, you know, a five million dollars worth of shares UM, and so he

was no longer just the legal advocate of Pharaos. He also um had skin in the game financially, and I felt self interest, not mere advocacy on behalf of client, and and uh, you know, I I strongly felt that that was a conflict of interest. And I wonder if that I wonder if that clouds a lawyer's judgment in some of the things you described, if people do that when they're representing clients as opposed to I don't see.

I don't see how can they can say that it doesn't And I don't see how it doesn't it it

has to. I mean, you're you're protecting a pile of five million dollars that, by the way, you accepted in lieu of of regular compensation because you expected that pile to grow as the stock and the evaluation of the company grew to to hear them if they come out and say so, um, you know, say that that this didn't influence how they behaved and and and how they worked for Thearonis, I think I would maintain as hawkwash.

So here let's talk to put some flesh on on the bones about the dollar value of Tharonis and what people why people thought it could go to the moon? Um at its peak, what was the most of the company was worth ten billion dollars? And how much money had investors put into it. So if you count the the money that was loaned by the private equity firm Fortress Investment Group eight last year to keep their US afloat, that was million dollars. If you count that cash injection,

almost a billion dollars. And so that's a you immediately you're talking about a ten x return if it if it keeps going. The thing that keeps coming up as I was working my way through the book was there's no there there there's there's really there was this initial idea and then there was no new science developed, There was no new technology developed. It was shocking. At what point did the outside world before your columns start to think, hey,

there's a fraud here. Where where did the red flags start appearing outside of the John Carrrews, No, there were grumblings among people in the laboratory science profession. In fact, one of the early voices was a guy at Stanford UM UH John Ionitus UH Laboratory UH Medicine UM professor

at at Stanford. And in fact, he and I recently had a test the exchange by email because he was angry that I hadn't mentioned him in my book um and and I told him that that I apologize for the omission, but I said, at the same time, you know he he had essentially written an opinion piece in the journal of the Association for the American Medicine Medical Association JAMMA UM and I believe it was in February

or March of two thousand fifteen. Um and I had become aware of it about a month into my reporting on the company. And really what he does in this piece is is UH he raises the question of whether theariness should be allowed to do what he termed stealth research UH and and UH and he posed hard questions about UH this trend toward companies in Silicon Valley Uh, bypassing the traditional system of peer reviewed publication, which was totally valid. And and you know, he put his finger

on something. But what I did respond to him was, you know, it's one thing to raise some of these questions, another thing to prove that the company was a fraud. And I think he he could agree that. Um that you know, I did the heavy lifting to to to prove that. The two biggest red flags that leapt out to me from the book the initial board of directors nobody from medicine, blood sciences lab. It's all, it's two Secretary of States, it's people from the defense. But it's

like a run of crazy things. Nobody from medicine, right, Um. And eventually they had somebody years later. But there were there were two out of I think twelve old men, old white men on the board. Uh. There were two had some connection to medicine. One was Bill Frist, who had once been a transplant surgeon before becoming a politician. Not from the beginning, right, wasn't he a later addition? No? No, no, he was there from the beginning. Not from the beginning.

But the board changed over the years, and the last iteration of the board essentially dated back to uh two thousand eleven, two thousand twelve, so almost a decade after they started. It's like she she acquired this new board UM because she felt that it would help her. It was sort of an exercise and reputational laundering, you know. She attracted these larger than life figures with fantastic resumes.

And then the other thing that was a giant red flag was all of the healthcare, medical sciences, medical device venture capitalists. Every one of them took a pass. Not a one put any money in this right because either because either she wouldn't meet with them or when she did accept meetings, and and some of these people started asking hard questions. UM, her interest in continuing to meet uh, you know, waned and and basically evaporated. We're speaking to

John Carrirew. He is the author of Bad Blood, Secrets and Lies in a Silicon Valley Startup. If you enjoy this conversation, well be sure and come back for the podcast Astras, where we keep the tape rolling and continue to discuss all things fraudulent at saranos. You can find that wherever your final podcasts are sold Apple, iTunes, Stitcher, Overcast, and of course Bloomberg dot com. Be sure and check out my daily column. You can find that on Bloomberg

dot com. Follow me on Twitter at Rich Halts. I'm Barry Rihults. You're listening to Masters in Business on Bloomberg Radio. Welcome to the podcast, John, Thank you so much for doing this. I have to tell you I really enjoyed reading the book. It retreats like a thriller as you're going through it. It's just what that that's just astounding. It's mind blowing. Um. I'll come back to some of the red flags. I have a ton of other questions, but I have to ask you how much fun was

this to write? You know, it was a lot of fun. It was the most fulfilling thing I've ever done in my life, uh, professionally or or probably otherwise. Um, it was nerve racking at the very beginning because you know, I had a book deal and a movie deal to wait. When did the movie deal before the book was written? Right?

Because the I reached my deal with Knopp to do the book, I think it was in March, uh late March of two thousand sixteen, and then the movie deal came less than three months later, and I only went on book leave and started writing the book and around October of two thousand sixteen. So I had this pressure from these two deals and from the fact that I had never written a book before. And uh, you know that's easy. You just keep going. You've had a column,

but you don't stop till you got a hundred words. Yeah. So anyways, it wasn't easy staring at a blank word document at first. But once I got a couple of chapters in UM and I got the I felt like I was in a rhythm and I was immersed. Uh. And by the way, I was continuing to do a lot of reporting, because the first three quarters of the book are told in the third person and or the what happens at the company until I come along, and

I had to re report a lot of that. Uh. Tons of new material came out of that reporting process. So I was really reporting and writing at the same time. And it was just uh so fun and fulfilling. And and I'm glad that to hear you say that it read like a thriller, because I tried to to make

it read, uh like a page turner. I'm I'm a big fan of Agatha Christie and UM Uh you know, I I also uh read people like Michael Crichton and and Dan Brown, um, and uh you know, I've picked up on some of their some of their techniques to to to keep the reader interested, and I channeled some of that as I was writing this book, no doubt

about it. The um I got more questions I want to circle back to, but I have to get into the whole back and forth with the Wall Street Journals editors and the threats of litigation and then the last minute hail Mary Elizabeth Holmes polled with Rupert Murdoch of all of old people, who who owns the Wall Street Journal. So so let's talk a little about that. Your editors sound like they're great. They seemed really stand up and there was never any Carrie, what the hell are you

doing to us? You're gonna get a suit? Come on, this is crazy. Tell us what the process was like in the newsroom. Right. So my editor is a guy named Mike Sikonolfi, who who's been old school, right, Yeah, he's been at the Wall Street Journal since I think the eighteen hundreds. I'm kidding, I didn't start till the can't tease him a lot about how long he's been at the journal. I think he actually joined the Wall stret Journal in nur UM. But he's a legend at

the journal, and he is loved and admired UM. And it's for good reason. He's a real journalist. UH loves to do hard hitting stories and to back reporters who are onto hard hitting stories. UM. And he's also great in the sense that he knows, uh to to let you have a long leash and to follow your knows.

He doesn't try to micromanage you. And UH, early in two thousand fifteen, I think it was February one or second week, I had gotten the tip from the pathology blogger UH, coming on top of the New Yorker story that had raised questions in my mind. I went to Mike and I said, I think potentially there's a story here, and I think potentially it could be a really sexy,

big story. And he sort of listened to me summarize, UM, what I thought the story might be, and he was like, ahead, you know, try it for a couple of weeks, and then just give me an update in a couple of weeks. And and and that's how the process started. And and UH, you know, When I gave him the next update, it was probably two or three weeks later, and I hadn't made uh some headway, and so then he was like, well keep going, and uh yeah, so he's a great

editor for sure. What what about when the nasty graham start to show up? I have to tell you when I got mine, and it's nothing like what you're my. I wrote a book review. Someone didn't like my book review. I got a h three page letter. But my immediate reaction is, oh my god, I totally screwed up. What did I do? And then I started reading through and I'm like, wait, wait a second, that that's not that's

not true. Everything I wrote in there, you said henchman, I used the word thug, But more or less everything in there in my review came right for your book. In fact, normally I don't do that. When I do, might hear the ten books I'm gonna read this summer or this winter. And I read a book and I'm like, oh, that's interesting, and I put it aside, but I so totally enjoyed the story. I'm like, there are red flags everywhere, there are lessons for investors. I'm gonna write something like that.

Not my usual approach, and I wrote it never in a million years expecting we're going to get a letter. But you get the email and it shakes you. You're like, holy cow, what did I do? And for a micro second, it's I really I screwed the pooch. I really did something terrible here. And then it took about ten seconds before wait no, I literally shut the book and started dictating on my iPhone because I was on the beach and the Hampton's got home, wrote it up that night,

polished it the next morning. Off it went. It was literally the book could not have been more fresh in my mind before that, before that column. And so after the letter came after I finally like took a deep breath, figured out all the page citations that were being complained about. You made the stuff up? No, I didn't. It's right from the book. Look, I stopped and I said, what was it like when carry my nothing little book review.

You're breaking major news stories. You're breaking stories that ultimately leads to the revealing of fraud. So we have we haven't even talked about the SEC and the other litigation that's going on, but you basically brought down a company that A was a fraud. B was putting people's life and safety at risk. If you get a false positive, well you it scares the hell to you. But there's no danger if you get a false negative. If they miss something because say this thing doesn't work, people die.

So what was it like when these letters started coming in, these nasty graham start coming in. I can't imagine the process you went through, right, It was stressful. I mean, some of your colleagues have interviewed me about the Book of asked whether there was any moment where I felt in physical danger. And I don't think there was any moment that I felt in physical ange. I mean there were moments when I'd come out of my apartment building in Brooklyn and I'd look left and right to see

if I could spot anyone UH following me. Do you think you would follow? I don't know. I don't. I don't know the assumption as they do a full online search if they have, if they had someone following me, and that comes out, I will not be surprised. But I can't say one way or another whether they did or not. I just don't know. I didn't I didn't

feel physically threatened. My biggest source of stress was that this scorched earth campaign to intimidate my sources and turn them and to also intimidate the paper that it would be fruitful and that they would succeed in destroying the scaffolding of reporting upon which I had built this story, and that ultimately, uh, you know, the story wouldn't come out. That was for me, that was the big source of stress. And I finally, you know, breathed a sigh of relief

when the story was in the paper. I think it was October, uh, two thousand fifteen, and then I didn't really have time to basket it very long because then I immediately you know, on to the next one. I was on to the to the to the first follow

up story, which we published that very night. Um, and uh, you know, from there it was months and months of more follow up reporting, and I think, uh, with each week that passed and with each regulatory inspection and finding, we were vindicated more and more until recently, you know, the criminal charges that were filed by the Justice Department, the wire fraud fraud charges filed against Elizabeth Holmes and

Sunny Baliwani by the Justice Department. Really, you know, we're the ultimate of vindication that my reporting was correct and I had been right all along. What about the state of California. Did they do any criminal investigations and it all took place primarily in California? Are they getting a pass by the state. Well, if you depends. If you count the the U. S. Attorney's Office in San Francisco as a federal it's not stage okay. So then if

you don't count them, California did nothing, that's shocking. I mean, this is a serious fraud. It's a billion dollars and investor money, not counting um, not counting the Fortress stuff after the fact. So it's almost a billion dollars and the risk to individuals. You know, one of in the book you describe the Paraos people and I don't remember. I was the lawyers or others intimidating some of the doctors who had had used that. That was Sunny Bow.

That was the number two executive the company, the president of the company, who was the boyfriend of the founder,

secret boyfriend of the secret boyfriend of the founder. She was hiding it from everyone, including her own board, flewed out to Phoenix and proceeded to intimidate and threaten all the doctors who had spoken to me on the record, And how did they know the names of those doctors because they had asked that we a of them information about the doctors and patients and their blood test results so that they could rebut them and respond to them,

which is natural. I mean we you know, you have you have to have the the party that you're investigating and writing about has to have the opportunity to respond. And so we did that. And what did they do? Rather than responding, they went and they used the information to find the people and threaten them, and didn't one of the doctors pretty much tell them to go jump. I thought one of the doctors was real stand up.

In the book, there were a couple of doctors who either refused to meet with them or or told him, uh, you know one and one comes to mind Dr Adrian Stewart, who who too had two colleagues who had buckled under pressure and signed these uh statements essentially recanting what they

told me. Uh. She wasn't there when her two Stewarts, when her two colleagues uh were presented with those statements and chickened out, And she came back a week later by which time I hadn't managed to reach her, and so she was prepared to be say, which she was as soon as she got back by Sunny Bowani, and

she stood, you know. She she refused to sign the document that he put to her, even though he told her, if your name appears saying anything about the Ainos in a Wall Street Journal story, we will drag your reputation through the mud. Nice guy. Good for her. She she's

another one of the heroes in the book. So I have to bring up the hail Mary that Elizabeth Holmes pulled with Rupert Murdoch, who owner of Fox News, of which Wall Street Journal was part of all the one way I have to correct you now it's been split blah blah. Webster Journals part of News Corps, which is a separate company. Fox is part of Century Fix. Right, So this is at the time it was a single entity. This is pre split, right, this was post split split

was really alright? So part of news Corp, an investor in Paraos. And the day before are publication was it October? So it's two weeks before publication. She and she had already done this once a month or two prior, when she had invited Murdoch to come to Theonos offices in Paloazza, and she'd raised my story with him and told him I had gathered all this information that was false, uh, misleading, and that would do great damage to the company if

it was published. And she had read about that the last one, the latter she invited him to kill it, and he the mirrored, told her that, you know, he trusted the journal's editors to do the right thing. I didn't want to involve himself. And then she came again late September, I think it was September, two weeks before my first story was published. She met with him in his eighth floor office in News Corp Building on fifth floor,

so three floors, three floors above me. She was there, meeting with him one on one, raising my story with him urgently, again hoping that he would volunteer to kill it, and uh, he did no such thing, despite having a hundred twenty five million reasons to do. Soon dollar investment in the Eventually Murdoch to his credit, so the story

publishes some years later. Murdoch sells his interest back to the company for a dollar, so he gets the tax right off a year and a half later, approximately sells his stake back in the company to the to the company for a symbolic dollar, so that he can use that huge loss to write off taxes on other earnings.

But um, there wasn't addendum to that buyback deal, which was that if Fairness settled any litigation with Huh, an investor who felt they had been defrauded for more than forty million dollars, then Murdoch would be entitled to another

payment of four million dollars. And so that that he did get that additional four million dollars later because there no settled with the San Francisco Hedge Fund partner fund that had invested a hundred million uh Sarrens settled with them for forty three million in the in the spring of two thousand seventeen, and so that entitled Murdoch to another four million. So he got four million plus one dollar. He's still in other words, he's still lost one million dollars. Amazing. Um,

there's a couple of other selmans. I wanted to ask this safe way in Walgreens, these companies had such a bad case of Foamo. They spent a ton of money because they were afraid their competitors would get in over them despite never seeing the machine, never getting the technology of the science. Well, they saw the machine, but she would do these these fake demos again. So the real machine they saw, no, they saw, they saw the real machine.

But there was a what they called this secret demo protocol where the Walgreens or the safe Way representative, or sometimes the board member or even the journalist came and had you know, saw the mini lab which was this big black box with a digital UH interface, and they'd have their finger pricked and the small fingerstick sample would be put in this cartridge which itself would be slotted into the mini lab machine. The Mini lab machine would be turned on and the testing what you'd hear the

worrying of the machine. And so you think the testing has started, and they'd say this is gonna take a while. Why don't you go out for lunch or visit the rest of the building, or meet with Elizabeth in her

office and then we'll get you your test result. And so the person Walgreen, Safeway or board member would leave the room and then when they were out of sight, a THEONIS employee would stop the Theoronis Mini Lab UH take the cartridge out, take the blood sample out of the cartridge, and bring it to the Theonis lab where they would either test it manually at the bench or

run it on one of the hacked Semens analyzers. So if someone says, no, I'm fine, I got my phone, I'm gonna just day busy, I just want to watch this machine work, nothing would have happened. Well, they yeah, you would have been pretty much without saying so, calling their bluff, and I'm sure they would have come up with, you know, some um excuse to get you out of the room at some point so that they could pull

off their sliders cans. So this is this has been a deep fraud from let's call it oh six oh seven. Is that about right? Yeah? I mean you you could argue that the fraud didn't matter as much until two thirteen as long as the company remained in R and D mode and never went live with the technology. Right.

But the second you commercialize the technology and you start offering it to the public, which is what started happening in the fall two thirteen, then it becomes a gigantic fraud because it's not just investors who are being defrauded, but it's the public that's being put in harm's away and that and that's really you know, I think that's what elevates this scandal, uh and puts it in in

antheon of of you know, modern financial scandals. Let's let's talk about the army and Lieutenant Colonel Shoemaker, a no nonsense guy with a medical background, was to approve all of these um experimental R and D s. Holmes but or whoever it was bumps into him when trying to get this approved for the army. And this guy doesn't take any bs, sees right through it practically from the beginning, well, he didn't. He didn't necessarily think that the technology didn't work.

He didn't know whether it worked or not. Um, But what he felt strongly about was that this device needed to be approved by the FDA. It's a medical device for testing blood. How couldn't it be right? And and and the f d A approves all laboratory testing equipment that laughs by and so he felt that the Thermis

device was no exception. And so what he really had a problem with was this regular to strategy that Elizabeth Holmes head um, you know, presented him with in in two thousand eleven, a couple of months after she had met Maddis and wrapped Manis around her finger and gotten Maddis to back this notion that the Themis technology would be used in the field in Afghanistan. And for that to happen, it had to go through Lieutenant Colonel Shoemaker at Fort Detrick UH in Maryland because he was the

guy who had to approve such experiments. So this lieutenant colonel gets a phone call from a four star general, Is that right? Right? And so yeah, later, you know, he had has these these clash diplomatic clashes with Elizabeth and it becomes clear, uh to her that she's not

gonna be able to steamroll him. And but so she appeals to to Maddis and she emails him and at that point he's actually in the war theater in Afghanistan and uh she uh because what what's happened by then is that Shoemaker has not only resisted what she wants to do, he has passed on what's he what he's learned about the Theoranis regulatory approach to the f d A and two CMS, the Centers for Medicare and Medicaid Services, and CMS has dispatched an inspector to do a surprise visit.

And Elizabeth is furious about this, and so she writes Madis, who's an Afghanistan, and Mannis gets her email. He's furious. And so in August of two thousand twelve, Shoemaker has to fly down with an FDA official to Tampa, Florida, which is, you know, the headquarters of the Central Command, because Maddis at that point was the head of the

Central Command. And he has to meet with Mannis and explain to this legendary journal general, I'm sorry, uh that uh you know that that he can't say yes to what this uh general wants uh and and here's why.

And so he and this um FDA official named Alberto Gutierrez go in brief Maddis um and they reach a compromise, which is that Theoronis can the Thearoness experiment can proceed only if it's using after the fact, left over de identified samples from wounded soldiers wounded or healthy for that matter, and um and so that they could feed it into it if they want a big sample of blood to

run tests. But nobody in the field is relying on this for medical exactly exactly and so, but that you know, that opens a window for for Theoroness to do this, and inexplicably, over the ensuing months, Theonis can never seem to get its act together to to get the study protocol written and ready, um and and and then you know, everyone retires, Mannis retires, his uh aid de camp retires,

Shoemaker ends up retiring mid two thirteen. Um. The live experiment in the field in Afghanistan, and that Elizabeth wanted never ends up happening. And then wait, wait, wait, wait wait why would she want to live? Is she still under the illusion this damn thing works? Like how delusional is she? She thinks that it's sort of works. And then in the end, just a few tweaks right that you know, will iterate and uh and and basically what

she has her eyes on is two things. She has her eyes on the potentially huge new revenue stream that a contract with the Pentagon, of course would bring. And she has her eyes on the validation of fairness that she would get by by virtue of being a supplier of this technology to the Pentagon. And what year is this? This is two thoen So when did the Safe Way and the Walgreens deals fall apart. So the Walgreens deal only fell apart after my revelations, and it took not

even two sixteen. Really, I mean it fell apart in steps. But they really, uh you know, ended the whole thing in two thousand sixty. And I think it was the summer of two thousands, just a big three hundred million dollar right off or whatever it was. It was a

d forty million that Walreens put in therapis. But I mean, but what about the renovator who did the big renovation was safe Way safe Weight loaned there, no thirty million, but on on the side, in addition to that loaned it renovated, uh, these these clinics inside its supermarkets and and about eight hundred of its supermarkets, Uh, in anticipation of you know, having the Theonis technology offered there. And that renovation cost three million dollars. So at least they

got new painting carpet is amazing. Um. The other two before I get to my standard questions, the other two um sort of frauds that that stood out that was surprising. One was the Johns Hopkins letter the right explain the

faux endorsement. Right, So uh, she goes to uh, Walgreen's has hired Johns Hopkins as sort of a consultant as it's beginning to set up this partnership with Sanis and so in I believe it's May of two thousand ten, Elizabeth and her boyfriend's Sonny go to the Johns Hopkins campus to meet with several Hopkins officials, among them laboratory scientists.

And they come with what is then the Edison, the black and white device, and they come with binders full of data, um, and they explain, you know, what the device does, and they show these binders with these graphs that show, you know, it's basically a diagonal line that shows a very tight correlation between the data from the Tharanis tests and regular technology with you know, regular Venus draws. And that was a scam also, And that was a scam.

Those were fake, fake graphs and fake data. Um. But they meant for a couple of hours, and you know, the meeting, at theirness's request, gave rise to a two page letter, not even two pages, a page and a half, which was essentially a summary of the meeting, minutes from the meeting, saying this meeting happened, and you know what

the airiness has described sounds interesting. And by the way, there's like small boilerplate uh at the end of the second letter saying you know, this is in no way an endorsement by Johns Hopkins of any uh Thereness technology. And she then uses this over the ensuing two or three years to claim that UH tharoness Is technology has been independently verified and validated by the Johns Hopkins School

of Medicine, and everyone falls for it. Nobody calls up Johns Hopkins and says it seems that this is a stunning thing. Right time and time and time again, there are these statements made, these claims made. Nobody does due diligence. Nobody sees the technology, nobody sees the actual Well, open up the machine. I can't like I would. It's one of your Why the vcs walked because you have to show us this and we can't give you money. This is not this isn't a negotiating tactic. It's it's show

it us or we're out, because that's how we run. Yeah. That the one of the Hopkins Lab scientists who attended that this meeting back in the spring of two thousand and ten at the end of the meeting, said to Elizabeth, you know this is all well and good, but you know, for us to really do a rigorous verification, you would need to send us one of your devices. Either you could leave this one or ship another one of them

to us. And then I'll want to have it in my lab for several months and put it, you know, pointed through its paces and compare it with the diagnostic equipment that I have in my lab. And so he encouraged her to do that, and she said she would. And of course she promised a lot of stuff. It never happened, never never happened. She promised data, she never delivered. She promised documentation, never delivered. But we know why because this thing was a fraud for years and years before.

How do you live like that? How does somebody not expect to get caught? You know? Again, in her mind goes back to the way that she channeled the traditional Silicon Valley, and again that what I think it was. The traditional Silicon Valley is the industry that grew out of the computer chip industry, then became you know, the personal computer revolution, and then the Internet boom, and now it's the smartphone that's the traditional Silicon Valley. It's based

on coding, computer programming. And it's true that there's been a lot of faking it until you make it. There's been a lot of exaggerating, making exaggerated vae vaporware to get the funding that you need to to make the product happen. And she I think because she modeled herself after jobs and to a lesser extent, Larry Ellison, she thought, you know, this is the rule book that everyone goes by in Silicon Valley, Like, it's not a big deal if I go by it too. So, last question on

her prepping for this. I watched a couple of videos. She always seems to speak like this in all of our videos. It's this sort of weird baritone. And I read a number of other articles that suggest that she faked this deep voice for reasons known apparently only to herself. What is the story with that? Is that her real voice is that fake? Is this trying to be a woman in a man's world? Like, what is what is the deal with that it's not her real voice? Um? And how do we know that for sure? So I'll

give you at least four data points. One is an anecdote that I tell in the book. I think it's in chapter eight of the book where an employee who has just been hired to as an injury to work as an engineer on the mini lab meets with her in early two thousand eleven, and the meeting is at the end of a long day. She's excited that he's

there and they're making progress on building this machine. And she closes the meeting by getting up and and taking her coat off her chair, and as she goes towards, you know, to open the door of her office to see him out, she lapses out of her baritone. She forgets to put on the baritone and lapses into a much more natural sounding young woman's voice. And he's totally startled at this point because he's only heard her with the baritone, and he he realizes at that point that

the voice is fake. He kind of turns it in his head over the next couple of days and realizes, you know, she must have decided this was necessary because, uh, Silicon valleys a man's world, and she dropped out as this young woman and that was so unusual. She must have felt along the way that it was necessary to

get people's attention. Now, the other data points I have are one is that um, as the book makes clear, one of my sources for the book was Elizabeth's best friend at Stanford, a young woman by the name of Chelsea Burquette UM. And Chelsea says that Elizabeth's voice was nothing like that at Stanford or even after Stanford. UM. And so Chelsea herself believes that the voice is fake. UM. A family member UM uh cooperated as well for the book.

And I'm not going to say this person's name, but that person believes and and uh professes that he knows for a fact that the voice is fake. And then there's probably the most conclusive proof is that there's an interview that she gave to the show Biotech Nation in May of two thousand five. It's an NPR show. UM and I have a recording of it. And at that point, she's eighteen months out of Stanford. She's like twenty or

twenty one years old. Uh. She gives this interview to Morrow Gunn and um Uh she sounds nothing like uh

the Elizabeth Holmes of later years. She sounds like this, uh, this this kid almost who's speaking very fast, uh, in a much more natural sounding young woman's voice, that's a couple of pitches higher and uh, and you realize listening to that audio recording that she basically at a certain point after that decided to create a whole new persona for herself, and and that changing her voice was part

of that new persona fashion. I always thought when you close your b around, your voice changes, and that that could have something to do with it. But you're saying nothing to do with that whatsoever. It was for sure a very part of a very contrived attempt to project this uh you know, female Steve jobs Aura, which which other than the other than the the black turtleneck. There was just nothing in common whatsoever. But um, hey, what are you gonna do that? That's was That was um

attempt and uh, just just astonishing. So I only have you for a couple of more minutes. Let me jump to my favorite questions that I ask all my guests. Before I do that, I just have to say, we covered a ton of stuff. Anything you want to bring up, anything I might have missed you think is noteworthy. A funny moment in this saga, which is uh, forty eight hours after my first story is published in October two fifteen, Um,

Elizabeth and Sonny lead this all employee meeting. You have that in the book, and that's it's amazing that people just go along with that. Yeah. And I was told that, you know, at least half of the employees in the audience, uh didn't go along with it. And and uh, I couldn't believe that this was actually happening. But then you you did have some employees, many employees, who did go along with it. And I think it speaks to the

culture of hubris arrogance. Uh. You know, us versus them, we're above everything, Uh, even though we haven't really invented anything new. Um. And and you know that that's it really speaks to how broken the culture of that company was. F you, Carrie row is what Bawani and Holmes lead them on chanting? And how long does this go on? And I think people told you about it was it was just a couple of times, two or three chants, um.

And it had been preceded. There had been a precedent three months prior after Aaroness had received FDA approval for one of its fingerstick tests. One turned out the only fingerstick tests that ever got approval for was a test to detect HERPS, which is actually a pretty easy test to do because it's just a test that says yes or no, do you have the disease um. So those tests are much much easier than than most lab tests,

which are quantitative tests. Anyways, Aarons had gotten this approval from the f d A and was very very proud, and Sonny had led employees in the Uteria in a chant which I actually have on tape because I have footage of that meeting, and he yeah, he had the whole company yelling, and at that point the chant was directed at Aronos's rivals Quest and Lab Corps, where the two nine pound guerrillas in the in the lab never for a second thought this little pissent company with a

fake technology was That's the most amazing thing is they think these are their rivals. And these two companies couldn't possibly care less about that. Well, I mean, by the time she became famous, they certainly knew who she was.

And I think it, uh, it didn't escape them that the valuation of Paris first disclosed and Fortune magazine in June two fourteen was nine billion, which was essentially the same you know, market capitalization that Quest and Labcorp had so um that had to get their their attention, and I know it did. But yeah, the the the amount that the degree to which Elizabeth and Sonny were obsessed with Quest and Lab Corp uh is uh exponentially greater than uh, you know, than how concerned Question and lap

Court were with Paras. But anyways, that first chant was directed at Quest and Lab Corps. And then three months later, when my story came out, at the end of this meeting in which Elizabeth and Sonny had both been very defiant about how my reporting was false and about how they would take the fight to the journal and to the journalist, a senior software engineer asked Sonny if he would lead them in a chant, and Uh, no, one

you know had to ask what the chant was. Everyone knew based on what had happened three months prior, and so Sonny was of course very happy to oblige and lead the company for a second time in a chant. Uh. And this time added my name after the F you, which was convenient because it rhymed amazing, John carry row your fake news. Let's um that's what he should have said. Um, I think the book is not fake news, and it's

absolutely fascinating. Let's let's jump to to our favorite questions, and I'm I'm going to skip around a little bit because I know we're tied on time. Tell us about some of your early mentors, so, uh, I would cite a few people. One of them would be uh my investigative team colleague Mark Merrimont. He's still at the Wall Street Journal to this day and still does great work

for the Wall Street Journal. Um was he on one of the Pulitzer Prize winning teams that you uh yeah, he was actually uh he he uh lead wrote one of the stories that was in a package on corporate scandals in two thousand two that won the Pulitzer Prize for Explanatory Reporting, and I lead wrote another one of

those stories. Um, but he he had been a mentor, uh several years prior on my first ever uh investigative work, which was unmasking a Belgian a speech recognition software company called learn out in Hospital, which was the pride of

Flanders back then. And I was based in Brussels, and and Mark and another journal colleague named uh jesse Eisener had um uh smelled a rat and and started writing about this company and they needed help from a reporter on the ground in Belgium and sought out my help and then we we ended up, you know, spending close to a year unraveling the fraud of this company. And I learned a ton from those twho's got two guys, especially from Mark Merrimont and uh so he was a mentor.

And then, UM, I'm gonna name check another former colleague, Mike Williams, who's now the UH investigative editor at UM at UH Reuters and who's a long time Wall Street Journal reporter and editor. He was my bureau chief in Paris for several years and he was later the Page one editor of the journal. And then of course Mike Sikonolfie, who was my current editor on the Investor investigative team. I would mention that Eisener went on to win the first online Pulitzer for his work at a pro public

That's right. So um, a lot lots of Pulitzer Prize UH winning journalists came out of out of his shop. So who, um, let's talk about your favorite books. Bad Blood is your first book? What do you read? Who do you really enjoy? Fiction? Nonfiction? Right Blood related or not? So? Um, I love nonfiction and I love UH page turning nonfiction. One of my favorite books of all time is a Civil Action, which I read in the in the late nineties. UH. I think it's uh. The name of the author is

Jonathan Harror. I think he worked on that book for seven years. UM. Another deeply reported book that I love is Black Hawk Down by Mark Bowden. Uh an amazing feat of reporting uh reconstructing uh what those soldiers went

through in Somalia. Uh. Just an unbelievable book. UM. I I loved the the sort of definitive UH nonfiction book about Wall Street and the eighties Barbarians at the Gate, which was written by UH guys who at the time worked for the Wall Street Journal, Brian Burrow and John Helliar. They've long since moved on. UM. I am a big fan of the former Wall Street Journal reporter and now best selling author Eric Larson. UM. Among his books H

Devil in the White City were um. Uh. The latest that I lead that I read by him is about the Lusitania. UM. He's just a terrific writer. UM. And I would say, UH an influence in terms of writing UH non nonfiction probably my my biggest influence. So what has changed since you became a journalist twenty years ago. How do you how do you see the we know, the industry, the business of journalisms have changed. What do you see as different in the actual reporting? Well, the

one obvious thing is the rise of social media. Um uh, it's it's there everywhere you turn, you know. Uh. Um. People you investigate are on social media or use social media. I used LinkedIn to make contact with ex Theoris employees, one of them Tyler Schultz. Um and uh yeah, I think that it's it's it's both a reporting tool, but it's also a disinformation tool, as we see hint, hint

with the current administration, it's sort of a propaganda tool. Um. Thinking of Twitter in particular, um uh and uh it's got other sort of um effects on our craft, uh, which some of which aren't so great, which is that journalists spend a lot of time on Twitter, probably too much time on Twitter instead of actually doing work. Um right, and sometimes they appine on Twitter in a way that

that compromises their objectivity or person objectivity. Um. So yeah, social media has been a game changer, I think for for our profession. If I had to point to something, so tell us about a time you failed and what you learned from the experience. So when I was a brand new reporter at the Wall Street Journal Europe and uscles back in I think it was UM and the Wall Street Journal Europe back then was separate from the mother ship. UM. We had these these European and Asian

editions that were run separately. So I wasn't a full fledged Wall Street Journal reporter. I was a Wall Street Journal Europe reporter. And uh, with respect to this incident, it was a good thing. I M a colleague and I wrote a story about a business deal that we thought, um, you know, we had learned about that that was basically turned out to be complete fiction. Uh. And it was

like a comedy of errors. It was a a merger or so we thought, between several post offices in Europe, and um, you know, we had these sources who were who were just you know, these pseudios, sources who were several times removed from actual information, but who uh you know, told us that they thought they knew what they couldn't have known because it wasn't true. And so we we wrote this this completely absurd story that was completely wrong and erroneous. What was the take um was that what

was your takeaway? No, my takeaway was that, um, you know you can't you you got to verify. I'm reading Cy Hirsch's um Um autobiography right now, and he has an expression for it that he learned at City News in Chicago, where he started out his career, uh, which is uh check it out. You know, he check it out. And we didn't do any checking. We just went with what you know, the first person we got on the

phone told us and the story was completely wrong. It was embarrassing, and frankly, I just I still don't understand why I wasn't fired for it. And what is it that you know about investigative reporting today that you wish you knew twenty years ago? I mean, I think earlier in my career, I think that I thought investigative reporting was a glamorous craft. You know this may sound um corny,

but um. One of the things that contributed to inspiring me to become a newspaper reporter was reading All the President's Men after college graduated in ninety four, and that was one of the first books I read after college, and uh, you know, I think it made uh investigative journalism and reporting seemed glamorous to me. And what I would caution you know, young people getting into this line of work is that uh of the time, it's not glamorous. It's digging. Uh you know, behind the scenes and the

dark in semi or complete obscurity. And um, you know, hopefully you you you published some some good stories, but oftentimes the stories won't have as much impact as you would hope they would have. And you know, it can be thankless work, and um, I would argue that it's also also can be very rewarding work, but you gotta stick with it, and it's uh work that requires persistence and perseverance. UM. I don't know if I necessarily knew all those things when it started out, just just fascinating.

Thank you, John for being so generous with your time. We have been speaking with John Carrirew, author of Bad Blood, Secrets and Lies in a Silicon Valley start up. If you enjoyed this conversation, well then look up and intro down an intro on Apple, iTunes, Overcast, Stitcher, or wherever your final podcasts are sold, and you can see any of our prior two hundred plus conversations. We love your comments feedback and suggestions right to us at m IB

podcast at Bloomberg dot net. I would be remiss if I did not thank my crack staff that helps to put together this conversation each week. Medina Parwana is our you engineer slash producer, Taylor Riggs is our booker and producer, and Michael Batnick is our head of research. I'm Barry Retolts. You've been listening to Masters in Business on Bloomberg Radio.