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As we first reported last may homes 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 a zenith theranos was worth nearly ten billion dollars. And Elizabeth Holmes became the youngest self made female billionaire in the world today. She and her companies one time president STAN criminally charged by the US government of perpetrating a multimillion dollar scheme to defraud investors doctors and patients you're about to hear from insiders how the theranos deception worked. Our work is in. Being able to make testing more accessible Elizabeth homes built her company theranos on this invention. She named the Edison a miniaturized blood analyzer that would disrupt the sixty billion dollar lab testing industry dominated by giants Labcorp and Quest Diagnostics homes called her invention. The ipod of healthcare, and it made her a celebrity, she greased magazine covers and was praised by politicians and the press alike. Founded this company twelve years ago, right? Tell him old your I was nineteen. The woman who I will be interviewing needs no introduction. She sold her vision with grandiose claims that her blood tests would cost a fraction of current prices. What we're doing in just pricing is saving Medicare and Medicaid hundreds of billions of dollars on an annual basis. Homes. Biotech startup was backed by a lustrous 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 Shultz the former secretary of state who helped end the Cold War. He introduced his grandson Tyler to homes dazzled Tyler Schultz became a believer in joined the company soon after getting his degree in biology from Stanford University when you met her and you heard about Elizabeth homes vision. What did you think I was totally sold on it? Tyler Schultz began working at theranos in September two thousand thirteen. 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. Oh from a painless finger prick the Tyler shoot says the Edison he saw just didn't work. Was it a sophisticated visa machinery? No, there were components that would kind of fall off in the middle of testing that you would have to fish out. They had doors that wouldn't close. They would get too hot. And then they will get too cold. What I was there. We could not complete any test accurately on the devices that we were manufacturing matchy joined theranos in two thousand twelve after getting his doctorate in biochemistry. His job was to adapt. Blood tests for the Edison. Tests, which homes told investors were ready to use on patients. But Elizabeth homes had told Walgreens in two thousand ten 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 laps was that true. No. Do you think she was lying to Walgreens? I do. Are you a Clinical Lab specialist? No, Erika Chong was fresh out of Berkeley with a degree in molecular and cell biology when she went to work at theranos, she was just twenty two but even the novice lab techs, suspected something was very wrong. When she saw faulty test results sent a Walgreens patients when did you think I probably shouldn't be doing this? Pretty pretty soon in the process, especially when we started to pick up more patients ampoules, and when those samples were retested she says there were often contradictory results. Did you ever alert the patient? Now, we didn't let them know. Hey, we ran your patient sample, and we're not actually positive about what the diagnosis this is. Someone's health information exactly this isn't an ABC crashing this. Isn't you know, someone's food delivery coming late? That'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 you was there blood getting collected. They didn't see what was going on behind closed doors about how it was processed. They will get their finger prick this all out of blood, then they'd be let out of the room. They go have a meeting. Go. Have lunch whatever and which plan and GM would run in the room grab the cartridge bringing down to the lab. So was the Edison doing the testing? Absolutely. Who was doing the testing scientists at the bench by hand. It was a bayton. Switch for investors that kept the money rolling in theranos raised nearly nine hundred million dollars from those investors who now say they were swindled by Elizabeth homes and company. President Ramesh sunny bull Wani the pair claimed investor documents obtained by sixteen minutes, the theranos technology was validated by the FDA pharmaceutical companies and was deployed on the battlefield by the US military in Afghanistan. Those claims were fabricated and in one public appearance after another homes is pitch became even more fantastic. And reckless we've done some work with people at Hopkins who have developed in demonstrated that in blood, you can see the onset of pancreatic cancer seventeen years before a tumor forms. We call Johns Hopkins medicine, they told us they never collaborated with theranos and Doug matchy 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 bad results. That's deceptive. 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 his best to make to make everyone. Happy this invention. It's going to be way up there. With the discovery of antibodies day to day operations were run by company. President sunny ball Wani Wani is a millionaire software engineer with no training in the biological sciences. But he did have a powerful connection to Elizabeth homes. Sonny Bono money was her secret boyfriend some people are here because of the mission because some people are opiate for the science. Money was also homes in four, sir. Firing employees is on the spot and berating scientists for failed tests after year and a half matchy quit. I saw that. There was a potentially fraud taking place there was far too much. Illegitimate things going on there talked to Sonny decided they want to be there anymore and left. Tyler Schulz 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 little tight end almost every media outlet, including us here at CBS body into the theranos a healthcare pioneer is being compared to visionaries like Bill Gates and Steve Jobs. Do you think she wanted to be the next Steve Jobs? She does a really idolize him. So she wore the black turtleneck thinks 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. Their nose employee's told us they were closely watched and required to sign nondisclosure agreements. All reinforced they said by a threatening team of lawyers in private investigators. That's why when Tyler shorts alerted authorities in the spring of two thousand fourteen 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 welfare knew that. I was talking to regulators easy meal to New York State Department of health regulators Schulz outlined questionable lab is and said he believed test results were being switched. I said this happened in my laboratory, and I just want to know if this is okay. And there is funded and said, no this is cheating. This is not how it's supposed to be done. Tyler Schultz was ready to resign. But I he sent Elizabeth homes and Email about his concerns. He got a response from sunny ball Wani 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 Schulz quit in April two thousand fourteen and soon after Erika Chong did too by February two thousand fifteen the theranos fairy tale was about to unravel publicly at the Wall Street Journal Pulitzer prize winning reporter, John Kerry ru who was 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 homes. She is. 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 homes 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 ruse, I started cool appeared in October two thousand fifteen and revealed theranos did less than ten percent of its tests on Edison machines. What do you think's going on here homes struck back? This is what happens when you work to change things. And I they think you're crazy, then they fight you. And then all of a sudden you change the world. Let's skeptics we're no longer buying the theranos deception what I'm showing you. Now is the result of hundreds of engineers and scientists work homes repeatedly insisted she would present proof that a major industry. Conference that her technology worked. It can see the tray dropping into the Texan module. There was proof that never came and the evidence that you presented fell far short of that in two thousand sixteen after a series of surprise inspections. Federal regulators shut down the company's laboratory saying it posed immediate jeopardy. Patient health and safety. Nearly one million theranos test results were invalidated once. 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 in her family and media mogul Rupert Murdoch each lost more than one hundred million dollars. Walgreens, Sube theranos and settled for less than a quarter of. One hundred and forty million dollar 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 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 relying the patients, you're lying doctors. You're lying regulators. Most people would call that fraud as well the securities and Exchange Commission called it massive fraud when they charged Elizabeth homes and sunny Bonnie in March home settled the SEC case without admitting guilt and paid half a million dollar fine. Bonnie who left theranos two years ago calls the SEC charges unwarranted and is fighting

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