Best Two of Six

Behind the Curtain

Mara: It's 2013, and Tyler Shultz is at a blood-testing machine in the Theranos lab that keeps coming apart. He told CBS News that parts would fall off in the middle of a test and have to be fished out. Doors wouldn't close. The machines ran too hot, then too cold.

Eli: The listener asked: who were the two young employees who blew the whistle on Theranos, and what did it cost them? Today's angle is the lab insiders who risked family, fortune, and safety to stop Theranos.

Mara: Tyler Shultz and Erika Cheung, another junior lab hire, would both turn whistleblower. Against them stood a company valued at around nine billion dollars, its lawyers, and Tyler's own grandfather on the board.

Eli: And the fixes were tape on the doors and barcodes stuck on scissors.

Mara: He'd come in a believer. As a Stanford junior he met Elizabeth Holmes through his grandfather, a former secretary of state who sat on the Theranos board from 2011 to 2015. Tyler said he 'fell in love with' her vision. He switched to biology, interned in 2013, then went full time as a research engineer on the Edison, the company's own analyzer.

Eli: So family got him the job, and the vision kept him at the bench.

Mara: Right up until quality control kept failing.

Eli: Meaning: run a sample with a known answer first, and see if the machine gets it right.

Mara: And if it misses, nothing it says about a patient can be trusted. On known samples, the Edisons failed as often as half the time. Erika Cheung later said, 'Patients had the same chance as flipping a coin in terms of getting their results from a test.'

Eli: A coin toss. And Tyler says Theranos launched with zero tests validated on it.

Mara: That was Tyler's 2013: a believer watching the company's own machine flunk its own checks. Eli, the other new hire was seeing the same thing.

The Open Secret

Eli: Erika Cheung came in October 2013, a UC Berkeley graduate in molecular and cell biology, starting as an entry-level lab associate. On her own, she found many of the same problems Tyler did. And she saw how failed quality-control runs got fixed: outlier deletion, which means throwing out the readings that don't fit until the average passes. In her words, 'they took out data points... and said, Oh well, this is the best 2 out of 6 the way we average things.'

Mara: She testified it could be up to two of six. A third of the run, gone.

Eli: Then vitamin D. On one proficiency test, a graded outside check on a lab's accuracy, an Edison result came back at 373 percent of the reference machine's value. Cheung testified that for a patient, 'this could be the difference between having a deficiency versus being in the normal range.' Theranos ended up voiding its vitamin D results. Tyler saw the same gap from his side. He says that for a New York state audit, Theranos ran samples on its own devices and on outside equipment, then reported only the outside results. Some pairs differed by more than 300 percent.

Mara: Outside equipment was the open secret. Tyler says the board was told the outside machines were just for validation. Holmes later described keeping the modified systems quiet as trade-secret protection.

Eli: Patient blood was going through commercial Siemens analyzers the company had modified. In 2015, the clinical lab director told John Carreyrou that only a dozen tests ran on the Edison. The menu listed more than 240.

Mara: Erika took the recurring failures to Sunny Balwani. She said he 'just sort of lost it.' He asked, 'What was your training in statistics?' and said he was 'tired of people coming in here and starting fires where there are no fires.' Then he sent her off to process patient samples. She walked out of that meeting, and her resignation followed.

Eli: Day one, Tyler says, Holmes fired the head of assay development for too many questions.

Mara: Tyler's breaking point was syphilis. By his account, the test would tell 35 of every 100 infected people, 'You're healthy, no need for medical intervention.' When a doctor signed off on it for patients, he felt physically sick. Holmes had him put his concerns in an email, then forwarded it to Balwani. Balwani wrote back that Tyler's 'reckless comment and accusation' rested on 'absolute ignorance.' Tyler quit.

Eli: His later take is drier. Tyler says Sunny called him 'arrogant, ignorant, patronizing, and reckless,' and that he was 'almost right about all of those except patronizing.' Two junior hires were out, and the one person left to hear them sat on the board.

A Wall of Silence

Mara: That board member was his grandfather. On the day Tyler quit, before he reached his car, his mother called. His grandfather had already heard from Holmes that Tyler had a vendetta and had quit in an inappropriate way. His parents' advice had been to leave quietly and say it was for a PhD. As Tyler put it, 'It would have been easier to quietly quit and move on with my life.'

Eli: Holmes got there first. Her rapport with his grandfather likely helped her version stick.

Mara: Tyler tried anyway. He brought Erika to dinner at his grandfather's home so she could explain the lab herself. Tyler says his grandfather was angrier by then and shut her down. He told them they were wrong, that the device was being used in medevac helicopters and operating rooms. In his deposition, Tyler said, 'I remember Erika and I saying that there is no way that could have been true because the devices were barely working in the walls of Theranos.' His grandfather told them to consider other jobs.

Eli: Cheung said he was polite but didn't believe them: 'like David facing multiple Goliaths.'

Mara: So the machine that dropped parts mid-test was, at that table, riding in medevac helicopters. Whether anyone outside would listen was still unknown. Inside, every door had closed.

Eli: So Tyler went outside, carefully. In 2014, under a fake name and without saying where he worked, he wrote to New York state lab regulators. He wanted an answer from 'someone who didn't have skin in the game.' The official called the practice a form of cheating. Tyler filed an anonymous complaint, one that may simply have been lost.

Mara: Carefully, because in his words, 'I knew how seriously Theranos protected their trade secrets.'

Eli: Then John Carreyrou, the Wall Street Journal reporter with a Pulitzer for exposing Medicare fraud. Tyler thought he 'might finally be the guy who would ask the hard questions.' Tyler called him on a burner phone, a cheap phone bought with cash so the call can't be traced back. Carreyrou said Tyler 'was terrified as well.'

Mara: Erika talked to Carreyrou too, without her name. Two junior lab hires, now sources.

Eli: And Theranos pushed back. In June 2015, its outside lawyer, David Boies, spent five hours at the Journal. Carreyrou said their demeanor was 'very aggressive,' and that they accused him of misappropriating trade secrets. Threatening letters followed. Tyler, for his part, was warned he'd never work again.

Mara: So Tyler had a reporter on a cash-bought phone, and the company was looking for its leak. Eli, it was about to find him.

The Ambush

Eli: Erika's moment came outside her new job in 2015. A man stepped out of an SUV and handed her a letter signed by David Boies. It was a cease-and-desist letter, a formal warning to stop or be sued. It told her to 'cease and desist' from disclosing Theranos trade secrets and from making 'false and defamatory' statements.

Mara: Tyler's came at his grandfather's house. He went expecting to sign a one-page confidentiality agreement. Instead, he says, two Theranos lawyers came downstairs with 'a notice to appear in court two mornings later, a letter signed by David Boies.' They said he'd broken his non-disclosure agreement and given away trade secrets worth 'literally billions of dollars.' They pressed him to sign papers recanting his claims and naming other sources. He refused.

Eli: The grandfather who got him into Theranos, now hosting its lawyers.

Mara: And he was isolated. Tyler has said he was told he could talk only to his wife, a priest or a lawyer. At night, a rustle outside the window and he'd think, 'tonight's the night that Sunny whacks me.' He still didn't sign.

Eli: Theranos and Boies called it enforcing binding confidentiality agreements and guarding intellectual property.

Mara: Eli, Tyler reads it the other way: 'Fraud is not a trade secret. I refuse to allow bullying, intimidation and threat of legal action to take away my First Amendment right to speak out against wrongdoing.'

Eli: And it followed them. Carreyrou says he strongly suspects Tyler and Erika were surveilled, either by Theranos or by Boies's firm. Tyler believed for several years he was being tailed. Erika said, 'I was being followed by private investigators, and what if one day I simply went missing. The thought of my family ever having to go through that experience caused me many sleepless nights.'

Mara: Tyler believed private investigators were tailing him, plus threats to sue.

Eli: Erika went to the government anyway. After getting legal advice, she phoned the Centers for Medicare and Medicaid Services, a federal health regulator, almost right after the Boies letter. That September she filed an official complaint. The deleted data points and the hidden Siemens work were now federal inspectors' business. That investigation led to the lab being shut down for failing federal guidelines.

The Wreckage and the Vindication

Mara: Tyler's refusal had a price, and his parents carried much of it. The family's legal bills climbed toward half a million dollars. His parents almost had to sell their home. Tyler said, 'I don't think I could have taken a class that could have prepared me for this.'

Eli: The parents who'd said quit quietly.

Mara: The fear moved in, too. At Holmes's sentencing, Tyler's father said he'd begun sleeping with a knife under his pillow. Tyler ran, 20 miles at a time in the mountains, to burn off the stress. When that didn't work, he drank.

Eli: With his grandfather, at one point, it was lawyers only. Tyler called that toll 'probably the worst.'

Mara: It did mend. Tyler said, 'We ultimately did reconcile, he never quite apologized, but he at least admitted that I was right about what I saw and he congratulated me for doing the right thing.' His grandfather died in 2021, at 100.

Eli: Tyler went back to diagnostics. He founded Flux Biosciences in 2017 to bring health testing into homes, and later The Healthyr Company. And he says he's been told 'directly to my face I need to be more like Elizabeth Holmes.'

Mara: Once confidential sources for Carreyrou, Tyler and Erika co-founded Ethics in Entrepreneurship around 2019, to help startups and their workers catch ethical trouble early. They agree the investment world needs a way to stop an unethical situation before it goes too far.

Eli: Tyler's own accounting, years later: 'It completely changed my life trajectory. For a long time, it was definitely bad.' And when Holmes was found guilty, he said, 'I feel like I got my vindication from that.'

Mara: So the two were Tyler Shultz and Erika Cheung, lab hires barely out of college. For Tyler, it cost his family those legal bills, years of feeling watched, and a long break with his grandfather. For Erika, it cost sleepless nights with investigators behind her. The 22-year-old who watched the machines fail their quality-control checks in 2013 was right about what he saw. And what it took to prove it shows how exposed a junior employee is when a well-funded company fights back.

Eli: Two things are still open. Tyler has a claim with the SEC's whistleblower program, which can pay tipsters, and whether it will ever pay him is unresolved. And someone broke into his family's lawyer's car and stole case files. Who did it has never been named.

Mara: Listeners can look up clinical quality control.

Eli: Follow Law and Justice for more stories as corporate whistleblowers face legal pressure.

Mara: That's it for today. I'm Mara.

Eli: And I'm Eli. Thanks for listening, and until next time on Angle.