The story of Theranos and its once-billionaire founder, Elizabeth Holmes, is well-known. Holmes rose to fame seemingly overnight as the enigmatic CEO of Theranos, a company that claimed to have developed a breakthrough medical technology (called “Edison”) that allowed for comprehensive blood testing with a single finger prick. Holmes’ trial played out in the media after the company’s supposed technology had already been exposed as fraudulent—with the key questions focusing on what Holmes knew and what level of culpability she had in promoting the company’s technology to its well-heeled investors and prominent board members.
But, a story that has gotten far less attention is the story of the whistleblowers who brought Theranos’ and Holmes’ fraud to light.
Erika Cheung and Tyler Shultz have chosen to make their names known by blowing the whistle. Many whistleblowers choose to remain anonymous, whether to avoid the limelight or out of fear of retaliation or retribution. By coming forward, Cheung and Shultz have provided a unique perspective into the fraud going on behind the scenes at Theranos. As reported by the Economic Times, Cheung disclosed that Theranos was tampering with statistics in order to falsely represent Edison’s capabilities, while Shultz has stated that, “there was nothing that Edison could accomplish that he really cannot perform with a beaker in his own hand.”
Theranos Whistleblower Erika Cheung Provides Detailed Account of Theranos’ Internal Workings
In late 2023, Cheung spoke at the University of Michigan on her experience at Theranos. During her presentation, she gave some of the most detailed insights yet into what she witnessed at the company and why she ultimately chose to come forward with her revelations about the company’s practices and its technology’s capabilities (or lack thereof). Here are some of the most notable takeaways, as reported by The Michigan Daily:
- Cheung first began to have concerns when she discovered falsified blood testing data at Theranos. According to Cheung, the company was falsifying data “in order to maintain an image of success;” and, when she reported her concerns to then-President Ramesh “Sunny” Balwani, he “belittled her for questioning the validity of the data.” In her prior congressional testimony, Cheung had stated that with Theranos’ Edison, “[y]ou’d have about the same luck flipping a coin as to whether your results were right or wrong,” and that Edison’s degree of failure “was not typical for a normal lab.”
- Balwani’s refusal to take her concerns seriously was a major red flag for Cheung. She told the audience at the University of Michigan that, “At that point, I was a bit naïve in thinking that there was some sort of chasm between what was happening at the operational floor and what was happening at upper management. . . . But this tipped me off to the fact there was something nefarious.”
- Cheung left Theranos because of her concerns about Edison. “It was about understanding that even though it was a tiny vial of blood, every vial was a person,” she said. Upon leaving Theranos, Cheung made the decision to report the company’s falsified data to the Centers for Medicare and Medicaid Services (CMS). In her later testimony, Cheung would reveal that “quality control tests in the lab would routinely fail so the company would use an ‘outlier deletion’ system to ‘cherry pick’ the best data points,” and that at least some quality control tests were not performed using human blood samples.
After Cheung was unable to convince Balwani to take action in response to her concerns, this is also when she contacted Shultz. Shultz’s grandfather, George Shultz sat on Theranos’ board and is a former U.S. Secretary of State.
Theranos Whistleblower Tyler Shultz Shared Concerns About the Company’s Data and Technology
When Chueng contacted Shultz, he was already struggling with how best to address his own concerns about Theranos’ data and technology. During a speech in October 2022, Shultz stated bluntly that from the beginning of his tenure with the company it, “had zero tests validated on the Theranos machine.” As reported by the Columbia Missourian, Shultz also said that:
“[His] job was to ensure the machine was functioning properly and giving out accurate test results, using a drop of blood. He arrived at the company just as the product began its rollout into Walgreens stores. However, he stated that despite this rollout, patients would have a vial, not a drop, of blood drawn. Furthermore, the blood would not be processed through the Theranos machine and was instead processed with expensive third-party medical devices already available.”
According to the Columbia Missourian, Shultz also indicated that “[o]nce the lab finally saw the company’s own machine, it witnessed the beginning of the deception and fraud to come.” Shultz stated that it was an “open secret” that Theranos’ claimed technology “simply did not exist,” and that, “you needed a couple-hundred-thousand-dollar robot to do the first step before you could put [a blood sample] into the Theranos device.”
Notably, Shultz also said that he communicated with Holmes directly. But, rather than alleviating his concerns, this meeting only raised additional red flags. Holmes referred Shultz to one of the company’s vice presidents; and, at this point, “it was evidence that the leaders knew they were lying to the world about the technology.”
Even worse, reports have surfaced that after Shultz came forward, “Holmes . . . signed off on surveillance aimed at intimidating [Shultz and other] Theranos employees who helped uncover the flaws with the blood-testing technology.” At Holmes’ sentencing, Shultz’s father revealed that he had begun sleeping with a knife under his pillow because he feared what might be done. Fortunately, Shultz and Cheung have both survived the ordeal unscathed, and now both are in the process of moving on. While Shultz said that he had some concerns about finding a job after blowing the whistle, he has since received numerous job offers, and Cheung is now the Co-Founder of Ethics in Entrepreneurship, a 501(c)(3) non-profit organization “focused on embedding ethical questioning, culture and systems in startups and innovation ecosystems.”
Key Takeaways for Other Employees Who Are Thinking About Blowing the Whistle
Blowing the whistle on Theranos was not easy for Cheung or Shultz. In an interview with NPR, Shultz acknowledged that he faced resistance not only from the company, but also from within his own family. “It would have been easier to quietly quit and move on with my life. . . . And that’s actually exactly what my parents advised me to do when I was a 22-year-old kid fresh out of college.” Shultz also said that his grandfather, a former U.S. Secretary of State and then a Theranos board member, told him that he was wrong and that Holmes had “assured [him] that they go above and beyond all regulatory standards.” While Shultz says his grandfather eventually told him that he did the right thing, he also says that their relationship was never the same as it was before the scandal. His grandfather died in 2021.
Similarly, Cheung told an audience at The Australian Financial Review Entrepreneur Summit in June of 2023 that she felt like coming forward was “the only option” and that she would not hesitate to do the same thing again. She said that the three years after she came forward were “some of the hardest years of my life,” not only because she was concerned about retaliation, but also because she was concerned about how others would perceive her.
Ultimately, however, she has been able to find solace in her decision to come forward. “It was a relief,” she said, when she found out that Holmes and Balwani would both serve long prison sentences for corporate fraud. “But the real reward was the bliss that I have of knowing that I was able to do the right thing.”
For other individuals who are thinking about blowing the whistle, these are the key takeaways from the Theranos whistleblowers’ actions. While coming forward isn’t easy, it is extremely important, and it is unquestionably the right thing to do. Several federal laws protect whistleblowers, and whistleblower lawyers can help employees, former employees, and others protect their identities while helping the federal government uncover fraud, waste, and abuse.
If you believe that you may have information about corporate fraud similar to the fraud at Theranos, what should you do? Your best option in this scenario is to speak with a lawyer in confidence. An experienced whistleblower lawyer will be able to help you make informed decisions—including decisions about whether to report your concerns internally and whether to file a formal whistleblower complaint with the federal government.
Schedule a Confidential Consultation with a Whistleblower Lawyer at Oberheiden P.C.
Our lawyers have extensive experience representing whistleblowers and investigating whistleblower complaints on behalf of the federal government. If you would like to speak with a whistleblower lawyer at Oberheiden P.C., we invite you to get in touch. To schedule a free and confidential consultation at your convenience, please call 888-680-1745 or tell us how we can contact you online today.
Dr. Nick Oberheiden, founder of Oberheiden P.C., focuses his litigation practice on white-collar criminal defense, government investigations, SEC & FCPA enforcement, and commercial litigation.