1. Myth-Making

We are on the record at the beginning of media number one volume one. This is the testimony of Elizabeth Holmes going on the record in San Francisco, California at 9 o'clock a.m. on July 11th, 2015. This Holmes please raise your right hand. Do you swear to tell the truth, the whole truth and nothing but the truth? I do. That's the voice of Elizabeth Holmes, the founder of Healthcare Company Theranos and once the world's youngest self-made female billionaire. Are you appearing here today for the Settina? She's giving testimony under oath in the summer of 2017. She's sitting in what looks like an empty conference room, her blonde hair pulled back in a messy bun, her eyes are wide and unblinking. She's sitting across from 12 attorneys, being grilled as the government investigates whether she helped orchestrate an elaborate years long fraud. Did it concern you that a number of tests weren't working on Theranos's devices? I know that we made mistakes. Not so long ago, Elizabeth was Silicon Valley's rising star. A healthcare pioneer is being compared to visionaries like spill gates and Steve Jobs. Her face was plastered across magazine covers when she was on TV all the time. This is a revolutionary company to threaten to change healthcare. The same way that Amazon changed retail or Intel and Microsoft changed computing or Apple yes, changed the cell phone. It could be that huge. Her technology was poised to change healthcare forever. Do you want to know about every element of your health? What's people would say? Here she is being interviewed by Bill Clinton. You found this company 12 years ago, right? Tell them how old you were. I was 19. So, don't worry about the future. We're in good hands. Her board was a who's who of government heavyweights. George Schultz, General Madness, Henry Kissinger. And some of the most wealthy and connected people in the world invested millions. The divorce family, the Walton family, Rupert Murdoch, even the craft family from the New England Patriots. You've got this really smart female CEO who's going to do a wonderful thing for the world, right? It is a great story. You want it to work. We all want that to work. Elizabeth is now under criminal indictment facing up to 20 years in prison. And her company, once valued at nearly $10 billion, is now worthless. This is an investigation by the Securities and Exchange Commission in the matter of Theranos Bank to determine whether there have been violations of certain provisions of the federal securities laws. It's a story of greed and it's a story of incredible deception. I think it's probably the most interesting fraud case I've dealt with. And you think there are similar people? I think they're very similar people. Smart, charming, bullies. I'm your host, Rebecca Jarvis. I've been covering business for more than a decade from the housing collapse to the fall of bare-sterns to the Bernie Madoff scandal. But no story comes close to the saga of Elizabeth Holmes. There was an office romance. Did you ever tell investors that you had a romantic relationship? No. Billions of dollars at stake. Everyone who invested in Theranos lost it all. And an incredible tragedy. I shouldn't know that things were much longer than they should have been. In the next six episodes, my team, Taylor Dunn, Victoria Thompson and I, travel the country, tracking down former Theranos employees, patients, board members and investors who got caught up with Elizabeth Holmes. It's just a moral breakdown at the highest level. And I got to be honest, even talking to you guys now. There's still a part of me that has feared. And we'll hear for the first time, never before aired Testimony. Hundreds of hours worth condensed and edited here for time. You'll hear from Elizabeth, her partner, Sunny Bellwani, her brother, and the people at the center of this story, as this defiant founder continues to this day to deny any wrongdoing. This is what happens when you work to change things. First, they think you're crazy, then they fight you, and then all of a sudden you change the world. From ABC Radio and Nightline, this is the drop out. Chapter one, myth making. So much of this story is about a woman with stars in her eyes in a sense of her own destiny. But where did this sense of confidence come from in a college drop out with so little experience? When Elizabeth Holmes was nine years old, she wrote a letter to her father. What I really want out of life, she said, is to discover something new, something that mankind didn't know was possible to do. Elizabeth at age seven, according to a New Yorker profile, drew a complete design for a time machine. Telling the writer a years later, the wonderful thing about the way I was raised is that no one ever told me that I couldn't do those things. Elizabeth was born in Washington, DC in 1984. Her mom, Noel, used to be a policy aid on the hill, and her dad Christian worked at a number of government agencies, and even briefly for Enron, the once celebrated energy giant, which came crashing down in one of the greatest frauds in American history. It's hard to track down friends and family from those early days willing to go on record. But we did talk to one former family friend who had a lot to say about those early years in Washington. You know, this was, I think, was a family that took nice things really seriously. I'm just going to start by having you saying and spelling your name. My name is Joseph JOSEPH Fuse, I have you on my SZ. Joe Fuse is an attorney and inventor. He's the type of guy you can picture wearing a smart, well-cut suit. He came to know the Holmes family when his dad and step mom moved next door in the late 80s. When did you first meet Elizabeth Holmes? I would have met her 20, 27 years ago plus. She would have been eight to ten. Eight to ten. Yeah. Elizabeth was the daughter of a good friend of my stepmothers. They were living in Washington DC at the time, had been neighbors at one point. Joe stepmom Lorraine and Elizabeth's mom Noelle became fast friends. They would certainly go out as a forceome, but I think the relationship was principally between Noelle and my stepmom. How would you describe Mr. and Mrs. Holmes, Elizabeth's parents? Her dad could be a charming guy and a kind of waspy way, well-mannered. Certainly if he wanted to be, it could be a very charming guy. The father would speak quite often about their lineage. They really took that sort of mantle of this family history, very seriously indeed. But he's probably one of the last of the more ekins. I think this wasp or a stalker see me, US is kind of dying out. Christian Holmes' claim to fame seemed to be his family ties to the Fleischmann yeast fortune. It was a powerful company with lots of money, but over generations, the wealth had dried up. And according to Joe, that bothered Christian. I think he had a real sense of entitlement in terms of the traditional importance of his family that it sort of eroded over the years. I think this sort of seeds of Elizabeth's grandiose vision or fantasy as it were for her business. I think it very much connects to this paradise lost kind of family mythology. You have to consider Joe's opinions in this context. The families would come to have a major fallout years later, leading Elizabeth to sue Joe's father Richard and his sons over a patent dispute, which Theranos later won. But most people who know the situation agree with Joe's assessment. Here's Wall Street Journal reporter John Kerry Rue, who's been covering the Theranos story for many years. What do you think it was about money that she was so attracted to and being incredibly wealthy? I think the parents very much yearned for those days of year when the family was one of the richest in America. And I think Elizabeth channeled that at a young age. There's an anecdote where she's 9 or 10 years old and she's asked by relative the question that every boy and girl is asked eventually, which is what do you want to do when you grow up? And she answers immediately, I want to be a billionaire. And the relative says, don't you want to be president? And she says, no, the president will marry me because I'll have a billion dollars. That fierce ambition came out in school. Elizabeth was a top student. She ran track and studied Mandarin on the weekends. Here's how her honors physics teacher, Aral Turk, remembers her. When I think of Elizabeth Holmes, the biggest thing that comes to mind is her poise. And I remember when I had her in class, I remember just the way that she carried herself, almost like a dancer carries herself on stage with this kind of can-do attitude chin up. So she was always very composed. And even when she had questions, even when things were confusing, she just. I still had this kind of presence about that stuck out in my mind. From what you know of Elizabeth in high school, how would you describe her in one sentence? She's the kind of student that I could hand my car keys to and I know it would come back safe and with a tank full of gas. Wow. How many students do you trust that way? Not very many. Not very many. When it came to applying to college, Elizabeth knew exactly where she wanted to go. Stanford University in the heart of Silicon Valley. Billis. Hi Rebecca. Good to see you again. Good to see you. So here we are on the Stanford University campus. That's correct. This is the medical. Billis Gardner has been a professor of medicine here for more than 30 years and she's seen her share of talented students. She's got close-cropped blondish gray hair, a warm personality and a sharp wit. So Paul G. Allen building right here. Bill Gates building right over there. David Packer, William Hewlett. Jerry Yang. Do you ever walk by these buildings with all of these names on them and think, wow, this is the epicenter. I do. I do. So this would have been Elizabeth Holmes first. Storm. Storm around. Right. Imagine coming as a student. It would be fun, huh? It would be ideal, because it feels pretty ideal. In this new environment, Elizabeth was full of big ideas. What was your first meeting with Elizabeth Holmes like? So Elizabeth was brought to me by a person who had been the former president of Panasonic, saying to me that she was this brilliant girl and she had this wonderful business idea. The idea was simply that she was going to make a micro-fruitic patch to sample blood, to test for infectious organisms and then deliver antibiotics through the same micro-fluoritic channels. Now that's not possible because antibiotics are not potent and I don't want to go in the details. But I kept saying to her, I'm sorry, that doesn't work. The reason antibiotics hang over you in bags of fluid when you're doing it this way is because they're not potent and you can't put it through a micro-fluoritic channel. So how did she respond to the criticism? Just kind of blinked her eyes and nodded and left. It was just a 19-year-old talking who'd taken one course in micro-fruitics and she thought she was going to make something of it. So Elizabeth moved on to another member of the faculty. A highly respected well-liked professor in the engineering school at Stanford, Channing Robertson. She took his class freshman year. All my exams are take home, take as much time as you want. That's the way life is. You're going to be given problems in life and you're going to be able to go sit someplace quiet and think about them and not have the stress of an exam. I did horrible. Here he is speaking in a deposition about meeting Elizabeth. I first met her when she came to my office when she was a freshman at Stanford and I believe it was the fall of 2002. She inquired us whether or not she could work in my lab. Elizabeth took her idea, this patch that could test for disease and deliver medication and spent five days on a school vacation riding up a pat. And even though this was all still theoretical, Channing was impressed, he believed in her. But Phyllis Gardner had her doubts. He was her mentor and he was heavily involved in the company from day one. At which point I became quite disappointed. In him. And I've told him so twice. And what did he say? He's an affable enough guy who says it's going to work and everything's fine. I introduced her to a couple of venture capitalists that I felt would sit down and chat with her about her vision and her aspirations. So how did Elizabeth Holmes convince you to become a director? It didn't take much convincing. I was very intrigued by her vision and felt it would be a really interesting proposition to be engaged with. She asked me if I would be on her board and I said yes. First later Robertson would tell Bloomberg Business Week magazine, "I think there are people who are the Mozart's and the Beethoven's and the Newton's and the Lovace's and the Einstein's and the Da Vinci's who come along rarely in a generational sets. These people who become scientists and artists and musicians I think possess a very special capability. It was becoming more and more clear to me that she had it. I was in the presence of somebody who was unlike anything that I had seen before." Elizabeth dropped out just like Steve Jobs to start her own company. It would come to be called Theranos, a mix of therapy and diagnosis. She started raising money. Many of the traditional healthcare science venture capitalists passed. There were a lot of MD PhDs in that world and they didn't buy that Elizabeth's idea could work. But a number of wealthy families poured in millions, like Tim Draper, a third generation investment guy. His daughter Jesse is a good friend of Elizabeth's. He cut Elizabeth a million dollar check. Funding started to fall into place and she had a Stanford professor on board. So Elizabeth, with less than two years of college, officially dropped out of Stanford in March 2004 to work on her business full time. Her idea had changed. She now wanted to make a portable device that could run multiple tests with just a drop or two of blood from the finger, rather than those standard traditional painful venous draws that were so used to. Now, when we talk about ideas that could change the world, this actually is one. Millions of people have blood drawn for tests every day and it can be a long and painful process. For anyone who's had their blood drawn the traditional way, it's not a pleasant experience. There can be times when the nurse struggles to find a vein. There's the poking around, the potential bruising. It stays with you. Elizabeth's plan was a system to test blood that would only need a tiny pin prick just to drop. That would have been a game changer. I actually originally did not intend to drop out of Stanford, but I wasn't going to any classes and I was spending all of my time talking to VCs. And so then, logistically, it just seemed like a waste of money because I was, you know, taking 20 units and I wasn't showing up. So then I just made a decision that I was going to figure out how to make it work. By February of 2005, less than a year after starting the company, she'd raised $6 million and Channing Robertson had joined Theranos full time as a board member. Soon Elizabeth was attracting other big name board members. There was Donald Lucas Sr., a guy known for spotting other young talent. He was an original backer of Larry Ellison, the founder of Oracle, and Lucas saw similar promise in Elizabeth. This is Lucas in an oral history interview he taped for a project at UC Berkeley in 2009. This young lady comes in, I think she probably was 21 years old and it left Stanford, didn't graduate. She was a company called Theranos. And I thought there was going to be a short conversation. She had no background in business. And so that is quite presumptuous for some reason. I'm going to be president of God, but there's an important distinction. Her great grandfather was an entrepreneur. Very successful. So that was one side. That's not an entrepreneur side, but she was in the medical side. It turns out later her hospital in there where they lived is named after her great uncle. So she came by both of these, the two things that are necessary here, one medicine and the other entrepreneur. Quite naturally. And she was distracted too. So over there. But they could all. By 2005, Elizabeth began to make some very bold groundbreaking claims to the press about her invention. I'm Boyra Gunn and this is a special Technation Audio segment. It's listening to our original on-edited interview with Elizabeth Holmes, president and CEO of Theranos. Exactly. How big is it? What does it do? What do you got to do if you're using it? So it's a handheld device and it's fully integrated. The only thing you have to do is hold your finger or you could actually do any part of your hand or your arm up toward the device. So it extracts a little from your hand? Exactly. It's a little teeny needle that pulls a little teeny drop of blood. And when it gets the drop of blood, basically it runs it through what we call a biogip, which separates out all the cells and other types of analytes in your blood, which could traditionally clog a biosynth or and then in real time runs many different chemistries. She was charming and convincing and early supporters were dazzled. Elizabeth also seemed to know the power of a good story, like this moving anecdote about her uncle, which came up again and again. I grew up spending summers and the holidays with my uncle. I remember his love of crossword puzzles and trying to teach us to play football. I remember how much he loved the beach. I remember how much I loved him. He was diagnosed one day with skin cancer, which all the sudden was brain cancer and in his bones. He didn't live to see his son grow up and I never got to say goodbye. Elizabeth focused a lot on loss. The power of losing someone close to you became sort of a mantra, repeated again and again. Elizabeth would come to say that her devices could save soldiers and Medevac helicopters and on the battlefield in Afghanistan, that it could help people all over the world. We see a world in which no one has to go through the pain of traditional philbotomy. I remember reading an email from the father of a little girl. He talked about taking her to the hospital and watching as they stuck her soft tissue again and again in the search for what he called the tiny invisible vein. Elizabeth wanted to be nothing short of revolutionary. She wanted to change people's lives in the world forever. According to those around her at the time, Elizabeth envisioned herself as the next Steve Jobs. Theronose was growing quickly. Holmes had to hire a lot of technology people to realize her vision for a pinprick test. She wanted her company to have the same design first aesthetic as Apple. Anna Ariola is a former Apple product designer. She's funny and personable and loves minimalist design, something she incorporated when she helped create the look of the iPhone. She was one of Elizabeth's first recruits and a big get for Theronose. When I was asked to meet this particular person who was leading this stealth startup, I didn't know who it was at the time and it was a bit of a clandestine meeting and it turned out to be Elizabeth Holmes. We had a great conversation. It sounded like an incredibly compelling mission. That was basically really thinking about the betterment of humanity. She's incredibly passionate. She's very energetic, very expressive with her hands. It has a very unique distinct voice that you just kind of get drawn into what it is that she's conveying and her conviction and her belief really shines through. She really did believe she was changing the world. This was a once in a lifetime opportunity to jump ship and we jump ship and unfortunately, I left 15,000 shares at Apple but say, "Live, life continues on." Anna joined Theronose as its chief design architect, responsible for the look and feel of the Edison. Theronose's breakthrough technology. It looks like a black rectangular box about the size of a desktop printer. There's a light-up screen in front. The machine was supposed to process those tiny blood tests. And Elizabeth naturally wanted the screen to resemble the iPhones and the casing to look like the original Mac. Elizabeth had a vision. But according to Anna, Elizabeth didn't look the part. So she would wear these frumpy Christmas sweaters, you know, things you would only see during the holiday season and I was like, "Huh, okay." But how the clothing came into play, she was very curious about Steve's attire. And I explained to her that he was inspired by Sony's heritage of having Isse Miyake come in and create a lot of the line manager apparel. And that eventually led Steve to get the Isse Miyake black turtleneck that is historically known. And so I pointed that out to her and then I think she went off and tracked down who Isse Miyake was and the rest is Cotour History, Prase. She did change her aesthetic and I think it was for the best. Soon, Elizabeth was wearing black turtlenecks just like Steve Jobs. Some like Phyllis Gardner say even her voice also changed dramatically into a low serious baritone. When she came to me, she didn't have a low voice. She didn't? Nope. What was her voice like when she came to you? It was just like a typical undergrad student when I next started. She says with this low voice and I'm like, "Oh my god." It was quite awesome. You were thrown. We didn't know that it wasn't her voice until much later. In all of my interactions with her, she never fell out of character. That was her voice. But other people that I worked with actually had caught her fall out of voice. I think it was at one of the company parties and maybe she had a little bit too much to drink or whatnot. But she fell out of character and exposed that that wasn't necessarily her returtural voice. Maybe she needed it to be more convincing to project a persona within a room amongst male VCs. I'm not really quite sure. Anna also started to notice other behavior that surprised her. Often I come into work really early because I have kids and so I was usually one of the first people to arrive at the office. Elizabeth might have beat me before but we sometimes would pull up in the parking lot together. I just remember she had a unique private sense. She was rocking and slamming her head to hip-hop music, just fully rocking out and I was like, "Huh, I don't think I was meant to see that." Elizabeth kept successfully recruiting from Apple's ranks, poaching several of Anna's former colleagues. So where are we right now? We're at Coupa Cafe in Palo Alto. This is where you would meet Elizabeth. This is where we met Elizabeth. This is where you met Elizabeth. But for people outside of Silicon Valley, this is a place where tech people would come and chat about big ideas. Yeah, they still do. Yeah, they still do. I think there's a reputation with this place that like things happen here, deals happen here, conversations happen so it fits like a narrative, right? It fits into that story. Somewhere over there there's a $40 million check. Anna's old Apple colleagues, Justin Maxwell and Adam Volmer, soon came on board along with Mike Bauerley, whose wife had worked at Apple with both of them. So would you call yourself buddies, work buddies? Oh yeah, yeah, definitely. Yeah, for sure. Mike and Justin worked on Anna's team designing the Edison and other product software. So Justin, starting with you, what made you take the offer? Anna and others involved in my recruiting, having hyped it up so much, I had just gone in there with this expectation that I was meeting brilliance. And so that thinking that I was meeting the next Steve Jobs, next Zuckerberg, something like that, that just created this impression of I was in awe of this person's drive. So for me, this was something that could make a positive dent on humanity. Adam was an engineer. Generally, I was like, yeah, this is somebody I want to come work for. We wanted to see her become that, feeling no later. Like everybody wants to work for the next Steve Jobs. It wasn't long before they started to see they were designing something in the Apple style for technology that really didn't exist. Like there was an overall feeling of like, we have absolutely no need for Apple designers here. That didn't make sense at first, but then as we started to learn from people saying the tech doesn't work or the science isn't matching up. But then we understood, oh, right, that's why you don't want us here. It's not because you don't like us as people. It's that like we actually can't provide value to this company right now if the foundation isn't working. On top of that, they say Elizabeth arranged things so that everyone was purposely siloed. They were sworn to secrecy to protect what Elizabeth felt were trade secrets. But it was like the left hand didn't know what the right hand was doing. It was beyond micromanaging. It was like actively kind of trying to foster this competition or I don't know how it was. It was a complete distrust for the organization that she built under her. But despite this chaos, she even managed to poach Avi Tivanian from Apple. He was Steve Jobs right hand at the company. He led the software team that developed Mac OS 10. Avi's even in the Steve Jobs movie. Avi Tivanian is our chief software designer and he wrote a demo program. It's like we built a great car. We haven't built the engine. We put a golf car battery in there to make it go for a little bit. Avi joined the board in 2006, but quickly got frustrated with what he was seeing. I think what she didn't expect was that I would actually ask a lot of questions and that if things weren't going as they should be going, that I would ask tough questions. How would she respond when you would ask tough questions? She was really good at I would say deflecting them. It was generally probably I would say more of a non-answer or an invasive answer, which is we don't have the contract right now. Maybe I can get that for you later things like that. wasn't the only one confused by the company. It seemed like employees were being hired and fired really quickly. Here's Justin. - Elizabeth did do a great job of recruiting amazing people. I would watch those people that I trusted disappear. Our office was right next to the General Counsel and the head of business development, both of whom were people I just had tremendous admiration for. They were extremely sharp and knew the industry very well and they just vanished. - And then I think like two weeks after I started, the CFO was just like promptly fired or just disappeared. And that was disconcerting. - Anna, then Theronautes' chief design architect, noticed the same thing. - She did not want to hear other people's opinions. She wanted positive results. I think that anyone who basically told Elizabeth no and disagreed with her perspective and point of view, you were immediately terminated. - It was just a very unusual environment. Yeah, there were posts to Glassdoor's website from employees where they equated it to a South American dictatorship or a drug cartel. - How would you describe the culture of Theronautes? Justin? (laughing) - First, watching people that I really trusted vanish and then actually noticing that this person is willing to lie to me about extremely trivial, unimportant things. - And how do you know she lied? - Oh, because we were discussing some product design over email and she was expecting me to stay in the office late to finish it up and she said something to the effect of, you know, like, I can't help with that right now but I will get back to you when I'm in the office tomorrow and she was actually just in an office right down the hall from me and I didn't know. - You could see her sending you that. - And so I walked over to her and had a bit of an argument with her and then we walked back to my office and she stormed after me and came in and shut the door behind me and said, don't ever walk off on me again. - But did she acknowledge that she had lied to you? - Of course not. - And things went beyond what employees say was casual lying. Just as Elizabeth had convinced the Apple recruits to come aboard to design a product for technology that didn't yet exist, she was trying to sell a product to Big Pharma that wasn't ready. One incident was particularly troubling to Anna. Elizabeth had convinced a major drug company to let Theranos test its technology on terminal cancer patients in a study in Tennessee. Really vulnerable people. This made Anna really nervous. - There were patients who were third and fourth stage on-cology, cancer patients at the University of Tennessee that had given up their basically their blood to test this device. We had gotten word from Adam Volmer, who was our mechanical engineer working on the internal mechanism for the Edison device that light was seeping in and with light seeping in it corrupted the blood telemetry data, thus corrupting the data. There was a very unfortunate situation. - And as it turned out, we had all this very sensitive chemistry that thousands of people were working on and it could be as precise as you wanted. But if you screwed up the introduction of the blood into this cartridge, it was like game over. You would get a wildly wrong result, right? But I think we all knew from where we sat that like, it seemed like we were a very long way away from having a working product. Our going into the study felt utterly premature, where we were at. They just weren't like we weren't generating reliable, reproducible data. - These employees didn't know the test results wouldn't impact the actual treatments given to these cancer patients and would just be for research purposes. Elizabeth kept that detail for most Theranos employees. Regardless, they hated making such vulnerable people guinea pigs. - Did you raise a red flag? Did you internally say, "I think this is a problem?" - That sort of feedback just went like generally ignored. - Not for enough cycles of that. It just felt like there were people like myself and others who disagreed with a lot of these decisions and that just was being overlooked. Again, again. - Anna confronted Elizabeth too. - That information was suppressed and so I said, "I'm gonna take this Elizabeth directly "and have a conversation with her of which I did." And she basically conveyed to me that I should not intervene, that this is an incredibly critical juncture in the company's current fundraising. And I was like, "That's unacceptable from an ethical perspective. "I just cannot stomach it and I confronted her "with this information and she gave me an ultimatum. "Suppress it and continue on as business as usual." Or I said I was resigning and I decided to resign. And I'd slip my resignation letter underneath her door and under the head of HR's door and I left for home. She inevitably found out that I had resigned and she frantically tried calling me. I would not take her phone calls. I just literally had nothing I wanted to do with that company anymore. - Anna's departure left her former recruits stunned. - Anna just said, Elizabeth is lying. She told everyone the tech in this situation worked and it didn't work at all. And I'm gonna go be a full time chef for my family. - Sounds like a pretty big 180. - Yeah. - But soon they'd be out the door too. Justin sent Elizabeth to management books and a pretty epic letter of resignation. - Do you mind reading, starting on that second paragraph? - Hi, I'm resigning. Good luck and please do read those books, watch the office and believe in the people who disagree with you. I wish I could say better things but I think you know exactly what is going on at Theranos. - Lying as a disgusting habit and it flows through the conversations here like it's our own currency. But I really truly believe you know it already. And for some reason I can't figure out you allow it to continue. I feel like I owe you this bad attempt at an exit interview since we have no HR to officially record it. Justin Maxwell. - Years later, Justin would see her just one more time. - Yeah, there was this point in I think 2012 and I was standing in a CVS covered in my own blood having just been hit by a car and I turned and I was picking up like a bike in or something. And Elizabeth's right behind me and she's like, hi Justin, totally regardless of the fact that like I'd obviously just been hit by a car. I was on a bike and she just says, you know, we really benefit from having you in the company right now. It's you know ashamed that things turned out the way that they did or whatever. Just thinking like okay, it's really good seeing you Elizabeth, you know thanks or whatever. - She didn't acknowledge in any way. - No, that was just like you would just been hit by a car. - No, it was so absurd. - It was just one of my thoughts. - Avi ran into the same problems with trust. He says he started to raise issues when it was proposed that Theranos transfer some stock into a nonprofit foundation. That might sound innocuous, but basically it would give Elizabeth even more control over the company. - Because by controlling the foundations, you had to vote in control of the shares. Well, it didn't make any sense to me. And it wasn't that big a deal in the grand scheme of things other than it didn't make any sense. Word got back to her, I think, that I raised an objection to this and I think this was like the last straw for her and for me. - Word got back to Elizabeth through Don Lucas, that board member you heard from before, who once helped Larry Ellison get his start. Then Elizabeth goes dark on me and Don Lucas called me. So I went to visit him and he said, you know, Elizabeth would like you to resign from the board, cutting to the chase. He literally said, "You asked too many questions." - By this point, Avi was irritated and seriously questioned many claims Elizabeth and Theranos had made. - And it was like, oh, something is very wrong here. All these promises none of them have happened. All these people involved, they're all gone. And nothing even lined up. And so I pulled this all together, all this information together, I printed it all out. I said, Don, okay, I'm gonna give you a choice. I think that there is a chance this company can make this product work. And I would love to stick around with you and help you to make it work. And we probably need to revisit how Elizabeth's role and everything else and do a few things. I'm happy to stick around and do that or if you want I'll resign, your choice. He said, I want you to resign. It was like out of a movie. And then-- - Were you surprised that he said, I'd like for you to resign? - I shouldn't have been, but I was. And I was, the reason I was surprised was because I had done all this work to find so many things that were clearly broken, many of which to me were fixable. And I guess I had just naively assumed that Don would listen, but he was just, his goal then, I think, was just to support Elizabeth And he believed everything that she's seen. said, "Don honestly believed that she was the next Steve Jobs." But the meeting didn't just end with Avi's resignation. No, Don said he needed one more thing from Avi. It actually gets weirder. So I tell Don, "I'm going to resign, have the lawyers send me the paperwork, I'll sign it and send it in." As I get out and I push the paper to him, give it to him, as I get up to walk out the door. Don says to me, "Oh, before you go, I need you to sign something else." I'm like, "What do you need me to sign?" And he says, "Well, Elizabeth is going to buy some shares from another founder in a private transaction." And I'm like, "Don, I'm not just going to blindly sign something. I'm not even sure that makes sense." So then I get up and try and leave again. He says, "Oh, one more thing, I need you to sign your own rights away." I'm like, "This is getting ridiculous." And I'm like, "I don't even know what this is about. Just have the lawyers contact me and I'll figure it out later." And on Christmas Eve that year, as I'm going back and forth with the lawyer, it was literally at like 11 p.m. on Christmas Eve. The general counsel of the company sends me an email saying, "We need you to sign this." And oh, by the way, it's come to our attention that you've been disparaging the company and saying negative things to people in general about the company. And a company in our stage cannot afford to be disparaged like this, essentially saying they're going to sue me unless I sign this agreement to give up my rights. This is Christmas Eve. I'm getting this email. So they threatened to sue you on Christmas Eve? Yeah, basically. They came about that close from. I don't think it was a literal threat, but it was pretty close. Avi, on the advice of a good friend who's in attorney, relented and signed the papers. I would have won. There's no question. It probably. I think it would have kind of exposed her and exposed the company for, I don't want to say being a fraud, but for not being totally legit. And he said, "What is that really your responsibility and do you want to spend all this money in a lawsuit just to do that?" He's like, "They're probably going to go out of business anyway." Right? And I said, "You're right." And so the next day I just signed the forms and you know, wet my hands of it. So you were done with Theranos? I was done with Theranos. I had seen so many things that were bad. Go on. I would never expect that anyone would behave the way that she behaved as a CEO and believe me. I worked for Steve Jobs. I saw some crazy things. But Elizabeth took it to a new level with, you know, personal attacks, threats of lawsuits. Walkouts, quitting and losing the guy who was Steve Jobs right hand. That would kill a lot of startups. But it didn't kill Theranos and new people kept coming to work at the company. Amazingly, this was nearly nine years before the company really started to unravel. If what Avi says was true, how could things have gone on as long as they did while Elizabeth became a superstar in the process? In the next episode of The Dropout, Cash is running out and Elizabeth brings in a new right hand with deep pockets. "Did you ever tell investors that you and Mr. Balwani had a romantic relationship at the time that you were asking them to invest in Theranos?" They continued to cultivate an environment of extreme secrecy. "Yeah, there was definitely like a culture of fear. I don't know exactly how it started, but it was definitely there." And as the technology gets ready to hit the market, were they about to potentially put millions of lives at risk? Elizabeth Holmes, Lorraine Fuse, Channing Robertson and Donald Lucas didn't respond or declined to comment for this podcast. The Dropout is written and produced by Taylor Dunn, Victoria Thompson and me. Our editors are Chris Baroube and Evan Viola, who created our theme song. Our researchers are Victor Ordinets and Lane Wynn. Our artwork is by Teddy Blanks at Chipson Y. The Dropout is a production of Nightline, ABC Radio and ABC's Business Unit. Jenna Millman is the supervising producer and Stephen Baker is the executive producer. Eric Overam runs ABC's Specialized Units. Thanks to the team at ABC Radio, Steve Jones, Andrew Kelp, Josh Cohen and Abe Vales and to the Wall Street Journal's John Kerry Rue, author of Bad Blood, who's investigative reporting first exposed this remarkable story.