She joined Theranos fresh out of the University of California, Berkeley, a self-described “starry-eyed’’ 22-year-old chemist and biologist who saw Elizabeth Holmes as a role model: the CEO who would revolutionize the blood testing industry.
Seven months later, Erika Cheung quit her job as a lab associate at the company and became a disillusioned whistleblower, her life now enveloped by one of the biggest business scandals in American history. She was among those who had made clear to federal regulators that she viewed Holmes as a liar who had put patients at risk. (Holmes, and her company’s former president, Ramesh Balwani, have been indicted on charges of defrauding investors out of hundreds of millions of dollars as well as deceiving hundreds of patients and doctors.)
In an interview with STAT, Cheung reflected on how she was duped by Holmes, why she believes the disgraced CEO should spend at least five years in prison and how the rifts between her fellow whistleblower Tyler Shultz, and his famous grandfather, George Shultz, went on longer than people know.
Shultz and Cheung, both close friends, have turned their attention since they left Theranos to creating an organization called Ethics in Entrepreneurship in the hope of offering advice for people in the world of technology to sniff out bad players early on. Cheung, now 28, lives in Hong Kong, but was in Boston this week to appear at the Atlantic magazine’s Pulse Summit on Health Care, which was co-sponsored by STAT.
Here is a transcript of the interview, which was edited for length and clarity.
Do you think Elizabeth Holmes should go to jail?
Yes. I’m not the type of person to want to serially punish someone for something that they’ve done. I think people can be forgiven for mistakes that they’ve made. But at the same time, to set that example, to say that you have lied to your investors, you have lied to your employees, you endangered the lives of tens of thousands of patients. And now, you’re going to just get away with that? What kind of example does that set for other people within this industry? That it’s OK to raise a whole bunch of money, put on this theatrical show and now walk away scot-free, versus the Fyre Festival guy. On a much smaller scale, all these partygoers ended up going to this festival; they were in FEMA tents and everything, he got five to six years. (She was referring to Billy McFarland, the founder of the Fyre Festival, who was recently sentenced to six years in prison for promoting a “luxury music festival’’ that bilked its backers.)
How long do you want to see her locked up? What would make you feel like she’s paying …
Her dues? For me, honestly, my only agenda in all of this was for them to stop processing patient samples. Everything beyond that I’m going to leave it up to the justice system. I just wish that she would have the common sense to come forward and apologize. In terms of number of years in prison? Definitely more, I suppose, than the Fyre Festival guy.
What do you make of her being very public these days, out with her reported fiance and her dog?
It’s just weird. It’s just a bit surreal. When you see someone have this situation and pretend that everything is normal. It’s so bizarre.
Elizabeth Holmes interviewed you to get the job. Did you think anything was off at the beginning?
Initially I came in starry-eyed. I admired Elizabeth Holmes. She was this female entrepreneur in biotech. Really what she represented to me was that you could work really hard and get to a position of running your own company. There was something very powerful about the mission she was trying to put forward: making health care accessible, affordable, allowing for price transparency when you get your blood diagnostics. It’s not until you look at her as a character in retrospect that you realize the red flags and warning signs of her behavior and her personality and the kind of act that she put on to be the front face of Theranos.
When did things turn for you?
Things started to turn for me about a month, two months in. Initially I started in research and development. When things fail in R&D, that’s fine. That’s expected. But about a month in we were starting to get patients that were rolling in from our Walgreens center in Palo Alto. And I had run this patient sample and before I’d run the patient sample, I was running all these quality controls and they kept failing. And failing. Over and over. I was up until 3 a.m. trying to get quality controls to work and they weren’t working. Things weren’t working all the time. They were deleting data as outliers. Untrained staff were making decisions. Upper level management was saying, “Just get the results out,” at any cost. And get it out quickly.
The better-known whistleblower, your friend Tyler Shultz, knew Holmes much better through his grandfather. (George Shultz was a former secretary of state and investor and champion of Holmes, who sided with her when his grandson started raising doubts.)
Tyler was a good contact for me to have because he had direct contact with Elizabeth Holmes because of his grandfather. He was eating Thanksgiving dinner with Elizabeth Holmes.
Are things OK with Tyler and his grandfather?
Yes. It took a while. A lot longer than I think people realize. It took quite a while. Until seven months ago. I think his grandfather finally realized the truth. They’re finally getting dinner together.
But it’s not what it was. It’s hard, right? For George Shultz, this was a legacy investment in a way. This was one of those last final projects that he was investing in.
It must have been very painful for Tyler.
Oh, yeah. Can you imagine? Tyler’s dad too. Tyler’s dad had to be put between his own father and his son. Tyler’s dad supported Tyler but really wanted it to end, all the legal battles.
Are you surprised by all the sustained publicity over Theranos, the major movie projects?
Yes. It’s blown up into this big story, this big case. One, she got hyped up to this large degree. She was on Fortune, she was considered the youngest billionaire in the United States. And I think rising to the height of everyone treating her as this celebrity and realizing it was on a basis of lies, and not only that it was a company that was around health care. This was people’s lives. It wasn’t developing an app that was like janky you couldn’t get your pizza delivered on time.
What’s your sense of whether Elizabeth Holmes knowingly committed fraud or deluded herself about her actions?
It’s hard when you’re dealing with someone who was clearly delusional to really understand what is going on in their head and what they perceive as reality versus what they’ve sort of imagined. Do I think she was out to scam everybody from the very beginning? At lot of people disagree with me, but I don’t think that was the case. I think she went in, at least initially, with good intentions. But she let her ego get in the way. She was more focused on being the next Steve Jobs of health care.
People have called her a “psychopath.’’
I don’t know her well enough. But clearly there’s something not right with her. She’s never made an apology. She’s never come forward to the patients and said, “Hey, I’m sorry.”
When you say she’s “not right,’’ do you look back at any clues that you didn’t pick up on?
The secrecy. The extreme amount of paranoia of these big medical diagnostic companies going to come after her and destroy her technology. The fact that before you even go in there and interview you have to sign an NDA. Responding to questions, “Well, until you work for the company, that’s trade secrets.”
Did you see that during your interview with Holmes?
She just dodged a lot of questions. Like, “Oh, so what kind of technology are you guys using to run the blood samples?” It would always be the case, “Until you work for the company, those are trade secrets — you’ll be able to find out what we’re working on.”
What’s the most off-the-wall thing you saw Holmes do?
The lying. Watching her do an article with Fortune or with Forbes, and it would just be such a different picture, just a wildly different picture of what was going on internally in the company versus what was being portrayed in the media. It was so disparate to the reality: Sitting at your lab bench and going, “What is she talking about?”
What are you doing now?
I founded a nonprofit basically focused on preventing major scandals from happening, like Theranos.
We’re focused on three different stakeholders: providing resources and tools for entrepreneurs, so that at every stage of development they understand the ethical considerations in building a business and in running a business, from hiring to the culture you implement to building your product. We’re working with ethics departments and seasoned lawyers and compliance officers to basically build out the tools to help entrepreneurs.
How big is your staff?
We launched six weeks ago. At the moment we have six people. I’m the only full-time. Tyler is coming on board; he helps with introductions and the strategy of the organization. At this point, we’re self-funded and we’re talking to a few investors.
What are long-standing consequences of the Theranos saga?
Investors are very cautious. Is this the next Theranos? A lot of people are very discouraged by this whole scenario. What are the implications of having a strong female founder in biotech being associated with the largest and biggest scandal in Silicon Valley to date? What are the unconscious biases that may go against female founders who are very charismatic, who are very good at selling, in terms of approaching investors or selling to customers?
Do you think this could happen again?
Yeah. Maybe not in the same style. A lot of people have been very skeptical of the fireworks and show that Silicon Valley puts on about how they’re going to change the world and make an impact in this very grandiose way without necessarily having the evidence to back up how they’re going to do that.
As software in general starts to integrate more into regulated industries, we’re going to have to be on high alert of these types of scenarios happening again.
Now that Holmes is out of the picture, is there a woman founder in the sciences you admire?
I like Anne Wojcicki from 23andMe. She’s a very kind, strong female leader. She’s very pragmatic. She’s been able to confront these different challenges of building a tech company in a highly regulated space with a certain level of sensibility about her. It’s not that she gets defeated when regulatory challenges come up.
Your advice to entrepreneurs to do good in the health space?
There still is a lot of opportunity to solve a lot of problems in health care. And even though Theranos was how not to do things, there are many good ways to do things well and we’re at an exciting period in this convergence between software and computing power and biology and synthetic biology that really we’re going to start seeing a lot of innovation in the health care space.
About the Author Reprints
I have watched numerous videos on this subject, and it still amazes me how easily she continues to lie directly to the camera! “Deep Throat” Elizabeth needs to come back down to earth, and spend at least 5 years in federal prison to help curtail her ego, and give the investors she ripped off and the employees that she terrorized some satisfaction. After she does her time, she needs to move to NYC and take part in what she was obviously born to do…….star in a Soap Opera!
Holmes chose her Board Members carefully. They were largely absent, senescent old men with big names. She was found out by young, nimble minds who were on the scene. In that sense, I don’t think the Board Members were complicit.
People have to realize that psychopaths like Holmes come in all genders and orientations. there is no human group that you don’t find psychopaths in. Whenever someone comes to you asking for the world in terms of investments and they seem to charming and bland, listen to your gut. The world would be a much better safer place if people could spot psychopaths and avoid dealing with them, avoid investing with them and stop believing that psychopaths like Holmes are capable of remorse. They simply don’t have functional consciences and they lack emotional empathy. Learning the red flags for psychopathy would benefit any investor as there is a higher proportion of psychopaths in certain fields, for example big business. They gravitate to it for money and prestige – and they get their kicks fooling people – look it up – it’s called “duper’s delight”.
These two lab techs did a great job exposing the lies of Theranos. Yes, Elizabeth Holmes belongs in jail.
I finished the great podcast Drop Out on this topic. Every second interviewee was compelled to mention that Holmes was “highly educated”. Why? She was probably the least educated person in her company, having dropped out of college at 19.
BOOM!
Sorry for the double-clutch on the submit button!
Despite the implication made in one of the questions, I don’t think this indicates anything about an inability to trust strong women in business, or should impugn businesswomen in general. Male counterparts have been pulling off these types of scams for a long, long time. All it proves is that women are just as capable of doing the same. It should matter little whether the “next big thing” is led by a man or a woman (and yes, silly people, there are only two genders), but whether enough due diligence is done to see if there is a real, functioning product or idea.
I’m not sure if you understand the point of people bringing up Holmes gender. The point is not to impugn women but rather to impugn the many powerful men who some believe ignored the many red flags of Theranos because they were so enthralled with Holmes charm. It is important to note that the one powerful women Holmes sought council from (Stanford University Professor Phyllis Gardner)completely rejected Holmes ideas and advised Holmes that her plan was not feasible.
“Male counterparts have been pulling off these types of scams for a long, long time.”
This is true but it would seem males are held to a higher level of scrutiny. Holmes was given every benefit of the doubt in large part because she was female and MSM, etc are foaming at the mouth for successful female entrepreneurs. This led to a lot of things being overlooked.
I do not know why. But I do not trust this Erika and Tyler guys. After watching The Inventor: Out for Blood in Silicon valley Documentary. I only see two people being part of a bigger Show and now reading this I feel like there is something more than disappointment and integrity behind. But time will tell us the true
Plenty of blames to go around. Obvious E Holmes should get her share of blame for lying and cheating, but plenty of her senior managers also went along with the lying and cheating. All the board members (the famous politicians and the experience VCs/academics) who failed to do their oversight duties. And let’s not forget the media, latching on the pretty blonde and giving her all the lavishing press coverage. Would a same medical start up with a CEO who is a fat middle age Indian woman get the same coverage? I think we all know the answer to that one…..
This is still ridiculous. You have a person with one (admittedly highly unethical) company experience and she is now an expert in teaching entrepreneurs “so that at every stage of development they understand the ethical considerations in building a business and in running a business, from hiring to the culture you implement to building your product.” Theranos certainly was not an experience that for any stage would teach one “how to do” as contrasted to “one thing not to do” at a certain stage. This sounds like inexperience setting out to counsel the inept. If they entrepreneur is inexperienced and needs help it should be obtained from someone with lots of positive experience rather than a neophyte with one bad experience.
Hi Dan, thanks for your comment. As a veteran in the medical device industry, I think we would benefit a lot from a conversation with you. I sent over a message on Linkedin to you as well but figured it would be worthwhile to send a note here as well in case you didn’t see it.
Wow! How is it possible for someone with so little experience to have such a over inflated opinion of herself that she thinks she is qualified to council others? She reminds me of Holmes.
She has intimate experience with one of the biggest scandals in healthcare history. She may not have a lifetime of experience, but she can certainly contribute meaningfully based on the hell she went through. And she and Tyler clearly have a rare combination of integrity, courage and tenacity. Erika, please do help others learn from your experience. Don’t listen to these jealous trolls.
I think the bigger point is she was inspired to prevent this from happening again. This has nothing to do with ego. Good luck!
Donn’s comment won’t likely be welcomed warmly, but he’s correct. Being a part of something that duped people doesn’t qualify you to teach others how not to be duped. This young lady (Ms. Cheung) has little life experience. So many people want to “change the world” without first knowing much about the world.
And it amazes me that so many don’t get how these people were duped as if they themselves wouldn’t be. Let’s do a test. I am going to say three things; 1) Most of what you know about Thomas Edison is bullshit. 2) Most of what you think you know about Silicon Valley is bullshit. 3) Most of Steve Jobs’ legacy and the things you believe about him are bullshit. If you resist any of these things automatically, that’s how they dupe you. Your need to believe … that’s how. Learn to observe critically. Think for yourself. And leave the fame nonsense out of it.
Elizabeth Holmes, General Mattis, Henry Kissinger, Secretary Schultz, and most of the VC’s in Silicon Valley are bullshit artists who thought they should sell you on something … and for whatever reason (probably money) they did. It’s really pretty simple.
She and Tyler do qualify because they were they were the ONLY ONES with the balls big enough to report the unethical behavior and not back down. They also got through it with their reputation and careers in tact. You must read the book. It was shocking how Theronos’s thugs that went after these 2 were similar to the mob, they were terrifying, yet these 2 did not back down. They had no support and were broke and each had careers that were threatened, let alone their lives. Yet they did not back down and learned how to protect themselves as whistle blowers. There were hundreds of scientist ans other former employees who new something was wrong, but were way too afraid to speak up. This was a 9 billion dollar company whose CEO could do no wrong and hired huge attorneys and thugs to viciously tear these 2 apart. Just having the courage these 2 had gives them valuable ideas to impart. Especially how to be a whistle blower and not get crushed. When I read the book I was shocked at how threatening this company was. I would have been terrified in their shoes and would have backed off.
It’s a silly argument being made…..only those with extensive experience are worthy of bringing attention to these ethical issues. Really? I see two young people with a lot of motivation to bring to the issue, not two people holding themselves out as the definitive authority. Most large educational initiatives are staffed by people with little to no experience in the specific topic ( chief skill: Motivating and getting things done), who then leverage the expertise of others. How about a little support for their objective.
Very interesting interview. Erika sets a good example by exposing a dangerous situation. We need more people like her who have a conscience and are willing to come forward at a cost of job loss and possible professional backlash. Thank you Erika. so proud of you for doing the right thing.
This was an excellent interview. Well done.