SCOTT SIMON, HOST:
Elizabeth Holmes is - or maybe that should be was - rich, charismatic and accomplished, the founder and CEO of a company valued at $10 billion that invented a device to run scores of tests from a mere drop of blood from a pinprick. It could transform medical care. But last week, Elizabeth Holmes was indicted for wire fraud and conspiracy. The blood test machine her company created doesn't work, never has. The representation she made to raise almost a billion dollars from investors including Rupert Murdoch, Carlos Slim and the family of Betsey DeVos and signed contracts with Walgreens and Safeway were lies. John Carreyrou is The Wall Street Journal's Pulitzer Prize-winning reporter who broke the Theranos story. His new book is "Bad Blood: Secrets And Lies In A Silicon Valley Startup." John Carreyrou joins us from our studios in New York. Thanks so much for being with us.
JOHN CARREYROU: Thank you for inviting me.
SIMON: So many distinguished names on the Theranos board - George Shultz, Henry Kissinger, so many big name investors - Robert Kraft, Larry Ellison. Were they - I'll give you triple choice - ignorant, negligent or foolish?
CARREYROU: You could say all three, frankly. Walgreen's ended up commercializing the technology and offering these faulty blood tests to its consumers, not having done its due diligence and verified that the device worked and that it could do what Elizabeth had told them it could do. And then the board members and the famous investors, I think, saw that these finger-stick tests were offered in Walgreens stores and assumed that Walgreens had done its homework and took what Theranos and Elizabeth Holmes told them at face value. And so yes, they were all ignorant. But they were also negligent.
SIMON: There were people in the company by the time you finish the book - quite a few - that knew something was going on.
CARREYROU: Right. I mean, you could argue that a lot of people over the years knew that Elizabeth was behaving unethically and overpromising and that the technology wasn't working. But actually, eventually, the reason this whole scandal broke and the truth came out is that a former employee who had been the lab director was willing to talk to me starting in February of 2015. And it's really thanks to him that this fraud has been exposed.
SIMON: Because the press was also fooled for a few years.
CARREYROU: That's right. And ironically, the first publication that put Elizabeth Holmes and Theranos on the map was my own newspaper, The Wall Street Journal. She had arranged to be interviewed by an opinion writer for The Wall Street Journal. And that interview took place in August of 2013 and was published right as she went live with the finger-stick test in Walgreens stores. And unfortunately, the writer who wrote that piece based on the interview took all her claims at face value. The story that arguably really made her a rock star in Silicon Valley and beyond was the Fortune cover story in June of 2014.
SIMON: How did they manage to cover up the failure of the machine for so long?
CARREYROU: They kept invoking trade secrets with everyone. You know, you couldn't see the machine. You couldn't really verify the claims because they were afraid that their secret sauce would leak out and that the incumbents in the lab industry, namely Quest and LabCorp, would get their hands on this technology and then put Theranos out of business. And unfortunately, a lot of people believed this and, you know, running the gamut from board members to journalists to these billionaire investors who invested more than $700 million.
SIMON: I have to note - Rupert Murdoch owns The Wall Street Journal, founder of Fox News - was also the biggest investor in Theranos. What happened when Elizabeth Holmes went to him - went to Rupert Murdoch and tried to persuade him to spike the stories you were doing?
CARREYROU: He didn't do it. He said he trusted the journal's editors to do the right thing and to behave fairly. One thing to bear in mind is I absolutely did not know that Rupert Murdoch was an investor when I began my investigation.
SIMON: People didn't just lose money. There were people who were harmed by Theranos, weren't there?
CARREYROU: That's the most egregious part of this scandal - is that she and her boyfriend Sunny Balwani, who was the No. 2 of the company, knew as they were rolling out the blood-testing services in Walgreens stores in California and Arizona that the blood tests were faulty. And yet they still went ahead with the rollout. And there were - I came across personally in my reporting more than a dozen patients who had health scares because they received bad results from Theranos.
SIMON: How could so many smart people be fooled?
CARREYROU: Well, I think she capitalized on this in part - it's not the only answer. But she capitalizes on this yearning there was in Silicon Valley and beyond to see a woman breakthrough in this man's world in Silicon Valley. If you look back over the past 30 years, all these tech founders that have gone on to be billionaires and icons are all men. Elizabeth Holmes was going to be that first tech founder who became a billionaire.
SIMON: John Carreyrou - his book "Bad Blood" - thanks so much for being with us.
CARREYROU: Thank you very much for inviting me.