As a Theranos insider and whistleblower, Tyler Schultz was able to provide information about the ongoing failures in medical laboratory testing at the once-high-flying Theranos to regulators and at least one journalist
What’s it like to be a whistleblower in a high-profile clinical laboratory? Few clinical laboratory workers will ever know. But former Theranos employee Tyler Shultz does know, after helping to expose the Silicon Valley blood-testing startup’s deceptions.
The 31-year-old Shultz reportedly celebrated the news of former Theranos CEO Elizabeth Holmes’ conviction on four charges of defrauding investors with champagne, joy, and a healthy dose of vindication, according to NPR.
“This story has been unfolding for pretty much my entire adult life,” Tyler Shultz (above), whistleblower in the Elizabeth Holmes fraud trial, told NPR from his parents’ home in Silicon Valley. “All of a sudden, it was just a weight was lifted. It’s over. I can’t believe it’s over,” he added. A former employee of now defunct clinical laboratory company Theranos, Shultz is CEO at Flux Biosciences, a company he co-founded. (Photo copyright: Deanne Fitzmaurice/NPR.)
Shultz Interns Briefly at Theranos
In 2011, Shultz was a biology major at Stanford University—where Elizabeth Holmes herself briefly attended—when his grandfather, former US Secretary of State George Shultz, a Theranos board member, introduced him to Holmes.
According to NPR, the younger Shultz was so impressed by the charismatic Holmes that he asked her if he could intern with Theranos after his junior year. Following his internship, he accepted a full-time position as a research engineer with Theranos, a stint that lasted only eight months. Shultz quit Theranos the day after he emailed Holmes in 2014 to alert her to failed quality-control checks and other troubling practices within the company’s clinical laboratory.
According a 2016 profile of Shultz in The Wall Street Journal (WSJ), his email to Holmes resulted in a “blistering” reply from then-Theranos President and COO Ramesh “Sunny” Balwani, who “belittled Shultz’s grasp of basic mathematics and his knowledge of laboratory science.”
Yet, Shultz told NPR, “It was clear that there was an open secret within Theranos that this technology simply didn’t exist.”
After leaving Theranos, Shultz became a key source for the WSJ’s 2015 exposé of Theranos. Using an alias, he also contacted state regulators in New York about the Theranos Edison blood-testing device’s shortcomings. In response, Theranos responded with threats of lawsuits and intimidation, the WSJ reported.
In an interview with CBS News, Shultz said, “I am happy that she was found guilty of these crimes and I feel like I got my vindication from that, and I feel good about that.”
Whistleblowers Were Critical to WSJ’s Investigation
Former WSJ reporter John Carreyrou, who authored the newspaper’s investigative series into Theranos, credits the Theranos whistleblowers for blowing the cover on the clinical lab company’s deceptions.
“I would not have been able to break this story without Rosendorff, Tyler, and Erika,” Carreyrou told NPR, referring to Shultz and two additional Theranos whistleblowers: one-time Theranos Laboratory Director Adam Rosendorff and laboratory associate Erika Cheung. “Tyler and Erika were corroborating sources, and that was absolutely critical.”
In the interview with CBS News, Tyler described the damage his role as a Theranos whistleblower caused to his relationship with his grandfather, former Secretary of State and Theranos board member George Shultz. Tyler said the elder Shultz did not believe his claims about Theranos’ regulatory deficiencies and the Edison device’s shortcomings until he neared the end of his life.
“That was extremely tough. This whole saga has taken a financial, emotional, and social toll on my relationships. The toll it took on my grandfather’s relationship was probably the worst. It is tough to explain. I had a few very honest conversations with him,” Shultz told CBS News.
While the elder Shultz never apologized to his grandson, Tyler said his grandfather ultimately acknowledged he was right.
“In one of my last conversations with him he told me a story about how he got Elizabeth invited during fleet week in San Francisco to go give a speech to United States Navy sailors. He said with tears in her eyes, she told the room about how she was so honored and humbled that her life’s work would be saving the lives of United States servicemen and women,” Shultz recalled in the CBS News interview.
“He said he could not believe that anybody could get in front of these men and women who are willing to put their lives in front of our country and lie directly to their face as convincingly as she lied,” he added.
George Shultz died in February 2021.
Jury’s Ruling on Defrauding Patients
In an interview with CNBC, Shultz said his one disappointment with the verdict was that Holmes was not found guilty of defrauding patients. Calling the patients “the real victims,” Shultz said, “I did what I did. I stuck my neck out to protect those patients, not to protect Betsy DeVos’ $100 million investment.” (The jury voted Holmes guilty on three counts of wire fraud and one count of conspiracy to commit fraud against Theranos’ investors, but not guilty on conspiracy to defraud and commit wire fraud against Theranos patients.)
Tyler Shultz was listed as a potential witness in the Holmes trial but was not called to take the stand. He—along with many clinical laboratory directors and pathologists who have closely followed the Holmes trial—will now await news of Holmes’ sentencing. Holmes could face up to 20 years in prison for each guilty verdict, but she’s likely to receive a lighter sentence.
The trail of Ramesh Balwani is expected to begin sometime in March. That trial can be expected to produce additional revelations about the problems of Theranos and how and why management is alleged to have knowingly reported inaccurate clinical laboratory test results to thousands of patients.
GI pathologists will be interested in how the Endoculus device uses tank-like treads to traverse the gastrointestinal tract, where it can capture images and perform biopsies
Gastroenterologists (GI) may soon gain a useful new tool for use in gathering both biopsies and diagnostic information when examining the gastrointestinal tract. Ongoing development of a new robotic device promises both capabilities using technology that will be of interest to GI pathologists and clinical laboratory scientists.
The minute robotic device uses tank-like treads to traverse the colon. While there, it can capture live images and perform biopsies under the control of a gastroenterologist. The researchers believe the robotic technology will benefit GIs performing the colonoscopies as well as the pathologists called upon to analyze biopsies.
AMTL researcher Gregory Formosa, PhD, said the team’s goal is to “have a capsule-sized robot that can actively traverse [a patient’s] entire gastrointestinal tract and send out diagnostics in real time, as well as autonomously navigate itself to localize problematic areas within [the] intestinal tract.”
Formosa noted that colorectal cancer is “the third-most fatal and diagnosed cancer in the United States.” But if caught at an early stage, these cancers are “95% treatable,” he added. “So, if we can get people screened early, we definitely can reduce the fatality rate of colorectal cancers significantly.”
One key to the device are the four treads, which are designed for traction on digestive tissue.
“You have to forget about everything you know from a locomotion standpoint because driving around inside the body is very different than driving around in a car,” said Rentschler in the University of Colorado news story. “The environment is highly deformable. It’s very slick. There are sharp peaks that you have to go over.”
The university news story noted the current availability of ingestible “pill cams” that can take photos as they travel through the digestive system. But once swallowed, their movements cannot be controlled.
“For our robots to be able to reach those regions that [can be] reached with a pill-cam—but also be able to stop and look around—that could be a big paradigm shift in the way we view these procedures,” said Micah Prendergast, PhD, an AMTL research team member.
Could Biopsies Be Diagnosed In Situ with Endoculus?
The researchers currently view Endoculus as a potentially better way to perform conventional biopsies. But could it lead to bigger advancements?
“Researchers continue to develop devices to help various specialist physicians—in this case GIs—do more when treating patients,” said Dark Daily Publisher and Editor-in-Chief Robert Michel. “This device fits that description. It is designed to improve the ability of GIs to evaluate the colon. Not only does this device do that, but it can also collect a biopsy at sites of interest. In this way, it is a device that can be a benefit to pathologists who will analyze the biopsy.
“With improvements in digital cameras and associated AI-powered analytical tools, the day might not be far off when a device like this can use the camera and artificial intelligence to diagnose the tissue of interest in situ,” he added. “This might create the opportunity for pathologists to be present in the exam room during the procedure, or even viewing the images remotely.
“Not only would that eliminate the need to collect a tissue specimen that must then be sent to a pathology lab, but it would create a new opportunity for pathologists to add value to patient care while shortening the time to diagnosis for the tissue of interest during these procedures,” Michel noted.
Split verdict could still mean considerable prison time for the one-time high-flying Silicon Valley entrepreneur
In a trial generating unprecedented interest among clinical laboratory scientists, former Theranos CEO Elizabeth Holmes was found guilty in federal court this week on four charges of defrauding investors.
Holmes faces up to 20 years in prison as well as a fine of $250,000 plus restitution for each count, though sentencing experts predict a much lighter sentence for the 37-year-old whose birth of her first child caused one of multiple delays in the start of the three-month-long trial.
“I suspect she may get five to seven years in prison,” Justin Paperny, Founder of federal prison consultancy White Collar Advice, told Fortune. However, Paperny said Holmes will be unlikely to be eligible for early release in federal prison beyond a 15% reduction in prison time for good behavior.
“There is no real mechanism to really aggressively advance your release date in federal prison,” Paperny told Fortune.
Holmes was acquitted on four counts, while the jury failed to reach a decision on three counts. Judge Edward J. Davila of the US District Court, Northern District of California, who presided over the trial, will sentence Holmes at a later date. Holmes is expected to be allowed to remain free on bail until sentencing.
Trial Delays Due to Pandemic, Holmes’ Pregnancy
According to ABC News, Holmes “expressed no visible emotion as the verdicts were read.” She did not respond to questions about the verdict as she left the courtroom and walked to a nearby hotel where she has stayed during seven days of jury deliberations.
“The jurors in this 15-week trial navigated a complex case amid a pandemic and scheduling obstacle,” US Attorney of the Northern District of California, Stephanie Hinds, told reporters Monday evening, according to ABC News. “I thank the jurors for their thoughtful and determined service that ensured verdicts could be reached. The guilty verdicts in this case reflect Ms. Holmes’ culpability in this large-scale investor fraud, and she must now face sentencing for her crimes.”
The decision followed an often-delayed trial in which the prosecution put 29 witnesses on the stand, most of whom reinforced the government’s contention that Holmes defrauded investors and patients as she worked to bring to market Theranos’ “revolutionary” Edison finger-prick blood-testing device. The prosecution also presented emails, text messages, and other documents that it said were evidence of Holmes’ deceptions.
Dark Daily covered all of this in multiple ebriefings, including the potential that the four CLIA-laboratory directors who held the top laboratory position in Theranos’ lab during Holmes’ tenure as CEO might be held accountable for their actions or inactions on some level.
Details of Charges and Guilty Verdicts against Holmes
According to the Mercury News, the jury returned guilty verdicts on four counts facing Holmes:
Count 1: Guilty of conspiracy to commit wire fraud against Theranos investors. This charge accused Holmes and Chief Operating Officer Ramesh “Sunny” Balwani, of “knowingly and intentionally” soliciting payments from investors with false statements about Theranos’ technology, its business partnerships, and its financial model.
Count 6: Guilty of wire fraud in connection with a 2014 investment of $38,336,632 made by PFM Health Sciences of San Francisco. Brian Grossman, PFM’s Chief Investment Officer, testified that his team was told Theranos had brought in more than $200 million in revenue, “mostly from the Department of Defense.” In realty, 2011 revenue came in at $518,000 and the company had no revenue in 2012 or 2013, according to Theranos’ former head of accounting.
Count 7: Guilty of wire fraud in connection with an October 2014 investment of $99,999,984 made by a firm associated with the family of former Education Secretary Betsy DeVos. Managing Director, Global Private Equity at Ottawa Avenue Private Capital, Lisa Peterson testified Holmes claimed Theranos’ technology was in use “on military helicopters,” and sent a report with a Pfizer logo touting the “superior performance” and accuracy of Theranos’ machines. The logo and follow-up questioning, Peterson said, led her to conclude that the report was prepared by Pfizer, which was false.
Count 8: Guilty of wire fraud in connection with an October 2014 investment of $5,999,997 from a company involving Daniel Mosely, the long-time lawyer for former US Secretary of State Henry Kissinger. Mosely testified he also was led to believe Pfizer had approved Theranos’ technology. In a letter to Kissinger, he called the report “the most extensive evidence supplied regarding the reliability of the Theranos technology and its applications.”
The jury of eight men and four women began deliberations on December 20 after closing arguments in the nearly four-month-long trial in San Jose, California. Holmes originally faced 12 counts of wire fraud and conspiracy to commit wire fraud. One count was dropped during the trial.
During a blistering three-hour closing argument, Assistant US Attorney Jeffrey Schenk hammered home the prosecution’s contention that Holmes choose to deceive investors and patients rather than admit failure in her quest to revolutionize healthcare by delivering a blood-testing device capable of running up to 200 laboratory tests using a finger-prick of blood.
“Ms. Holmes made the decision to defraud her investors, and then to defraud patients,” Schenk told jurors, according to CNBC. “She chose fraud over business failure. She chose to be dishonest with investors and with patients.”
The defense team put three witnesses on the stand, with Holmes emerging as a surprise witness in her own defense. She maintained she never intended to defraud anyone and instead relied on experts within her company for the claims she made about Theranos’ blood-testing device. During her seven days of testimony, she also alleged emotional, physical, and sexual abuse by Balwani. Balwani has denied in legal filings Holmes’ abuse allegations.
Holmes Wanted to “Change the World,” Defense Claims
In his closing argument, defense attorney Kevin Downey maintained Holmes’ intent was not to deceive but to “change the world.”
“At the end of the day, the question you’re really asking yourself is, ‘What was Ms. Holmes’ intent?'” Downey told jurors, according to Business Insider, “Was she trying to defraud people?”
The jury’s answer: “Yes.”
Clinical laboratory directors and pathologists will soon learn the price Holmes will pay for her deceptions when she is sentenced in coming weeks. Meanwhile, the start of Balwani’s fraud trial has been postponed to February 15, according to Bloomberg News.
The Theranos trial brought plenty of media attention, but beneath the hype, laboratory managers have lessons to ponder
Editor’s note: This is a special edition of Dark Daily brought to you by The Dark Report.
The conviction of disgraced Theranos founder and former CEO Elizabeth Holmes brings a close to one of the most infamous healthcare and high-tech trials ever.
But the high-profile case should not camouflage critical, everyday lessons for clinical laboratories.
Holmes was found guilty on Monday of four charges: three for defrauding investors and one for conspiracy to commit wire fraud (i.e., fraud perpetrated using electronic communications). The jury said she was not guilty of four other fraud charges related to patients who received blood testing, and it deadlocked on three charges related to defrauding other investors.
Look for more details about the trial’s conclusion on Monday from Dark Daily and a full analysis of what the verdict means for clinical laboratory directors and anatomical pathologists in a future issue of The Dark Report.
Two Lessons for Laboratories to Evaluate Following the Trial
The average lab director likely will never face the media buzz and scandalous nature of the Holmes trial. Nonetheless, laboratory leaders should take lessons from aspects of the court proceedings.
The biggest one? The director listed on a lab’s license under the Clinical Laboratory Improvement Amendments of 1988 (CLIA) holds responsibilities that have legal sway.
Such ramifications were clear during the Holmes trail given that four of Theranos’ former lab directors took the witness stand. However, it won’t take a high-profile case to bring up CLIA licenses in court. Laboratory teams should carefully review what their legal responsibilities are under the regulation.
Another important facet for lab managers to consider is adding a policy to their operations manual (if not already present) about properly dealing with whistleblower complaints.
No one will ever know if Theranos’ trajectory would have changed had executives, including Holmes, heeded the warnings of whistleblowers regarding inaccurate test data from the Edison machines. Instead, they shrugged the whistleblowers off, likely because they were young and Theranos was the subject of significant positive media coverage. The whistleblowers ended up being powerful sources of information for regulators and prosecutors.
Subscribers to The Dark Report can check out past coverage of the trial, which analyzed developments during the proceedings to explain how they should influence lab directors moving forward:
In Theranos’ Trial, CLIA Laboratory Director Has a Starring Role (Nov. 29, 2021)
CLIA Lab Director Testimony Shows Risks to Pathologists (Nov. 8, 2021)
Third CLIA Lab Director Testifies in Trial of Elizabeth Holmes (Nov. 8, 2021)
Former Theranos Lab Director Makes News at Elizabeth Holmes Trial (Oct. 18, 2021)
Combining robotic-assisted bronchoscopy with rapid on-site evaluation by cytopathologists enables cancer evaluation and diagnosis in one procedure
New technologies are making it possible to both collect a tissue biopsy and diagnose lung cancer during the same procedure. Cytopathologist are essential in this unique approach, which has the potential to greatly shorten the time required to diagnose lung cancer.
At USA Health Mitchell Cancer Institute in Alabama, a team consisting of pulmonology, pathology, surgical, and medical oncology specialists can diagnose lung cancer significantly faster thanks to the combining of a robotic-assisted bronchoscopy (RAB) system with rapid on-site evaluation of biopsies (ROSE) by a cytopathologist during the same procedure.
The RAB platform was created by Auris Health in Redwood City, Calif. According to a USA Health new release, the Auris Health Monarch “enables physicians to see inside the lung and biopsy hard-to-reach nodules using a flexible endoscope. When combined with rapid on-site evaluation (ROSE) it allows for diagnosis at the time of bronchoscopy.”
USA Health says it is the only academic health system in Alabama to combine the Auris Health Monarch (Monarch) with ROSE to diagnose lung cancer in a single procedure.
“Nine-nine percent of the time we make a diagnosis—negative or positive (at time of bronchoscopy). We don’t have to do repeat procedures,” said Elba Turbat-Herrera, MD, Director of Pathological Services at USA Health’s Mitchell Cancer Institute (MCI) and Professor, MCI Interdisciplinary Clinical Oncology, in an exclusive interview with Dark Daily.
The American Society for Cytopathology defines ROSE as “a clinical service provided for patients where a pathologist, or in certain settings, an experienced and appropriately qualified cytotechnologist provides immediate real‐time evaluation of a fine needle aspiration (FNA) biopsy or touch imprints of a core biopsy.”
As a cytopathologist, Turbat-Herrera performs ROSE during procedures at USA Health. “I think we have improved diagnostics very much. With the Monarch equipment, one can see where the needle is traveling in the bronchial tube. It is more precise,” Turbat-Herrera explained.
Patients Benefit from Robotic-assisted Bronchoscopy
Traditionally, anatomic pathologists receive core (tissue sampling) biopsies and fine-needle aspiration biopsies from doctors looking to determine if a lung nodule may be cancerous. But the procedures to secure the biopsies are invasive and stressful for patients waiting for results from clinical laboratories. And some nodules are difficult for surgeons to reach, which can delay care to patients.
Currently, more than 112 US healthcare providers use the Monarch robotic-assisted bronchoscopy (RAB) platform, which garnered US Food and Drug Administration (FDA) clearance in 2018, the USA Health news release noted.
The Monarch platform, according to USA Health, “integrates robotics, micro-instrumentation, endoscope design, and data science into one platform to empower physicians.”
Eric Swanson, a pulmonologist at Essentia Health-St. Mary’s Medical Center in Duluth, MD, calls Monarch a game changer. “It’s a big, big upgrade from what we had before,” Swanson told the Duluth News Tribune. “(Before), you’d just pass a small catheter through a regular bronchoscope, and you turn it and hope you land in the right spot.”
The Monarch platform has enabled USA Health to step-up diagnosis of lung cancer, as compared to FNA (fine needle aspiration) biopsy on its own, according to Turbat-Herrera.
“With FNA alone, you try to get (sample tissue), and you are not sure. Now, if it is there, you should get it because the (Monarch) equipment helps you get there. Our role in pathology is to help guide the hand of the pulmonologist: ‘you don’t have what we need,’ or ‘keep going in that area of the lung,’” she said, adding that physicians have been able to reach tiny lesions.
High Incidence of Lung Cancer
The American Cancer Society, says lung cancer is the second most common cancer, with an estimated 235,760 new lung cancer cases and 131,880 deaths from the disease in 2021.
It’s hoped that healthcare providers’ investment in new robotic technology—such as Monarch and others—may shorten the time required to diagnose lung cancer and eventually save lives.
Providers such as USA Health go a step further by integrating ROSE with RAB. The robotic technology—coupled with on-site rapid evaluation by a cytopathologist that averts repeat biopsy procedures—immediately secures an assessment of sample adequacy and a cancer diagnosis that may benefit patients as well.
This is yet another example of how a new technology in one field can have a benefit for anatomic pathologists.
MIT’s deep learning artificial intelligence algorithm demonstrates how similar new technologies and smartphones can be combined to give dermatologists and dermatopathologists valuable new ways to diagnose skin cancer from digital images
According to an MIT press release, “The paper describes the development of an SPL [Suspicious Pigmented Lesion] analysis system using DCNNs [Deep Convolutional Neural Networks] to more quickly and efficiently identify skin lesions that require more investigation, screenings that can be done during routine primary care visits, or even by the patients themselves. The system utilized DCNNs to optimize the identification and classification of SPLs in wide-field images.”
The MIT scientists believe their AI analysis system could aid dermatologists, dermatopathologists, and clinical laboratories detect melanoma, a deadly form of skin cancer, in its early stages using smartphones at the point-of-care.
Improving Melanoma Treatment and Patient Outcomes
Melanoma develops when pigment-producing cells called melanocytes start to grow out of control. The cancer has traditionally been diagnosed through visual inspection of SPLs by physicians in medical settings. Early-stage identification of SPLs can drastically improve the prognosis for patients and significantly reduce treatment costs. It is common to biopsy many lesions to ensure that every case of melanoma can be diagnosed as early as possible, thus contributing to better patient outcomes.
“Early detection of SPLs can save lives. However, the current capacity of medical systems to provide comprehensive skin screenings at scale are still lacking,” said Luis Soenksen, PhD, Venture Builder in Artificial Intelligence and Healthcare at MIT and first author of the study in the MIT press release.
The researchers trained their AI system by using 20,388 wide-field images from 133 patients at the Gregorio Marañón General University Hospital in Madrid, as well as publicly available images. The collected photographs were taken with a variety of ordinary smartphone cameras that are easily obtainable by consumers.
They taught the deep learning algorithm to examine various features of skin lesions such as size, circularity, and intensity. Dermatologists working with the researchers also visually classified the lesions for comparison.
“Our system achieved more than 90.3% sensitivity (95% confidence interval, 90 to 90.6) and 89.9% specificity (89.6 to 90.2%) in distinguishing SPLs from nonsuspicious lesions, skin, and complex backgrounds, avoiding the need for cumbersome individual lesion imaging,” the MIT researchers noted in their Science Translational Medicine paper.
In addition, the algorithm agreed with the consensus of experienced dermatologists 88% of the time and concurred with the opinions of individual dermatologists 86% of the time, Medgadget reported.
Modern Imaging Technologies Will Advance Diagnosis of Disease
According to the American Cancer Society, about 106,110 new cases of melanoma will be diagnosed in the United States in 2021. Approximately 7,180 people are expected to die of the disease this year. Melanoma is less common than other types of skin cancer but more dangerous as it’s more likely to spread to other parts of the body if not detected and treated early.
More research is needed to substantiate the effectiveness and accuracy of this new tool before it could be used in clinical settings. However, the early research looks promising and smartphone camera technology is constantly improving. Higher resolutions would further advance development of this type of diagnostic tool.
In addition, MIT’s algorithm enables in situ examination and possible diagnosis of cancer. Therefore, a smartphone so equipped could enable a dermatologist to diagnose and excise cancerous tissue in a single visit, without the need for biopsies to be sent to a dermatopathologist.
Currently, dermatologists refer a lot of skin biopsies to dermapathologists and anatomic pathology laboratories. An accurate diagnostic tool that uses modern smartphones to characterize suspicious skin lesions could become quite popular with dermatologists and affect the flow of referrals to medical laboratories.