The impact of the alleged Theranos crimes: Part 10

Federal prosecutors argue that Holmes and her company potentially put lives at risk and tens of thousands of Theranos patient test results had to be voided. Elizabeth Holmes has pled not guilty.
6:45 | 03/16/19

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Transcript for The impact of the alleged Theranos crimes: Part 10
Reporter: Elizabeth Holmes, once valued at $4.5 billion, once touted as silicon valley's sweetheart. She was able to put a magic spell on people with her big blue eyes and her deep voice. She would have been the next Steve jobs. Reporter: Now worth nothing. Her carefully constructed world was crumbling around her. The theranos lie was unraveling. The department of justice announced they were filing criminal charges against Elizabeth Holmes and sunny balwani. She could end up going to jail for at least 20 years. Holmes and Ramesh balwani have pleaded not guilty. Reporter: By September of 2018 theranos was officially out of business. And hundreds of millions of dollars from some of the wealthiest and connected individuals on the planet, wiped out. Everyone who invested lost it all. Reporter: Reed kathrein is one of the attorneys who sued theranos on behalf of investors. I think it's probably the most interesting fraud case I've dealt with. Bernie Madoff would be second. Reporter: Bernie Madoff, the now infamous financier, who's serving life in prison. I spent six hours in jail interviewing him. You think they're similar people? I think they're very similar people. Smart charming bullies. Reporter: And just like Madoff, it wasn't just the ultra-wealthy investing. I was told it was going to be the next big thing. Reporter: Eileen Lepera, a retired executive assistant ultimately invested $100,000 in theranos. It was the biggest investment of my life. And what did you expect? A new house. Reporter: While she didn't know a lot about theranos, Eileen thought she knew enough about the people who were vouching for Elizabeth. Well I was trusting the knowledge and the expertise of who I bought it from. And I'm not placing any blame because everybody pretty much got snookered from big muckety mucks. Reporter: In the end Eileen lost that $100,000. If you could say something right now to Elizabeth Holmes? Send me that $100,000 back please. I'll never earn that much money back in my life. I don't have enough years. It's a hard pill to swallow. Reporter: Elizabeth and her counsel did not respond to our repeated requests for comment. But the attorney for sunny balwani wanted to defend his client. Does he feel in any way that he was duped by Elizabeth Holmes? No. Mr. Balwani believed in Elizabeth Holmes and her vision for the company. He tried to execute that plan with her to make it a success. If you were going to give him a grade on the job he did at theranos, what would that grade be? I would give him an a plus for dedication and effort but obviously when we look at this after the after the fact, it has been a business failure. And you know Mr. Balwani is very sorry about that,but that is not fraud. Reporter: But among the allegations from the department of justice against Elizabeth and sunny were those false and misleading statements they made about their so-called revolutionary technology. Turns out the majority of their tests were actually being run on devices they purchased from other companies. Don't you think that Walgreens would have wanted to know what device you were using to process these samples? I am not aware that they were very focused on what hardware that we were using. Why use a third-party product, if you're charging for that cutting edge technology? Right, good question. The concept was to collect the samples from the Walgreens stores and transport them to the central lab where they'd be tested. If you have lots of samples being collected you need machines that are going to have higher throughput. Machines from other companies. Right. Did theranos ever disclose to Walgreens what devices it was using to run different test types? No. We would never do that. Why not? Well there was a lot of trade secrets here. There was no secret that theranos was doing traditional blood testing. Except for the fact that the advertising itself suggested you could have your tests done with a prick of blood. I was wondering if you would take a blood test for us which is one drop of blood. One drop? Bring it on. Well that was -- it never said that's the only way it would go. When they did the venous draw they did do it in a way that drew less blood that was a little less painful and difficult. Reporter: But the impact of theranos' alleged crime goes far beyond corporate fraud. Lives were potentially put at risk. Tens of thousands of patients test results had to be voided. How can you claim that the technology is accurate when the company itself theranos is withdrawing those results? Mr. Balwani was doing everything he could to make sure the testing was accurate by hiring the very best people. He had to rely on his scientists. Are you suggesting then that it wasn't possible for sunny balwani to know whether the technology actually worked? I mean -- The head of the laboratory? Of course it was possible to know and he did think it worked because his scientific team was telling him it worked. Our quality controls were at one point what seemed almost everyday. Reporter: Recall those scientists, like Erika Cheung, who said they tried to speak to out but were angrily brushed off by sunny. We've heard from some employees that the scientists were those who were most afraid of sunny balwani. I just don't think that's accurate. When it comes to our health, people want to know it's 100% accurate day one. They want to know that what's inside of a Walgreens or at their doctor's office can actually do what it says it will do. Of course that's true. I think though the unfortunate thing is that in our system of health care there's mistakes that are made every day. There's no perfect answer. I think people may accept that mistakes happen but if you know that something is systemic, that's a problem. Of course that is a problem. That's not what happened here though. Should someone go to jail for this? No. I think this is a business failure. It's not fraud and I'm very confident that when the jury hears the whole story you're going to see an acquittal in this case, acquittals. Reporter: What does life look like now for the fallen former billionaire. And I looked over to my left, and at a bar table, staring right at me, it was Elizabeth Check it out, our Unlimited plan

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