Theranos whistleblower claims Holmes lied about devices' capabilities: Part 7

Tyler Shultz, a grandson of George Shultz, one of the company's most influential board members at the time, blows the whistle on Theranos. Elizabeth Holmes denies all wrongdoing.
8:17 | 03/16/19

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Transcript for Theranos whistleblower claims Holmes lied about devices' capabilities: Part 7
Elizabeth started this company when she was 19. She's raised more than $400 million. Reporter: At 31 years old, Elizabeth Holmes topped Forbes' list of America's richest, self-made, women. This CEO is out of for blood. A 9 billion evaluation? Yeah. Congratulations on that! Reporter: She continued to be a media darling, but this dogged investigative journalist just wasn't buying it. I read a profile of Elizabeth Holmes in December 2014 written by Ken Auletta in "The new Yorker" and one of the first things that struck me as off in that story, was this notion that she had dropped out of Stanford with just two semesters of chemical engineering classes under her belt and gone on to pioneer a groundbreaking new medical science. Reporter: John carreyrou, a reporter with "The Wall Street journal," had his hands on his next story. One of the first things that raised my eyebrows was that sunny and Elizabeth were an item and I was stunned by that because in "The new Yorker" story the clear implication was that she was single. I had heard through the grapevine that she had a boyfriend. I thought oh that's a weird little lie to tell. When she was 18, he had been around 38 or so. I met Ms. Holmes in 2002. We were in the same Stanford program at beijing university. The entire department knew about her Chinese, her skills. And so that's how -- when I -- when I first met her, I'm like, "Oh, you must be the Elizabeth Holmes." Were you and sunny balwani ever engaged in a romantic relationship? Yes. When? For a long period of time. For the majority of that time were you living with Ms. Holmes? Yes. Did you ever tell investors that you had a romantic relationship? No. It was concealed from the board. It was concealed from the press, it was concealed from investors. You think it was intentional that they hid it? It was absolutely intentional. Reporter: Carreyrou dug deeper, contacting a number of theranos employees, but many had signed confidentiality agreements and feared the repercussions of violating them. The threat of litigation was always in the air when you worked at theranos. Elizabeth had sued former employees in the early years of the company. She had been very ruthless. Reporter: Ultimately, carreyrou would find his big break in a then-25 year-old former employee: Tyler Shultz. I noticed he checked out my profile on linkedin. So I in-mailed him. I ignored it for a few weeks. I was beginning to lose hope that he would ever make contact. Why did it take you so long? I was afraid all this would happen. And then one day I pick up the phone and it is Tyler. He was calling me from a burner phone because he didn't want our communications to be traced. Reporter: Tyler wasn't just a theranos employee. He was also the grandson of one of company's most influential board members, George Shultz, the former secretary of state who was also a longtime mentor to Elizabeth Holmes. Good morning. Good morning. Have you ever been deposed Nope. Reporter: What Tyler would reveal to carreyrou was ultimately the story he would tell under oath, in this deposition, years later. Did you develop an impression of Ms. Holmes as a person? I was in love with her vision. I thought she was brilliant. Did your impression of Ms. Holmes change from the time that you started at theranos through present day? Yes. How did it change? I felt like she was very manipulative. What do you mean by that? She's really good at telling you what you need to hear to keep going. She definitely did that a lot with my grandfather. She would just feed him things that were completely factually not true. People can come in and do full service laboratory testing with a stick from the finger, as opposed to having tubes and tubes taken from your arms. Can you recall any of the factually not true things that Ms. Holmes told you? The big ones are being able to run 100s of blood tests from a single drop of blood. My grandfather would go get a theranos test done and he would have a needle in his arm and I thought this was a single drop of blood. There would be some excuse about why they needed to take a venous draw for him, but for everyone else it's a finger prick and he continued to buy into that. When you read the articles, it sounds like the tests were being done at Walgreens, but they were really being sent to theranos and then most of the tests were being run on third-party machines. Did Ms. Holmes know at the time that theranos could not do all those tests? Yeah, she knew. Reporter: And of the few tests they were running on theranos devices, Tyler says the results were often inaccurate. I think that at the end of the day, everyone was concerned that we were not giving patients the right results. Do you think in 2013, in 2014 that Ms. Holmes was aware that theranos was not giving patients the right results? I don't know. What about Mr. Balwani? Based on what other people were telling me, I would say that, yes, he knew. Reporter: Tyler tried to voice his concerns directly with Elizabeth. After attempting to set up a formal meeting on numerous occasions, he settled for an email. She responded later that evening. And she writes Tyler these are very, very serious comments and allegations that you're making. And then she says that she will have to have the teams go through this line by line. So it will take some time before I get back to you on this. Reporter: But rather than a follow-up from Elizabeth, Tyler got this pages' long email from sunny balwani, who wrote in part, "That reckless comment and accusation about the integrity of our company, its leadership and its core team members based on absolute ignorance is so insulting to me that had any other person made these statements, we would have held them accountable in the strongest way. The only reason I have taken so much time away from work to address this personally is because you are Mr. Shultz's grandson. The only email on this topic I want to see from you going forward is an apology." Tyler responded with his two weeks' notice and says he went to meet with his grandfather. Tyler tried to make him realize that this was a fraud and his grandfather had sided with Elizabeth Holmes and didn't believe him. He said they're trying to convince me that you're stupid, but they can't do that. They can however convince me that you're wrong and in this case I do believe you're wrong. And my grandfather said that the theranos device was currently being used in medivac helicopters. Did he tell you who had told him that? He didn't say who had told him that, but I have a really good guess. He also said they were being used in operating rooms. I remember saying that that couldn't possibly be true because the devices were barely working in the walls of theranos. Reporter: Realizing his grandfather's allegiance to Elizabeth was strong, Tyler put his trust in John carreyrou and the journal. But it wasn't long before Elizabeth and theranos became aware of Tyler's secret conversations with carreyrou. My dad said, they know, you

This transcript has been automatically generated and may not be 100% accurate.

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