Theranos Reporter Ready for Stand if Called in Holmes Case

(Bloomberg Law) -- The investigative journalist whose story sparked the downfall of Theranos Inc. said he’s yet to receive a subpoena in the trial of company founder Elizabeth Holmes though he’s willing to offer his testimony.

John Carreyrou, whose October 2015 report in the Wall Street Journal cast doubts about the efficacy of Theranos’ technology, locked horns with the company’s lawyers at Boies Schiller Flexner. Heather King, a former Theranos legal chief who eventually returned to Boies Schiller, sent the Journal retraction demands, he said.

“There was an incredibly aggressive, scorched-earth legal campaign, as I called it in my book, to threaten and intimidate me to get this story killed,” said Carreyrou, a two-time Pulitzer Prize winner. “I would be a very good witness for the prosecution and a terrible one for the defense.”

Carreyrou and journalist Roger Parloff are on the extensive list of potential witnesses in the criminal case against Holmes, which starts Tuesday with jury selection in a federal district court in San Jose, Calif. It’s not clear whether either reporter will actually be called to testify.

By the time Carreyrou’s book on Theranos was published in May 2018, what was left of the company would soon dissolve. Carreyrou and Parloff are among several high-profile potential witnesses, including former Secretary of State Henry Kissinger and famed litigator and Boies Schiller co-founder David Boies, who could take the stand in Holmes’ criminal fraud trial.

Boies, who recently declined to discuss with Bloomberg Law whether he might testify in the trial, has said he acted ethically in advising Holmes.

“One thing I’ll say in David Boies’ defense—I can’t say that he knew what was going on at Theranos and in its lab,” Carreyou said. “I get the sense he did not know, at least until after I started asking questions.”

Parloff, who wrote a 2014 profile of Holmes for Fortune magazine, could be asked to testify on what prosecutors described in court documents as false and misleading representations by Holmes, a culture of secrecy at Theranos, and the company’s efforts to vilify competitors. The Yale Law School graduate and veteran business journalist detailed in a separate 2015 story how he believed Holmes misled him.

Parloff declined to comment.

Rupert Murdoch, the owner of Dow Jones & Co. Inc. and the Journal, media magnate could also be called as a witness. Murdoch, who sold his $125 million stake in Theranos for $1 in 2017, stood by the Journal’s editors and Carreyrou’s reporting.

Carreyou said that companies he worked with on Theranos have been so vigorous in defending him that he has never needed to hire his own lawyers.

Instead, it has been in-house counsel—at the Wall Street Journal, Penguin Random House LLC-owned publisher Alfred A. Knopf Inc., and now Sony Music Entertainment, which tapped him to host a podcast—that have protected Carreyrou as he worked to unravel the sudden rise and fall of Theranos.

“When I was at the Journal, I relied on the Journal’s legal team,” said Carreyrou, who singled out general counsel Jason Conti and associate general counsel Jacob Goldstein. “I have a lot of respect for them, and they vetted the hell out of my reporting.”

Conti, who in 2015 was a deputy general counsel and chief compliance officer for Journal parent Dow Jones, didn’t respond to a request for comment. Goldstein, who was an assistant general counsel at Dow Jones when Carreyrou began his Theranos reporting, declined to comment.

Carreyou’s reporting led to his book, “Bad Blood: Secrets and Lies in a Silicon Valley Startup,” that was the basis for an Alex Gibney-directed documentary in 2019. The book has also been adapted for a future film starring Jennifer Lawrence.

When Carreyrou went to write “Bad Blood,” Knopf told him the company had a $10 million insurance policy against libel claims. If anyone, such as Holmes or former Theranos president and COO Ramesh “Sunny” Balwani, sought to sue over the book, Carreyrou would be liable for legal costs capped at $75,000, he said.

Three weeks after “Bad Blood” was published, Holmes and Balwani were charged with fraud. “It became very hard for her to go after me legally with a defamation claim once she was indicted,” Carreyrou said of Holmes.

Holmes and her legal team, after initially accusing Carreyrou of advocacy journalism in bringing about Theranos’ collapse, have failed to float that argument in nearly 18 months, he said. Recently, Holmes’ Williams & Connolly lawyers have turned their focus on Balwani for their defense.

In court papers last year, prosecutors sought to preclude Holmes from arguing that its investigation and charging decisions were influenced by journalists like Carreyrou. The government acknowledged that it could call witnesses, such as Boies and King, whom it alleges sought to interfere with Carreyrou’s reporting.

The podcast that Carreyrou is currently working on with Sony, “Bad Blood: The Final Chapter,” debuted last week on Apple Podcasts. It has been vetted by in-house lawyers and outside counsel contracted by Sony, he said.

In some federal trials, judges have ruled that witnesses can’t attend the rest of the proceedings. But Carreyou said he must be allowed to attend Holmes’ entire trial in order to do his duties as a journalist.

“The one thing I am a little bit worried about, if I am called to testify, is what impact that’s going to have on my podcast,” he said.

To contact the reporter on this story: Brian Baxter in New York at bbaxter@bloomberglaw.com

To contact the editor responsible for this story: Chris Opfer at copfer@bloomberglaw.com;
John Hughes at jhughes@bloombergindustry.com

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