FROM THE PRESIDENT AND CEO
Bruce Dorris, J.D., CFE, CPA
Intuition. It drives fraud examiners in their daily pursuits to uncover or prevent fraud in their organizations. But CFEs are trained to do this work. Tyler Shultz, our 2019 Sentinel Award winner, wasn’t a CFE. He was a young, idealistic, budding scientist who helped unravel one of the most prolific frauds in years. His intuition led him to start questioning what was going on at Theranos, a blood-testing company founded in Silicon Valley. He knew his test results and observations didn’t match what the company was publicizing. He suspected Theranos CEO Elizabeth Holmes wasn’t being completely truthful.
Shultz was a 22-year-old biotech guy who wanted to be part of a promising new technology. The Theranos device purportedly would save lives by increasing the efficiency and effectiveness of blood tests. The technology seemed limitless, which led Shultz to think, “I need to be a part of this.” However, Shultz discovered problems just a few months into his job.
Some sentinels have that “a-ha” moment — something that directly tells them a fraud has taken place. Shultz didn’t have that defining moment but rather a series of events. He increasingly saw Holmes and her company executives spinning stories for the public and investors that weren’t consistent with what he was seeing. For example, Holmes said the device could run hundreds of tests, but in reality, it could run only a handful. And the accuracy of the tests the device did run were questionable at best and completely inaccurate at worst.
Shultz came forward and started voicing his concerns, but he was in the minority. In his keynote speech at the 30th Annual ACFE Global Fraud Conference, he said there was a “toxic work culture at Theranos” because the employees were scared of losing their jobs if they spoke up.
What would’ve happened if Theranos had given Shultz and other employees anti-fraud training? The ACFE’s Report to the Nations demonstrates a reduction in both duration and amount of loss when anti-fraud controls and training are in place.
Shultz didn’t set out to become a sentinel, but he was willing to report what he saw. Often people want to report their concerns, but they don’t have Shultz’s intuition to know what to look for.
As CFEs, we can help other possible Tyler Shultzs by providing training and resources before they see fraud so they can do the right thing and report it.
In the September/October issue of Fraud Magazine, Tyler Shultz, Theranos whistleblower and ACFE Sentinel Award Winner, explains where things went wrong at the infamous blood-testing company and why he couldn’t sit back silently. Read Shultz’s inspiring interview in the current issue’s cover story.