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The Childhood Neighbor

While Elizabeth was busy building Theranos, an old family acquaintance was taking an interest in what she was doing from afar. His name was Richard Fuisz. He was an entrepreneur–cum–medical inventor with a big ego and a colorful background.

The Holmes and Fuisz families had known each other for two decades. They first met in the 1980s as neighbors in Foxhall Crescent, a leafy neighborhood of stately homes in Washington, D.C., surrounded by woodlands and abutting the Potomac River.

Elizabeth’s mother, Noel, and Richard’s wife, Lorraine, struck up a close friendship. Both were stay-at-home mothers back then, raising children of similar ages. Lorraine’s son was in Elizabeth’s class at St. Patrick’s Episcopal Day School, the neighborhood’s private elementary school.

Noel and Lorraine were in and out of each other’s houses. They shared a weakness for Chinese food and often went out for lunch while the children were in school. Elizabeth and her brother attended the Fuisz children’s birthday parties and frolicked in the Fuiszes’ pool. One evening, the power went out in the Fuisz home while Richard was away, so the Holmeses took Lorraine and her two children, Justin and Jessica, in for the night.

The relationship between their husbands wasn’t as warm. While Chris Holmes had to make do on a government salary, Richard Fuisz was a successful businessman and wasn’t shy about flaunting it. A licensed doctor, he had sold a company that made medical-training films for more than $50 million a few years earlier and drove a Porsche and a Ferrari. He was also a medical inventor who licensed out his patents and reaped the royalties. During one excursion the families made together to the zoo, Justin Fuisz remembers, Elizabeth’s younger brother, Christian, told him, “My dad thinks your dad is an asshole.” When Justin later repeated the comment to his mother, Lorraine chalked it up to jealousy.

Money was indeed a sore point in the Holmes household. Chris’s grandfather, Christian Holmes II, had depleted his share of the Fleischmann fortune by living a lavish and hedonistic lifestyle on an island in Hawaii, and Chris’s father, Christian III, had frittered away what was left during an unsuccessful career in the oil business.

Whatever simmering resentments Chris Holmes harbored did not prevent Noel Holmes and Lorraine Fuisz from being good friends. The two women stayed in regular contact even after the Holmeses moved away, first to California and then to Texas. When the Holmeses returned to Washington for a brief period in between, the Fuiszes took them out to a nice restaurant to celebrate Noel’s fortieth birthday. Lorraine arranged the outing to make up for the fact that Chris hadn’t thrown his wife a party.

Lorraine later visited Noel in Texas several times, and they also traveled to New York City together to shop and sightsee. They brought the children along once and booked rooms at the Regency Hotel on Park Avenue. In a photo from that trip, Elizabeth can be seen standing arm in arm between her mother and Lorraine in front of the hotel. She’s wearing a light blue summer dress and pink bows in her hair. On subsequent trips, Noel and Lorraine left the children at home and stayed in an apartment the Fuiszes purchased in the Trump International Hotel and Tower on Central Park West.

In 2001, Chris Holmes hit a rough patch in his career. He had left Tenneco to take a position at Enron, Houston’s most prominent corporation. When Enron’s fraudulent practices were exposed and it went bankrupt in December of that year, he lost his job like thousands of other employees. In the aftermath, he paid a visit to Richard Fuisz in search of job leads and business advice. With one of his sons from a previous marriage, Fuisz had started a new company around one of his inventions: a thin strip that dissolved in the mouth and delivered drugs to the bloodstream faster than traditional pills. He and his son, Joe, ran it from a suite of offices in Great Falls, Virginia.

Chris Holmes came in looking haggard and glum, Joe Fuisz recalls. He mused aloud about trying his hand at consulting and indicated that he and Noel were desperate to move back to Washington. Having just purchased a new house in the affluent Beltway suburb of McLean, Richard Fuisz offered him use of the one he and Lorraine had just vacated across the street, rent-free. They hadn’t bothered to list it yet. Chris mouthed a “thank you” but didn’t take him up on the offer.

CHRIS AND NOEL HOLMES DID eventually move back to Washington four years later when Chris got a job at the World Wildlife Fund. At first, they stayed with friends in Great Falls while they looked for a new place to live. As Noel toured houses, she called Lorraine frequently to update her on her search.

Over lunch one day, the topic turned to Elizabeth and what she was up to. Noel proudly told Lorraine that her daughter had invented a wrist device that could analyze a person’s blood and started a company to commercialize it. The reality was that Theranos was already moving on from Elizabeth’s original patch idea at that point, but that lost nuance hardly mattered in the chain of events Noel’s lunchtime confidence unleashed.

When she got home, Lorraine repeated what Noel had told her to her husband, thinking it might be of interest to him as a fellow medical inventor. What she probably didn’t anticipate is how he would react.

Richard Fuisz was a vain and prideful man. The thought that the daughter of longtime friends and former neighbors would launch a company in his area of expertise and that they wouldn’t ask for his help or even consult him deeply offended him. As he would put it years later in an email, “The fact that the Holmes family was so willing to partake of our hospitality (New York apartment, dinners, etc.) made it particularly bitter to me that they would not ask for advice. Essentially the message was, ‘I’ll drink your wine but I won’t ask you for advice in the very field that paid for the wine.’ ”

FUISZ HAD A HISTORY of taking slights personally and bearing grudges. The lengths he was willing to go to get even with people he perceived to have crossed him is best illustrated by his long and protracted feud with Vernon Loucks, the CEO of hospital supplies maker Baxter International.

Throughout the 1970s and early 1980s, Fuisz traveled a lot to the Middle East, which had become the biggest market for Medcom, his medical film business. On his way back, he usually spent a night in Paris or London and from there took the Concorde, the supersonic passenger jet operated by British Airways and Air France, back to New York. During one of these stopovers in 1982, he ran into Loucks at the Plaza Athénée hotel in Paris. At the time, Baxter was eager to expand into the Middle East. Over dinner, Loucks offered to buy Medcom for $53 million and Fuisz accepted.

Fuisz was supposed to stay on to head the new Baxter subsidiary for three years, but Loucks dismissed him shortly after the acquisition closed. Fuisz sued Baxter for wrongful termination, alleging that Loucks had fired him for refusing to pay a $2.2 million bribe to a Saudi firm to get Baxter off an Arab blacklist of companies that did business with Israel.

The two sides reached a settlement in 1986, under which Baxter agreed to pay Fuisz $800,000. That wasn’t the end of it, however. When Fuisz flew to Baxter’s Deerfield, Illinois, headquarters to sign the settlement, Loucks refused to shake his hand, angering Fuisz and putting him back on the warpath.

In 1989, Baxter was taken off the Arab boycott list, giving Fuisz an opening to seek his revenge. He was leading a double life as an undercover CIA agent by then, having volunteered his services to the agency a few years earlier after coming across one of its ads in the classified pages of the Washington Post.

Fuisz’s work for the CIA involved setting up dummy corporations throughout the Middle East that employed agency assets, giving them a non-embassy cover to operate outside the scrutiny of local intelligence services. One of the companies supplied oil-rig operators to the national oil company of Syria, where he was particularly well connected.

Fuisz suspected Baxter had gotten itself back in Arab countries’ good graces through chicanery and set out to prove it using his Syrian connections. He sent a female operative he’d recruited to obtain a memorandum kept on file in the offices of the Arab League committee in Damascus that was in charge of enforcing the boycott. It showed that Baxter had provided the committee detailed documentation about its recent sale of an Israeli plant and promised it wouldn’t make new investments in Israel or sell the country new technologies. This put Baxter in violation of a U.S. anti-boycott law, enacted in 1977, that forbade American companies from participating in any foreign boycott or supplying blacklist officials any information that demonstrated cooperation with the boycott.

Fuisz sent one copy of the explosive memo to Baxter’s board of directors and another to the Wall Street Journal, which published a front-page story about it. Fuisz didn’t let the matter rest there. He subsequently obtained and leaked letters Baxter’s general counsel had written to a general in the Syrian army that corroborated the memo.

The revelations led the Justice Department to open an investigation. In March 1993, Baxter was forced to plead guilty to a felony charge of violating the anti-boycott law and to pay $6.6 million in civil and criminal fines. The company was suspended from new federal contracts for four months and barred from doing business in Syria and Saudi Arabia for two years. The reputational damage also cost it a $50 million contract with a big hospital group.

For most people, this would have been ample vindication. But not for Fuisz. It irked him that Loucks had survived the scandal and remained CEO of Baxter. So he decided to subject his foe to one last indignity.

Loucks was a Yale alumnus and served as a trustee of the Yale Corporation, the university’s governing body. He was also chairman of its fund-raising campaign. As he did every year in his capacity as a trustee, he was scheduled to attend Yale’s commencement exercises in New Haven, Connecticut, that May.

Through his son Joe, who had graduated from Yale the year before, Fuisz got in touch with a student named Ben Gordon, who was the president of the Yale Friends of Israel association. Together, they organized a graduation day protest featuring “Loucks Is Bad for Yale” signs and leaflets. The crowning flourish was a turboprop plane Fuisz hired to fly over the campus trailing a banner that read, “Resign Loucks.”

Three months later, Loucks stepped down as a Yale trustee.

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