The walls are closing in around Palo Alto-based "blood testing" startup Theranos, whom erstwhile partner Walgreens is now suing for $140 million in voided tests. But a new layer to the drama has just been revealed by the Wall Street Journal reporter John Carreyrou, whose intrepid reporting on Theranos essentially laid low the company once valued at $9 billion. The first whistleblower at Theranos was an employee whose grandfather has been on the company's board of directors since 2011: George Shultz, a public figure closely associated with Ronald Reagan under whom he served, among other positions, as Secretary of State. Tyler Shultz, 26, is no longer in contact with his grandfather, who remains on the board of the seemingly sinking company. Writes Carreyrou:

After working at Theranos Inc. for eight months, Tyler Shultz decided he had seen enough. On April 11, 2014, he emailed company founder Elizabeth Holmes to complain that Theranos had doctored research and ignored failed quality-control checks.

The reply was withering. Ms. Holmes forwarded the email to Theranos President Sunny Balwani, who belittled Mr. Shultz’s grasp of basic mathematics and his knowledge of laboratory science, and then took a swipe at his relationship with George Shultz, the former secretary of state and a Theranos director.

“The only reason I have taken so much time away from work to address this personally is because you are Mr. Shultz’s grandson,” wrote Mr. Balwani to his employee in an email, a copy of which was reviewed by The Wall Street Journal.

The younger Shultz made his initial, anonymous complaint to New York officials who had administered tests to Theranos, tests Shultz alleged Theranos had cheated its way through. While Shultz tried initially to address his concerns to company leadership, he was reportedly rebuffed. “We saw your email to Elizabeth," Balwani wrote in an email according to the WSJ. "Before I get into specifics, let me share with you that had this email come from anyone else in the company, I would have already held them accountable for the arrogant and patronizing tone and reckless comments.”

Many others, including members of Shutlz's family, discourage him from speaking up. But now, years later, the damage is still unfolding.

The tension opened a rift in the Shultz family. While growing up, Tyler played in the pool at his grandfather’s house, and he often dropped by the elder Mr. Shultz’s home or his office at the Hoover Institution think tank while attending Stanford University.

In the past year and a half, the grandson and grandfather have rarely spoken or seen one another, communicating mainly through lawyers, says Tyler Shultz. He and his parents have spent more than $400,000 on legal fees, he says. He didn’t attend his grandfather’s 95th birthday celebration in December. Ms. Holmes did.

“Fraud is not a trade secret,” says Mr. Shultz, who hoped his grandfather would cut ties with Theranos once the company’s practices became known. “I refuse to allow bullying, intimidation and threat of legal action to take away my First Amendment right to speak out against wrongdoing.”

Did director and screenwriter Adam McKay (The Big Short, Anchorman) know all this when he announced he would give the Theranos debacle the big screen treatment with Jennifer Lawrence attached to play Holmes? Who knows, but until that's out, you can read the Wall Street Journal article here.

All SFist coverage of Theranos