ga ♪ tonig on kqed newsroom, with the primary election over, a busy summer of campaigning lies ahead as candidates for governor, and others battle it out. key ptakeawayslus analysis from and ornia politics government teams. also the "wall street journal" investigative reporter talks abouis new book, "bad blood" detailing how the $9 billion company deceived silicon valley and the rest of the country. hello and welcome to kqed newsroom. i'm thuy vu. we begins with politics. tuesday's primary results set the stage for some big races i november. wealthy gop businessman john cox finished second behind gavin newsom in the vernor's re. democrats are sharpening their

focus on seven key congressionat in california that are crucial to winning control of t the hous year. in two of those races, the gop incumbents are reting, giving democrats hope they could flip the seats in the general election. but the gop is fielding candidates they think will motivate the base to turn out in november. joining me for a perspective is republican national committeeman sean steele. he joins us via skype from orange county. mr. steele, nice to have you with us. >> it is great to be here. thank you. >> well, let's begin with the governor's rac john cox, it is john cox against gavin newsom, but coxnly has about one-tenth of the campaign money that newsom has so what does john cox need to do to prevail in november? >> we, first of all, cox came from way behind. frankly, none of us in the p thought either republican would have a hans to get up there and they came in in the top four, two of the top fou the big oddity was rego, we thought it would be democrats all the way. cox is holding the message.om he putething together that makes a lot of sense to

democrats as well and he'slk taing about the hollowing out of the middle class, that is the war against middle class. to win, there's a lot of vulnerabilities. newsom certainly didn't have a majority of democrats behin him, so he comes out with that. he's he's also a san rancisco democrat. in san francisco that's a great thing. outside of san francisco, not so great because most folks understand that san francisco has turned into kind of a trash town, hh disease rate, high alcohol. we got tent cities. it is reaunlly dysfional and you need a hazmat suit certain parts of town, that's no exaggeration. that's according to mfrp the chronicle." >> we heard this message before, right, mr. steele? let's loo at 2014, for example. republican neil cash challenged jerry brown. he blamed the californiaess on governor brown. it didn't work, he lost. what do you think will be different this time if that's the message john cox is sending? >> good point. he is no longer in california.a

he wa come-from-behind that we have never heard from since. he was appointed by president obama. jerry brown goss worse.4 illion left california in the last years, but it has accelerated in the last two years particular. more people are leaving california than coming to california and thesere mostly bread winners, middle class folks. john cox has to get serious money together. luckily he is a wealthy developer and so he's got a reported wealth of 2.00 million so he certainly will be there with his own money. n publican governor's associatuld love nothing better to give gavin newsom a hard time because gavin's not ready for governor, we know that. he's running for president. automatically when you're governor of california you are considered presidential rown ial, even jerry thought so. >> he has said on this program he's not running for president, but as you know we can't predict the future. >> >>, yeah. et me ask about john cox again. since we're speaking of p sidents, president trump

endorsed him during the election. we saw john cox rise in the pollfts shortly a that. will the republican national committee ask president trump to come the california to campan on beh of john cox in the governor's race and in other races aroundhe state? >> probably trump would be best servedn orange county. trump had he had the time would have campaigned in orange county and probably carried it nice but trump made an intelligent decision during the presidential campaign.ig you cam where the votes are, most likely to get the alectoral college. so he is popul in orange county. it's turned around in the last year. he's been an effective president, even democrats have s to admit ihe best unemployment ratio in two ge erations. african-americans have never been so fully employed since they started measuring the metric. foreign policy -- >> wilre you ask pdent trump though to come to california to campaign on behalf of john cox and other republican candidates? n cox going to let j figure that out. my guess isrump's numbers are

negative in l.a. county and san francisco and that's abo of the votes right there, maybe 60% of the votes. i would have trump come to orange county where he's popular and we got four congressional races up for grabs.t i think would help us. but cox -- but cox, i'll tell you, maybe trump will do fundraisers for him, he certainly would pack the house. >> let's talk about the incongressional racesce you brought those up. what are your biggest takeaways there espec tially in seven gop-held seats democrats are hoping to flip in november? >> well, first of all, every single republican seat except for one that are under challenge, seven of them, a hejority of voters voted for t republicans who are running against democrats. that's a real tell for the fall. secondly, in orange county there's four congressional sea that have been targeted. three of the four republicans are women. all four of the democrats are men. so it is a big changei. hink the party has been really smart in that. in a district that's 35% asian

american voting -- i don't mean just population but voting that's in the fuller district, young kim is the candidate for theublicans and she did extremely well on election day. the republicans have aen rsed her. we're going to keep that seat, and that's probably one of the toughest seats to keep in california. you have an extraordinary candidate that'sgu bilinal. in the same district we actually kicked out a white democ elected ling ling chang and a newor senat for the same area. we have a chinese-speaking senator, a korean-speaking enator. not to leave thaone, we have alexandra coronado running for assembly in the same area. she is spanish-speaking ph.d. she will do well with the spanish-speaking community. >> how much can you rely onia asn american voters? because those that do identify with the party, they still identify as democrats over republicans two-to-one. yous hau so have a situation where

the gop is the third party in califoia behindocrats and behind those who refuse to state a party affiliation. whatind of challenges do those pose for you? >> good challenges and that's in orange county the minority are republican. 40% republican, 30% democrat. most asian americans are republicans or decline to state. a smaller number, number 3, are demrats inrange county. in orange county the asian americans will have a different set of values.s itry good news that our party -- you saw it in the ""l.a. times"" todays becomin an asian republican party. that's the big -- >> all right. we will leave ie.t ther sean steele, you certainly have a lot on your mind. thank you for joining us. sean steele, republican national committeeman forifornia. ♪ and for further analysis of the political landscape, i'm join now in studio by our own

kqed california polics and government team, senior editor scott schafer,eporter maria avlasos, nice toe you back. >> good to be here. >> marisa, a lot of national attention paid to the governor's race. california is a blue state. gavin newsom in a prime spot, a strong position. are there potential vul challenges ahead? >> i mean, you know, you would e this y in any race lik to take anything for granted. john cox, the republican, did get through.it s seeming like he's solving a lot of -- you know, support on the right. he did get the president's endorsement a couple of weeks before the primary. you know,e wants to me this not about trump, which i'm sure newsom would love to keep talking about. he wants to talk about the affordable crisis, the housing crisis. the message from republicans is at california is doing well economically but there's a lot of people who have been left behind and that democrats broke it and, you know, they think they can fix it b

so i think that this will be an interesting race. the numbers are not in john vo cox's r, you know. republicans have less voters on eir rolls than independents in california, but i think this will be -- it will be a race. i think it will be interesting vet cox because he's very unknown and we don't know a lot about him. >> whatf o the economy, if it tanks for some reason over the summer c? >> ild. generally it takes a while for people to feel that and things are going so well right nown california and the country. but, you know, we -- one big question i thier is the pow of the gas tax, repeal. you know, we saw one state senator, josh newman, recalled by his constituents on tuesday by a big margin and that's a big message that the republins have between now and november. >> the republicans are celebrating because they no longer have a democratic super majority in the state legislature for t >> exactly. they would like the power of that message. whether it will translate to a fegovernor's race is a dnt question. you might be for the gas tax

repeal and still vote for gin newsom. >> so gavin newsom promises to be -- if elected promises to be one of the most progressive governors we have seen in quite a while. could it be a liability though given that in some other local races, district attorney and judges races for example, we saw progressives not doing that well? >> yeah, you know. i think the thing about gavin nto some he tapped i really grassroots issues that -- where there's a lot of passion, whether its marijuana legalization, gay marriage, gun control. i think he benefitted from that. you know, e thehusiasm level for gavin newsom going back, yo, knoor the last several years on different issues, he's been very adept of getting out front of issues. >> yeah, i think there are some atfalls for himround single payer. people want to know how are you going the pay for this, will it be with tax increases. think those like district attorney races are a different calculinion. yes, gewsom is running as a progressive but he has the support of a lot of establishment in the business community. you know, as a san francisco mayor, he was pretty moderate. he overcame big budget deficits.

i think he's kind oin tryg to walk that line, saying he's going to keep the fiscal responsibility of brown, you know, his predecessor, but also tr to be ambitio and look towards more progressive solutions for the problems facing california. y >>eah. i look at cox trying to focus in on issues where he thinkavin newsom has gone too far left and i think single payer is an example of th. you look at polls where folks are told it will come with an tax increase aot they're n going to support it. the gas tax wbe on the ballot in november. but those that are tentative about the tax issues, maybe he non find holes with newsom. if turut is high for democrats in november i think it becomes a moot point. >> money is an issue. are republicans going to want t why're battling for control of the house, looking at so many national fights, do they want to spend monn what is really an uphill battle -- not an impossie one, but a uphill battle. >> and the gop is already planning to blame democrats and by extension gavin newsom for

the decline of the middle class. y out ll that likely pla among voters? >> you know, you look at a governor like jerry brown who has, y know,tty wide popularity still in the state and he has done it by huing the middle path, betting some republicans on board in major deals he struck in the legislature. so think maybe the task for gavin new son in t months ahead is to say i'm going to offer continuation of what jerry brown has done athe state capital, which is fiscal spab stability and moderate gains. >> i think the candidates move to the mprdle after the imary, and i think it will be easier n for wsom to do that t john cox. cox hitched his wagon to donald trump in a big way, and he d do that to get in the top two, and there's no indication rom that.to back away >> his history on abortion, other things that maybe are importae to the republican bas but will not play as well, even not just with democrats but some independent voters, i thinkl be hard for him to overcome. >> what you said earlier, scott, i want to expand on you said, you know, typically

after a race candites move more towards the middle. do you think it is true for congressional races, too? i mean democra kind of dodged a bullet, they will have, you know, in most congressional nraces a democrat the top two, ndt what do they need to do between now november to win the races? >> in a word, turnout. in nine of the ten congressionae districts t by the democrats, if you counted up all of the votes for republican ndidates and all of the votes for democratic candidates, only one of the ten districts was aj there aority of votes for the democrat. but the turnout will be much tbigger, and it hao be. you know, it has to be because it is going to be younger, it willwh be less ite, it will be more democratic, more liberal. i think that's the key thing, and that's what typicallyer happens in g elections. >> i think too, look, it's been crt of a free-for-all. we had so madidates in these races running, in some ight? on both sides, multiple republicans, multiple democrats. if democrats cansc coalee behind these candidates, get the vote out, i think newsom sees this a

an opportunity to have a republican opponent that he can focus on some of those down-ticket races. you know, they have a fighting chance. nothing is guarantrd for eithe party, but i do think that the electorate will likely look vern differentovember than it did in june, and that is going to help democrats in theses. race they're going to be talking to the specific issues of those districts, which i think is ally important. it is easy to kind of generalize these things, but if you are running against, you know, steve knight in pal dale ar, it is going to be a different conversation than even in orange county whichs not that far away. >> absolutely. i think that despite that, you ns ll will see republi nationally try to tie the democrats to democratic leadership in the house, especially democratic leader nancy pelosi. on the flip side you will see democrats try to tie the candidates to president trump. it is easier with a incumbent like dany rohrabacher who has votes on the board with the affordable care act. ing someone like ling l cheng who is a fresh face.

s in s, i think in some w the districts where there were resignations, they're in stronger position because they're not tied to trump. in the end, the midterm are a referendum on the white house, especially now because one party controlall branches of bovernment. how do you feel the president and the country. >> you have been talking about voter turnout, but what aboutth message do democratics have? do they need to move to the middle goingk bto the earlier question? >> as marisa said, these are localis sues. there isn't one national message i don't think the democrats have. it does depend on the local issue. in the central valley it is things like water, immigration of course, but in the end peoplt e on their guts. do they like this person, do they like the incuent, t person running. it is more of a retail politics. governor, you know you're going to get your sense from tv and radio. but for congress, you're going

to meet these folks. >> look at jeff dunham. he has beenup a srter of the dreamers of the daca deal, but in recent weeks he is moving to push a vote on the issue, 't ready to wa consider six months ago. i think it speaks to the potency of the l vinoote in his district and him kind of reading the tea leaves and wanting to s, say, ye i voted with trump on the affordable care act but i'mg not go stick shoulder-to-shoulder with him on immigration issues when my district doesn reflect that type of, you know, feeling or message. >> i'm sorry. go ahead. hat's thegoing to say key, is to have a candidate in a district that reflect the people who live there. >> i have o move on to this before we run out of time because there was something else very interesting happening in this election as well on the local front. there was thi criminal justice theme weaving through a lot of the local races, rig? despite efforts by black lives mat per and criminal justi groups and even with help from billionaires like george sor and steve jobs' widow, the progressive challengers for or example district attorney

races largely lost. what happened? >> they did. r still have aun-off in contra costa so there's one outstanding hope of the races that were targeted by george soros. you know, think that this was in some ways perhaps an overreach by tse groups. these are national groups that came in. you know, they targeted nancy n o'malley alameda. she is a democrat with the support of jerry brown and othes fhat pushed criminal justice reform. so i think there were some schisms within that left progressive community who pushed a lot of the things we have seen statewide, and i do think in some ways iwas the first shot. i think we will expect to see it come back and more challges d perhaps better, stronger candidates. >> yeah, i think it is something you will see kind of slowly o progressver time against district attorneys. look, d.a.'s can push back and we saw it with nancy o'malley in the closing weeks of the campaign. she was on tv, getting in front of the voters.fe it is difrent than in judicial races where maybe judges are hesitant to be overtly political. that's not t case with district attorneys.

>> in general it is good that the impact of district attornew elevated because most people don't know even a d.a. is flected much less what they do. they have a lot power. it is worth, even if the candidates lose it is worth having a conion with the voters about what kind of values do you want in your d.a. in >> speg of, you know, elections of people that maybe the public doesn't always realizd, are elec the case in santa clara county of judge aaron persky. he was recalled. t was a case watched nationally, very closely. he was recalled over what maybe y people thought was a nfordnt sentencing of a s student convict of attempted rape. what does this mean, scott, for judicial >> i don't think it means a lot. this was one particular case that had a lot of passio there were some people against judge persky who felt very strongly, this was in a me-too moment. sadon't think we're necrily going the see all kind of judges being swept out of office. we saw four inhoan francisco were targeted by public defenders and all four were re-elected,reconfirmed. >> strongly. >> strongly, yeah. >> yeah, t i thihat the persky

thing in addition to the me-too movement was confluence with bl k lives matter. there was concern over that sentence and whether it had to doith brock turner's race and after influence. >> privilege. >> privilege, yes., >> agait is something we should be talking about in terms of should judges be elected, but i'm not ready t a agree wit lot of the critics that this will change theame entirely >> i think the political reality for the judicial and district attorney races, it is easier to get an incumbent out of office when you are going after them over pneerceived egregious decision in the case of judge perse than to m the argument about an over-arcing need to focus on racial disparity w is what the district attorney's e about. >> san francisco mayor's race? >> a hair between mar leno, l we are getting results every day at 4:00. it could be days until we know thr.actual winne >> all right. boy, you guys had a busy week

and it keeps getting busier. thank you all. > thank you. in 2015 founder elizabeth holmes she would traform blood testing by using a single drop of blood to get fast, low-costs results for everything from cholesterol to cancer. but in march the securities and exchange commission called it an elaborate year's long fraud. holmes persuaded investors to snk hundreds o millions of dollars into her company. "wall strt journal" investigative reporter broke that story. he has a new book out chronicling company's collapse called "bad blood, secrets and les in a silicon valley starp." good to have you here. >> thanks for having me. >> what was the game-changing technogy that the compa was pitching? >> so elizabeth claim to havein vented technology that could run the full range of laboratory tests, ich if youak to

experts can range from a few hundred tests to a few thousands, from a drop of blood or two nicked from the finger and teturn results to doctors and patients very quickly and at esfraction of the cost of other laboratori this would have been game-changing technology because no one had been able to run tt many tests off a tiny sample of blood. >> and it was revolutio because down the line eventually walgreen's and safe way signe as well and became clients. your book though raised in great etail all of the red flags along the w abo deliberately misleadi misleading test results, the failure by c elizabeth holmes to produce contracts she said it she hadh pharmaceutical companies. >> right. >> yet it stillttracted an all-star cast of investors. the board consisted of those

general james mattis. how many were so duped along the way? >> what elizath was adept at, it was winning the support of someone older, experienced, with a great reputation, and then leveraging that association t h ge own credibility. the firspesh person she did i with was her stanford engineering professor channingbe rtson. then a few years in, she met don lucas, the venture capitalist who grewariel i son and helped him bring oracle corporation public in the mid '80s. in 2011 she met george schultz, the famousmer secretary of state, who crafted the reagan adm pistration's foreiicy and who many still credit with winning the cold war. what many peopl ke don'tnow about george schultz is that he is passionate about science. i his houses right off the stanford campus. when he met elizabeth, i was wowed with her claims about what herhnology could do and quickly agreed to join her board and thenntroduced hero his

buddies at the hoover institution, which is a think tank housed o the stanfd campus. that's how she came to meet the likes of henryissinger and sam nun and bill frisk, bill perry, et c they soon joined the board, too. >> and was timing also a factor in all of this? because aroun 2010 we see facebook rising, twitter being htry popular. >> r >> investors were basically looking for the next unicorn startup and there it was. >> right, and money was gushingo inhe valley because in large part we had had the great recession in 2008, 2009 and if federal reserve lowered interest rates and traditional investments le bonds noonger turned good money so investors were looking for higher turns elsewhere. >> so the valley became the gold rush. >> the valley became the gold rush, d one of the companies that seemed so promising was theronos.

in late 2013, early 2014 the company achieved a valuation of more than $9 million and elizabeth holmes managed to keep half of the equity so she was rth almost $5 billion and this fulfilled this yearning there was for the fir female tech founder who became a billionaire. there were other women in the valley who had achieved you know, fame and wealth. sheryl sandbergr who is numbe two at facebook, marissa mire, but they had not created their own companies. elizabeth holmes was going to be the first tech founder who was a woman and who achieved reat riches. >> do you think she was intentionally trying to mislied investors or was she consumed by her own ambitions and thought she could make happen? >> i mean it is a mixture of both. this is not a madoff long con, you know. madoff essentially decid the late '80s he was no longer really investing money and built a poncy scheme. elizabeth holmes when she dropped out of stanford had a

vision and set about creating a company and hiring people to make the vision happen, but along the way encountered setbacks as entrepreneurs do, and refused to admit the reality of those setbacks and continues to overpromise to investors. it got to aoint where gap between her promises and what she said she had achieved techny logicalnd what the reality of the technology was got so enormous that by the time they went live with theck finger s blood test in wall green's stores in the fall of 2013 it had become a massive fraud. >> so is there a possibility that tre could be criminal charges stemming from this? because the se of course, charged her with massive fraud. she agreedy to pa$500,000 fine. are there criminal investigations going along -- going on right now though? >> right. there's an investigation spearheaded by the u.s. attorney's office in s francisco that's been going on since december of 2015. so we're now two-and-a-half

years into it and my sources tell me tnvt thatestigation is very active and very advanced, and i may welesult in criminal indictments of elizabeth holmes and her ex-boyfriend, who was the number two at the company. >> and we just have a time remaining, but you say in your book it is the biggest corporate fraud since enron. what do you think is the biggest lessono learn from this? >> enron was a bigger company certainly and more money was involved. it was the seventh largest u.s. company at the time. ustheronos is obv a startup, albeit a startup that attracted nearly a billion dolrs in investing, a billion dollars that went poof. but the mostgregious part of the theronos scandal is the wayn the coy was cavalier about putting patients in harm's way. eporting i se of my came across more than a dozen cases of patients who had ver questionable test results and who had health scares and whether or not anyone was harmed

is still an open question. and i think that the big lesson is that you can't employ the silicon valley vapor ware, fake it until you make it playbook im the rea of medicine. when you are -- >> there are lives at stake. >> there are lives at stake. >> john carey rou, author of "bad blood." thanks for being here. >> that will do it for us. you cane find mor ours coverage. i'm thuy vu. thank you for joining us. ♪ ♪

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