Crime and Safety

Theranos founder Elizabeth Holmes sentenced to 11 years in prison for fraud

Elizabeth Holmes, the disgraced Theranos founder who was once compared to Steve Jobs before she was convicted of defrauding investors who backed the now-defunct blood-testing company, was sentenced to more than 11 years in prison on Friday.

The pregnant Holmes, dressed in a dark blouse and black skirt, was given 135 months behind bars by US District Judge Edward Davila in the same San Jose, Calif., courtroom where a jury convicted her in January.

Moments after the ruling, the 38-year-old Holmes turned to hug her crying mother. She was also comforted by her father and her partner after the sentence was handed down.

During the hearing, Holmes cried as she said she was “devastated” by her failures and would have done many things differently if she had the chance.

“I have felt deep shame for what people went through because I failed them,” she said.

Before handing down the sentence, Davila called the case “troubling on so many levels,” questioning what motivated Holmes, a “brilliant” entrepreneur, to misrepresent her company to investors.

“This is a fraud case where an exciting venture went forward with great expectations only to be dashed by untruths, misrepresentations, plain hubris and lies,” he said.

She was ordered to begin serving the sentence April 27. Her lawyers have two weeks to file an appeal and are expected to ask the judge to allow her to remain free on bail during the process.

Holmes’ 135-month sentence was below the 15 years requested by prosecutors, who also sought $804 million in restitution for 29 investors.

The amount covers most of the nearly $1 billion that Holmes raised from a list of sophisticated investors that included software magnate Larry Ellison, media mogul Rupert Murdoch and the Walton family behind Walmart.

Davila ordered Holmes repay $121 million to 10 investors, including Murdoch and former Wells Fargo CEO Richard Kovacevich, who sat on the company’s board, according to the New York Times.

Elizabeth Holmes was convicted of defrauding investors who backed her tech venture Theranos.
Elizabeth Holmes was convicted of defrauding investors who backed her tech venture Theranos.
REUTERS

Her legal team had asked for incarceration of no more than 18 months, preferably served in home confinement. A probation report also submitted to Davila recommended a nine-year prison sentence for Holmes.

Before Davila handed down his sentence, the courtroom was abuzz when the prosecuting attorney, John Bostic, claimed that Holmes once said: “They don’t put attractive people like me in jail.”

Holmes’ defense attorney, Kevin Downey, disputed the claim, saying that the prosecution never called any witnesses during trial who can testify to the alleged remark.

The sentencing marks an end to a saga that has been dissected in an HBO documentary and an award-winning Hulu TV series about Holmes’ meteoric rise and epic downfall.

Once valued at $9 billion, Theranos promised to revolutionize how patients receive diagnoses by replacing traditional labs with small machines envisioned for use in homes, drugstores and even on the battlefield.

Forbes dubbed Holmes the world’s youngest female self-made billionaire in 2014, when she was 30 and her stake in Theranos was worth $4.5 billion.

While wooing investors, Holmes leveraged a high-powered Theranos board that included former US Defense Secretary James Mattis, who testified against her during her trial, and two former US Secretaries of State, Henry Kissinger and the late George Shultz, whose son submitted a statement blasting Holmes for concocting a scheme that played Shultz “for the fool.”

Her lawyers had argued that Holmes deserved more lenient treatment as a well-meaning entrepreneur who is now a devoted mother with another child on the way.

Downey also asked Davila to consider the alleged sexual and emotional abuse Holmes suffered while she was involved romantically with Ramesh “Sunny” Balwani, who became a Theranos investor, top executive and eventually an accomplice in her crimes.

Balwani, 57, is scheduled to be sentenced Dec. 7 after being convicted in a July trial on 12 counts of fraud and conspiracy.

Federal prosecutors urged the judge to hand down the maximum sentence of 15 years in prison.
Federal prosecutors urged the judge to hand down the maximum sentence of 15 years in prison.
Peter DaSilva/EPA-EFE/Shuttersto

Holmes’ reporting date to begin her prison time could be the result of her second pregnancy in two years. After giving birth to a son shortly before her trial started last year, Holmes became pregnant at some point while free on bail this year.

Although her lawyers didn’t mention the pregnancy in an 82-page memo submitted to Davila last week, the pregnancy was confirmed in a letter from her current partner, William “Billy” Evans, that urged the judge to be merciful.

In that 12-page letter, which included pictures of Holmes doting on their 1-year-old son, Evans mentioned that Holmes participated in a Golden Gate Bridge swimming event earlier this year while pregnant.

He also noted Holmes suffered through a case of COVID-19 in August while pregnant. Evans didn’t disclose Holmes’ due date in his letter.

Holmes was hailed as a pioneering captain of industry in tech after claiming that her product would revolutionize health care.
Holmes was hailed as a pioneering captain of industry in tech after claiming that her product would revolutionize health care.
Peter DaSilva/EPA-EFE/Shuttersto

Downey painted Holmes her as a selfless visionary who spent 14 years of her life trying to revolutionize health care with a technology that was supposed to be able to scan for hundreds of diseases and other aliments with just a few drops of blood.

Although evidence submitted during her trial showed the tests produced wildly unreliable results that could have steered patients in the wrong direction, her lawyers asserted Holmes never stopped trying to perfect the technology until Theranos collapsed in 2018.

They also pointed out that Holmes never sold any of her Theranos shares — a stake valued at $4.5 billion in 2014 when Holmes was being hailed as the next Steve Jobs on the covers of business magazines.

Holmes at one point owned a stake in Theranos that was said to be worth billions of dollars.
Holmes at one point owned a stake in Theranos that was said to be worth billions of dollars.
Getty Images

Defending herself against criminal charges has left Holmes with “substantial debt from which she is unlikely to recover,” Downey wrote, suggesting that she is unlikely ever to pay any restitution that Davila might order as part of her sentence.

“Holmes is not a danger to society,” Downey wrote.

Federal prosecutor Robert Leach emphatically declared Holmes deserves a severe punishment for engineering a scam that he described as one of the most egregious white-collar crimes ever committed in Silicon Valley.

In a scathing 46-page memo, Leach told the judge he has an opportunity to send a message that curbs the hubris and hyperbole unleashed by the tech boom of the past decade.

Holmes “preyed on hopes of her investors that a young, dynamic entrepreneur had changed healthcare,” Leach wrote.

“And through her deceit, she attained spectacular fame, adoration, and billions of dollars of wealth.”

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