Elizabeth Holmes sentenced to more than 11 years in prison for fraud



CNN

Elizabeth Holmes was sentenced to more than 11 a year in prison on Friday after being convicted in January of defrauding investors while running the failed blood-testing startup Theranos.

Judge Edward Davila imposed a sentence of 11 years and three months in prison, with three more years of supervised release after Holmes is released. The penalty also includes a $400 fine, or $100 for each count of fraud. The refund will be determined later. On April 27, 2023, Holmes was ordered to surrender to custody. He is expected to appeal his verdict.

Holmes, who was found guilty in January of four counts of defrauding investors, faced up to 20 years in prison as well as a $250,000 fine plus restitution for each count.

Government attorneys sought a 15-year prison sentence, as well as probation and restitution, while Holmes’ probation officer sought a nine-year sentence. Holmes’ defense team asked Davila, who handled her case, to sentence her to up to 18 months in prison followed by probation and community service.

Before the sentencing, a tearful Holmes addressed the court in San Jose, California. “I loved Theranos. It was my life’s work,” she said. “The people I tried to bring into Theranos were the people I loved and respected the most. I am devastated by my failures.”

She also apologized to Theranos employees, investors and patients. “That’s right, I’m very sorry. I gave everything I had to build our company and save it,” she said. “I regret my failures with every cell in my body.”

In sentencing arguments Friday, Kevin Downey, one of Holmes’ attorneys, said that unlike other defendants in corporate fraud cases, the Theranos founder did not express greed by cashing in stock or spending money on “yachts and airplanes. ” Instead, the money was “used to build medical technology”.

Federal prosecutor Jeffrey Schenk pointed out that Holmes gained fame, admiration and lifestyle through fraud, even if she did not make a financial profit. “These are the benefits she receives,” he said.

Friday’s sentencing is behind Holmes a staggering decline. Once hailed as a tech industry icon for her company’s promise to test for a range of conditions with just a few drops of blood, she is now the rare tech industry founder to be convicted and face prison time for her company’s missteps.

Holmes, now 38, started Theranos in 2003 at the age of 19 and soon after dropped out of Stanford University to pursue the company full-time. After a decade under the radar, Holmes began wooing reporters with claims that Theranos had invented technology that could accurately and reliably test for a range of conditions using just a few drops of blood taken from a finger prick.

Elizabeth Holmes (L), founder of Theranos, and her partner, Billy Evans (R), leave the Robert F. Peckham Federal Building and US Courthouse in San Jose, California on October 17, 2022.

Theranos has raised $945 million from an impressive list of investors, including media mogul Rupert Murdoch, Oracle founder Larry Ellison, Walmart’s Walton family and the billionaire family of former Education Secretary Betsy DeVos. At its peak, Theranos was valued at $9 billion, making Holmes a billionaire on paper. She was praised on magazine covers, often wearing a signature black turtleneck that invited comparisons to late Apple CEO Steve Jobs. (She didn’t wear that look in the courtroom.)

The company began falling apart after a Wall Street Journal investigation in 2015 revealed that the company had only ever performed about a dozen of the hundreds of tests it offered using its own blood-testing device, and with questionable accuracy. Instead, Theranos relied on third-party devices from traditional blood testing companies.

In 2016, Theranos voided two years of blood test results. In 2018, Holmes and Theranos settled charges of “massive fraud” with the Securities and Exchange Commission, but neither admitted nor denied any of the charges as part of the deal. Theranos folded shortly thereafter.

In her trial, Holmes claimed she was in the midst of a decades-long, abusive relationship with her then-boyfriend and Theranos chief operating officer Ramesh “Sunny” Balwani while running the company. Balwani, she said, tried to control almost every aspect of her life, including disciplining her diet, her voice and her image, and isolating her from others. (Balwana’s lawyers have denied her claims.)

In July, Balwani was found guilty of all 12 counts in a separate trial and faces the same potential maximum jail time like her. Balwani is scheduled to be sentenced on December 7.

“The effects of Holmes and Balwani’s fraudulent conduct were far-reaching and serious,” federal prosecutors wrote in a November court filing regarding Holmes’ sentence. “Dozens of investors lost more than $700 million, and numerous patients received unreliable or completely inaccurate medical information from Theranos’ flawed tests, putting the health of those patients at serious risk.”

More than 100 people wrote letters of support to Holmes Davila, asking for a lighter sentence. The list includes Holmes’ partner Billy Evans, many members of the Holmes and Evans families, early Theranos investor Tim Draper, and Senator Cory Booker. Booker described how he met her at dinner years before she was charged and bonded over the fact that they were both vegan and ate nothing but a bag of almonds, which they shared.

“I still believe that she hopes that she can contribute to the lives of others and that, despite her mistakes, she can make the world a better place,” Booker wrote, noting that he still considers her a friend.

Ahead of the hearing, there were also questions about how Holmes’ sentencing could be complicated by developments in her life after she left Theranos. Holmes and her partner Evans, who met in 2017, have a young son. Holmes is also pregnant, as confirmed by recent court filings and her last court appearance in mid-October.

Mark MacDougall, a lawyer and former federal prosecutor, told CNN Business before the hearing that the fact that Holmes has a young child could affect how she is sentenced.

“I don’t know how he can’t, just because judges are human,” he said.

MacDougall also said he did not see what a long prison sentence would accomplish. “Elizabeth Holmes will never run a big company again,” he said. “She will never be in a position to have something like this happen to her again.”

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