Elizabeth Holmes Conviction: The former CEO of Theranos faces judgment day on fraud and conspiracy charges
SAN JOSE, California– A federal judge on Friday will rule on whether disgraced Theranos CEO Elizabeth Holmes should serve a lengthy prison sentence for deceiving investors and endangering patients while peddling counterfeit blood-testing technology.
Holmes’ conviction in the same courtroom in San Jose, California where she was convicted on four counts of investor fraud and conspiracy in January, marks a climax in a saga that has been analyzed in an HBO documentary and an award-winning Hulu television series, and her meteoric rise and humiliating demise.
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US District Judge Edward Davila will take center stage as he weighs the federal government’s recommendation that Holmes, 38, be sent to federal prison for 15 years. That’s a little less than the maximum sentence of 20 years she could face, but far longer than her legal team’s attempt to limit her detention to no more than 18 months, preferably under house arrest.
Her lawyers have argued that Holmes deserves more lenient treatment as a well-meaning entrepreneur who is now a devoted mother with another child on the way. Her arguments were supported by more than 130 letters submitted by family, friends and former colleagues praising Holmes.
A parole report, also submitted to Davila, recommended a nine-year sentence for Holmes.
Prosecutors are also seeking $804 million in compensation from Holmes. The amount covers most of the nearly $1 billion Holmes raised from a list of sophisticated investors including software magnate Larry Ellison, media mogul Rupert Murdoch and the Walton family behind Walmart.
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While courting investors, Holmes utilized a senior Theranos board that included former US Secretary of Defense 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 issued a statement surrendered to beating up Holmes for hatching a plan that played Shultz “for the fool”.
Davila’s sentencing – and Holmes’ report date for a possible jail term – could be affected by the former businesswoman’s second pregnancy in two years. After giving birth to a son just before her trial began last year, Holmes got pregnant sometime this year while she was out on bail.
Although her lawyers made no mention of the pregnancy in an 82-page memo presented to Davila last week, the pregnancy was confirmed in a letter from her current partner, William “Billy” Evans, urging the judge to be merciful.
In that 12-page letter, which included pictures of Holmes doting on her 1-year-old son, Evans mentioned that earlier this year Holmes had competed in a swimming competition on the Golden Gate Bridge while she was pregnant. He also noted that Holmes suffered a case of COVID in August while pregnant. Evans did not disclose Holmes’ due date in his letter.
Duncan Levin, a former federal prosecutor who is now a defense attorney, predicted Davila’s sentencing decision will not be affected by the pregnancy but expects the judge to allow her to remain free until after the baby is born.
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“She will no longer pose a flight risk after she is convicted while awaiting sentencing,” Levin said. “We need to temper our judgments with a degree of humanity.”
The pregnancy makes it more likely that Davila will be criticized no matter what sentence he faces, predicted Amanda Kramer, another former federal prosecutor.
“There’s a pretty healthy debate going on about what kind of penalty is required to create a general deterrent to sending a message to others who are thinking of crossing that line from sharp salesmanship to material misrepresentation,” Kramer said.
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Federal Attorney Robert Leach insisted that Holmes deserved a severe sentence for orchestrating what 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 had an opportunity to send a message that would curb the hubris and hyperbole unleashed by the tech boom of the past decade.
Holmes “has capitalized on her investors’ hopes that a young, dynamic entrepreneur is transforming healthcare,” Leach wrote. “And through her deception, she achieved spectacular fame, adoration, and billions of dollars in wealth.”
Although Holmes was acquitted by a jury on four counts of fraud and conspiracy involving patients undergoing Theranos blood tests, Leach also urged Davila to consider the health hazards posed by Holmes’ behavior.
Holmes’ attorney Kevin Downey painted her as a selfless visionary who spent 14 years of her life revolutionizing healthcare with technology that would be able to screen for hundreds of diseases and other foods with just a few drops of blood.
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Although evidence presented during her trial showed the tests produced wildly unreliable results that could have steered patients the wrong way, her attorneys claimed Holmes never stopped perfecting the technology until Theranos collapsed in 2018 . They also pointed out that Holmes never sold any of their Theranos shares — a stake worth $4.5 billion in 2014, when Holmes was being hailed as the next Steve Jobs on the covers of business magazines.
Defending against criminal charges has left Holmes “substantial debts from which she is unlikely to recover,” Downey wrote, implying she will likely never pay any compensation Davila might order as part of her sentence.
“Holmes is not a threat to society,” Downey wrote.
Downey also asked Davila to consider the alleged sexual and emotional abuse Holmes suffered while she was romantically involved with Ramesh “Sunny” Balwani, who became a Theranos investor, top executive, and eventually an accomplice in her crimes. Balwani, 57, is due to be sentenced December 7 after being convicted of 12 counts of fraud and conspiracy at a trial in July.
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