A federal judge on Friday sentenced disgraced Theranos CEO Elizabeth Holmes to more than 11 years in prison for duping investors in the failed startup that promised to revolutionize blood testing but instead made her a symbol of Silicon Valley’s culture of audacious self-promotion.
U.S. District Court Edward Davila imposed the sentence. It was shorter than the Federal prosecutors requested a 15-year penalty but much more severe than what her legal team wanted for the mother, who had a year-old son and another child.
Holmes, who was CEO throughout the company’s turbulent 15-year history, was convicted in January in the scheme, which revolved around the company’s claims to have developed a medical device that could detect a multitude of diseases and conditions from a few drops of blood. The technology didn’t work.
Another climactic moment in the story of Holmes’ meteoric rise to fame and her tragic downfall is when she was sentenced in the same San Jose courtroom in California.
Holmes, 38 years old, was eligible for a maximum sentence up to 20 years. But her legal team asked that the judge reduce Holmes’ sentence to 18 months. It should be served in home confinement.
Her lawyers argued that Holmes, a well-meaning entrepreneur and a mother to another child, deserved a more gentle treatment. They were supported by over 130 letters written by former colleagues, family members, and friends praising Holmes.
Holmes would also be required to pay $804 million in restitution, according to the prosecution. This amount covers the majority of the $1 billion Holmes received from sophisticated investors, including software mogul Larry Ellison and Rupert Murdoch. It also includes the Walton family that owns Walmart.
While wooing investors, Holmes leveraged a high-powered Theranos board that included former Defense Secretary James Mattis, who testified against her during her trial, and two former 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.”
Holmes must report to prison by April 27. Holmes gave birth to her son just before her trial began last year. She was released on bail and became pregnant again.
Although her lawyers didn’t mention the pregnancy in an 82-page memo submitted to the judge last week, the pregnancy was confirmed in a letter from her current partner, William “Billy” Evans, that urged the judge to be merciful.
The sentence could be controversial if Holmes’ pregnancy played a part in her sentencing. Over a 12-month period, more than 1,000 women were pregnant and entered federal and state prisons. 753 of those women gave birth while in custody.
According to a 2016 survey by the Bureau of Justice Statistics, more than half of women entering federal prison — 58% — reported being mothers of minor children.
Robert Leach, a federal prosecutor, stated that Holmes deserves severe punishment for engineering the scam. He called it one of Silicon Valley’s most outrageous white-collar crimes. Leach sent a 46-page memo telling the judge that he has the chance to send a message to curb the hyperbole and hubris unleashed by Silicon Valley’s tech boom.
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.”
Even though Holmes was acquitted by a jury on four counts of fraud and conspiracy tied to patients who took Theranos blood tests, Leach also asked Davila to factor in the health threats posed by Holmes’ conduct.
Holmes’ lawyer Kevin Downey painted her as a selfless visionary who spent 14 years of her life trying to revolutionize health care.
Even though evidence at her trial revealed that blood tests could have been misleading patients and led to them seeking the wrong treatments, Holmes’ lawyers maintained that Holmes was relentless in her pursuit of the technology until Theranos collapsed.
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.
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 to pay any restitution that Davila might order as part of her sentence.
“Holmes is not a danger to society,” Downey wrote.
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 due to be sentenced Dec. 7.
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