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Elizabeth Holmes sentenced to 11.25 years in prison for Theranos fraud

Elizabeth Holmes (C), founder and former CEO of blood testing and life sciences company Theranos, walks with her mother Noel Holmes and partner Billy Evans into the federal courthouse for her sentencing hearing on November 18, 2022, in San Jose, California.
Enlarge / Elizabeth Holmes (C), founder and former CEO of blood testing and life sciences company Theranos, walks with her mother Noel Holmes and partner Billy Evans into the federal courthouse for her sentencing hearing on November 18, 2022, in San Jose, California.

Elizabeth Holmes has been sentenced to 11.25 years in federal prison, plus three years of supervision for her conviction in January on four counts of defrauding investors of her failed blood-testing company, Theranos. Restitution in the case will be determined at a later hearing, not yet set.

The sentencing is less than the maximum of 20 years set by federal sentencing guidelines, but still more than the nine-year prison sentence recommended by the probation officer in Holmes’ case.

Federal prosecutors had sought 15 years of imprisonment and for Holmes, 38, to pay roughly $804 million in restitution to defrauded investors. Holmes’ lawyers, meanwhile, requested just 18 months of house arrest and argued that she has “essentially no assets” and could not pay a nine-figure fine.

Judge Edward Davila of US District Court for the Northern District of California handed down the prison term today in San Jose, California, where reporters began gathering outside the courtroom hours ahead of the 10 am PST start time for the sentencing. First in line was Wall Street Journal reporter John Carreyrou, who first broke the story that there were fatal problems at the glowing startup, including that its famed Edison blood-testing machines did not work properly.

Prior to that, Holmes promised her innovative machine could perform more than 200 medical tests with just a few drops of blood. The promise and hype, fronted by Holmes’ ambition and confidence, drove Theranos’ valuation up to $9 billion in 2014, attracting large investors, including Safeway and Walgreens.

During today’s sentencing, Judge Davila, who presided over the entirety of Holmes’ trial, concluded that Holmes’ fraud resulted in $121 million in total loss to the company’s share value, according to reporters in the courthouse. He noted that this would put the federal recommendations for Holmes’ sentencing between about 11 and 14 years. Then, Davila opened the hearing to last-minute arguments and statements from both sides.

Holmes read a prewritten speech to the court, saying that she took responsibility for Theranos. Amid tears, she said she was “devastated by failings,” and has “felt deep pain” in the years since the company’s collapse.

Just before handing down the sentencing, Davila said the case was “troubling on so many levels,” and suggested that Holmes’ fraudulent actions were motivated by hubris or “intoxication with fame.”

Holmes’ fate in the trial has drawn significant media attention and public interest, given her high-profile rise and dramatic fall. She has become a poster child for Silicon Valley’s brazen tactics. “Elizabeth Holmes” was trending on Twitter Friday morning, despite the platform’s internal mayhem. And her sentencing may be seen as a bellwether for future white-collar fraud.

Two portrayals

In their court filings, federal prosecutors argued that a lengthy prison term would “serve not only to deter future startup fraud schemes,” but also “rebuild the trust investors must have when funding innovators.”

Overall, they painted Holmes in a harsh light, noting that in Theranos’ fleeting heyday, Holmes flew on private jets, lived in a $15 million mansion, and graced the cover of numerous glossy magazines. Meanwhile, patients who used her technology received inaccurate medical results for pregnancy, cancer, and HIV testing, among other things. And investors lost millions a short time later.

“Over the course of many years, Elizabeth Holmes defrauded dozens of investors of hundreds of millions of dollars,” the prosecutors wrote. “Time and again, she chose deceit over candor. She forged her own endorsements…  preyed on hopes of her investors… leveraged the credibility of her illustrious board. And, through her deceit, she attained spectacular fame, adoration, and billions of dollars of wealth.”

They also argued that she had not taken responsibility for her actions, instead downplaying her fraud and deflecting blame. “She stands before the Court remorseless. She accepts no responsibility. Quite the opposite, she insists she is the victim. She is not,” prosecutors wrote.

Holmes’ lawyers countered with a portrayal of Holmes as regretful, well-intentioned, and selfless, and argued that a tough sentence could deter innovation. They painted Theranos’ wealthy investors, meanwhile, as sophisticated, but careless with their investments. In filings and in arguments today, Holmes’ team emphasized that Holmes never cashed in her stock or used investor funds for luxuries, such as yachts.

“Ms. Holmes built Theranos for indisputably good reasons, invested resources and effort to correct errors, and did not cash out,” they wrote in a filing. “She works every day to be a good friend, partner, mother, and citizen who contributes to the positive well-being of those around her. Ms. Holmes was not driven by greed, as the government apparently cannot help but persist in suggesting despite the overwhelming evidence to the contrary.”

Filings note that Holmes, who is visibly pregnant with her second child, has become a rape crisis counselor, logging 500 hours of counseling amid the trial. Her lawyers also filed more than 100 letters from friends, family, and colleagues supporting Holmes.

Holmes is scheduled to report to prison in April, but she is expected to appeal her conviction

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