Elizabeth Holmes gets more than 11 years for Theranos fraud

SAN JOSE, California – The disgraced CEO of Theranos, Elizabeth Holmes, was sentenced Friday to more than 11 years in prison for fooling investors into the failed startup that promised to revolutionize blood testing but instead turned it into an icon made for Silicon Valley ambition turned delusion.

The sentence imposed by US District Judge Edward Davila was shorter than the 15-year sentence required by federal prosecutors but far harsher than the leniency her legal team was asking for the mother of a one-year-old son with another child on the way.

Holmes, who was CEO during the company’s tumultuous 15-year history, was convicted in January in the trial surrounding the company’s claims of having developed a medical device that could diagnose a variety of diseases and conditions from a few drops of blood could recognize. But the technology never worked, and their claims were wrong.

Theranos was undone “by misrepresentation, hubris and outright lies,” the judge said.

“This case is so disturbing on so many levels,” he said. “What prompted Ms. Holmes to make the decisions she made? Was there a loss of moral compass?”

Holmes’ meteoric rise to fame once landed her on the covers of business magazines, hailing her as the next Steve Jobs. And their deception was convincing enough to attract a list of sophisticated investors including software magnate Larry Ellison, media mogul Rupert Murdoch, and the Walton family behind Walmart.

She sobbed as she told the judge she took responsibility for her actions.

“I regret my failure with every cell in my body,” said Holmes.

The conviction in the same San Jose courtroom where Holmes was convicted on four counts of investor fraud and conspiracy in January marked another high point in a saga that has been dissected into an HBO documentary and an award-winning Hulu series.

The 38-year-old Holmes faced a maximum of 20 years in prison. Her legal team asked the judge for a sentence of no more than 18 months in prison, preferably to be served under house arrest.

Her attorneys argued that Holmes was 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.

Prosecutors also ordered Holmes to pay $804 million in restitution — an amount that covers most of the nearly $1 billion she raised from investors. But the judge left that question for a future hearing, which was not scheduled.

While courting investors, Holmes utilized a senior Theranos board that included former Secretary of Defense James Mattis, who testified against her during her trial, and two former Secretary of State, Henry Kissinger and the late George Shultz, whose son filed a statement, in which Holmes was blown up for devising a plan that played Shultz “for the fool”.

The judge gave Holmes, who is pregnant, more than five months’ freedom before she is due to report to jail on April 27. She gave birth to a son just before her trial began last year.

If Holmes’ pregnancy played a role in determining her sentence, the decision could prove controversial. A 2019 study found that more than 1,000 pregnant women were sent to federal or state prisons over a 12-month study period; 753 of them gave birth in custody.

According to a 2016 Bureau of Justice Statistics survey, more than half of the women who were sent to a federal prison — 58% — said they were mothers of minor children.

Federal Attorney Robert Leach called the Theranos fraud one of the most egregious economic 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 30 years.

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 asked the judge 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.

Although evidence presented during her trial showed the blood tests gave wildly unreliable results that could have led patients to wrong treatments, her lawyers claimed that Holmes never stopped perfecting the technology until Theranos collapsed in 2018.

They also pointed out that Holmes has never sold any of their Theranos shares — a stake worth $4.5 billion in 2014.

Defense against criminal charges has left Holmes “substantial debts from which she is unlikely to recover,” Downey wrote, hinting that she is unlikely to pay compensation.

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

Downey also asked Davila to consider the alleged sexual and emotional abuse Holmes suffered while romantically dating 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 on 12 counts of fraud and conspiracy in a July trial.