SAN JOSE, Calif. (CN) — Disgraced Theranos founder Elizabeth Holmes will serve more than 11 years in federal prison for defrauding investors and misrepresenting the benefits of her now-defunct company's blood-testing device publicly.
Federal prosecutors asked U.S. District Judge Edward Davila to make an example of Holmes given the need for trust between Silicon Valley innovators and investors, and to “send a clear message to the community that white collar crime is serious and deserving of significant punishment.” They asked that she serve 15 years in federal prison and pay nearly $804 million in restitution.
Holmes had asked for a maximum of 18 months in confinement followed by community service — or no prison sentence at all — when she appeared in court in October visibly pregnant, accompanied by her partner Billy Evans.
She surprised the courtroom Friday by standing to speak just before Davila handed down a sentence, sobbing on the stand.
"I stand before you taking responsibility for Theranos," she said.
"I loved Theranos. It was my life’s work. I am devastated by my failings."
Holmes said she was sorry for disappointing many people who believed in the company, and how she wishes she had made different choices. She finished with a quote she attributed to Rumi, which is actually from the Hindu spiritual leader Sri Chnmoy: "Yesterday I was clever so I wanted to change the world. Today I am wise so I'm changing myself."
The sole victim to speak to Holmes was Alex Shultz, father of the first whistleblower Tyler Shultz. He told Holmes he could sympathize with her pain of her public image being shattered, because he saw the damage to his son when she hired a private investigator to follow him.
“My son slept with a knife under his pillow every night thinking someone was going to come and murder him in the middle of the night," he said. "My family home was desecrated by Elizabeth and the lawyers."
Davila called the case "troubling on so many levels" in a monologue about Silicon Valley's transformation from agricultural riches to technology capital. He noted Holmes' youth when she started Theranos at 19, being unquestionably bright and committed to her vision.
“Was there a loss of a moral compass here?” Davila pondered aloud. “Was it intoxication with the fame that comes with being a young entrepreneur?”
Yet he added that because the jury heard the case, deliberated for days and tested the evidence before reaching a guilty verdict, that verdict would be respected with a suitable sentence.
The judge also ordered three years of supervised probation for each of the four counts for which Holmes was convicted. A restitution hearing will take place later.
The sentencing follows several bids by Holmes for acquittal or a new trial. The $9 billion blood-testing startup’s founder and CEO said in September that new evidence was discovered from a remorseful star witness in the fraud trial that ended in her conviction.
But Davila found there was enough evidence presented throughout the trial, from text messages to financial records, for a “reasonable juror” to find that Holmes conspired with her former partner and onetime lover Ramesh “Sunny” Balwani to commit wire fraud to prevent “financial ruin” of their company. He turned down Balwani's requests for acquittal and new trial, for the same reasons.
Holmes said in her 82-page memorandum opposing sentencing, filed Nov. 10, that she has become “a caricature to be mocked and vilified.” She said the court should instead notice the more than 130 letters submitted from family and friends on her behalf.
She also reiterated claims of abuse during her decade-long romantic relationship with Balwani and subsequent isolation from her support system. She claimed his abuse “involved severe sexual elements that caused Ms. Holmes particular distress, including thoughts of suicide.” Now that she is with a new partner, Evans, she asked to not be separated from him, their son born in July 2021 and their new child on the way.
“The defense believes that home confinement with a requirement that Ms. Holmes continue her current service work is sufficient,” Holmes’ lawyers added.
Attorney Kevin Downey told Davila that his client did not try to become as wealthy as possible, and her actions were on behalf of keeping the company running.
"We see year in, year out opportunities were presented to Holmes to become a very wealthy individual, wealthy beyond her wildest imagination," he said. "She was offered tens of millions for stock in 2010 before the conspiracy began. She declined that offer.”
Downey said Holmes never used the money to buy luxuries like "jets or boats."
"We don't have the lines of a great crime here … rooted in the avarice of the defendant. The defendant's motive was to build medical technology," he told Davila.
In their Nov. 11 memorandum for sentencing, prosecutors said Holmes showed duplicity in misleading inventors and the public about the Theranos device, which she said could test drops of blood from a finger, rather than the traditional draw from a vein, with higher accuracy and less variability than traditional methods. They point to her being found guilty of four courts of wire fraud, defrauding dozens of investors of hundreds of millions of dollars.
“Time and again, she chose deceit over candor,” prosecutors said in the brief. “And, through her deceit, she attained spectacular fame, adoration, and billions of dollars of wealth. At trial, she blamed her COO (and longtime boyfriend), her board, her scientists, her business partners, her investors, her marketing firm, her attorneys, the media — everyone, that is, but herself.”
The government also pointed to Holmes' responsibility for putting many patients at risk with “an unproven and unreliable medical device” — risks she minimized even after Theranos concluded possible patient effects from every test run.
“During her fraud scheme, women received wrong tests about their pregnancies, Theranos generated wrong results for cancer tests, and one victim was led to believe she had the virus that causes AIDS," prosecutors said.
“She stands before the court remorseless. She accepts no responsibility. Quite the opposite, she insists she is the victim.”
The government said a sentence of 15 years in federal prison will “serve to deter others from committing or contemplating committing white collar crimes.”
In court, prosecutor John Bostic described how Holmes ignored warnings that her company's device did not deliver the promised results. He quoted a Walgreens consultant who said when he told Holmes the blood tests could be highly inaccurate and she could go to prison for it, she allegedly said "They don’t put attractive people like me in jail."
And attorney Jeff Schenk pointed out how journalists were misled and media attention was used heavily by Holmes to promote her company. He called the attention "a tool of the fraud."
Holmes — who must surrender by April 27 — will likely appeal.
Balwani’s sentencing will take place Dec. 7. He faces up to 20 years in prison as well as a fine of $250,000 plus restitution for each count of wire fraud and conspiracy.
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