SAN JOSE, Calif. (CN) — Elizabeth Holmes, the disgraced founder of the failed $9 billion blood-testing startup Theranos, will likely wait until April to find out how much she owes investors and whether a judge will release her while she appeals her wire fraud conviction.
A jury convicted Holmes of defrauding investors and misrepresenting the benefits of her now-defunct company's blood-testing device publicly in 2022, following a monthslong trial. She asked a federal judge to release her from surrendering to serve an 11-year sentence in federal prison starting next month due to the birth of her second child.
She lost a bid for a new trial in November, and 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 the month before visibly pregnant, accompanied by her partner Billy Evans.
At the hearing Thursday, Holmes, dressed in black, nodded to members of her family attending the hearing. Some in the gallery congratulated the family on the recent birth.
Just before the hearing, an elderly man wearing plaid and a baseball cap pushed his way through the barrier toward where Holmes sat, holding out an unidentified document. He was quickly stopped by security and escorted out of the courthouse with some struggle, asking “OK, OK I’ll go. Are you going to arrest me or not?”
When asked, security officers said the man did not actually have a document to give to Holmes.
Her attorneys first presented their opposition to the government’s estimate of nearly $804 million in restitution to investors. They asked U.S. District Judge Edward Davila to deny restitution for the broader class of injured investors, limiting it to 10 investors.
The defense said that the government lacked evidence on how investors tied to counts of fraud that resulted in a hung jury were affected. They said that in cases where investors who own shares in a company that becomes devalued, there must be an offset of value of what portion of the company the investor owns after the defense presents its case — which the government was supposed to prove.
The judge said the court can review "even counts that weren’t charges" for restitution. But he noted the substance of the defense’s argument involved the nature of what happens when an investor puts money into a company, saying that ultimately, “Irrespective of what happened, I lost my investment.”
Assistant U.S. Attorney Robert Leach said the mandatory restitution should be at least for all investors affected by Holmes’ fraud.
“You should look to the definition of victim,” Leach said. “We did dismiss those counts, but it could be for lack of a wire. It's not a finding that they weren’t a victim.”
Holmes’ attorneys next told Davila that Holmes ought to be released pending appeal, in part because “there is no credible argument that Ms. Holmes is a flight risk or danger to the community.”
“Over a year ago, in January 2022, Ms. Holmes explained the circumstances by which, before the verdict and full of hope, Mr. Evans booked a ticket in her name on a commercial airline to attend the Mexico wedding of close friends,” attorneys say in a filed document. “The ticket was canceled immediately when the government raised the issue.”
Holmes’ motion to strike also said that the court has her expired passport and she has a spotless record with pretrial services officers. Her attorneys objected to the government calling Holmes a flight risk because her partner pays for family living expenses, and that she is dangerous because she holds patents she intends to work on in the future.
Attorney Amy Mason Saharia told Davila there have been multiple findings that Holmes is not a flight risk. She was staying at home under a bond managed by her parents, then moved to another district in California and gave birth to another child, cementing “her motivation not to flee.”
Federal prosecutors said Holmes can be out on bond but denied making explicit findings that she is not a flight risk. When Davila said there was reason to be suspicious of Holmes purchasing a one-way ticket to Mexico, the defense said, "They simply didn't know how long they wanted to stay.”
Holmes also asked to strike and seal some documents, like former partner Ramesh “Sunny” Balwani’s testimony in a separate trial which resulted in a guilty verdict that has also been appealed. Davila said he saw no reason to strike or seal any documents.
Holmes is still set to begin her prison sentence in April, pending Davila’s order, which he told the parties not to expect before the end of the month.
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