SAN JOSE, Calif. (CN) — Ramesh “Sunny” Balwani, the disgraced former president of the failed $9 billion blood-testing startup Theranos, will spend nearly 13 years in federal prison for wire fraud.
U.S. District Judge Edward Davila sentenced Balwani on Wednesday to 12 years and 11 months for his role in risking patient health by misrepresenting Theranos technology accuracy and defrauding investors.
This past July, a Silicon Valley jury found Balwani guilty on 12 counts of fraud. Balwani was accused of working with Theranos founder Elizabeth Holmes, his friend and then-romantic partner, to defraud investors by claiming their technology would revolutionize the health care industry with blood tests using only one drop of blood.
Prosecutors wanted a 15-year sentence for Balwani as they did for Holmes, who was handed a sentence of 11 years and three months in federal prison last month.
Balwani’s lawyers in the trial depicted him as a loyal executive who tried to save the blood-testing company, which he and Holmes started in 2003. Attorney Jeffrey Coopersmith painted Balwani as a tireless executive who “put his money where his mouth is” by investing about $15 million of his fortune into Theranos between 2009 and 2011 because he believed in Holmes’ vision. Balwani and Holmes asserted that the Theranos proprietary analyzer produced results that were cheaper and more reliable than existing methods, with quicker results.
U.S. Attorney Stephanie M. Hinds said in a statement Wednesday that “Ramesh Balwani, in a desire to become a Silicon Valley titan, valued business success and personal wealth far more than patient safety.”
“He chose deceit over candor with patients in need of medical care, and he treated his investors no better. Today’s sentence should serve as a lesson to anyone considering fraud in their own push for success.”
Food and Drug Administration Assistant Commissioner Catherine Hermsen said the agency will go after anyone else who jeopardizes people in the quest for money. “Patients and their doctors rely on accurate, reliable test results to ensure a proper diagnosis of their condition. When individuals jeopardize patient health and put profits above the public health, the FDA will continue to investigate and bring them to justice," she said in a statement.
The prosecution said Balwani knew the analyzer performed only basic tests, was slower than existing devices and had limited capabilities.
“Evidence at trial and examples in a sentencing memorandum filed by the government demonstrate the dark reality these misrepresentations created for patients,” the U.S. Department of Justice said in a statement Wednesday.
The evidence presented in the trial showed that when Theranos offered the analyzer to the public for tests, misdiagnoses of many patients followed — but Balwani and Holmes continued drawing in investors with false representations of their tool’s success. Balwani conspired to induce Walgreens and Safeway to invest in Theranos based on false pharmaceutical company endorsements and high revenue projections.
That strategy brought great wealth to Balwani, who owned nearly 30 million shares of Theranos — over 6% of the company — worth hundreds of millions of dollars at the peak of the fraud, according to the government.
Balwani was tried separately from Holmes, whom a jury convicted on four counts and deadlocked on three individual investor fraud counts. Both subsequently struck out in their attempts to get acquittals and new trials. Holmes has appealed.
Davila also sentenced Balwani to three years of supervision following release from prison, with a hearing to determine the restitution Balwani must pay to be scheduled. Balwani will surrender to begin his sentence on March 15, 2023.
“We are disappointed with the outcome. We respectfully disagree and plan to appeal," Balwani's attorney Jeffrey Coopersmith said via email.Follow @@nhanson_reports
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