Elizabeth Holmes, who was convicted 10 months ago of defrauding investors in blood testing startup Theranos, was sentenced on Friday to 11 years and two months in prison followed by three years of probation.
Judge Edward Davilawho also presided over Holmes’ criminal fraud case for four years and his four-month trial in U.S. District Court in San Jose, said the case was “disturbing on so many levels,” as he pronounced the sentence.
“Failure is normal. But failure by fraud is not acceptable,” he said. said.
Holmes attempted, through his now-closed company, to defraud investors of over $144 million by making misleading claims about Theranos technology, in particular that his “Edison” device could perform a full range tests using only a few drops of blood.
In addition to the length of sentence given by Davila, a point of contention was whether Holmes would be required to report to jail the same day or be allowed to remain out of jail pending any appeal. Pregnant again and with a 1-year-old son, she was expected to try to delay her incarceration, legal experts said.
His sentence is scheduled to begin in April 2023.
Federal prosecutors had sought a 15-year sentence as well as an $800 million fine, painting her as an unrepentant liar, despite crimes that were ‘among the biggest white-collar crimes than Silicon Valley or any other. district has known”.
His fraud was so “spectacularly successful”, for court documents filed this week, that she was “one of the wealthiest and most famous female leaders in our [country’s] historic,” the CEO’s shares in Theranos peaking at more than $4 billion.
Holmes’ lawyers had countered that she shouldn’t be sentenced to jail because she ‘never cashed in and went down with the ship when the business went bankrupt’. In addition, given the “dehumanizing and cruel” media coverage she suffered, the defense had recommended 18 months of house arrest or, at most, 18 months of incarceration, with the obligation of community service. Holmes’ sentencing note also noted that she had no assets to pay restitution.
A survey of The Wall Street Journal in 2015 found that most of the tests Theranos claimed to perform on its analyzer were actually performed by standard blood-testing machines. In 2018, the Justice Department charged Holmes and his next commanding officer, Ramesh “Sunny” Balwani, with a 12-count indictment (one charge was later dropped).
Last January, Holmes was sentenced four counts, including counts of fraud and conspiracy. She was acquitted on four other counts, with the jury deadlocked on the other three. His trial, which took place over a 15-week period in federal court in San Jose, has become a referendum on the culture of fake it until you make it — and a cautionary tale for marketers at health.
In turn, his sentence can be interpreted as a deterrent against the misrepresentation of a company’s capabilities, the risk of which is all too common in the high-flying world of tech startups. With entrepreneurs having less and less need for a large agency, this risk has increased.
“Much of audience building and consumer demand happens through owned social channels,” Stan Fioritoa former Group Account Manager for Theranos’ unique AOR, TBWAChiatDay, Told MM+M earlier this year. “There is therefore less need for a partner. This can be scary, as there’s less chance of an outside agent doing the checks and balances, if you will, to help run a brand.
At Balwani’s four day trial, which followed Holmes, the former chief operating officer was convicted by a jury of 12 counts of federal wire fraud and conspiracy to commit wire fraud, and defrauding both investors and patients. His sentencing is scheduled for December 7. Balwani faces up to 20 years in prison, as well as fines and restitution.
The defendants were tried separately, as lawyers for Holmes claimed she suffered sexual and emotional abuse at the hands of the elder Balwani while the two ran Theranos. Holmes maintained that he exercised control over her activities and even forced her to have sex, allegations he strongly denied, and often belittled and lambasted her.