A few short years ago, media reports were holding up Theranos founder and CEO Elizabeth Holmes as the next Steve Jobs, a comparison she clearly invited with her trademark black turtleneck and deep speaking voice. However, the company’s supposedly revolutionary blood testing technology didn’t work, and Holmes now stands convicted of multiple counts of wire fraud. After numerous delays due to the COVID-19 pandemic and Holmes’ multiple pregnancies, Judge Davila has sentenced Holmes to 11 years and three months in prison.
The prosecution argued for a 15-year sentence, citing Holmes’ role in promoting the company despite its inoperable Edison machine. They claim the Theranos fraud was fueled by Holmes’ arrogance and need for acclaim, and the deception damaged the trust between innovators and customers. Prosecutors claim that investor losses topped $804 million — money that was handed over largely on the word of Holmes that the Edison machine was a bioassay revolution.
Holmes’ lawyers asked for leniency and no jail time, saying her decision not to cash in her stock options shows that she did not intend to defraud investors. They say Theranos had good intentions and should not be lumped in with Enron or Worldcom. However, Judge Davila noted that text messages prove Holmes conspired with Theranos president and COO Sunny Balwani to engage in fraud. Attorneys for Holmes also disputed the government’s accounting, and the judge did decide the reasonable loss to investors was closer to $121 million. The actual repayment amount, which Holmes will probably never be able to cover, will be decided upon at a later date. Holmes herself spoke to the court, accepting responsibility for the failure of Theranos and apologizing to investors and patients.
Ultimately, the judge sentenced Holmes to the low end of the guidelines, which called for 135-168 months. She will be on supervised release for three years after serving her time. The trial, which finally got underway in 2021, was delayed due to Holmes’ first pregnancy. Many online have speculated that Holmes married and started a family in hopes of a lighter sentence — she was pregnant for the second time during sentencing.
…it will be followed by 3 years of supervised release.
Holmes will be required to self surrender at a later date.
— scott budman (@scottbudman) November 18, 2022
Theranos was unique among health science startups, running more like the slick Silicon Valley firms that surrounded it in Palo Alto. Holmes dropped out during her undergraduate education to pursue her blood testing idea, leveraging familial contacts to raise capital. While tech firms can “fake it until they make it,” health services are more tightly regulated. Thus, Holmes and other senior Theranos leaders had to hide the fact that its Edison blood testing machine didn’t work. That didn’t stop the company from claiming the opposite, even forging a deal with Walgreens to offer the defective tests to patients.
Holmes will be serving more than 11 years for crimes against investors, who pumped millions of dollars into Theranos. The cash vanished when the Theranos house of cards collapsed when the Wall Street Journal‘s John Carreyrou revealed the grift. Prosecutors also sought convictions for four counts of defrauding patients, but the jury acquitted Holmes of those charges. Holmes was not taken into custody following the hearing. She will be required to surrender at a later date.
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