Elizabeth Holmes, founder and CEO of collapsed Silicon Valley blood testing company Theranos, was sentenced to 11.25 years in prison plus three years of supervised release for financial crimes she committed while running the once high-flying company.
Holmes was also fined $400 million. Holmes is due in police custody on April 27, 2023. Holmes is expected to appeal.
The judge presiding over Holmes’s trial and sentencing says the landmark case, one of the most closely watched in Silicon Valley history, should be a cautionary tale for startup founders who are willing to exaggerate capabilities of their products.
“I guess we step back and ask what is the pathology of fraud? Is it the refusal to accept responsibility or to express contrition in any way?” Judge Edward Davila said. “Perhaps that is the cautionary tale that will come out of this case.”
In letters submitted to the court in support of Holmes, Davila noted that venture capitalists point to the fact that startup failures are “normal” and that investors expect to lose 90% of the money. that they invest.
“One thing that was missing from those letters…the letters didn’t say anything about, or endorse, ‘failure by fraud,'” Davila added.
Prior to sentencing, Judge Davila said that under US sentencing guidelines considerations, the court concluded that Holmes should serve between 11.25 and 14 years in prison. The court’s calculation of the “reasonable total loss” suffered by the identified victims of the fraud is $121.1 million.
On Friday, Holmes, 38, appeared for sentencing in the San Jose District Courthouse, where a jury found her guilty in January of three counts of wire fraud and one count of conspiracy. In convicting Holmes, the jury found that she had lied to investors who invested around $900 million in the biotech company about Theranos’ technology and profitability.
As Davila read Holmes’ sentence aloud to a crowded courtroom, the former CEO and former Silicon Valley sweetheart looked visibly pregnant with her second child in a long black skirt and blazer. Holmes was accompanied in court by her partner, Billy Evans, and her mother, Noel Holmes.
Before Holmes’ sentence was read, she addressed the courtroom to express her remorse.
“I stand before you taking responsibility for Theranos. I loved Theranos. It was my life’s work. My team meant the world to me. They wanted to make a difference in the world. I am devastated by my failures,” she said. “Every day for the past few years I have felt deep pain for the people…those people who believe in us and these patients. I have worked so hard to serve. I have given my all. had to try to build… Theranos. Looking back, there are so many things I would do differently. I tried to achieve my dream too quickly.”
Holmes’ prison term is about 14% of the maximum allowable 80 years that sentencing guidelines technically allow for his four fraud convictions. Each of these charges carried a sentence of up to 20 years, as well as $250,000 in fines, plus restitution.
While Holmes is expected to appeal her conviction, Friday’s hearing ends the former Silicon Valley superstar’s multi-billion dollar slide that began in 2003, when at 19 she gave up the job. Stanford University with the dream of democratizing health care.
Holmes’ co-defendant, Ramesh “Sunny” Balwani, who was her boyfriend during the time she ran Theranos and served as the company’s president and chief operating officer, was found guilty in July of 12 charges of similar fraud. His sentencing is scheduled for a later date.
For nearly 15 years, Holmes worked tirelessly to grow the blood testing business, dazzling investors and pushing for innovative technology that she hoped would miniaturize the amount of blood and the size of equipment needed to test. perform standard blood diagnostic tests.
However, she and Balwani falsely told investors that Theranos’ proprietary blood analyzer could perform conventional lab tests from a blood sample of just a few drops of blood, rather than the traditionally larger volumes taken from blood. using traditional venous sampling.
The duo also lied to investors by claiming that the company was profitable and that its technology had been widely validated by several major pharmaceutical companies.
Holmes and Balwani’s representations also helped Theranos secure a $140 million partnership with drugstore giant Walgreens, which planned to offer Theranos tests in its retail stores. But the deal imploded as Holmes and Balwani failed to show that their testing device could run around 200 common blood tests.
Theranos ultimately collapsed following a 2015 Wall Street Journal report that found the company wasn’t actually performing the range of blood tests from a finger prick like Holmes did. had promoted.
Of the jury’s four guilty verdicts, three were based on investments in 2014: $38.3 million from veteran healthcare investor Brian Grossman; an investment of around $100 million by former US Secretary of Education Betsy DeVos; and a $6 million investment by prominent real estate attorney Daniel Mosley, who referred wealthy clients to Theranos.
At its peak, Theranos was valued at $9 billion, making Holmes at the time the world’s first self-proclaimed female billionaire.
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