Theranos Founder Elizabeth Holmes to Be Sentenced Friday in Fraud Trial

Disgraced blood-testing company Theranos Inc. founder Elizabeth Holmes has asked a federal judge for leniency for her fraud crimes, setting herself up as a loving mother and selfless community servant.

Ms. Holmes, who has asked for a sentence of home confinement and community service, and no more than 18 months in prison, will face a tough challenge when she appears in San Jose, California, federal court on Friday for sentencing, according to the defense. Had to fight. The lawyers who followed his case. The hearing is scheduled to begin at 1 p.m. ET.

Prosecutors prosecuting Ms Holmes are seeking a sentence of 15 years in prison, three years of supervised release and damages of more than $800 million. A probation officer received an independent report which recommended a nine-year prison sentence for Ms Holmes. US sentencing guidelines, which judges must consider, recommend life sentences for offenders convicted of conspiracy to defraud as large as Ms Holmes’s.

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Ms. Holmes was convicted by a jury in January of four counts of criminal fraud for defrauding investors during a years-long scheme run at Theranos, a now-defunct startup that revolutionized blood testing. claimed to bring

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US District Judge Edward Davila, who oversaw Ms. Holmes’ months-long trial, had about a year to consider the jury’s decision, legal precedent and other factors to consider his case for the 38-year-old onetime startup wunderkind. Will inform the punishment.

Ms Holmes’s lawyers tried to persuade the judge that she was a caring friend and community member who had been stigmatized by the media, and that her imprisonment would only serve to separate young children from their mothers. Judge Davila was joined by Ms. Holmes’ family, friends, a US senator, a police sergeant, a fire captain, a restaurant owner, technology company executives, a retired Navy admiral, investors, government officials and more than 140 former Theranos employees and board members. The letter submitted directors work to paint a picture of her as a well-intentioned, devoted mother whose selflessness and talent should be mitigating factors for any legal consequences.

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“Ms. Holmes has scientific gifts, an interest in improving the world, and clear talent for leadership,” wrote William Foege, a one-time Theranos board member and former director of the Centers for Disease Control and Prevention. “He couldn’t make those contributions while incarcerated.”

A federal jury convicted Theranos founder Elizabeth Holmes on four of 11 charges. Each count carries a maximum sentence of 20 years in prison. WSJ’s Sarah Randazzo shares highlights from Holmes’ testimony. Photo: Josh Adelson for The Wall Street Journal

The portrait of Ms. Holmes that emerges in the letters stands in stark contrast to the one that emerged during her trial, in which former employees and investors alleged her dishonesty about Theranos’ technical and financial health, her punitive treatment of its staff members, and her actions. Testified about the extremes taken. As a revelation of his startup to hide the problems.

Prosecutors told the judge Ms Holmes “accepts no responsibility” and said her “reality distortion field” will continue to harm people as she continues to insist she is a victim and fails to see the seriousness of her crimes. fails. The prosecution, citing a confidential probation officer’s report, said since her conviction, Ms Holmes had continued to work on new patents for healthcare inventions.

The government presented letters from victims of Ms. Holmes’ crimes, including a letter from Ms. Holmes’ aunt, Elizabeth Doust, who, like most of the family, was an early investor in Theranos. In her letter, she asked the judge to sentence her niece harsher: “The punishment for white-collar crime is too often a slap on the wrist,” Ms Douste wrote.

Ms. Holmes is out on $500,000 bail, which is secured by her parents’ estate in Washington, DC. His sentence was delayed for about two months at his request.

According to defense lawyers following the case, Ms Holmes is almost certain to lose the argument that home confinement and community service is sufficient punishment.

He said the most formidable factor for Ms Holmes was the amount she defrauded investors. The government set the amount at $804 million – the total Theranos raised from investors in 2013 and 2014 financing rounds, investments from business partners and an early board member, former Secretary of State George Shultz. The amount falls under the top category of financial loss in the US sentencing guidelines, which triggers the most severe punishment.

“The amount will have such a huge impact on his sentence,” said white-collar defense attorney Michael Weinstein. He described Ms. Holmes’ request for leniency as unrealistic.

Ms Holmes’s lawyers dispute the government’s calculations.

Judge Davila has considerable legal discretion in his final decision. He will likely consider factors that were not relevant to her trial but may be favorable to Ms. Holmes, criminal-defense attorneys said: the absence of a criminal history, that she is the mother of a young son, who has other children. . Along the way, she never sold Theranos stock and ended up with the dissolution of the startup, and allegations of abuse against her ex-boyfriend and business partner, which she has denied.

Ramesh “Sunny” Balwani, Ms Holmes’ ex-boyfriend and former Theranos chairman, is due to be sentenced next month after pleading guilty to 12 counts of fraud against investors and patients.

The government has urged Judge Davila to consider other facts that could add more time to her sentence: that she was the undisputed decision maker at Theranos, that she used unwitting employees and the media to perpetuate the fraud, There were more than 10 victims of his fraud, and patients were misled and harmed by his deception, according to a court filing. Ms Holmes was acquitted of four counts of defrauding patients.

According to an analysis by consultants Empirical Justice LLC, US Sentencing Commission figures show the average prison term for offenders with economic offenses similar to Ms. Holmes’s is 16 years, in line with the government’s recommendation. The review, which included 102 first-time offenders, did not include defendants who cooperated with officers or entered guilty pleas, often resulting in lighter sentences. Ms. Holmes did not cooperate.

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Lawyers for both sides cast doubt on Ms Holmes’ ability to pay her victims. The government said Ms Holmes’ estate is more than $450,000 in debt to pay the Securities and Exchange Commission settlement in 2018, and legal fees exceed $30 million. The defense said Ms Holmes had not worked since 2018.

The defense has raised Ms Holmes’s motherhood to argue for leniency, and letters presented on her behalf emphasize her close relationship with the child. Her partner, Billy Evans, wrote in her letter that she was expecting her second child.

Relatives of Mr Evans wrote to the judge about the importance of the family unit in their Mormon faith: “I believe a strong family foundation is best achieved with a two-parent household, wrote Mr. Evans’ uncle, Art Billings.

The letters also offer a glimpse into Ms. Holmes’ life beyond Theranos and her loyal supporters. A Mountain View, Calif., fire captain wrote that Ms. Holmes volunteered to help train dogs to find people buried under the rubble. Friends complimented her recent volunteer work to help survivors of sexual assault. In a letter, Sen. Cory Booker of New Jersey recalled his connection with Holmes over his vegan diet, and said he considered her a friend who would “really dedicate herself to making a positive contribution to the world.”

Despite Theranos’ flare-up, there are still some believers. Former Theranos board member and biotechnology executive Fabrizio Bonani suggested in his letter to the court that Judge Davila sentence Ms. Holmes to discuss the lessons learned in a case study, which has been shared through podcasts, classroom instruction and other means. can be shared from He added that Theranos “ran out of time in its final stages of development.”

In his trial testimony, Mr. Bonani said he agreed with Theranos’ decision in 2016 to void all lab test results from its proprietary technology because they could not be accurate.

write to Heather Somerville at [email protected]

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