Theranos founder faces up to 20 years in prison

Elizabeth Holmes, one of Silicon Valley’s most famous and reviled startup founders, is due in San Jose court on Friday for a sentencing hearing where she is expected to find out whether she will go to jail for defrauded investors out of hundreds of millions of dollars.

Holmes, who was found guilty in January of three counts of wire fraud and one count of conspiracy related to her now defunct blood testing company, Theranos, faces up to 20 years in prison, up to to $1 million in fines and nearly $804 million. in restitution.

But criminal law experts say Holmes, 38, is unlikely to receive a near 20-year sentence because, under sentencing guidelines, the district court judge has great leeway to take into account the mitigating factors that reduce his sentence.

“Thus, the judge has a wide enough discretionary power to deviate almost entirely from [the guidelines] if he chooses to,” Keri Axel, criminal defense attorney at Waymaker LLP, told Yahoo Finance, explaining that Judge Edward Davila may consider factors in favor of Holmes such as his lack of priors. criminals and that the investors were mainly wealthy people. and corporations, as well as those working against it, such as patients who received erroneous blood test results.

REFILE – ADDING COUNTRY Former Theranos CEO Elizabeth Holmes departs after a hearing in federal court in San Jose, California July 17, 2019. REUTERS/Stephen Lam

At its height, Theranos, which Holmes led as CEO and promised to revolutionize healthcare, was valued at $9 billion, making Holmes at the time the world’s first self-proclaimed female billionaire.

Holmes falsely told investors that Theranos’ proprietary blood analyzer could perform conventional lab tests from a fingertip blood sample that used approximately a few drops of blood, rather than much larger volumes taken from using traditional venous sampling.

Holmes also falsely told potential investors that the diagnostics company’s technology had been extensively validated by several major pharmaceutical companies and that its ‘Edison’ test device had been deployed overseas by the Department of Defense. to care for wounded soldiers. Holmes also touted Theranos as a profitable business.

In separate court documents submitted ahead of Friday’s hearing, Holmes’ lawyers and the prosecutors who won convictions against her argued for vastly different sentences.

Government lawyers have asked Judge Davila, who presided over the case and will determine Holmes’ fate, to sentence the former CEO to 15 years in federal prison, plus three years of probation. Holmes’ lawyers, on the other hand, asked Davila to spare her any jail time and instead sentenced her to 18 months house arrest.

Elizabeth Holmes, CEO of Theranos, speaks at the annual meeting of the Clinton Global Initiative in New York, September 29, 2015. REUTERS/Brendan McDermid

Elizabeth Holmes, CEO of Theranos, speaks at the annual meeting of the Clinton Global Initiative in New York, September 29, 2015. REUTERS/Brendan McDermid

Prosecutors are also asking Davila to demand that Holmes repay $803,840,309 to his individual investors as well as corporate investors in Theranos, Walgreens and Safeway.

“Over many years, Elizabeth Holmes defrauded tens of investors out of hundreds of millions of dollars,” prosecutors wrote in a brief. “It fed on the hopes of its investors that a young, dynamic entrepreneur had changed health care.”

Prosecutors said Holmes, blinded by her ambition, risked the lives of patients who had faulty Theranos tests and prioritized deception that earned her “spectacular fame, adoration and billions of dollars in wealth”.

“She stands before the Court without remorse. She declines all responsibility. On the contrary, she insists that she is the victim,” prosecutors wrote in their filing.

Holmes’ lawyers countered those claims in a responsive filing, saying she should be spared the kind of harsh sentence that has been meted out to white-collar criminals like former Enron CEO Jeffrey Skilling, who is left with a considerable financial fortune.

The former founder of Theranos “improved healthcare accessibility through Theranos; she built a real business with real value; she has not cashed in her shares despite opportunities to do so; she acknowledged and sought to correct the many mistakes she and others in the company had made; and she has made efforts outside of Theranos to help others,” the memo reads.

Holmes will have the opportunity to make a statement in court. The judge can also allow the victims of Holmes and Theranos to talk about how they were affected by the fraudulent actions.

“And then the judge will make a decision, probably then, right there,” said Cole Schotz, criminal defense attorney. Michael Weinstein said.

If Judge Davila sentences Holmes to jail, she could be taken into custody immediately. Alternatively, his lawyers may request, although this is not guaranteed, additional time to appear in police custody. Lawyers said Holmes, who is pregnant with her second child, may have time to give birth before she is forced to submit to incarceration, if she is ordered to serve her sentence.

Holmes’ co-defendant Ramesh “Sunny” Balwani, who served as Theranos’ chief operating officer and was Holmes’ boyfriend while she ran the company, was found guilty of similar criminal fraud charges in related to his role at Theranos. In July, a separate jury returned guilty verdicts against Balwani on 12 counts of wire fraud and conspiracy.

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.

Friday’s hearing is scheduled to begin at 1 p.m. Eastern Time.

Alexis Keenan is a legal reporter for Yahoo Finance. Follow Alexis on Twitter @alexiskweed.

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