Fraud

Theranos founder Elizabeth Holmes jailed for fraud

Theranos founder Elizabeth Holmes has been sentenced to over 11 years in prison for defrauding investors in her blood testing startup that was once valued at $9bn (£7.5bn).

Holmes seen arriving to court on Friday
Image caption,Holmes seen arriving to court on Friday with family members

Theranos founder Elizabeth Holmes has been sentenced to over 11 years in prison for defrauding investors in her blood testing startup that was once valued at $9bn (£7.5bn).

The former Silicon Valley star falsely claimed the technology could diagnose disease with just a few drops of blood.

Holmes, 38, who is pregnant, tearfully told the court she felt “deep pain” for those misled by the scam.

She was found guilty in January after a three-month trial.

Holmes is expected to appeal against the sentence, which was handed down on Friday in a California court.

The sentencing has been widely viewed as a test of how seriously the justice system takes corporate fraud in the tech sector.

Once hailed as the “next Steve Jobs”, Holmes was at one time said to be the world’s youngest self-made billionaire.

She launched Theranos after dropping out of Stanford University at age 19, and its value rose sharply after the company claimed it could bring about a revolution in the diagnosing of disease.

But the technology Holmes touted did not work and – awash in lawsuits – the company was dissolved by 2018.

At Holmes’ trial in San Jose, California, prosecutors said she knowingly misled doctors and patients about Theranos’ flagship product – the Edison machine – which the company claimed could detect cancer, diabetes and other conditions using just a few drops of blood.

They also accused Holmes of vastly exaggerating the firm’s performance to its financial backers.

Jurors ultimately found her guilty on four counts of fraud, with a maximum sentence of 20 years in prison. But they found her not guilty on four other charges, and failed to reach a verdict on three more.

Before Judge Edward Davila issued his sentence on Friday, Holmes read a speech to the court in which she tearfully apologised to investors and patients.

The rise and fall of Elizabeth Holmes

“I am devastated by my failings. I have felt deep pain for what people went through, because I failed them,” she said.

“I regret my failings with every cell of my body,” she continued.

The judge referred to Holmes as a “brilliant” entrepreneur, and told her: “Failure is normal. But failure by fraud is not OK.”

He questioned whether her scheme was influenced by “intoxication with fame” and described her case as a “cautionary tale” for other Silicon Valley executives.

She is required to surrender to begin serving her sentence on 27 April.

Holmes and Ramesh “Sunny” Balwani, her former business partner and lover, were charged in 2018 with wire fraud and conspiracy to commit wire fraud. Balwani, who was tried separately, was found guilty of fraud this summer. He will be sentenced next month.

Prosecutors requested that she face 15 years in prison and pay some $800m in restitution to investors, including several high-profile figures such as former US Secretary of Defense James Mattis, who testified against her at trial, and software tycoon Larry Ellison.

Snapshots show Holmes enjoying her freedom since her conviction in June
Image caption,Snapshots shown in court show Holmes enjoying her freedom since her conviction in June

They argued that hers was “one of the most substantial white-collar offences Silicon Valley or any other District has seen”.

But Holmes’ defence team – who claim she was well-intentioned and trying to help people – said she should spend 18 months under house arrest.

The judge on Friday determined that she actually caused $121m in losses to investors, including Rupert Murdoch, the family that owns Walmart and the CEO of Wells Fargo bank. The amount she will be required to repay will be determined at a later court hearing.

Over 130 friends, family and former Theranos employees wrote to the judge to appeal for clemency.

Among those pleading for a light sentence was 2020 presidential candidate and New Jersey Democratic Senator Cory Booker, who wrote that Holmes could “despite mistakes, make the world a better place”.

The group noted that Holmes is a young mother. She had a son in July 2021 and is currently pregnant with her second child.

It is not known when she is due to give birth. Her lawyers are expected to try to keep her from entering prison until after the baby is born.

If she has to give birth in prison, there are two residential programmes offered by the federal department of prisons, according to the Mercury News.

However, neither is located in California. The facilities allow mothers to live with their babies in prison for up to 30 months.

Her partner Billy Evans, in his sentencing memo to the court, told the judge that he fears for “a future in which my son grows up with a relationship with his mother on the other side of glass armed by guards”.

Incarcerated parents are searched thoroughly before limited visits with their children that permit physical contact. Prisoners have to wait in long queues and pay steep fees to call family members over the phone.

The wife of Theranos’ former chief scientist, who died by suicide in 2013 after telling her that the technology did not work, continues to blame Holmes for his death.

Rochelle Gibbons, the widow of Ian Gibbons, said in January that she got “a little satisfaction” from Holmes’ conviction.

“Satisfaction in knowing she’s going to suffer because, believe me, I’ve suffered and Ian suffered,” she said.

“She has shown no remorse for any of the things she’s done to anyone, nothing.”  

Eileen Lepera, a Silicon Valley secretary who lost a chunk of her life savings by investing in Theranos, told the BBC she was “happy” with the sentence.

“I think it’s fair, considering all the facts of the case,” Ms Lepera said. “She knew it was fraud, and she put people’s lives at risk.”

Source: Theranos founder Elizabeth Holmes jailed for fraud – BBC News

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