She was convicted of four counts of wire fraud and conspiracy to commit wire fraud after a four-month trial that featured testimony and accounts from billionaire investors, endorsements from former US officials and patients who had used the technology of the company. Holmes also took the stand over the course of seven days in emotional testimony defending her actions as being in good faith and denying knowledge of the fraud.
On Friday, Federal District Judge Edward J. Davila sentenced her to prison effective April 27.
“The tragedy of the case is that Ms. Holmes is brilliant,” the judge said in a lengthy statement. She battled herself in a male-dominated world and people gravitated towards her at her vision of her and the thrust of her, she said.
“She made it, she entered that world.” But the world of venture capital is also unforgiving of fraud, she said.
Theranos founder Elizabeth Holmes has been found guilty in a landmark fraud case in Silicon Valley
The conviction is the conclusion of the long-running Holmes saga, during which she was once hailed as a heroine to female entrepreneurs before a dramatic fall to become the infamous founder of a crumpled company. Now the subject of an HBO documentary, a Hulu TV series, a best-selling book and numerous podcasts, Holmes has become one of the most famous CEOs of tech start-ups, as well as a cautionary tale for how badly an ambitious start-up can spiral out of control.
“The message to Silicon Valley and other entrepreneurs is have a dream, invest in it, but be honest with investors about where you stand and don’t commit fraud,” said Jason Linder, a former federal prosecutor who is now a partner at the corporate law firm Mayer Brown and handled the case.
Holmes spoke before the judge passed his sentence. He cried as he read from his notes, breaking the serious composure he’d maintained throughout the day and most of his previous court appearances.
“I take responsibility for Theranos,” he said. “I regret my failures with every cell in my body.”
After her sentence was read, she stood up and was hugged by her family, burying their faces in their shoulders. She then quickly left the courtroom as reporters and her supporters fell silent before walking out.
Later, she and her partner left the courthouse building through a side entrance, dodging a large group of photographers and cameramen who had gathered outside the front door. She hopped into a black SUV, which took off quickly.
Ever since Theranos collapsed, Holmes has kept a low profile. He lives in Silicon Valley with his partner and son, and has volunteered at a crisis line for sexual assault survivors. She is pregnant with their second child.
Holmes founded the company in 2003 when he was just 19 with the promise of developing technology that would eliminate the need to draw test tubes and tubes of blood to run diagnostic tests. He quickly attracted investors, attracting hundreds of millions of dollars in investments from prominent businessmen and political figures including Larry Ellison, Rupert Murdoch and others. Holmes also attracted prominent statesmen such as Henry Kissinger and Jim Mattis to his board of directors.
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Federal prosecutors were asking the judge to sentence her to 15 years in prison, as well as seek the return of about $800 million to repay investors and business partners.
He rented space in a popular Silicon Valley office park and hired hundreds of employees. After her start-up went public with her ambitions about a decade ago, Holmes rose to fame. She was one of the few young female founders in a competitive tech world that often still features white male CEOs.
The media took notice, putting her on the covers of magazines including Forbes, Fortune and Inc., as well as speaking at conferences and giving a TEDMED talk. She signed deals with Walgreens and Safeway to put her technology to her: a tiny blood-testing machine, known as an Edison, that purported to use “nanotainers” that needed only a blood prick to test for everything from cholesterol to ‘herpes.
But internally, it was a different story, according to testimony at his trial last year. Theranos’ proprietary technology could only actually run a dozen tests, and witnesses said it didn’t always run them reliably.
During the trial, former employees testified to growing concern within the company about how quickly Theranos was pushing to use the technology on patients. Former Walgreens and Safeway executives said they didn’t realize Theranos was using other companies’ traditional machines to process blood tests. And former defense secretary Jim Mattis, who served on the company’s board of directors, said he would have had a different view of the company if he had known the limitations of the Theranos blood testing device.
“It would have tempered my enthusiasm significantly,” he said in court.
Whistleblower testifies to blood test technology concerns in Elizabeth Holmes’ trial
A Wall Street Journal investigation in 2015 revealed that Theranos relied on traditional lab testing machines and typical blood draws to perform many of its tests.
Regulators began investigating the company, and Theranos went on the defensive. Holmes’s empire and public image began to crumble.
A federal laboratory regulator has found deficiencies in the company’s laboratory that “pose an immediate danger to patient health and safety.” Holmes was ultimately barred from owning or operating a medical laboratory for at least two years. And in 2018, she was charged with massive fraud by the Securities and Exchange Commission, for which she paid a hefty fine. She left Theranos that year and the company closed soon after.
Holmes was originally accused by her former business partner and romantic Sunny Balwani. He was convicted on 12 counts in a separate trial this summer and is expected to be sentenced in December.
Prosecutor Jeff Schenk told the court during Friday’s hearing that a 15-year sentence was in line with the guidelines for Holmes’ crimes.
“Faced with the choice to allow Theranos to fail, Ms. Holmes chose to defraud her investors,” he said.
Former Theranos executive Sunny Balwani was convicted of 12 counts of fraud
Schenk argued that since Holmes had not apologized for the fraud or admitted to the crime, the court should have given her a serious sentence that would act as a strong deterrent to committing new crimes.
The judge asked if any victims wanted to speak. Alex Shultz, father of Theranos whistleblower Tyler Shultz, stood up and said Holmes hired a private investigator to follow his son when Theranos suspected Tyler Shultz of speaking to the company media.
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“It’s been an exhausting experience to go through. I feel like my family home has been desecrated by Elizabeth and the lawyers,” she said.
Holmes’ defense attorneys asked the judge to sentence her to 18 months in prison, or home confinement plus hours of community service.
Holmes’ defense attorney Kevin Downey said in court she never cashed when given the chance and was stripped of her support network during most of the time she ran Theranos.
Holmes testified on the witness stand for more than 20 hours during last year’s trial, speaking publicly for one of the first times in years and drawing crowds of reporters and members of the public to see her in person. She told the jury that she has always acted in good faith, trying to create and sustain technology that helps people.
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Holmes admitted on the witness stand during his trial that Theranos was running blood tests on modified third-party machines without telling its business partners, and that it added the logos of two pharmaceutical companies to studies the company sent to investors. He said he didn’t mean to intentionally deceive them.
“They weren’t interested in today or tomorrow or next month,” she said. “They were interested in what kind of change we could make.”
Former Defense Secretary Jim Mattis testifies about his time on the Theranos board during the trial of Elizabeth Holmes
Balwani, Holmes’ former partner, was charged alongside Holmes before her case was later dropped when Holmes alleged he had been abusing her for years. Balwani has denied the allegations.
More than 100 people wrote letters supporting Holmes for her sentencing memo, including former employees, investors, and even New Jersey Senator Cory Booker, who said he met Holmes years before she was charged.
“In the intervening years, I’ve always been struck by how our conversations have focused on her wishes to make a positive impact on the world,” he wrote.
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Holmes’s partner Evans also wrote to the judge, seeking to describe a different Holmes than had been portrayed in the media. He praised her “willingness to sacrifice for the greater good is something I really admire about her.”
She also wrote that “earlier this year, while pregnant, she decided she wanted to swim the Golden Gate Bridge,” something that worried Evans.
“Rain or shine she practiced, and her determination was overwhelming the odds against her,” she wrote. “Two weeks before the event she did the time limit, swimming breaststroke. I was wrong, you’d think I’d learned by now not to underestimate her persistence.