Prosecutors seek 15-year jail term as Theranos’s Elizabeth Holmes faces sentencing

A US federal judge on Friday will decide whether disgraced Theranos founder and former CEO Elizabeth Holmes should serve a lengthy prison sentence for duping investors and endangering patients while peddling a bogus blood-testing technology.

Holmes’s sentencing in the same San Jose, Calif., courtroom where she was convicted on four counts of investor fraud and conspiracy in January marks a climactic moment in a saga that has been dissected in an HBO documentary and an award-winning Hulu TV series about her meteoric rise and mortifying downfall.

US District Judge Edward Davila will take center stage as he weighs the federal government’s recommendation to send Holmes, 38, to federal prison for 15 years. That’s slightly less than the maximum sentence of 20 years she could face, but far longer than her legal team’s attempt to limit her incarceration to no more than 18 months, preferably served in home confinement. Her lawyers have argued that Holmes deserves more lenient treatment as a well-meaning entrepreneur who is now a devoted mother with another child on the way.

Prosecutors also want Holmes to pay $804 million US in restitution. The amount covers most of the nearly $1 billion US that Holmes raised from a list of sophisticated investors that included software magnate Larry Ellison, media mogul Rupert Murdoch and the Walton family behind Walmart.

While wooing investors, Holmes leveraged a high-powered Theranos board that included former US Defense Secretary James Mattis, who tested against her during her trial, and two former US secretaries of state, Henry Kissinger and the late George Shultz, whose son submitted a statement blasting Holmes for concocting a scheme that played Shultz “for the fool.”

Pregnant with 2nd child

Davila’s judgment—and Holmes’s reporting date for a potential stint in prison—could be affected by the former entrepreneur’s second pregnancy in two years. After giving birth to a son shortly before her trial started last year, Holmes became pregnant at some point while free on bail this year.

Although her lawyers didn’t mention the pregnancy in an 82-page memo submitted to Davila last week, the pregnancy was confirmed in a letter from her current partner, William “Billy” Evans, that urged the judge to be merciful.

Holmes leaves federal court in San Jose, Calif., on Jan. 3 after she was convicted of fraud for turning her blood-testing startup Theranos into a sophisticated sham that duped billionaires and other unwitting investors into backing a seemingly revolutionary company whose medical technology never worked as promised. (Nic Coury/The Associated Press)

The pregnancy makes it more likely Davila will be criticized no matter what sentence he imposes, predicted Amanda Kramer, a former federal prosecutor.

“There is a pretty healthy debate about what kind of award is needed to effect general deterrence to send a message to others who are thinking of crossing that line from sharp salesmanship into material misrepresentation,” Kramer said.

In that 12-page letter, which included pictures of Holmes doting on their one-year-old son, Evans mentioned that Holmes participated in a Golden Gate Bridge swimming event earlier this year while pregnant. He also noted Holmes suffered through a case of COVID-19 in August while pregnant. Evans didn’t disclose Holmes’ due date in his letter.

‘Spectacular fame’

Federal prosecutor Robert Leach emphatically declared Holmes deserves a severe punishment for engineering a scam that he described as one of the most egregious white-collar crimes ever committed in Silicon Valley. In a scathing 46-page memo, Leach told the judge he has an opportunity to send a message that curbs the hubris and hyperbole unleashed by the tech boom of the past decade.

Holmes “preyed on hopes of her investors that a young, dynamic entrepreneur had changed health care,” Leach wrote. “And through her deceit, she attained spectacular fame, adoration and billions of dollars of wealth.”

Even though Holmes was acquitted by a jury on four counts of fraud and conspiracy tied to patients who took Theranos blood tests, Leach also asked Davila to factor in the health threats posed by Holmes’s conduct.

Holmes’s lawyer, Kevin Downey, painted her as a selfless visionary who spent 14 years of her life trying to revolutionize health care with a technology that was supposed to be able to scan for hundreds of diseases and other foods with just a few drops of blood.

Although evidence submitted during her trial showed the tests produced wildly unreliable results that could have steered patients in the wrong direction, her lawyers asserted Holmes never stopped trying to perfect the technology until Theranos collapsed in 2018. They also pointed out that Holmes never sold any of her Theranos shares — a stake valued at $4.5 billion in 2014 when Holmes was being hailed as the next Steve Jobs on the covers of business magazines.

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