Elizabeth Holmes, the disgraced founder of failed blood-testing startup Theranos, has been sentenced to more than 11 years in prison for what prosecutors have called one of the ‘biggest’ white-collar crimes ever seen in the United States.
Friday’s 135-month sentence marks the culmination of a saga that has sparked a debate over the US tech industry’s ‘fake it ’til you make it’ philosophy and the investment community’s willingness to embrace charismatic business founders.
Holmes, 38, who is pregnant with her second child, wept as she addressed the court on Friday. “I loved Theranos. It was my life’s work,” she said. “I am devastated by my failures.”
After the sentencing, Holmes, who was wearing black, kissed her husband Billy Evans. She exited through a courtyard door, avoiding the crowd of press waiting for her exit. She is expected to begin serving her sentence in April.
“His conviction reflects the audacity of his massive fraud and the mind-boggling damage it caused,” U.S. Attorney Stephanie Hinds said in a statement.
Holmes was found guilty in January of four counts of defrauding investors, following a trial that lasted nearly four months.
Jurors were told how Theranos’ centerpiece, the Edison machine, was unable to perform the groundbreaking blood tests that Holmes and company had promised. Prosecutors showed evidence they said proved she forged endorsements in order to gain approval from investors and partners, a deception that led Theranos to raise $900 million in funding for a private valuation of $9 billion.
Prosecutors said the investors deserved full restitution for their expenses, likening Theranos to a “flying plane with a broken engine.”
“The writing was on the wall, it was going to fail,” prosecutor John Bostic said during Friday’s sentencing hearing. “Investors were locked in this plane. There was no way to escape. When the company went out of business, none of them got anything out of their investment. »
Holmes had faced a maximum of 20 years in prison. The Justice Department, calling her “blinded” by ambition, had asked Judge Edward Davila to impose a 15-year prison sentence and millions of dollars in restitution on her defrauded investors.
“Holmes’ crimes weren’t failing, they were lying — lying in the most serious context, where everyone needed her to tell the truth,” prosecutors wrote.
A hearing will be held to determine final restitution to 10 defrauded investors, including Rupert Murdoch. Judge Davila calculated the amount of money lost to be around $121 million, although that could change.
Holmes’ attorneys said in a sentencing note that 18 months of house arrest, plus community service, was appropriate.
They presented her as a well-meaning entrepreneur with honorable goals and a determined woman with an unwavering belief that she could achieve what Theranos set out to do: create a revolutionary device capable of performing a number of diagnostic tests. sophisticated on a single drop of blood.
“We recognize that this may seem like a tall order, given the public perception of this case – particularly when Ms Holmes is seen as the caricature, not the person; when the company is seen as a house of cards, and not the ambitious, inventive and indisputably valuable company that it was; and when the media vitriol of Ms. Holmes is taken into account, ”wrote her defense lawyers.
During Friday’s hearing, defense attorney Kevin Downey noted that Holmes did not attempt to sell his shares in the company, unlike other figures convicted of major fraud.
“These are the cases with yachts, airplanes, parties and large mansions,” Downey said. “What did this woman do?” She built the technology.
After securing lucrative contracts with Walgreens and others, the promise of Holmes’ Edison machine soon dawned. The company started using off-the-shelf technology made by Siemens to perform tests instead, and sometimes provided incorrect results.
It wasn’t until Theranos employee-turned-whistleblower Tyler Shultz, the nephew of former US Secretary of State and Theranos director George Shultz, informed The Wall Street Journal that the matter came to light.
Journalist John Carreyrou’s book on Holmes and Theranos, Bad blood, became a New York Times bestseller and inspired a slew of dramatic television reinterpretations, spurred by Holmes’ signature look and mannerisms inspired by Steve Jobs.
Shultz’s father, Alex, addressed the court on Friday, claiming that Holmes had hired a private detective to follow Tyler and that Tyler had slept with a knife under his pillow out of fear. “It was an exhausting experience to go through,” said Alex Shultz. “My family home has been desecrated by Elizabeth.”
Holmes’ defense said the public interest should not be used against her, noting that more than 130 people “who actually know Ms Holmes” had written to the court in support.
Among them was Democratic Senator Cory Booker, who bonded with fellow vegan Holmes over a dinner party where they both shared a packet of almonds. She “carries within her a sincere desire to help others, to render meaningful service, and possesses the ability to redeem herself,” he wrote.
In a separate trial, Holmes’ former boyfriend and Theranos COO Ramesh “Sunny” Balwani was found guilty for his part, found guilty of 12 counts of fraud. He is due to be sentenced in early December.