Former Theranos CEO Elizabeth Holmes awaits sentencing on Friday, 10 months after the verdict.Defrauding investors in a failed blood test company.
The sentencing hearing in San Jose, California, began shortly after 10 a.m. PST, and was continuing as the clock approached noon — an unusually long period for what is normally a fairly procedural hearing.
Holmes, 38, founded Theranos in 2003, and it quickly grew into one of the most popular startups in the world, with a maximum valuation of $10 billion. But a series of revelations by the Wall Street Journal have raised questions about the effectiveness of the company’s technology and business practices, prompting multiple investigations by federal and state officials.
The ruling, to be handed down by Judge Edward Davila of the Northern District of California, will be seen as a sign of how seriously wrongdoers in the tech startup world can expect to be punished when they misrepresent a company’s capabilities.
“Especially in a highly publicized case, you want the public to know that if you defraud investors or anyone else, you’re looking at serious prison time,” said Carrie Cohen, global co-chair of white collar investigations and advocacy. Practice group at the law firm of Morrison Foerster.
“Given the facts that all came to light during the trial, I suspect she is looking at a significant prison term, perhaps closer to what the government has requested,” Cohen said.
In January, Holmes was found guilty of four counts of murder. A jury acquitted her of four other counts of harming patients who used a Theranos blood test machine, and could not agree on the other counts. Investors in Theranos, a group that included media mogul Rupert Murdoch and software billionaire Larry Ellison, lost $144 million when the startup defaulted.
Federal prosecutors have requested a 15-year prison sentence and $800 million payment, calling Holmes’ crimes “among the most serious white-collar crimes ever seen in Silicon Valley or any other area,” according to court filings this week.
Holmes’ attorneys asked that she not be imprisoned, arguing that she did not pose a danger to society, had debts she likely could not pay, and had already suffered from “cruel, inhumane” media coverage of Theranos’ downfall. They presented testimony from 130 people, including friends, family, and even Senator Cory Booker, attesting to Holmes’ good interest.
Holmes has a one-year-old son and appears to be pregnant at her latest hearing. Cohen said both are factors that can lead a judge to be lenient in sentencing.
Holmes testified that she was traumatized after being raped in college, and that she suffered sexual and emotional abuse at the hands of 19-year-old Theranos’ former COO, Sunny Balwani. While the duo ran Theranos, Holmes asserted that Balwani controlled her schedule, diet, and presentation to others, and frequently belittled and criticized her.
Balwani’s lawyers denied the allegations. found guilty bin July and the verdict is scheduled for December 7.
Holmes said she plans to appeal her conviction. If she is sentenced to prison, one of the points of contention can be when she begins her sentence. A judge can delay the start of her term until after Holmes is born. Cohen said she can also bail to stay out of jail while she appeals the sentence.
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