Elizabeth Holmes, the disgraced founder of failed blood-testing start-up Theranos, has been sentenced to more than 11 years in prison for what prosecutors called one of the “most substantial” white collar crimes ever seen in the US.
The 135-month sentence handed down Friday marks the climactic point in a saga that ignited a debate on the US tech sector’s “fake it ‘til you make it” ethos and the investment community’s willingness to embrace charismatic company founders.
Holmes, 38, who is pregnant with her second child, cried as she addressed the court on Friday. “I loved Theranos. It was my life’s work,” she said. “I am devastated by my failings.”
After the sentence was handed down, Holmes, who wore black, embraced her husband Billy Evans. She left out of a court side door, evading throngs of press awaiting her exit. She is scheduled to begin serving her sentence in April.
“Her sentence reflects the audacity of her massive fraud and the staggering damage she caused,” US attorney Stephanie Hinds said in a statement.
Holmes was found guilty in January on four counts of defrauding investors, following a trial that lasted almost four months.
Jurors were told of how the centrepiece of Theranos, the Edison machine, was incapable of performing the groundbreaking blood tests Holmes and her company had promised. Prosecutors showed evidence they said proved she falsified endorsements in order to win investor and partner approval, a deception that led to Theranos raising $900mn in funding at a private valuation of $9bn.
Prosecutors said investors deserved full restitution for their outlays, likening Theranos to an “aeroplane flying 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 that aeroplane. There was no way to escape. When the company went out of business, none of them took anything from their investment.”
Holmes had faced a maximum of 20 years in prison. The Department of Justice, calling her “blinded” by ambition, had asked Judge Edward Davila to impose a 15-year prison sentence as well as millions of dollars in restitution to her defrauded investors.
“Holmes’ crimes were not 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 the final restitution to 10 defrauded investors, including Rupert Murdoch. Judge Davila calculated the amount of money lost to be about $121mn, although that could change.
Holmes’s attorneys said in a sentencing memo that 18 months of house arrest, plus community service, was appropriate.
They billed her a well-intentioned entrepreneur with honourable goals, and a determined woman with an unwavering belief she could achieve what Theranos had set out to do: create a game-changing device that could carry out a number of sophisticated diagnostic tests on only one small droplet of blood.
“We acknowledge that this may seem a tall order, given the public perception of this case — especially when Ms Holmes is viewed as the caricature, not the person; when the company is viewed as a house of cards, not as the ambitious, inventive, and indisputably valuable enterprise it was; and when the media vitriol for Ms Holmes is taken into account,” her defence lawyers wrote.
In Friday’s hearing, defence attorney Kevin Downey noted that Holmes had not attempted to sell her shares in the company, in contrast with other high-profile individuals convicted of major fraud.
“Those are the cases with the yachts, the planes, the parties and the large mansions,” Downey said. “What did this woman do? She built technology.”
After securing lucrative contracts with Walgreens and others, the promise of Holmes’s Edison machine quickly unravelled. The company began using off-the-shelf technology made by the likes of Siemens to carry out tests instead, and sometimes delivered incorrect results.
It was not until Theranos employee-turned-whistleblower Tyler Shultz, the nephew of former US secretary of state and Theranos director George Shultz, tipped off The Wall Street Journal that the matter came to light.
Reporter John Carreyrou’s book about Holmes and Theranos, Bad Blood, became a New York Times bestseller and inspired a host of dramatic TV reinterpretations, spurred on by Holmes’s distinctive Steve Jobs-inspired look and mannerisms.
Shultz’s father Alex addressed the court on Friday, saying Holmes had hired a private investigator to follow Tyler, and that Tyler had slept with a knife under his pillow out of fear. “It was a gruelling experience to go through,” Alex Shultz said. “My family home was desecrated by Elizabeth.”
Holmes’s defence said the public’s 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 in which they both shared a packet of almonds. She “has within her a sincere desire to help others, to be of meaningful service, and possesses the capacity to redeem herself”, he wrote.
In a separate trial, Holmes’s former boyfriend and Theranos chief operating officer Ramesh “Sunny” Balwani was found guilty for his part, convicted on 12 counts of fraud. He is due to be sentenced in early December.