Theranos founder Elizabeth Holmes loses bid to avoid prison, required to pay $452M in restitution
Disgraced Theranos CEO Elizabeth Holmes appears to be soon bound for prison after an appeals court Tuesday rejected her bid to remain free while she attempts to overturn her conviction in a blood-testing hoax that brought her fleeting fame and fortune.
In another ruling issued late Tuesday, US District Judge Edward Davila ordered Holmes to pay $452 million in restitution to the victims of her crimes.
Holmes is being held jointly liable for that amount with her former lover and top Theranos lieutenant, Ramesh “Sunny” Balwani, who is already in prison after being convicted on a broader range of felonies in a separate trial.
The Ninth Circuit Court of Appeals decision on Holmes’ attempt to avoid prison comes nearly three weeks after she deployed a last-minute legal maneuver to delay the start of her 11-year sentence.
She had been previously ordered to surrender to authorities on April 27 by Davila, who sentenced her in November.
Davila will now set a new date for Holmes, 39, to leave her current home in the San Diego area and report to prison.
The punishment will separate Holmes from her current partner, William “Billy” Evans, their 1-year-old son, William, and 3-month-old daughter, Invicta. Holmes’ pregnancy with Invicta — Latin for “invincible,” or “undefeated” — began after a jury convicted her on four counts of fraud and conspiracy in January 2022.
Davila has recommended that Holmes serve her sentence at a women’s prison in Bryan, Texas.
Who is Elizabeth Holmes and why is she going to jail?
Elizabeth Holmes is the founder and former CEO of Theranos — and a convicted fraudster.
In 2018, Holmes, along with Theranos’ former president Ramesh Balwani, encouraged doctors and patients to use the company’s blood testing services when they knew Theranos was incapable of consistently producing accurate and reliable results, according to the indictment.
The Securities and Exchange Commission pressed fraud charges against Holmes in March 2018, accusing Holmes of defrauding investors of more than $700 million through made-up claims.
Theranos and 34-year-old Holmes ran “an elaborate, years-long fraud in which they exaggerated or made false statements about the company’s technology, business and financial performance,” according to the SEC.
In January 2022, the mother-of-two was convicted of one count of conspiracy to commit fraud and three counts of committing fraud to individual investors, totaling more than $140 million.
Holmes reported to the women’s prison camp FPC Bryan in Texas on Tuesday to begin her 11-year sentence after attempting to overturn her conviction.
It hasn’t been disclosed whether the federal Bureau of Prisons accepted Davila’s recommendation or assigned Holmes to another facility.
Balwani, 57, began a nearly 13-year prison sentence in April after being convicted on 12 counts of fraud and conspiracy last July.
He was incarcerated in a Southern California prison last month after losing a similar effort to remain free on bail while appealing his conviction.
The former Silicon Valley darling was convicted in January on three charges of wire fraud and one conspiracy charge after a jury found she criminally deceived investors over false claims that her company’s blood-testing technology could diagnose diseases with just a few drops of blood.
She was originally indicted on 11 charges, acquitted of four, and the jury could not reach a verdict on the remaining three.
Prosecutors had asked that Holmes serve 15 years behind bars for her crimes, calling the case “one of the most substantial white collar offenses Silicon Valley or any other District has seen.”
Holmes’ defense team pleaded for leniency from the judge, arguing that she is a daughter and a mother who would be able to do good in society moving forward.
More than 130 individuals sent letters to the judge supporting her character, some with significant influence – including Senator Cory Booker.
The verdict against Holmes came after 46 days of trial testimony and other evidence that cast a spotlight on a culture of greed and hubris that infected Silicon Valley as technology became a more pervasive influence on society and the economy during the past 20 years.
The trial’s most riveting moments unfolded when Holmes took the witness stand to testify in her own defense.
Besides telling how she founded Theranos as a teenager after dropping out of Stanford University in 2003, Holmes accused Balwani of abusing her emotionally and sexually.
She also asserted she never stopped believing Theranos would revolutionize healthcare with a technology that she promised would be able to scan for hundreds of diseases and other potential problems with just a few drops of blood.
While pursuing that audacious ambition, Holmes raised nearly $1 billion from a list of well-heeled investors that included Oracle co-founder Larry Ellison and media mogul Rupert Murdoch.
The investors all lost their money after a Wall Street Journal investigation and regulatory reviews exposed dangerous flaws in Theranos’ technology.
In his restitution ruling, Davila determined that Holmes and Balwani should pay Murdoch $125 million — by far the most among the investors listed in his order.
The restitution also requires the co-conspirators in the Theranos scam to pay $40 million to Walgreens, which became an investor in the startup after agreeing to provide some of the flawed blood tests in its pharmacies in 2013.
Another $14.5 million is owed to Safeway, which has also agreed to be a Theranos business partner before backing out.
Holmes’s lawyers have been fighting her conviction on grounds of alleged mistakes and misconduct that occurred during her trial.
They have also contended errors and abuses that biased the jury were so egregious that she should be allowed to stay out of prison while the appeal unfolds — a request that has now been rebuffed by both Davila and the Ninth Circuit Court of Appeals.
