The entrepreneur was found guilty in January of lying to investors about the real progress of her company.
Former Silicon Valley star Elizabeth Holmes was sentenced to just over 11 years in prison on Friday, November 18, for fraud in the management of her startup Theranos, which promised to revolutionize health diagnostics. The defendant, pregnant and the mother of a baby boy, has until April 27 to begin her sentence, Judge Edward Davila said.
In January, after a four-month media trial in a San Jose, California court, she was found guilty of lying to investors about her company’s true progress. “I accept my responsibility for Theranos before you,” she said at Friday’s hearing, sobbing just before sentencing. “I’m devastated by my mistakes,” she added. “In the past few years, not a day has gone by that I haven’t been deeply touched by what people have gone through because of my mistakes.”
When the verdict was announced, the partner and parents of the former leader, now 38, came to hug them. Prosecutors had asked for fifteen years in prison and wanted her to reimburse her victims for $800 million. The defense had pleaded for a maximum sentence of one and a half years. Her attorney said Friday she would appeal.
“Manipulation and lies used to do business”
“The tragedy in this case is that Ms. Holmes is brilliant” and that she has managed to find a place for herself in a world “dominated by male egos,” the judge noted. But there is also sufficient evidence of “manipulations and lies used in business dealings,” he added. The judge stated that he failed to consider Elizabeth Holmes’ apparent disregard for the potential risks to patients, since she was acquitted of the fraud charges against her. The fact that she failed to acknowledge her responsibility by pleading not guilty works against her, he said.
The judge also noted that he did not include all of the losses incurred as a result of his company’s fall, only a portion of the losses accumulated by 10 investors, namely $121 million. The amount it has to return to investors will be decided at a later date. She will not be punished. Prosecutor Jeff Schenk argued in court that the verdict should reflect the idea that “the end does not justify the means.” It’s not “punishment for Ms. Holmes’ dream,” but punishment for “the decision to deceive investors,” he said.
The young woman’s attorney, Kevin Downey, countered that his client was never motivated by greed: she could have gotten rich but never sold stock to use the money to build her technology.
“I thought it was the next Apple”
Elizabeth Holmes founded Theranos in 2003 at the age of just 19 with the idea of making a blood diagnostic tool that would be quick, painless, and cheaper than traditional labs. With the help of a very elaborate story and performance, in a few years she had managed to gain the trust of luminaries and raise funds from reputable investors who were attracted by the profile of this young woman, a rarity in the male world of California engineering. “I thought it was the next Apple,” summarized Adam Rosendorff, who was once the company’s lab manager, during the trial.
The story was beautiful. As a child, she hated injections. So she set out to invent a machine that would perform hundreds of blood diagnoses with a single drop of blood from a fingertip. Media magnate Rupert Murdoch, ex-Secretary of State Henry Kissinger and Donald Trump’s Defense Secretary Jim Mattis were once convinced of Elizabeth Holmes’ plans. At its peak, the company was valued at nearly $10 billion.
But in 2015, the scandal came to light when the Wall Street Journal revealed that the machine never worked as it was supposed to. Ramesh “Sunny” Balwani, Elizabeth Holmes’ former partner and chief operating officer of Theranos, was tried separately and also found guilty of fraud. His sentence is due on December 7th.