Business

US: Tech Star and Founder Jailed For Fraud

Published

2 years ago

Nov 19, 2022.

Elizabeth Holmes, a former Silicon Valley tech CEO, has been sentenced to over 11 years for fraud.

Eko Hot Blog reports that her company Theranos was once valued at $9bn (£7.5bn). She falsely claimed the firm’s technology could diagnose disease with just a few drops of blood.

EDITOR’S PICKS

Holmes, 38, who is pregnant, tearfully told the court she felt “deep pain” for those who were misled by the start-up.

She was found guilty in January of duping investors and lying about the technology after a three-month trial.

Holmes is expected to appeal against the sentence, which was handed down on Friday in a California court.

The sentencing has been widely viewed as a test of how seriously the justice system takes corporate fraud in the tech sector.

Once hailed as the “next Steve Jobs”, Holmes was at one time said to be the world’s youngest self-made billionaire.

She launched Theranos after dropping out of Stanford University at age 19, and its value rose sharply after the company claimed it could bring about a revolution in the diagnosing of disease.

But the technology Holmes touted did not work at all and – awash in lawsuits – the company was dissolved by 2018.

At Holmes’ trial in San Jose, California, prosecutors said she knowingly misled doctors and patients about the Theranos flagship product – the Edison machine – which the company claimed could detect cancer, diabetes and other conditions using just a few drops of blood.

They also accused Holmes of vastly exaggerating the firm’s performance to its financial backers.

Jurors ultimately found her guilty on four counts of fraud, with a maximum sentence of 20 years in prison. But they found her not guilty on four other charges, and failed to reach a verdict on three more.

Before Judge Edward Davila issued his sentence on Friday, Holmes read a speech to the court in which she tearfully apologised to investors and patients.

“I am devastated by my failings. I have felt deep pain for what people went through, because I failed them,” she said.

“I regret my failings with every cell of my body,” she continued.

According to reporters in court, the judge referred to Holmes as “brilliant”, and told her: “Failure is normal. But failure by fraud is not OK.”

He also questioned whether her scheme was influenced by “intoxication with fame”. He described her case as a “cautionary tale” for other Silicon Valley executives.

She is required to surrender to begin serving her sentence on 27 April.

Holmes and Ramesh “Sunny” Balwani, her former business partner and lover, were charged in 2018 of wire fraud and conspiracy to commit wire fraud. Balwani, who was tried separately, was found guilty of fraud this summer. He will be sentenced next month.

Prosecutors requested that she face 15 years in prison and pay some $800m in restitution to investors, arguing hers was “one of the most substantial white collar offences Silicon Valley or any other District has seen”.

But Holmes’ defence team – who claim she was well-intentioned and trying to help people – said she should spend 18 months under house arrest.

Over 130 friends, family, and former Thernaos employees wrote to the judge to appeal for clemency.

Among those pleading for a light sentence was 2020 presidential candidate and New Jersey Democratic Senator Cory Booker, who wrote that Holmes could “despite mistakes, make the world a better place.”

The group noted that Holmes is a young mother. She had a son in July 2021 and is currently pregnant with her second child.

The wife of Theranos’ former chief scientist, who died by suicide in 2013 after telling her that the technology did not work, continues to blame Holmes for his death.

Rochelle Gibbons, the widow of Ian Gibbons, said in January that she got “a little satisfaction” from Holmes’ conviction.

“Satisfaction in knowing she’s going to suffer because, believe me, I’ve suffered and Ian suffered,” she said.