The Theranos denouement: ‘Humble, hardworking’ Elizabeth Holmes sentencing Friday; prosecution and defense paint different pictures (updated)

Elizabeth Holmes finally faces the music and perhaps the mercy of Judge Edward Davila on Friday, 10 am PT. Convicted on four felony counts of 11 and defrauding investors of over $144 million, the prosecution has called for Holmes to go to Federal prison for 15 years of the maximum 20, plus three years of supervised release. Restitution of $804 million would go to investors plus a fine of $250,000 for each charge. In US Attorney Stephanie Hinds’ 46-page pre-sentencing memo to Judge Davila, the prosecution states that she was blinded by ambition. “She repeatedly chose lies, hype and the prospect of billions of dollars over patient safety and fair dealing with investors. Elizabeth Holmes’ crimes were not failing, they were lying—lying in the most serious context, where everyone needed her to tell the truth.” They called her crimes “extraordinarily serious, among the most substantial white collar offenses Silicon Valley or any other district has seen.” and that her actions damaged the trust and integrity that is needed for Silicon Valley investors to trust companies to fund ideas before profits are seen. The cut: “She stands before the Court remorseless. She accepts no responsibility. Quite the opposite, she insists she is the victim.”

In all fairness, her defense has relentlessly painted Holmes as exactly that, from young, naive, battered, psychologically and sexually abused Trilby to Sunny Balwani’s Svengali. Their argument in their 82-page sentencing memo argues for mitigation to the point of no sentence at all, or a minimal sentence of no more than 18 months in home confinement plus her continuing service work. Supporting her character as a ‘humble, hardworking, and compassionate woman who deeply wants to give what she can to the world” and not motivated by greed or personal gain were character testimony letters from Billy Evans, her partner, as one would expect, but also from some unexpected places: the Senator from this Editor’s home state of New Jersey, Cory Booker, who knew her starting in 2012, and a former EPA head, William Reilly, who worked with Holmes’s father back in the George H.W. Bush administration. Their memo cited 130 letters.

Also revealed by the defense: Holmes is not only the mother of a year-old son but also pregnant. Evans’ letter contains another heartbreaking fact. Her beloved ‘wolf’ of a husky dog, Balto, was tragically killed by a mountain lion while she and Evans were living in seclusion in a rural area. While they lived in San Francisco, according to him, they were harassed by reporters, ordinary people, and threatening letters, so they hit the road for at least 6 months living in a camper.

Holmes’ ability to pay $804 million to the likes of Safeway and Walgreens seems to be a bit of a reach, as Holmes never cashed out of Theranos stock–at its peak valued at  $4.5 billion–is unemployed with no prospects, and is widely assumed to be, as they say, flat broke as are her parents. As to her sentence, what is widely expected is a multi-year sentence. If that happens, the defense will request that she remains free on bail (a motion for stay) while the filing to the Federal Appeals Court is made, a process that can take a year or more from filing to a decision. 

Judge Davila’s record has been to take in all the circumstances and to be measured in sentencing. After several years, he is intimately familiar with Theranos to the likely point of dreaming about it at night. Factors he may consider in sentencing, start of her term, where it will be served, restitution and fines: lack of flight risk, Holmes’ young child, and her current condition both physical and financial. Savvy court watchers have noted that if Federal law enforcement is in the courtroom, Holmes may initially be taken to prison and held, then freed on bail pending appeal. The jury convicted her on only four out of 11 counts (and threw out the 12th), but it remains that the prosecution proved and the jury decided that she was fully capable of engineering fraud, not once but several times, leaving Balwani’s Mesmerizing Influences aside.

Balwani’s own sentencing on 12 charges, with the same maximum of 20 years in Federal prison, is scheduled for 7 December, Pearl Harbor Day, at 10 am PT.

The Mercury News articles, while thorough, are paywalled: 11 November (defense memo), 11 November (Billy Evans letter), 14 November (prosecution filing). FierceBiotech, MedCityNews

The US Attorney, Northern District of California summary: U.S. v. Elizabeth Holmes, et al.  District Court documents here.

NBC Bay Area will cover the sentencing live here at 10 am PT, 1 pm ET, 6 pm GMT.

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