Elizabeth Holmes faces possible prison time as sentencing begins
Seven years after an explosive investigation recast Elizabeth Holmes from the eager young entrepreneur with a skyrocketing fortune to the possible fraudster who had misled the masses about her blood-testing start-up, the former Theranos CEO will face a judge who holds her fate in his hands.
The entrepreneur – who started Theranos as a Stanford University dropout and grew it into a company with a peak valuation of $9 billion – was convicted in January of misleading investors that her technology could run hundreds of tests from just a few drops of blood. In reality, the company was relying on technology from other companies to run the tests.
She was convicted of four counts of wire fraud and conspiracy to commit wire fraud after a four-month-long trial that featured testimony and tales of billionaire investors, former U.S. officials' endorsement and patients who had used the company's technology. Holmes also took the stand over the course of seven days in emotional testimony defending her actions as being in good faith and denying that she was aware of the fraud.
Holmes will appear in a drab courtroom in the heart of Silicon Valley Friday at a federal sentencing hearing where federal prosecutors have asked the judge to sentence her to 15 years in prison, as well as require a fine of $800 million to pay back investors and business partners.
"Her reality distortion field put, and will continue to put, people in harm's way," prosecutors wrote in memo to the judge. "She stands before the Court remorseless. She accepts no responsibility. Quite the opposite, she insists she is the victim. She is not."
Representatives for Holmes did not respond to a request for comment. Since Theranos crumbled, Holmes has kept a low profile. She lives in Silicon Valley with her partner and son, and has been volunteering at a crisis line for sexual assault survivors. She was pregnant at a hearing in San Jose last month.
Holmes started the company in 2003 when she was just 19 years old with the promise to develop technology that would eliminate the need for drawing tubes and tubes of blood to run diagnostic tests. She quickly drew in investors, attracting hundreds of millions of dollars in investment from prominent businesspeople and political figures including Larry Ellison, Rupert Murdoch and others. Holmes also attracted big-name statesmen such as Henry Kissinger and Jim Mattis to her board of directors.
She leased space in a famed Silicon Valley office park and hired hundreds of employees. After her start-up went public with its ambitions roughly a decade ago, Holmes soared to fame. She was one of the few young female founders in a competitive tech world that still often features White, male CEOs. The media took notice, putting her on the covers of magazines including, Forbes, Fortune and Inc. as well as speaking at conferences and giving a TEDMED Talk. She inked deals with Walgreens and Safeway to put her technology – a small blood-testing machine, known as the Edison, that purported to use "nanotainers" that needed just a finger prick's worth of blood to test for everything from cholesterol to herpes.
But internally, it was a different story, according to testimony at her trial last year. Theranos's proprietary technology could in reality only run only about a dozen tests, and witnesses said it didn't always do those reliably.
During the trial, former employees testified about growing concern within the company about how quickly Theranos was pushing to use the technology on patients. Former Walgreens and Safeway executives said they didn't realize Theranos was using other company's traditional machines to process blood tests. And former defense secretary Jim Mattis, who served on the company's board, said he would have had a different view of the company if he had known the limitations of the Theranos blood-testing device.
"It would have tempered my enthusiasm significantly," he said in court.
A Wall Street Journal investigation in 2015 revealed that Theranos was relying on traditional lab testing machines and typical blood draws to run many of its tests.
Regulators started investigating the company, and Theranos went on the defensive. Holmes's empire and public image began to crumble.
A federal regulator of laboratories found deficiencies at the company's lab that "pose immediate jeopardy to patient health and safety." Holmes was eventually barred from owning or operating a medical lab for at least two years. And in 2018, she was charged with massive fraud by the Securities and Exchange Commission, which she paid a hefty fine to settle. She left Theranos that year and the company shuttered soon after.
She has since been the subject of an HBO documentary, a Hulu TV series, a best-selling book and multiple podcasts.
Holmes testified on the stand for more than 20 hours during the trial last year, speaking publicly for one of the first times in years and drawing a crowd of reporters and members of the public to see her in person. She told the jury that she was always acting in good faith – trying to create and sustain a technology that would help people.
Holmes admitted on the stand that Theranos was running blood tests on modified third-party machines without telling its business partners and that she added the logos of two pharmaceutical companies to studies that the company sent to investors. She said she did not intentionally mean to deceive them.
"They weren't interested in today or tomorrow or next month," she said on the stand. "They were interested in what kind of change we could make."
Throughout the trial, Holmes's lawyers argued she made mistakes as a young CEO but acted with good intentions and believed in the company she was creating.
"Theranos certainly didn't see mistakes as crimes; they saw them as part of the path to success," attorney Lance Wade said at the beginning of the trial.
Holmes's defense lawyers asked the judge to sentence her to 18 months in prison, or home confinement plus community service hours.
"She founded and built Theranos for indisputably good reasons," they wrote to the judge. "She worked tirelessly along with hundreds of brilliant and committed employees to improve access to affordable health information."
Holmes has been trying to get a new trial for months. Holmes's team previously filed three motions for a new trial, all of which were denied by Federal District Judge Edward J. Davila.
One motion to dismiss cited an encounter between a prominent witness in the trial, former Theranos lab director Adam Rosendorff who apparently showed up at Holmes's house and spoke with her partner, Billy Evans.
In a memo about the conversation, Evans said Rosendorff was "desperate" to talk to Holmes and commented that the prosecutors were trying to make everyone look bad.
"And that this was weighing on him, He said he was having trouble sleeping," Evans wrote.
The judge allowed an evidentiary hearing with Rosendorff, but ultimately dismissed the motion.
Holmes's former business and romantic partner Sunny Balwani, was charged together with Holmes before his case was later severed when Holmes alleged he had abused her for years. Balwani has denied the allegations.
Balwani was convicted on all 12 counts of conspiracy and wire fraud he was charged with. His sentencing is scheduled for December.
More than 100 people wrote letters in support of Holmes for her sentencing memo, including former employees, investors and even New Jersey Sen. Cory Booker, who said he met Holmes years before she was charged.
"In the years since, I've always been struck by the way our conversations focused on her desires to make a positive impact on the world," he wrote.
Holmes's partner Evans also wrote to the judge, seeking to describe a different Holmes than had been portrayed in the media. He extolled her "willingness to sacrifice herself for the greater good is something I greatly admire in her."
He also wrote that "earlier this year, while pregnant, she decided she wanted to swim the Golden Gate Bridge," something that concerned Evans.
"Rain or shine she practiced, and her determination was overpowering the odds against her," he wrote. "Two weeks before the event she made the cut off time, swimming the breaststroke. I was wrong, you would think by now I would learn to not discount her perseverance."