Former Theranos CEO Elizabeth Holmes awaits sentencing Friday, 10 months after aof defrauding investors in the failed blood test company.
The sentencing hearing in San Jose, California, began shortly after 10 a.m. Pacific time and continued as the clock approached noon — an unusually long time for what is typically a fairly procedural hearing.
Holmes, 38, founded Theranos in 2003, and it quickly grew into one of the best-known startups in the world, with a peak valuation of $10 billion. But a series of revelations by the Wall Street Journal raised questions about the effectiveness of the company’s technology and business practices, prompting multiple investigations by federal and state officials.
The sentence, which will be handed down by Justice Edward Davila of the Northern District of California, will be seen as a signal for how serious offenders in the high-flying world of tech startups can expect to be punished when they misrepresent a company’s capabilities .
“Especially in a highly publicized case, you want the public to know that if you defraud investors or anyone else, you face serious jail time,” said Carrie Cohen, global co-chair of the Division of Investigations and White Collar Defense. practice group at law firm Morrison Foerster.
“Given the facts that have all come out at the trial, I would suspect she’s looking at a significant amount of jail time, probably closer to what the government has asked for,” Cohen said.
In January, Holmes was convicted of four charges. A jury acquitted her of four other counts of harming patients using Theranos’ blood testing device, and failed to agree on other charges. Investors in Theranos, a group that includes media mogul Rupert Murdoch and software billionaire Larry Ellison, lost $144 million when the startup faltered.
Federal prosecutors are seeking a 15-year prison sentence and $800 million payment, depicting Holmes’ crimes as “among the most substantial white-collar offenses Silicon Valley or any other district has seen,” according to court filings this week.
Holmes’ lawyers have asked that she not be jailed, arguing she poses no danger to society, has debts she is unlikely to be able to repay and has already suffered from “inhumanly cruel” media coverage of the demise of Holmes. Theranos. They presented testimonials from 130 people, including friends, family, and even Senator Cory Booker, confirming Holmes’s kindnesses.
Holmes has a 1-year-old son and was found to be pregnant at her most recent court hearing. Both are factors that may prompt the judge to be lenient in imposing sentences, Cohen said.
Holmes has testified that she was psychologically traumatized after being raped in college, and that she was sexually and emotionally abused by former Theranos Chief Operating Officer Sunny Balwani, who is 19 years her senior. While the duo ran Theranos, Holmes claimed that Balwani controlled her schedule, diet, and presentation to others, often belittling and berating her.
Balwani’s lawyers have rejected the claims. He was found guilty ofin July and is expected to be sentenced on December 7.
Holmes has said she intends to appeal her conviction. If she is sentenced to prison, there could be a point of contention when she begins the sentence. The judge could postpone the start of her term until after Holmes gives birth. She can also post bail to stay out of jail while she appeals her sentence, Cohen said.