Cupertino Courier

Holmes responds to demand she pay $878M restitutio­n

Earlier filing claims Theranos founder has `no assets of meaningful value'

- By Ethan Baron ebaron@ bayareanew­

Theranos founder Elizabeth Holmes, fighting an almost $900 million restitutio­n demand, claims her crimes were not proven to have caused her blood testing startup's collapse, and her deceptions did not generate all the money investors poured into her firm.

Federal prosecutor­s last month filed a motion asking Judge Edward Davila to order Holmes, convicted in January 2022 of four counts of defrauding investors in her now-defunct Palo Alto startup, to pay $878 million in restitutio­n. Davila sentenced Holmes in November to more than 11 years in prison, ordering her to start imprisonme­nt April 27, a date she is battling to extend until her appeal concludes.

Holmes in a filing March 3 in U.S. District Court in San Jose noted that Davila ruled in a January order that prosecutor­s had not establishe­d that Theranos collapsed because of Holmes' criminal conduct. Holmes further claimed that the prosecutio­n had not “shown that the investor-victims it identifies relied on the offense conduct when deciding to invest.”

Davila, Holmes argued, “should decline to order restitutio­n.”

Davila's order pegged investor losses from Holmes' criminal conduct at $381

million, but prosecutor­s noted that legally, the loss amount for restitutio­n is calculated under a different standard than for sentencing. The prosecutio­n cited legal precedents for restitutio­n amounting to the entirety of fraud victims' investment­s,

and argued that Holmes should pay the entire $878 million in losses among investors “directly harmed” by Holmes' “criminal conduct in the course of the scheme.”

Holmes' ability to pay restitutio­n remains in question. In a court filing last month, she said she “continues to work on ideas for patents.” However, in the same filing Holmes said she “has essentiall­y no assets of meaningful value.”

A restitutio­n hearing for Holmes is set for March 17. After that, Davila will weigh both sides' arguments, evaluate submission­s by Holmes' fraud victims concerning what they believe they're owed, and will issue an order specifying how much she must pay to which investors, money that will be distribute­d to each in proportion to their loss, said criminal defense lawyer Carrie Cohen, who follows the Holmes case from New York. The restitutio­n can come from any assets Holmes is found to own, and from a percentage of any future earnings.

Federal investigat­ors will have searched for any money or assets belonging to Holmes, and anything they may have turned up would be used to pay back investors, Cohen said.

“You can't get blood from a stone,” Cohen said. “If in fact she actually has no assets and no income, then you look to future income.”

Whether Holmes, who is barred by a Securities and Exchange Commission settlement from serving as an officer or director of a public company until 2028, will generate income for restitutio­n after she finishes her prison sentence is unclear. It remains possible that Holmes could produce an invention valuable enough to restore victims' losses, but “investors at this point probably assume they've lost their money,” Cohen said.

 ?? DAI SUGANO — STAFF ARCHIVES ?? Theranos founder Elizabeth Holmes, shown in this file photo, is claiming no assets after a demand she pay $878 million in a lawsuit.
DAI SUGANO — STAFF ARCHIVES Theranos founder Elizabeth Holmes, shown in this file photo, is claiming no assets after a demand she pay $878 million in a lawsuit.

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