The Union Democrat
Theranos founder gets 11-plus years in prison for fraud
SAN JOSE — Theranos founder Elizabeth Holmes has been sentenced to 135 months — or more than 11 years — in prison, following her conviction for felony fraud in one of the most closely and widely watched trials in Silicon Valley history.
Holmes, 38, is expected to appeal the jury’s January verdict, which resulted in Friday’s sentence. She is pregnant, and the mother of a 15-month-old son born weeks before her trial began in September last year. She will not have to surrender to serve prison time until April 27. It is not clear when Holmes is due with her second child.
Federal prosecutors last week asked Davila, who presided over Holmes’ four-year criminal fraud case and her four-month trial in U.S. District Court in San Jose, to put Holmes away for 15 years, and make her pay $804 million in restitution to investors. Holmes had asked Davila for no prison time, or at most, 18 months, which her lawyers argued could be served under home confinement. Holmes has no money for restitution, her sentencing memo said. The federal probation office recommended nine years in prison.
Shortly before she was sentenced, Holmes addressed Judge Edward Davila, sobbing throughout her five-minute speech.
“I stand before you taking responsibility for Theranos. I loved Theranos,” Holmes said. “It was my life’s work. Our team, advisors, board members and the people who believed in us meant the world to me. They wanted to make a difference in the world and worked tirelessly to give a better future to people who couldn’t afford (blood) testing. I am devastated by my failings.”
“Every day for the past years I have felt deep pain for what people went through because I failed them,” Holmes said. “I gave everything I had to building our company and trying to save our company.”
Before issuing his sentence, Davila invoked the spirit of innovation in Silicon Valley’s famed technology industry in addressing Holmes’ crimes.
“This case is so troubling on so many levels,” Davila said. “The tragedy of this case is Ms. Holmes is brilliant, she had creative ideas. She’s a big thinker. She was moving into an industry that was dominated by, let’s face it, male ego. She got into that world.”
Davila also asked the questions that have fascinated so many about Holmes’ four-year criminal case.
“What was it that caused Ms. Holmes, regrettably, to make those decisions that she did?” he said. “There was significant evidence about manipulation and untruths that were being used in the negotiation of the business. What is it that caused that? Was it hubris? Was it intoxication with the fame that comes from being a young entrepreneur?”
Holmes, the charismatic founder and Stanford University dropout launched her Palo Alto blood-testing startup in 2003, and built it into a company backed by some of America’s richest people: Oracle co-founder Larry Ellison, media mogul Rupert Murdoch, and the Walton family of Walmart. Theranos was overseen, weakly, by a board seeded with luminaries including former U.S. secretaries of state Henry Kissinger and George Shultz, and former U.S. defense secretaries James Mattis and William Perry.
A series of Wall Street Journal exposés starting in 2015 led to federal investigations, a U.S. Securities and Exchange Commission settlement fining Holmes $500,000 and barring her from serving as an officer or director of a public company for 10 years, and federal fraud charges in 2018.
Just before Holmes addressed Davila, the judge had asked if there were any of her victims in the courtroom who wished to speak. Alex Shultz, father of Theranos whistleblower Tyler Shultz — whose accounts of his time working for Theranos precipitated the WSJ stories — stood up. Schultz’s father, the late U.S. Secretary of State George Schultz, was a board member for Theranos.
“Elizabeth hired a private investigator to follow my son and probably my wife and I,” Alex Shultz told the court Friday. “My son slept with a knife under his pillow every night thinking somebody was going to come and murder him.”
Shultz said Holmes, after George Shultz discovered Tyler may have spoken to a reporter about Theranos, arranged for lawyers to come to a family home when Tyler and George were to discuss the company. “Lawyers came down the stairs and confronted Tyler when he was telling George about what happened with Theranos,” Alex Shultz said. “My family home was desecrated by Elizabeth.”
In the end, Holmes “won” in the Shultz family dispute, when George’s wife Charlotte called to ask that Tyler be excluded from George’s 95th birthday, Alex said. “She took advantage of my dad,” he said. George Shultz died last year at 100.