Theranos founder Elizabeth Holmes is going to prison. Here's what to know
Author of the article:Washington Post
Washington Post
Annabelle Timsit, Rachel Lerman and Jacob Bogage, The Washington Post
Published May 18, 2023 • 6 minute read
Elizabeth Holmes must report to prison on May 30 to begin serving her 11-year sentence for fraud and conspiracy, a judge ruled, after a court rejected Holmes’s bid to remain free while she appeals her conviction.
Holmes, 39, is the founder of Theranos, a blood-testing start-up that failed after a public scandal. Holmes rose to prominence as a health-care innovator and self-made business executive, only to fall from grace when the Wall Street Journal revealed in 2015 that her technology did not work as advertised.
In 2018, federal authorities began building a case around allegations that Holmes lied to investors about her company’s ability to deliver on its promise to provide patients with fast, cheap and reliable blood-test results using only small quantities of their blood. She was found guilty last year of four counts of wire fraud and conspiracy to commit wire fraud.
Here’s what to know.
Who is Elizabeth Holmes?
Holmes founded Theranos in 2003 at age 19, when she was still a Stanford University student in Silicon Valley. She dropped out of college shortly afterward to run the start-up full time and eventually grew the Palo Alto, Calif., business to about 800 employees, attracting high-profile investors.
Her pitch was that traditional blood tests were too expensive, took too long to yield results and were poorly suited for people who, like her, had an aversion to needles. She argued that improving the blood-test experience would encourage more people to seek health care.
Theranos’s (ultimately unrealized) goal was to develop a miniature robotic lab that could run hundreds of diagnostic tests from just a small drop of a patient’s blood that could be used in drugstores and doctors’ offices.
Holmes burst into the mainstream in 2013 when her company started talking publicly about its technology. She attracted favorable media coverage and soon became an icon for female entrepreneurs. In 2014, when Holmes was 30 years old, Forbes named her “the world’s youngest self-made woman billionaire” and assessed her net worth to be about $4.5 billion.
By 2016 – amid swirling allegations of fraud against her and Sunny Balwani, her former boyfriend and Theranos’s president – the publication revised its estimate down to $0.
Things began to fall apart when Wall Street Journal investigations revealed that Theranos’s technology was not working consistently. The articles said Holmes was running a workplace in which employees were afraid to voice concerns about serious issues and were discouraged from working with other teams. The investigations kicked off a years-long legal battle for Holmes that culminated in her January 2022 conviction and the recent court decision mandating that she begin her prison sentence at the end of the month.
In the intervening years, Holmes has mostly kept a low profile as her personal life evolved. She entered into a romantic relationship with hospitality heir Billy Evans, with whom she had two children. (She was pregnant during parts of her trial.) And she recently broke her silence in an interview with the New York Times, in which she said she created a “character” because she “believed it would be how I would be good at business and taken seriously.”
What was Holmes charged with?
Federal prosecutors charged Holmes and Balwani with wire fraud for allegedly lying about what Theranos’s technology could do and receiving money based on those lies.
Despite Holmes’s claims that Theranos could run comprehensive laboratory tests from just a few drops of blood taken from a finger, federal prosecutors said that, in reality, Theranos’s small lab machines were working inconsistently and could run only a few tests on its own technology. Other tests were being run on traditional lab equipment, and some blood samples were being diluted so much that the results were unreliable.
Jeffrey B. Coopersmith, a lawyer for Balwani, said in an email that Balwani “never defrauded or abused anyone, but has been abused by an unfair trial filled with constitutional errors.” He said his team would continue to appeal Balwani’s conviction. A lawyer for Holmes did not respond to requests for comment Thursday.
A jury found Holmes guilty on four out of 11 federal fraud and conspiracy charges in January 2022. She was acquitted of one charge of conspiracy to commit wire fraud against Theranos patients, as well as three counts of wire fraud against individual patients. Another fraud charge was dismissed during the trial, and the jury could not reach a verdict on three remaining wire fraud charges.
During Holmes’s trial, her lawyers argued that Balwani controlled and abused her and that their relationship affected her decision-making at Theranos. Balwani has denied the allegation.
What went wrong with Theranos?
In 2015, Theranos was valued at $9 billion and appeared poised to expand its business across the United States.
When allegations first emerged that things at Theranos weren’t as they appeared, investigators from the Centers for Medicare and Medicaid Services inspected Theranos’s flagship lab in Newark, Calif. They found that it did not meet standards for patient health and safety, and they revoked the lab’s license to perform blood tests. Holmes and the other owners and operators of the lab were banned from owning, operating or directing any laboratory for at least two years.
By 2018, Theranos had shut down, its business collapsing under the weight of investor and federal scrutiny. The company said in a letter to shareholders that it could not find a buyer and that it faced an “imminent cash shortage.”
Why was the start of Holmes’s prison sentence delayed?
In November, U.S. District Judge Edward J. Davila in San Jose sentenced Holmes to 11 years and three months in prison. The judge said her prison sentence would start April 27, 2023.
Holmes’s lawyers filed a motion for her to remain free on bail while she worked to appeal her 2022 conviction. Lawyers cited the birth of Holmes’s second child as one reason she should be allowed to delay serving her sentence, the Associated Press reported. Holmes’s trial had been delayed while she gave birth to her first child.
But Davila denied the request in April, stating that while he did not believe Holmes was a flight risk, she had not raised a “substantial question of law or fact” likely to lead to a reversal of her conviction or to a new trial.
Then, just two days before she was due to report to federal prison, Holmes appealed again – which automatically allowed her to remain free until the U.S. Court of Appeals for the 9th Circuit could make a decision. Her lawyers argued that Holmes’s 2022 conviction was the result of “prejudicial errors that warrant reversal and a new trial.” They said the court’s April decision to deny Holmes’s request to remain free while she worked on her appeal reflected “numerous, inexplicable errors.”
The court denied her request this week, and on Wednesday, Davila ordered Holmes to report to prison no later than 2 p.m. on May 30. According to the AP, Holmes’s lawyers proposed the date, explaining in a filing that Holmes needed time to arrange child care for her two young children, among other issues.
What can we expect from her appeal?
The five-year process leading to Holmes’s conviction has been long and complex, and an appeal would likely take a long time to litigate, according to Kevin J. O’Brien, a partner at Ford O’Brien Landy and former assistant U.S. attorney.
“The case was so well-combed. [Holmes] had a very impressive legal team” who “left no stone unturned,” O’Brien said. Given that, he added, “it’s just hard to see what critical legal issue would remain that the court of appeals would weigh in on in such a way as to overturn the conviction.”
For Holmes’s lawyers to succeed, he said, they would have to prove that the government made “a significant error” in its case against Holmes and that there was an “abuse of discretion” by the judge along the way that led to an incorrect verdict. “That’s going to be an uphill battle.”
What happened to Sunny Balwani?
Balwani was convicted in December in a separate but similar trial of 12 counts of conspiracy to commit wire fraud and wire fraud. He was sentenced to 12 years and 11 months in prison. After an unsuccessful motion to delay prison, he started his incarceration on April 20 at a federal correctional institute in San Pedro, Calif.
The Washington Post’s Julian Mark contributed to this report
torontosun.com
Author of the article:Washington Post
Washington Post
Annabelle Timsit, Rachel Lerman and Jacob Bogage, The Washington Post
Published May 18, 2023 • 6 minute read
Elizabeth Holmes must report to prison on May 30 to begin serving her 11-year sentence for fraud and conspiracy, a judge ruled, after a court rejected Holmes’s bid to remain free while she appeals her conviction.
Holmes, 39, is the founder of Theranos, a blood-testing start-up that failed after a public scandal. Holmes rose to prominence as a health-care innovator and self-made business executive, only to fall from grace when the Wall Street Journal revealed in 2015 that her technology did not work as advertised.
In 2018, federal authorities began building a case around allegations that Holmes lied to investors about her company’s ability to deliver on its promise to provide patients with fast, cheap and reliable blood-test results using only small quantities of their blood. She was found guilty last year of four counts of wire fraud and conspiracy to commit wire fraud.
Here’s what to know.
Who is Elizabeth Holmes?
Holmes founded Theranos in 2003 at age 19, when she was still a Stanford University student in Silicon Valley. She dropped out of college shortly afterward to run the start-up full time and eventually grew the Palo Alto, Calif., business to about 800 employees, attracting high-profile investors.
Her pitch was that traditional blood tests were too expensive, took too long to yield results and were poorly suited for people who, like her, had an aversion to needles. She argued that improving the blood-test experience would encourage more people to seek health care.
Theranos’s (ultimately unrealized) goal was to develop a miniature robotic lab that could run hundreds of diagnostic tests from just a small drop of a patient’s blood that could be used in drugstores and doctors’ offices.
Holmes burst into the mainstream in 2013 when her company started talking publicly about its technology. She attracted favorable media coverage and soon became an icon for female entrepreneurs. In 2014, when Holmes was 30 years old, Forbes named her “the world’s youngest self-made woman billionaire” and assessed her net worth to be about $4.5 billion.
By 2016 – amid swirling allegations of fraud against her and Sunny Balwani, her former boyfriend and Theranos’s president – the publication revised its estimate down to $0.
Things began to fall apart when Wall Street Journal investigations revealed that Theranos’s technology was not working consistently. The articles said Holmes was running a workplace in which employees were afraid to voice concerns about serious issues and were discouraged from working with other teams. The investigations kicked off a years-long legal battle for Holmes that culminated in her January 2022 conviction and the recent court decision mandating that she begin her prison sentence at the end of the month.
In the intervening years, Holmes has mostly kept a low profile as her personal life evolved. She entered into a romantic relationship with hospitality heir Billy Evans, with whom she had two children. (She was pregnant during parts of her trial.) And she recently broke her silence in an interview with the New York Times, in which she said she created a “character” because she “believed it would be how I would be good at business and taken seriously.”
What was Holmes charged with?
Federal prosecutors charged Holmes and Balwani with wire fraud for allegedly lying about what Theranos’s technology could do and receiving money based on those lies.
Despite Holmes’s claims that Theranos could run comprehensive laboratory tests from just a few drops of blood taken from a finger, federal prosecutors said that, in reality, Theranos’s small lab machines were working inconsistently and could run only a few tests on its own technology. Other tests were being run on traditional lab equipment, and some blood samples were being diluted so much that the results were unreliable.
Jeffrey B. Coopersmith, a lawyer for Balwani, said in an email that Balwani “never defrauded or abused anyone, but has been abused by an unfair trial filled with constitutional errors.” He said his team would continue to appeal Balwani’s conviction. A lawyer for Holmes did not respond to requests for comment Thursday.
A jury found Holmes guilty on four out of 11 federal fraud and conspiracy charges in January 2022. She was acquitted of one charge of conspiracy to commit wire fraud against Theranos patients, as well as three counts of wire fraud against individual patients. Another fraud charge was dismissed during the trial, and the jury could not reach a verdict on three remaining wire fraud charges.
During Holmes’s trial, her lawyers argued that Balwani controlled and abused her and that their relationship affected her decision-making at Theranos. Balwani has denied the allegation.
What went wrong with Theranos?
In 2015, Theranos was valued at $9 billion and appeared poised to expand its business across the United States.
When allegations first emerged that things at Theranos weren’t as they appeared, investigators from the Centers for Medicare and Medicaid Services inspected Theranos’s flagship lab in Newark, Calif. They found that it did not meet standards for patient health and safety, and they revoked the lab’s license to perform blood tests. Holmes and the other owners and operators of the lab were banned from owning, operating or directing any laboratory for at least two years.
By 2018, Theranos had shut down, its business collapsing under the weight of investor and federal scrutiny. The company said in a letter to shareholders that it could not find a buyer and that it faced an “imminent cash shortage.”
Why was the start of Holmes’s prison sentence delayed?
In November, U.S. District Judge Edward J. Davila in San Jose sentenced Holmes to 11 years and three months in prison. The judge said her prison sentence would start April 27, 2023.
Holmes’s lawyers filed a motion for her to remain free on bail while she worked to appeal her 2022 conviction. Lawyers cited the birth of Holmes’s second child as one reason she should be allowed to delay serving her sentence, the Associated Press reported. Holmes’s trial had been delayed while she gave birth to her first child.
But Davila denied the request in April, stating that while he did not believe Holmes was a flight risk, she had not raised a “substantial question of law or fact” likely to lead to a reversal of her conviction or to a new trial.
Then, just two days before she was due to report to federal prison, Holmes appealed again – which automatically allowed her to remain free until the U.S. Court of Appeals for the 9th Circuit could make a decision. Her lawyers argued that Holmes’s 2022 conviction was the result of “prejudicial errors that warrant reversal and a new trial.” They said the court’s April decision to deny Holmes’s request to remain free while she worked on her appeal reflected “numerous, inexplicable errors.”
The court denied her request this week, and on Wednesday, Davila ordered Holmes to report to prison no later than 2 p.m. on May 30. According to the AP, Holmes’s lawyers proposed the date, explaining in a filing that Holmes needed time to arrange child care for her two young children, among other issues.
What can we expect from her appeal?
The five-year process leading to Holmes’s conviction has been long and complex, and an appeal would likely take a long time to litigate, according to Kevin J. O’Brien, a partner at Ford O’Brien Landy and former assistant U.S. attorney.
“The case was so well-combed. [Holmes] had a very impressive legal team” who “left no stone unturned,” O’Brien said. Given that, he added, “it’s just hard to see what critical legal issue would remain that the court of appeals would weigh in on in such a way as to overturn the conviction.”
For Holmes’s lawyers to succeed, he said, they would have to prove that the government made “a significant error” in its case against Holmes and that there was an “abuse of discretion” by the judge along the way that led to an incorrect verdict. “That’s going to be an uphill battle.”
What happened to Sunny Balwani?
Balwani was convicted in December in a separate but similar trial of 12 counts of conspiracy to commit wire fraud and wire fraud. He was sentenced to 12 years and 11 months in prison. After an unsuccessful motion to delay prison, he started his incarceration on April 20 at a federal correctional institute in San Pedro, Calif.
The Washington Post’s Julian Mark contributed to this report
Theranos founder Elizabeth Holmes is going to prison. Here's what to know
Elizabeth Holmes must report to prison on May 30 to begin serving her 11-year sentence for fraud and conspiracy, a judge ruled, after a court rejected Holmes’s…