Elizabeth Holmes’ Fraud Conviction Will Send a Message One Way or Another

Senator Cory Booker, Democrat of New Jersey, recently praised Elizabeth Holmes’ thoughtful focus and “determination to make a difference.”

Actress Ricki Noel Lander said Ms Holmes was ‘a trustworthy friend and a really lovely person’.

And Channing Robertson, who was a professor of chemical engineering at Stanford University, praised Ms Holmes for her “compassion towards others”.

Their comments were part of a cache of more than 100 letters that were filed last week with a federal judge in San Jose, California, in an attempt to reduce the sentence of Ms. Holmes, the founder of the test failure blood. -to Theranos. In January, she was found guilty of four counts of defrauding investors about Theranos technology and business dealings. She is expected to be sentenced for those crimes on Friday.

Ms Holmes, 38, faces a maximum of 20 years in prison, according to federal sentencing guidelines for wire fraud. His lawyers have requested 18 months of house arrest, while prosecutors have requested 15 years of imprisonment. The probation officer in Ms Holmes’ case recommended a nine-year sentence.

The decision rests with Judge Edward J. Davila of the US District Court for the Northern District of California, who oversaw Ms Holmes’ trial last year. As well as letters from his supporters asking for clemency, he is prepared to consider the lengthy memos filed by his lawyers and prosecutors, and will consider whether Ms Holmes has accepted responsibility for her actions.

In particular, Judge Davila must weigh the message Ms Holmes’ sentence sends to the world. His highly publicized case has become a symbol of the excesses and hubris of Silicon Valley companies that often play fast and loose with the law. Theranos has raised $945 million from investors, valuing the company at $9 billion, claiming its technology can accurately run many tests on a single drop of blood. But the technology never worked as promised.

Few tech executives are ever convicted of fraud. So a lighter sentence for Ms Holmes could send the wrong signal to the industry, legal experts have said.

“This is a case with more deterrence potential than most,” said Andrew George, white-collar defense attorney at Baker Botts. “Judge Davila will be sensitive to any impression that this privileged person has been slapped on the hand.”

Since Ms Holmes was sentenced, other high-profile start-up founders have also come under scrutiny, sparking new debates about start-up ethics. Trevor Milton, the founder of electric vehicle start-up Nikola, was convicted last month of lying about his company’s technology. Sam Bankman-Fried, the founder of cryptocurrency exchange FTX, is under heavy investigation after his company suddenly went bankrupt last week.

Lawyers for Ms Holmes did not respond to a request for comment.

Prosecutors said in court papers that a significant prison sentence for her would send a message to other entrepreneurs who stretched the truth. A lengthy sentence would not only “deter future startup fraud schemes,” but also “rebuild the confidence investors need to have when funding innovators,” they wrote.

Lawyers for Ms Holmes have tried to downplay the money investors have lost on Theranos, portraying the venture capital industry as a bunch of sophisticated wealthy people who don’t research their investments thoroughly. And in their letters of support, its allies said what happened at Theranos was no different from the results of many other start-ups.

“Chess is part of the game in Silicon Valley,” said Alex Moore, an investor at investment firm 8VC. “We cannot punish our innovators in society or there will be no innovation.”

In another letter, Yinne Yu, a venture capitalist, said Ms Holmes “showed more soul-searching and remorse than I had personally witnessed in any other failed founder” in a decade of business. investment.

Tim Draper, a venture capitalist who backed Theranos, wrote that Ms Holmes was condemned by the company for “taking this huge risk, sacrificing everything and failing”. He admitted that he did not know all the facts of the case.

The letters – which came from family members, childhood and college friends, former employees, roommates, consultants and board members – attempted to portray Ms Holmes as a warm person and disinterested. They also painted the first detailed picture of what his life has been like in recent years. Apart from giving evidence at her trial, Ms Holmes has not spoken publicly since Theranos collapsed in 2018.

Court documents showed she had become pregnant with her second child since her conviction. She also logged 500 hours as a rape counselor and swam across the San Francisco Bay. Her dog, Balto, was killed by cougars.

Prosecutors argued Ms Holmes’ letters of support showed she could not blame her crimes on a difficult upbringing. “Holmes, with strong family support, exceptional educational opportunities and financial stability, has chosen to commit fraud on multiple occasions,” they wrote.

In an eight-page, single-spaced letter, Billy Evans, Ms Holmes’ partner, wrote that much of what was written about her was untrue, including that she was a good salesperson.

“Liz doesn’t have the ability to ‘sell something’; she just believes in things with such depth that it’s seductive,” Mr. Evans wrote. “She’s more of a fanatic than a showman.” He said Ms Holmes’ notoriety had ruined any privacy and described a life under constant surveillance and threat.

Mr Evans’ father William, who posed as a bystander named ‘Hanson’ at Ms Holmes’ trial, said in his own letter that Google search results for Ms Holmes exceeded those for Babe Ruth or Ronald Reagan – and all of his were negative. . “Osama bin Laden has 21 million results, many of which are positive,” he added.

In his letter, Mr Booker described meeting Ms Holmes at an event ten years ago by Senator John McCain of Arizona, where they shared a bag of almonds for dinner. They were both vegan.

“I believe Ms. Holmes has within her a sincere desire to help others, to render meaningful service and possesses the ability to redeem herself,” Mr. Booker wrote.

Prosecutors countered these portraits with evidence presented during Ms Holmes’ trial. She manipulated regulators, lied to the media, falsified documents and intimidated whistleblowers, leading one employee, Tyler Shultz, to contemplate suicide, they wrote. She enjoyed the fruits of her fraud, they wrote, flying in a private jet, living in a $15 million mansion, appearing on magazine covers and dining at the White House.

“She repeatedly chose lies, hype and the prospect of billions of dollars over patient safety and fair investor relations,” they said.

In addition to 15 years in prison, prosecutors have asked the court to order Ms. Holmes to pay $804 million in restitution for harm to Safeway and Walgreens, two companies with which Theranos had partnerships, and George P Shultz, the former Secretary of State. . Mr. Shultz, who died last year, was Tyler Shultz’s grandfather and served on the board of Theranos.

Ms Holmes did not make much money on Theranos, according to court documents. In addition to a $450,000 loan to pay a settlement with the Securities and Exchange Commission, she has legal fees of more than $30 million, according to filings. Prosecutors questioned whether Ms Holmes and her family’s money was managed to avoid paying off investors and whether she felt remorse. Lawyers for Ms Holmes responded that suggesting Mr Evans marry her so that his family, who own a chain of hotels, would pay off their debts was ‘baseless’.

Prosecutors also asked if Ms Holmes was remorseful.

“She accepts no responsibility,” they wrote. “On the contrary, she insists that she is the victim. She is not.”