AP – Disgraced Theranos CEO Elizabeth Holmes was sentenced on Friday to more than 11 years in prison for duping investors in the failed startup that promised to revolutionise blood testing but instead made her a symbol of Silicon Valley ambition that veered into deceit.
The sentence imposed by United States (US) District Judge Edward Davila was shorter than the 15-year penalty requested by federal prosecutors but far tougher than the leniency her legal team sought for the mother of a year-old son with another child on the way.
Holmes, 38, faced a maximum of 20 years in prison.
Her legal team requested no more than 18 months, preferably served in home confinement.
“This is a very heavy sentence,” said defence lawyer Rachel Fiset, who has also been involved in healthcare cases.
Holmes, who was CEO throughout the company’s turbulent 15-year history, was convicted in January in the scheme, which revolved around the company’s claims to have developed a medical device that could detect a multitude of diseases and conditions from a few drops of blood.
But the technology never worked, and the claims were false.
Theranos was dashed “by misrepresentations, hubris and just plain lies”, the judge said.
“This case is so troubling on so many levels,” Davila said. “What was it that caused Ms Holmes to make the decisions she did? Was there a loss of a moral compass?”
Holmes’ meteoric rise once landed her on the covers of business magazines that hailed her as the next Steve Jobs. And her deception was persuasive enough to draw in a list of sophisticated investors, including software magnate Larry Ellison, media mogul Rupert Murdoch and the Walton family behind Walmart.
She sobbed as she told the judge she accepted responsibility for her actions. “I regret my failings with every cell of my body,” Holmes said.
She promised Davila she would devote the remainder of her life to trying to help others.
Holmes’ attorney, Kevin Downey, indicated she would appeal the sentence. Holmes and her family left the courthouse by a side entrance and managed to evade reporters and photographers.
Before handing down the sentence, Davila reflected on Silicon Valley’s transition from an agricultural hub populated by farmers and ranchers to a “crucible of innovation” brimming with bright-eyed entrepreneurs dreaming of changing the world.
Recalling the humble beginnings of technology pioneer Hewlett-Packard in a small garage in Palo Alto – the same city where Theranos was based – he spoke wistfully of “honest, hard work”.
“That, I would hope, will be the legacy and continuation of this valley,” the judge said.
A former federal prosecutor Amanda Kramer, who is now a defence attorney, described the sentence as “the equivalent of neon, flashing billboard” offering “a reminder the long-term consequences of fraud far outweigh any short-term gains”.
The sentencing in the same San Jose courtroom where Holmes was convicted on four counts of investor fraud and conspiracy marked another climactic moment in a saga that has been dissected in an HBO documentary and an award-winning Hulu series.
Her lawyers argued that Holmes was a well-meaning entrepreneur who is now a devoted mother.
Their viewpoints were supported by more than 130 letters submitted by family, friends and former colleagues praising Holmes.
Davila suggested that the letters might have struck a different tone had the writers seen and heard all the evidence shown to the jury.
Prosecutors also wanted Holmes to pay USD804 million in restitution – an amount that covers most of the nearly USD1 billion that she raised from investors. But the judge left that question for a future hearing that has not been scheduled.
While wooing investors, Holmes leveraged a high-powered Theranos board that included former Defence Secretary James Mattis, who testified against her during her trial, and two former secretaries of state, Henry Kissinger and the late George Shultz, whose son, Alexander submitted a statement blasting Holmes for concocting a scheme that played Shultz “for the fool”.
Alexander Shultz made a brief appearance on Friday to lambaste her for terrorising his son, Tyler, a former Theranos employee turned whistleblower who helped The Wall Street Journal expose the flaws in the company’s technology.
Federal prosecutor Robert Leach described the Theranos scam as one of the most egregious white-collar crimes ever committed in Silicon Valley.
In a scathing 46-page memo, Leach urged the judge to send a message to curb the hubris and hyperbole unleashed by the tech boom of the last 30 years.
Even though Holmes was acquitted on four counts of fraud and conspiracy tied to patients who took Theranos blood tests, Leach also asked the judge to factor in the health threats posed by Holmes’ conduct.
Evidence submitted during her trial showed the tests produced wildly unreliable results that could have steered patients towards the wrong treatments.
