SAN JOSE -- Disgraced Theranos CEO Elizabeth Holmes was sentenced to more than 11 years in federal prison Friday in a highly publicized fraud case that spawned movies, a bestselling book and rocked the freewheeling "fake it until you make it" world of Silicon Valley startups.
In a dramatic courtroom moment, an emotional Holmes - tears streaming down her face - spoke to the court during the sentencing statements.
"I am devastated by my failings," she told the court. "I have felt deep pain for what people went through because I failed them. To each of them, I am so, so sorry. I gave everything I had to save the company."
Wall Street Journal reporter John Carreyrou – whose reporting exposed Theranos and led to Holmes' downfall – didn't think it was much of an apology.
"She didn't acknowledge any wrongdoing, she didn't apologize to patients, she didn't apologize to investors," said Carreyrou. "She said she let people down, but only in the sense that the company failed. She failed as an entrepreneur and she had big regrets about that, but that's not the same."
U.S. District Judge Edward Davila heard more than four hours of courtroom debate, listened to Holmes and other victim impact statements, and reviewed dozens of filings in determining the sentencing.
"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?"
"Failure is normal," he added. "Failure by fraud is not ok."
The judge ruled the sentencing guideline in the case was 135 to 168 months after a morning of courtroom debate. In the end, he ruled Holmes needed to be incarcerated for 135 months and not just placed under home detention as the defense team asked for. Holmes was convicted back in January of this year.
Among those also giving statements was Alex Shultz, the son of Theranos board member and former U.S. Secretary of State George Shultz. Alex Shultz's son, Tyler, worked for Theranos and ultimately became a whistleblower when he discovered the tests didn't work. When he raised concerns, he was allegedly threatened by the company.
"My son slept with a knife, because he was afraid of being killed," Shultz told the court as he glared at Holmes as she sat at the defense table.
Shultz also said Holmes had "desecrated his family."
Davila ruled that Holmes never accepted responsibility for her crimes heading into the sentencing -- "She maintains that she did nothing wrong."
Additionally, Davila ruled the loss to investors was in the range of $121 million, not the $804 million the federal prosecutors claimed, with money raised from a list of sophisticated investors including software magnate Larry Ellison, media mogul Rupert Murdoch, and the Walton family behind Walmart.
The judge said he will set a later date to determine what Holmes owes in a fine.
Davila ordered Holmes to surrender to federal custody on April 27, 2023, apparently taking into account the fact that Holmes is pregnant with her second child. After giving birth to a son shortly before her trial started last year, Holmes became pregnant at some point while free on bail this year.
"Silicon Valley has seen the rise of companies whose inventions have changed the world and, through intellectual prowess, hard work, and sheer determination, this region continues to innovate," said U.S. Attorney Stephanie M. Hinds in a prepared statement following the sentencing. "Capital investment is critical to that innovation. When fraud is perpetrated on those providing the necessary capital, it staunches investment and can cripple an industry. For almost a decade, Elizabeth Holmes fabricated and spread elaborate falsehoods to draw in a legion of capital investors, both big and small, and her deceit caused the loss of hundreds of millions of dollars. Her sentence reflects the audacity of her massive fraud and the staggering damage she caused."
The U.S. Attorney's Office for the Northern District of California posted a copy of their full statement on its website.
Russell Hancock, the President and CEO of Joint Ventures of Silicon Valley feels the stiff sentence sends a clear message.
"I just see it as the criminal justice system at work. A person who operated with dishonesty with the intent to deceive was actually tripped up by her justice system and is now paying her debt to society," Hancock said.
Hancock has worked with numerous businneses in Silicon Valley but he says he's never seen one quite like Theranos.
"What's so striking to me about this case is it's exceptionalism. I don't know of other cases like this one. For some reason, this company stands out," he added. "It didn't have the same level of scrutiny. There was somehow a charisma affect, a celebrity affect with Ms. Holmes herself."
Hancock doesn't expect a company like Theranos to set up shop in Silicon Valley ever again. Especially now as the economy is showing signs of a slow down the vetting process to invest in startups will continue to be thorough.
"What's striking about the period we are in, is that venture capitol has a very high bar. You must have done due diligence, you must have a proven customer base, there has to be a clear path to revenue. For some reason this company stands out," Hancock said.
Holmes' attorneys are expected to file an appeal and ask the judge for her to remain free during the process.
The former Silicon Valley tech mogul arrived at the sentencing hearing surrounded by a horde of reporters and media cameras. She was holding hands with partner Billy Evans with her parents close by. Holmes was stoic and did not respond to reporters' questions.
More than 140 letters were submitted to Davila in support of Holmes. They ran the spectrum from family and friends to U.S. Senator Cory Booker, a police sergeant, a fire captain, a restaurateur, technology company executives and former Theranos employees and board directors.
A group of Holmes supporters also greeted her at the courthouse.
Davila considered sentencing recommendations that spanned from 15 years of imprisonment by federal prosecutors to 18 months home confinement from Holmes' defense team. Meanwhile, a probation report also submitted to Davila recommended a nine-year prison sentence for Holmes.
Theranos had promised to deliver a blood analyzer with revolutionary technology that could scan for hundreds of diseases and other ailments with just a few drops of blood. But it never worked; prosecutors said Holmes repeatedly resorted to using conventional machines to obtain the blood test results that the Theranos analyzer was supposed to perform,
Holmes' sentencing came in the same San Jose courtroom where she was convictedmarks a climactic moment in a saga that has been dissected in an HBO documentary and an award-winning Hulu TV series about her meteoric rise and mortifying downfall.
While wooing investors, Holmes leveraged a high-powered Theranos board that included two U.S. Secretaries of State, Shultz and Henry Kissinger, as well as former U.S. Defense Secretary James Mattis, who testified against her during her trial.
Duncan Levin, a former federal prosecutor who is now a defense attorney, predicted that Davila's sentencing decision won't be swayed by the pregnancy, but expects the judge to allow her to remain free until after the baby is born.
"She will be no more of a flight risk after she is sentenced than she was while awaiting sentencing," Levin said. "We have to temper our sentences with some measure of humanity."
The pregnancy makes it more likely Davila will be criticized no matter what sentence he imposes, predicted Amanda Kramer, another former federal prosecutor.
"There is a pretty healthy debate about what kind of sentence is needed to effect general deterrence to send a message to others who are thinking of crossing that line from sharp salesmanship into material misrepresentation," Kramer said.
Federal prosecutor Robert Leach emphatically declared Holmes deserves a severe punishment for engineering a scam that he described as one of the most egregious white-collar crimes ever committed in Silicon Valley.
In a scathing 46-page memo, Leach told the judge he has an opportunity to send a message that curbs the hubris and hyperbole unleashed by the tech boom of the past decade.
Holmes "preyed on hopes of her investors that a young, dynamic entrepreneur had changed healthcare," Leach wrote. "And through her deceit, she attained spectacular fame, adoration, and billions of dollars of wealth."
Even though Holmes was acquitted by a jury on four counts of fraud and conspiracy tied to patients who took Theranos blood tests, Leach also asked Davila to factor in the health threats posed by Holmes' conduct.
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