Elizabeth Holmes, the disgraced chief executive of blood-testing startup Theranos, has reportedly said she cannot afford to repay $250 a month to those who lost money because of false claims she made about her company.
Bloomberg reported on Monday that Holmes, who was found guilty of defrauding investors earlier this year, had told a judge via her legal team that she would not be able to make $250-a-month restitution payments once she had finished serving the 11-year jail term she started last month.
Last month, a judge ordered Holmes to pay just over $452 million in restitution to the victims of her crimes.
She is being held jointly liable for the nine-figure sum with Ramesh “Sunny” Balwani, her former boyfriend and ex-Theranos president, who is serving a 13-year jail sentence for his role in the Theranos hoax.
Criminal restitution is money ordered by a court to reimburse an offender’s victims for financial losses that arose as a direct consequence of their crimes. Restitution does not serve as a punishment for the offender, but as a monetary debt owed to their victims. However, compliance with a restitution order becomes a condition of the offender’s probation.
Despite restitution being a court-ordered obligation, the chance of the entire amount being fully recovered is low, as many defendants do not have sufficient wealth or assets left to repay their victims upon their release from prison.
Victims usually receive a number of small payments over a long period of time, as offenders often have large sums to repay to a large number of people.
Both Holmes and Balwani were ordered to begin making quarterly $25 restitution payments while they are in prison. Holmes has not objected to this condition, Bloomberg reported.
Once a $9 billion company
As she built Theranos into a $9 billion company, Holmes raised almost $1 billion from investors including media tycoon Rupert Murdoch, Oracle co-founder Larry Ellison and the Walton family of Walmart fame.
They lost their money after investigations by the Wall Street Journal exposed how the blood-testing company’s technology didn’t work; how it had tried to cover up its failures; and how the firm had put its patients’ health at risk. Theranos denied the allegations made in the reports, but the exposé triggered a chain of events that would lead to its collapse.
In his restitution ruling, U.S. District Judge Edward Davila said Holmes and Balwani should pay $125 million to Murdoch, $40 million to drugstore chain Walgreens and lesser amounts to 13 other victims of their fraud.
While the judge ordered Balwani to pay at least $1,000 a month or 10% of his earnings in restitution once he is released, the amount Holmes must repay after serving her jail term was reportedly not specified.
Prosecutors, Bloomberg reported, have said there is a clerical error in the paperwork involved in Holmes’s case, and have asked Davila to correct this so that Holmes will be ordered to make set monthly payments of $250 to her victims upon her release from prison.
However, according to Bloomberg, the Theranos founder’s lawyers argued she has “limited financial resources” and therefore should not be forced to pay $250 a month in restitution. Her legal team reportedly said that prosecutors were wrong to assume the absence of a post-prison payment plan meant the judge had made a mistake.
Holmes’s attorneys did not respond to Fortune’s request for comment on her ability to repay her half of the nine-figure restitution sum.
According to Forbes, Holmes is now broke, with a net worth of $0.
It’s a far cry from where she was at the peak of her once glittering career. Before her spectacular downfall, Stanford dropout Holmes was named the world's youngest self-made woman billionaire, with her net worth hitting $4.5 billion when she was 30 years old.
