SAN JOSE, Calif – Former Silicon Valley star Elizabeth Holmes is heading to a federal courthouse here on Friday to beg for leniency during her sentencing hearing, likely the final chapter in the years-long saga of Theranos, the blood-testing startup she founded. Prosecutors are expected to argue that she deserves 15 years in prison.
Judgment day for Holmes follows a jury convicting her on fours counts of defrauding investors out of hundreds of millions of dollars with false and misleading claims about what her supposedly breakthrough technology could do with just a few drops of blood. Behind the scenes, it turned out, she was relying on traditional lab testing machines.
In 2014, Theranos was estimated to be worth $9 billion, more than the value of Uber and Spotify at the time. Not long after, the company began to unravel.
The story of Holmes, an eccentric tech leader who once drew comparisons to Steve Jobs and inspired fawning attention in the media, is one of the most dramatic downfalls of a business leader in recent history.
Federal prosecutors called Holmes' crimes in court papers ahead of the hearing "among the most substantial white-collar offenses Silicon Valley, or any other district, has seen," but defense lawyers for Holmes counter that she has shown remorse and that she is being punished for nothing more than a startup failure.
Defense lawyers are asking that Holmes stay out of prison and instead serve time in home confinement. But Holmes' legal team also said in court papers that if incarceration is deemed necessary, she should not spend any longer than 18 months. That's in sharp contrast to the 15 years prosecutors are pushing for, just shy of the maximum prison time she could face of 20 years under federal guidelines.
The decision rests solely with U.S. District Judge Ed Davila, who presided over Holmes' trial, and the separate trial of Theranos' No. 2 executive, Ramesh "Sunny" Balwani, who was also convicted of fraud and is scheduled to be sentenced next month.
Back in January, the jury in Holmes' case returned a mixed verdict: Jurors acquitted her of fraud related to Theranos patients who were harmed, but they convicted her of counts linked to investors who were hoodwinked.
Prosecutors, however, have argued that the patients who received incorrect blood test results because of the company's faulty technology represent facts that should be considered "relevant conduct for sentencing purposes," meaning the patients could still play into Davila's sentence.
Letters from her partner, a tech investor and a senator ask for mercy
Holmes' legal team submitted 130 letters to the judge from friends, family and other supporters, including New Jersey Sen. Cory Booker, who is a longtime friend of Holmes. In his letter, Booker wrote, "Each of us is more than the worst thing we've done," citing Bryan Stevenson, the criminal justice reform advocate and lawyer.
Billy Evans, Holmes' partner, wrote the judge asking for mercy and described the impact the case has had on their family. The submission includes photos of the the couple with their 1-year-old son and their dog, Balto, which the family says was killed by mountain lions. Evans wrote that Holmes has already paid mightily for enduring the notoriety that followed Theranos crumbling under pressure.
"If you are to know Liz, it is to know that she is honest, humble, selfless, and kind beyond what most people have ever experienced," Evans wrote. "Please let her be free."
Holmes, who is 38 years old, was visibly pregnant with her second child at her last court appearance. If Davila hands down a prison sentence, her pregnancy could influence when her confinement starts.
Her lawyers also point out that she has been volunteering as a sexual assault victim counselor. Holmes is herself a survivor of sexual assault, which she spoke about when she took the stand in emotional testimony that stretched on for days at trial.
Holmes' defense team has argued that the media scrutiny and legal proceedings connected to the collapse of Theranos is punishment enough, a point her lawyers hammer home to the judge by quoting a letter sent to the court from tech investor David Sokol.
"She poses no danger to anyone. She openly acknowledges her business mistakes and she did not benefit in any material way notwithstanding the opportunity to do so," Sokol wrote. "Her suffering, including among other things extreme public ignominy, financial bankruptcy and the terrifying prospect of incarceration while the mother of a new baby, provides more than ample deterrence to others."
In their memo to the judge, prosecutors point out that in fraud cases, the amount of lost money is weighed more heavily than any other factor when it comes to sentencing according to federal guidelines.
Theranos raised nearly $1 billion from people including medial mogul Rupert Murdoch and Oracle chief executive Larry Ellison before the company's implosion. The amount of Holmes' fraud is not even fully captured in the highest level of loss in the guidelines, which caps out at more than $550 million. In other words, the sheer dollar amount of money defrauded in the case, prosecutors argue, leaves no other choice but to send Holmes away for more than a decade behind bars.
Prosecutors highlight a further reason they are pushing to have Holmes locked up: to send a signal to Silicon Valley.
"A significant custodial sentence will serve not only to deter future startup fraud schemes," prosecutors wrote. "But it will also serve to rebuild the trust investors must have when funding innovation."
