Theranos founder Elizabeth Holmes fraud conviction has raised two big questions: Will she go to prison? And if so, for how long?
Holmes faces up to 80 years behind bars and a $1 million fine after her conviction on one count of conspiracy to commit wire fraud and three counts of wire fraud related to defrauding investors. Each count carries a maximum sentence of 20 years and a $250,000 fine.
Legal experts agree Holmes is headed for a cell. Judges' broad discretion and federal sentencing guidelines make consecutive sentences rare — but those federal guidelines, and the judge's history in fraud-case decisions, offer strong clues as to how long Holmes' sentence might be.
Judge Edward Davila, who has set Holmes' sentencing hearing for Sept. 26, has put big-money fraudsters into prison for lengthy terms. She remains free on bail pending her sentencing hearing.
Legal experts say Davila is likely to decide on a sentence that aligns with his history in cases like hers. But there's also a wild card in the case: Holmes, 37, gave birth to a son in July.
Davila could easily justify a long sentence, said Stanford Law professor Robert Weisberg.
"If he gave her 12 years because of the loss amount she would have a very, very hard time overturning that on appeal," Weisberg said. But he added, "I don't think she'll get that, or anything like that. She's the mother of a young child."
In seven local fraud cases, Davila sentenced all of those convicted to serve time in prison, with sentences ranging from six months to 10 years. That included Fritz Kramer, who fleeced investors, including Santa Clara County residents, out of $10 million in a gold-and-diamonds scam; investment manager John Geringer, who hoodwinked clients of his Scotts Valley investment company into almost $50 million in losses; Rodney Hatfield, who bamboozled dozens of people, including members of his own Watsonville Jehovah's Witnesses congregation, out of more than $1 million in a Ponzi scheme; Monterey real estate broker David Nilsen, who cheated investors out of up to $20 million; and Isaac Choi, founder of Santa Clara job-search startup WrkRiot, who defrauded his own employees out of $91,000. The only other woman among those fraudsters, Tara Bonelli, was sentenced to three years after conning Santa Cruz investors out of more than $3 million in a foreclosure-assistance gambit.
None of these cases involved anything close to the $144 million in financial losses in Holmes' case.
Still, Davila's record suggests he has locked people up for shorter periods than the guidelines recommended, legal analyst and former San Francisco prosecutor Michele Hagan noted.
The attention given to Holmes' spectacular fall rivals the publicity attending the downfalls of America's most infamous scammers, including former Enron CEO Jeffrey Skilling, who received 14 years over more than $60 billion in investor losses, former WorldCom boss Bernard Ebbers, who got 25 years for leading an $11 billion fraud, and mega-Ponzi-schemer Bernie Madoff, who was handed a 150-year sentence for defrauding investors out of up to $65 billion. The scale of Holmes' fraud is similar to that of Dennis Kozlowski, ex-CEO of industrial-goods giant Tyco, who was convicted of stealing nearly $100 million from the company and sentenced in 2005 to eight to 25 years in prison.
Although Holmes' case became notorious enough to spawn a best-selling book, Hollywood movie and a TV series, key differences from schemes such as Madoff's and Skilling's are expected to affect her sentence.
"There's different flavors of fraud," said former Santa Clara County prosecutor Steven Clark. "The other ones were basically scams from the outset and I don't think you can say that here — it started out with best intentions whereas those other ones clearly weren't that."
The losses in Holmes' case come in far below those from Madoff and Skilling — but the sentencing guidelines add negative points for loss amounts. Davila could also conclude that Holmes' conspiracy conviction covers more than the losses under the three defrauding-investors counts — the government alleges hundreds of millions of dollars in total damage — and bump up her sentence, Clark said.
Holmes shares a lack of criminal history with many scammers Davila has previously locked up, so she won't get negative points added for earlier crimes, Clark noted.
Holmes may well get dinged under the guidelines for abuse of trust and a leadership role in the fraud, Hagan said. Holmes did not plead guilty, so wouldn't get mitigating credit under the guidelines for accepting responsibility, nor did she do much for her cause when she testified in her own defense during her trial, Hagan added. "She had seven days on the stand to take responsibility and she didn't," said Hagan, who attended the proceedings. "She tried to keep wiggling out."
Hagan calculated that under the guidelines, Holmes could get a sentence of 11 to 14 years. If Davila follows his precedents and sentences her to about 30% less time than sentencing guidelines, he could send her to prison for around eight years, Hagan said.
Stanford's Weisberg said it "would not be the least bit difficult" for Davila to justify a 12-year sentence. "I don't think she'll get that, or anything like that," Weisberg said. "He's not going to want to give her anything higher than the low single digits."
But because so many women of color are imprisoned, if Davila hands that lighter sentence to Holmes, "he will or should give a pretty elaborate explanation."
While motherhood isn't a mitigating factor under the sentencing guidance, judges are free to consider it when deciding on prison terms, said Weisberg, who has been following the Holmes case closely.
"He will be somewhat influenced by the fact that she's the mother of a young child," Weisberg said. But whatever Davila's decision, navigating the baby issue will be tricky, he added. "I wouldn't want to be in the judge's shoes on that one."
