© Reuters. FILE PHOTO: Theranos founder Elizabeth Holmes and her family leave a federal court hearing in San Jose, California, U.S. January 3, 2022. REUTERS/Brittany Hosea-Small/File Photo
By Jody Godoy and Dan Levine
SAN JOSE, Calif. (Reuters) – A California judge sentenced Theranos founder Elizabeth Holmes to 11 years and three months in prison for defrauding investors in her defunct blood-testing venture that was once valued at $9 billion.
U.S. District Judge Edward Davila in San Jose, Calif., convicted Holmes of three counts of corporate fraud and one count of conspiracy. A jury convicted Holmes, 38, in January following a three-month trial.
Holmes, dressed in a black blouse and black skirt, hugged her parents and a friend after the verdict.
At the meeting, Mr Holmes wept saying he was “disappointed” by his failures and would have done many things differently if he had had the chance.
“I’m very ashamed of what people went through because I failed them,” he said.
Before handing down the sentence, Davila called the case “very serious,” questioning what motivated Holmes, a “brilliant” businessman, to misrepresent his company to investors.
“This is a case of fraud where an interesting project has gone forward in the hope that it will only be undermined by falsehoods, falsehoods, insults and lies,” he said.
A judge set a commitment date for Holmes in April. His lawyers are expected to ask the judge to allow him to remain free on bail pending an appeal.
Assistant US Attorney Jeff Schenk told the judge before handing down the sentence that a 15-year sentence would be “a statement that the ends will not justify the means.”
Holmes’ defense attorney Kevin Downey called for Holmes to serve a prison term, saying leniency was warranted because unlike a man who committed a “heinous crime” he was not driven by greed.
The federal prosecutor’s office agreed to a nine-year prison sentence, according to court documents.
Prosecutors and Holmes’ lawyer declined to comment as they left court.
Prosecutors said Holmes misrepresented Theranos’ capabilities and funding, including by claiming that its tiny blood test machine could perform blood tests in multiple drops. The company secretly relied on conventional machines from other companies to conduct patient tests, prosecutors said.
Holmes testified in his own defense, saying he believed what he said at the time was correct.
Although convicted on four counts, Holmes was acquitted of four counts of defrauding patients who paid for Theranos tests.
Once valued at $9 billion, Theranos Inc promised to revolutionize the way patients receive diagnoses by replacing traditional labs with tiny machines envisioned for use in homes, pharmacies and even on the battlefield.
Forbes named Holmes the world’s youngest self-made billionaire in 2014, at age 30 and worth $4.5 billion at Theranos.
But the startup collapsed after several Wall Street Journal articles in 2015 questioned its technology.
Holmes is expected to appeal his conviction and Davila’s convictions to the 9th US Circuit Court of Appeals.
Before handing down the sentence, Davila asked if there were people who had cheated on Holmes while in court.
Alex Shultz, whose son Tyler Shultz worked at Theranos and whose father, former U.S. Secretary of State George Shultz, invested in the company, told the judge how a family member overheard Holmes describing his so-called revolutionary technology.
“What’s the matter?'” the relative asked Holmes,
according to Shultz.
“No problem,” Holmes replied.