Elizabeth Holmes is convicted in fraud trial

New Jersey Democrat Senator Cory Booker recently praised Elizabeth Holmes’ thoughtful focus and “determination to make a difference.”

The actress Ricki Noel Lander said Mrs. Holmes was “a reliable friend and a genuinely lovely person”.

And Channing Robertson, who was a professor of chemical engineering at Stanford University, praised Ms. Holmes for her “compassion for others.”

Their comments were part of a cache of more than 100 letters filed this past week with a federal judge in San Jose, California, in an effort to reduce the sentence for Mrs. Holmes, the founder of the botched blood test startup. -on Theranos. In January, she was convicted of four counts of defrauding investors over Theranos’ technology and business dealings. She will be sentenced for these crimes on Friday.

Ms. Holmes, 38, faces up to 20 years in prison, according to federal guidelines for sentencing for electronic fraud. Her lawyers have asked for 18 months of house arrest, while prosecutors have demanded 15 years in prison. The probation officer in Mrs Holmes’ case has recommended a nine-year sentence.

The decision rests with Judge Edward J. Davila of the United States District Court for the Northern District of California, who oversaw Ms. Holmes’ trial last year. In addition to letters from her supporters asking for clemency, he will consider lengthy memos submitted by her lawyers and prosecutors, and will consider whether Ms. Holmes has accepted responsibility for her actions.

Most notably, Judge Davila must weigh up the message that Mrs. Holmes’ verdict is sending to the world. Her high-profile case symbolized the excesses and hubris of Silicon Valley companies that often play fast and loose with the law. Theranos raised $945 million from investors and valued the company at $9 billion, claiming that its technology could accurately perform many tests on a single drop of blood. But the technology never worked as promised.

Few technical managers are ever found guilty of fraud. So a lighter sentence for Ms. Holmes could send the wrong signal to the industry, legal experts said.

“This is a case with more deterrence potential than most,” said Andrew George, a white-collar attorney at Baker Botts. “Judge Davila will be sensitive to any impression that this privileged person has received a blow to the wrist.”

Since Ms Holmes was sentenced, other high-profile start-up founders have also come under scrutiny, sparking further debate over start-up ethics. Trevor Milton, the founder of electric vehicle start-up Nikola, was convicted last month of lying about his company’s technology. Sam Bankman-Fried, the founder of the cryptocurrency exchange FTX, is facing numerous investigations after his company suddenly went bankrupt last week.

Lawyers for Ms Holmes did not respond to a request for comment.

Prosecutors said in court filings that a significant prison sentence for her would send a message to other entrepreneurs stretching the truth. A long sentence would not only “deter future start-up fraud schemes,” but also “restore the confidence investors should have when funding innovators,” they wrote.

Ms. Holmes’s lawyers tried to downplay the money investors lost on Theranos by portraying the venture capital industry as a group of sophisticated rich people who don’t scrutinize their investments. And in their letters of support, its allies said what had happened at Theranos was no different from what happened at many other startups.

“Failure is part of the game in Silicon Valley,” said Alex Moore, an investor with investment firm 8VC. “We can’t punish our innovators in society, otherwise there won’t be any innovation.”

In another letter, Yinne Yu, a venture capital investor, said Ms. Holmes showed “more introspection and remorse than what I had personally seen in any other failed founder” in a decade of investing.

Tim Draper, a venture capital investor who backed Theranos, wrote that Mrs. Holmes was condemned by society for “taking that huge risk, sacrificing everything and failing.” He admitted that he did not know all the facts of the case.

The letters — which came from relatives, childhood and college friends, former employees, roommates, counselors and board members — attempted to reframe Ms. Holmes as a warm and selfless person. They also painted the first detailed picture of what her life has been like in recent years. Outside of her testimony at her trial, Ms. Holmes has not spoken publicly since the collapse of Theranos in 2018.

The court documents revealed that she was pregnant with her second child since her sentencing. She also logged 500 hours as a rape crisis counselor and swam the San Francisco Bay. Her dog, Balto, was killed by mountain lions.

Prosecutors argued that the letters of support for Ms. Holmes showed that she could not blame her crimes on a difficult upbringing. “Holmes, with strong family support, exceptional educational opportunities and financial stability, repeatedly chose to commit fraud,” they wrote.

In an eight-page, single-spaced letter, Billy Evans, Mrs. Holmes’ partner, wrote that much of what has been written about her was untrue, including the fact that she was a good salesman.

“Liz doesn’t have the ability to ‘sell something’; she just believes in things so deeply that it’s enticing,” Mr. Evans. “She’s more of a zealot than a showman.” He said that Mrs. Holmes’ fame had ruined any privacy and described a life under constant surveillance and threat.

Mr Evans’ father, William, who posed as a bystander named “Hanson” at Ms Holmes’ trial, said in his own letter that the Google searches for Ms Holmes surpassed those for Babe Ruth or Ronald Reagan – and all her results were negative. “Osama bin Laden has 21 million results, many of which are positive,” he added.

In his letter, Mr. Booker described meeting Mrs. Holmes at an organized event ten years ago by Senator John McCain of Arizona, where they shared a bag of almonds for dinner. They were both vegan.

“I believe that Mrs. Holmes has within her a sincere desire to help others, to be of meaningful service, and possesses the ability to save herself,” wrote Mr. Booker.

Prosecutors countered those portraits with evidence presented at Ms. Holmes’ trial. She manipulated regulators, lied to the media, falsified documents and intimidated whistleblowers, leading one associate, Tyler Shultz, to contemplate suicide, they wrote. She enjoyed the fruits of her fraud, they wrote, as she flew on a private jet, lived in a $15 million mansion, appeared on magazine covers, and dined at the White House.

“She repeatedly chose lies, hype and the prospect of billions of dollars over patient safety and fair dealing with investors,” they said.

In addition to 15 years in prison, prosecutors asked the court to order Ms. Holmes to pay $804 million in restitution for damages to Safeway and Walgreens, two companies Theranos worked with, and George P. Shultz, the former Secretary of State. . Mr. Shultz, who died last year, was Tyler Shultz’s grandfather and served on the board of Theranos.

Ms. Holmes didn’t make much money off Theranos, the court documents showed. On top of a $450,000 loan to pay a settlement with the Securities and Exchange Commission, she has more than $30 million in legal fees, according to the documents. Prosecutors questioned whether Ms. Holmes and her family’s money was being managed to prevent investors from being paid back. Ms Holmes’ lawyers responded that the suggestion that Mr Evans marry her so that his family, who own a hotel chain, would pay her debts, was “baseless”.

Prosecutors also questioned whether Ms. Holmes felt remorse.

“She takes no responsibility,” they wrote. “On the contrary, she insists she is the victim. She is not.”