Elizabeth Holmes files motion to stay out of prison pending appeal

Convicted Theranos founder Elizabeth Holmes is asking the judge who presided over her trial and sentenced her last month to more than 11 years in prison to grant her freedom while she appeals her case.

In a court document filed Monday, Holmes’ lawyers offered three reasons in support of the former blood-testing company CEO's request to remain out of custody, despite San Jose, California U.S. District Court Judge Edward Davila’s order to submit to incarceration on April 27.

First, they said, Holmes is neither a flight risk nor a danger to public safety. Second, they said, her appeal is not intended to delay her incarceration. And third, they argued that her appeal will present several substantial questions.

Among those questions, the lawyers wrote, are whether or not Judge Davila erred in making various rulings on Holmes’ motions before, during, and after her trial. They point out that Holmes filed 19 pretrial motions concerning which evidence should be admitted at trial, as well as requests for a new trial at the close of her case.

“In sum, the record is teeming with issues for appeal,” Holmes' lawyers said in the document, noting that if the 9th Circuit Court of Appeals agrees with any of Holmes' appellate arguments, a new trial would need to be held.

SAN JOSE, CALIFORNIA - NOVEMBER 18: Former Theranos CEO Elizabeth Holmes on November 18, 2022 in San Jose, California. Holmes appeared in federal court for sentencing after being convicted of four counts of fraud for allegedly engaging in a multimillion-dollar scheme to defraud investors in her company Theranos, which offered blood testing lab services. (Photo by Justin Sullivan/Getty Images)

Release during appeal would permit Holmes to continue communication with her attorneys, they said. The $500,000 bond secured by her parents’ only home would be “sufficient” to secure Holmes’ release pending appeal, the lawyers suggested.

Holmes’ freedom during appeal depends on the decision of Judge Davila, and potentially an appellate judge.

First, she could persuade Judge Davila – who also presided over the trial of her codefendant Ramesh “Sunny” Balwani who is set to face sentencing on 12 fraud convictions on Wednesday — that she deserves to stay out of custody while her appeal plays out in the higher court. If Judge Davila rejects such a request, Holmes can appeal to the 9th Circuit Court of Appeals, which is empowered to decide if she must report to prison or remain free as it considers the merits of her appeal.

Kyle Clark, a criminal defense lawyer with Baker Botts, said it’s difficult to predict how Judge Davila would respond to a request by Holmes for continued freedom.

“If there's an appeal, sometimes they'll keep the people out [of prison] pending appeal, and sometimes they put them in jail, even though there's an appeal pending,” Clark said.

To make the decision, he explains, Judge Davila is tasked with considering many of the same factors that determined whether to permit Holmes to remain on bail following her indictment and into her sentence, such as whether her crime involved violence, her lack of criminal history, and whether she’s a flight risk.

“The judge may be amenable to sentencing her, but holding her at bay while her appeal grinds away,” Clark said. “Though the government's position on that is important, too.”

Clark said he expects prosecutors to counter Holmes’ request by stressing that the long process of an appeal could significantly delay Holmes from serving out her sentence.

“Sometimes it works, sometimes it doesn’t,” Clark said.

Theranos Chief Executive Officer Elizabeth Holmes speaks on stage at the Glamour Women of the Year Awards where she receives an award, in the Manhattan borough of New York November 9, 2015.    REUTERS/Carlo Allegri
Theranos Chief Executive Officer Elizabeth Holmes speaks on stage at the Glamour Women of the Year Awards where she receives an award, in the Manhattan borough of New York November 9, 2015. REUTERS/Carlo Allegri (Carlo Allegri / reuters)

George Demos, a former prosecutor for the U.S. Securities and Exchange Commission, says avoiding incarceration altogether is an uphill battle for Holmes. To do so, she would need to prevail in her appeal, he said.

Even the appellate court cannot overturn Davila’s sentence in the event that Holmes’ loses on appeal, unless the court finds that Davila miscalculated Holmes’ punishment under the U.S. Sentencing Guidelines.

Clark and other attorneys who talked with Yahoo Finance say Holmes’ chances for the appellate court to overturn the jury’s verdicts or Davila’s sentence are slim given Davila’s close management of the case, which helped to preserve a fair trial. Appeals can be based on rulings on testimony and evidence, whether the judge’s rulings during the course of the actual trial are consistent, and whether Holmes was granted or denied the opportunity to put in any exculpatory evidence.

“The judge tried this case very carefully,” Jacob Frenkel, a white-collar criminal defense attorney, told Yahoo Finance in January immediately after the jury returned its verdicts following seven days of deliberations. “It's unlikely that an appeal would result in changing the sentence.”

Frenkel also pointed out that Holmes, in taking the stand during her trial, may have contributed to sealing her fate on appeal.

“The fact is, Elizabeth Holmes testified. That was a gambit,” he said. “And ultimately, the jury made its decision in large part based on whether it did or did not believe Elizabeth Holmes. So I think the appeal is going to be tough sledding for the defense.”

In January, Holmes was convicted on three counts of criminal wire fraud and one count of conspiracy to commit wire fraud. Her jury unanimously found her guilty of illegally fleecing investors out of millions of dollars through her Silicon Valley blood-testing startup.

In July, a separate Silicon Valley jury closed another chapter in the decades-long Theranos story, convicting its former president and chief operating officer, Ramesh “Sunny” Balwani, of criminal fraud. Balwani was also Holmes romantic partner during the time the two ran the biotech startup.

Demos said Holmes’ freedom pending appeal will be carefully considered by Davila, and the appellate court, if Holmes files a request with the 9th Circuit.

“So whether or not she reports to prison on April 27 remains to be seen,” Demos said.

Alexis Keenan is a legal reporter for Yahoo Finance. Follow Alexis on Twitter @alexiskweed.

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