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Elizabeth Holmes likely to face 'double-digit sentence' for fleecing investors, experts predict

·Reporter
·4 min read

Criminal law experts expect Theranos founder Elizabeth Holmes to be sentenced to more than a decade in prison after a jury found her guilty of defrauding investors in her blood-testing startup of millions of dollars.

“I could easily see the judge impose a double-digit sentence here,” former federal prosecutor Jacob Frenkel told Yahoo Finance Live on Tuesday, the day after the jury's mixed verdict came down.

After a nearly four-month trial, a federal jury convicted Holmes, 37, on three counts of criminal wire fraud and one count of conspiracy to commit wire fraud. The jury deadlocked on three counts of wire fraud, leading to a mistrial on those counts. She was found not guilty on four counts of defrauding customers of Theranos, which Holmes had suggested could perform numerous diagnostic tests from a finger prick of blood.

Each of the counts carry a possible prison sentence of 20 years, along with a $250,000 fine and full restitution. However, judges rarely impose consecutive, or stacked, prison terms on white collar defendants like Holmes, who could in theory face 80 years in prison on the four convictions, given the judge's leeway in sentencing. Still, experts say that the amount of money involved in the fraud could lead to a multi-year prison sentence for Holmes.

“For these white collar cases, that’s where they get you. The loss amount is just so critical,” says Andrew George, a white collar criminal defense attorney at Baker Botts.

Elizabeth Holmes walks into federal court in San Jose, Calif., Monday, Jan. 3, 2022. (AP Photo/Nic Coury)
Elizabeth Holmes walks into federal court in San Jose, Calif., Monday, Jan. 3, 2022. (AP Photo/Nic Coury)

The jury’s four guilty verdicts stemmed from three investments made by wire transfers in 2014: $38.3 million from experienced healthcare investor Brian Grossman; roughly $100 million by former U.S. Education Secretary Betsy DeVos; and $6 million by prominent estate lawyer Daniel Mosley, who was perhaps more influential than any other investor in steering wealthy clients to Theranos.

That roughly $144 million in victim losses, added to the conspiracy conviction that alleged no particular dollar figure, could carry heavier consequences than if Holmes were convicted of defrauding victims out of less significant amounts.

“I think the jury's verdict was probably the best possible verdict for the government,” Frenkel says. “And the reason I say that is because the conviction was on the fraud counts — the total well over $100 million — which really sets up the judge to impose a high sentence.”

Still, George expects the judge to impose a more lenient sentence than the guideline range that he calculates to around 210 to 262 months, or 17.5 years to nearly 22 years. Judges are allowed to deviate from those guidelines.

“Because I think that's a very severe sentence, and I don't think he'll go that hard," George said, referring to Judge Edward Davila, who presided over the case. "But I would expect no less than five years, and quite possibly more than 10.”

Holmes was 19 when she dropped out of Stanford to launch Theranos, which aimed to revolutionize blood diagnostics technology. The startup, which boasted luminaries like Henry Kissinger and the late Secretary of State George Shultz as board members, imploded in 2018 after regulators halted some of its operations, and after a Wall Street Journal investigation revealed serious flaws in the technology.

Holmes' onetime boyfriend and former Theranos COO Ramesh "Sunny" Balwani was indicted on the same counts as Holmes and is scheduled to face trial this year. During testimony in her own defense, Holmes said that Balwani verbally and sexually abused her while she was leading the company.

Holmes still has a challenging argument to make to mitigate her sentence given that she was the CEO, according to Rachel Fiset, managing partner of Zweiback Fiset & Coleman.

"After the judge considers all factors, I think it is likely she receives a sentence between 12 and 15 years in prison, a $1 million fine and restitution in the amount of loss," Fiset predicts.

The prosecution will ask the judge to consider Holmes' role in the criminal enterprise, the number of victims, and the amount those victims lost, to increase her sentence as much as possible, according to Fiset. In turn, Holmes, who gave birth in August while she waited this trial, will try to lessen that sentence.

"She will argue that she was young and did not understand the gravity of her actions, is a first time offender, has lost her livelihood and all semblance of a normal life, was not convicted of multiple counts, and that she is a new mother who wants a chance to see her child grow up," Fiset said.

The jury’s decision was based on testimony from more than 30 witnesses as well as arguments from each party's lawyers, and more than 900 exhibits introduced over the trial’s 15 weeks. Holmes is expected to appeal the decision.

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

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