18-CR-00258-EJD)[1] was a United States federal criminal fraud case against the founder of now-defunct corporation Theranos, Elizabeth Holmes, and its former president and COO, Ramesh Balwani.
[13][14] The decline of Theranos began in 2015, when a series of journalistic and regulatory investigations revealed doubts about the company's technology claims and whether Holmes had misled investors and the government.
In 2018, the U.S. Securities and Exchange Commission charged Theranos and Holmes with deceiving investors by "massive fraud" through false or exaggerated claims about the accuracy of the company's blood-testing technology.
[19] On June 15, 2018, following an investigation by the U.S. Attorney's Office for the Northern District of California in San Francisco that lasted more than two years, a federal grand jury indicted Holmes and former Theranos chief operating officer and president, Ramesh "Sunny" Balwani, on nine counts of wire fraud and two counts of conspiracy to commit wire fraud.
[24] Later unsealed documents indicated Holmes's plans to blame Balwani, who "dominated" her to such an extent she was unable to make her own decisions: "Ms. Holmes plans to introduce evidence that Mr. Balwani verbally disparaged her and withdrew ‘affection if she displeased him’; controlled what she ate, how she dressed, how much money she could spend, who she could interact with – essentially dominating her and erasing her capacity to make decisions."
"[26] In November 2019, Law.com reported that Senior District Judge H. Russel Holland, who was overseeing the civil case, indicated that he would allow Cooley to withdraw.
[29][30] In late August 2020, Holmes's legal team filed new motions seeking the dismissal of seven of the felony fraud charges, claiming that Judge Edward Davila had made a mistake about her obligations to the Theranos investors.
[32][33] In February 2021, federal government prosecutors accused Holmes and other executives of destroying evidence in Theranos's final days in business.
The specific evidence in question concerned the company's history of internal testing, including the accuracy and failure rates of Theranos's blood-testing systems.
[1] The case was prosecuted by the United States Attorney for the Northern District of California, with Holmes being defended by white-collar crime litigation firm Williams & Connolly.
Other prominent investors and/or board members were discussed but not called into court, including Betsy DeVos, Rupert Murdoch, Larry Ellison, George Shultz, and Henry Kissinger.
[36] Evidence was provided of Holmes's role in faked product demonstrations, falsified validation reports, misleading claims about contracts, and overstated financials.
[37][38] She also said that Balwani sought control over her during their romantic relationship, which was still ongoing when the alleged criminal acts took place, and at times berated and sexually abused her.
[37][39] However, she also testified that Balwani had not forced her to make the false statements to investors, business partners, journalists and company directors that had been described in the case.
[38] Prosecutors argued her culpability crossed into fraud when she lied about the accuracy, types and number of tests Theranos's machines could do, "At so many of the forks in the road, she chose the dishonest path," said an attorney during closing arguments.
[7] After her conviction, Holmes and her partner allegedly attempted to flee, according to prosecutors, when they bought one-way plane tickets to Mexico.
A few days prior to the rescheduling, Holmes had asked the judge to acquit because she maintained "no rational juror could have found" her guilty beyond a reasonable doubt.
She would start her 11-year prison sentence on May 30, 2023, following the request Holmes's lawyers made to allow her to travel out of state and prepare child care.
[50] Judge Edward Davila recommended she be incarcerated at Federal Prison Camp, Bryan, in Texas, a minimum security facility with limited or no perimeter fencing.
Kaatz said while the jury quickly concluded she was guilty of fraud against investors, they were not convinced she was fraudulent of patients, as they were "one-step removed" from the CEO.
After her conviction, Holmes and her partner allegedly attempted to flee, according to prosecutors, when they bought one-way plane tickets to Mexico.
Separately, prosecutors requested Holmes to repay $878 million to Theranos investors, representing the entirety of all investments made into the company.
On 11 June 2024, Holmes' legal representatives submitted on her behalf an appeal before California’s Ninth Circuit court, arguing that judge Edward Davila "erred in several decisions" in her trial.
Holmes "would be the most notable female executive to serve time since Martha Stewart did in 2004 after lying to investigators about a stock sale".
[9] Opening arguments were expected to start on March 15, but were delayed when the judge adjourned proceedings due to COVID-19 exposure by someone in attendance in the courtroom.
[61] Balwani's defense maintained he "acted in good faith to make blood testing more accessible, more convenient and more affordable to everyone" and had not engaged in fraud.