Theranos founder Elizabeth Holmes loses appeal to remain free, is hit with huge restitution bill

Disgraced Theranos CEO Elizabeth Holmes appears to be soon bound for prison after an appeals court Tuesday rejected her bid to remain free while she tries to overturn her conviction in a blood-testing hoax that brought her fleeting fame and fortune.

In another ruling issued late Tuesday, U.S. District Judge Edward Davila ordered Holmes to pay $452 million US in restitution to the victims of her crimes. Holmes is being held jointly liable for that amount with her former lover and top Theranos lieutenant, Ramesh (Sunny) Balwani, who is already in prison after being convicted on a broader range of felonies in a separate trial.

The Ninth Circuit Court of Appeals decision on Holmes’s attempt to avoid prison comes nearly three weeks after she deployed a last-minute legal manoeuvre to delay the start of her 11-year sentence. She had been previously ordered to surrender to authorities on April 27 by Davila, who sentenced her in November.

Davila will now set a new date for Holmes, 39, to leave her current home in the San Diego area and report to prison.

The punishment will separate Holmes from her current partner, William Evans, their one-year-old son, William, and three-month-old daughter, Invicta. Holmes’s pregnancy with Invicta began after a jury convicted her on four counts of fraud and conspiracy in January 2022.

Davila has recommended that Holmes serve her sentence at a women’s prison in Bryan, Texas. It hasn’t been disclosed whether the federal Bureau of Prisons accepted Davila’s recommendation or assigned Holmes to another facility.

Ex-partner began serving sentence in April

Balwani, tried after Holmes, began a nearly 13-year prison sentence in April after being convicted on 12 counts of fraud and conspiracy last July. The 57-year-old was incarcerated in a Southern California prison last month after losing a similar effort to remain free on bail while appealing his conviction.

The verdict against Holmes came after 46 days of trial testimony and other evidence that cast a spotlight on a culture of greed and hubris that infected Silicon Valley as technology became a more pervasive influence on society and the economy during the past 20 years.

The trial’s most riveting moments unfolded when Holmes took the witness stand to testify in her own defence. Besides telling how she founded Theranos as a teenager after dropping out of Stanford University in 2003, Holmes accused Balwani of abusing her emotionally and sexually.

She also asserted she never stopped believing Theranos would revolutionize health care with a technology that she promised would be able to scan for hundreds of diseases and other potential problems with just a few drops of blood.

Rupert Murdoch owed $125M, court rules

While pursuing that audacious ambition, Holmes raised nearly $1 billion from a list of well-heeled investors that included Oracle co-founder Larry Ellison and media mogul Rupert Murdoch. Those sophisticated investors all lost their money after a Wall Street Journal investigation and regulatory reviews exposed dangerous flaws in Theranos’s technology.

In his restitution ruling, Davila determined that Holmes and Balwani should pay Murdoch $125 million — by far the most among the investors listed in his order. At her trial, court heard that Holmes personally lobbied Murdoch, unsuccessfully, to spike the “Bad Blood” series that ultimately ran in the Journal, which he owns.

The restitution also requires the co-conspirators in the Theranos scam to pay $40 million to Walgreens, which became an investor in the startup after agreeing to provide some of the flawed blood tests in its pharmacies in 2013. Another $14.5 million is owed to Safeway, which had also agreed to be a Theranos business partner before backing out.

In separate hearings, lawyers for Holmes and Balwani tried to persuade Davila that their respective clients should be required to pay little, if anything. Prosecutors had been pushing for a restitution penalty in the $800 million range.

Both Balwani and Holmes — whose stake in Theranos was once valued at $4.5 billion — have indicated they are nearly broke after running up millions of dollar in legal bills while proclaiming their innocence.

Holmes’s lawyers have been fighting her conviction on grounds of alleged mistakes and misconduct that occurred during her trial. They have also contended errors and abuses that biased the jury were so egregious that she should be allowed to stay out of prison while the appeal unfolds — a request that has now been rebuffed by both Davila and the Ninth Circuit Court of Appeals.