Theranos founder Elizabeth Holmes arrives at the Robert F. Peckham Federal Building and U.S. Courthouse in San Jose, Calif., on Friday, March 17, 2023. (Dai Sugano/Bay Area News Group)
Theranos founder Elizabeth Holmes’ bid to stay out of prison past her scheduled April 27 incarceration date remains in play after her judge said Friday he would not issue an order until early next month.
Holmes, convicted of felony fraud in connection with her now-defunct Palo Alto blood-testing startup, has asked Judge Edward Davila to let her remain free on bail until her appeal is concluded, which could take months. When Davila in November sentenced Holmes to more than 11 years in prison, he delayed Holmes’ incarceration until April 27, with legal experts saying the judge likely wanted her to be able to deliver her second child before imprisonment.
Davila presided Friday over a hearing in U.S. District Court in San Jose into whether Holmes should pay restitution to Theranos, and whether she can stay out of prison pending appeal. After hearing arguments into restitution, Davila noted that he expected he would issue rulings on both matters the first week of April.
Holmes, as has been typical throughout her four months of legal proceedings, sat upright in the courtroom between two of her lawyers. Her mother Noel, father Christian and fiancé Billy Evans watched from the courtroom gallery.
A jury convicted Holmes in January 2022 on four felony counts of defrauding investors in Theranos out of more than $144 million. Ten months later, Davila sentenced her and recommended a minimum-security facility in Texas. Federal prison authorities have final say on where Holmes will be locked up. The U.S. Bureau of Prisons did not immediately respond Friday to questions about the location of Holmes’ incarceration.
The fallen Silicon Valley entrepreneur has been fighting to remain free until her appeal, filed in December, is concluded. Federal prosecutors argued that Holmes should surrender herself April 27 and claimed her one-way ticket to Mexico with a departure soon after her conviction was an attempt to flee the country, and that she posed a flight risk. Holmes denied the claim and said she had planned to go to a wedding in Mexico with her fiancé Billy Evans if she were acquitted, but they neglected to cancel the flight.
Holmes, 39, founded Theranos in 2003 as a Stanford University dropout, and drove the startup to a valuation as high as $9 billion on claims her machines, for a time in use at Walgreens drug stores, could run a full range of tests on just a few drops of blood. The company went bust in 2018 after a series of Wall Street Journal exposés led to federal investigations and fraud charges.
Holmes has a son born in July 2021 and recently gave birth to a second child. Court filings indicate she had the baby between November and mid-February. Davila, during arguments Friday on whether Holmes posed a flight risk, asked prosecutor Kelly Volkar about Holmes’ legal team referring in a court filing to Holmes’ two young children. Volkar said she did not have much to say other than that Holmes had an infant when the one-way Mexico flight was booked, and that Holmes “clearly has family support in the United States.”
Federal prosecutors in a court filing last month asked Davila to order Holmes to pay back the full amount of investor losses, which the prosecution tallied at more than $878 million. Davila has pegged investor losses from Holmes’ criminal conduct at $381 million. Holmes in a February court filing said she “continues to work on ideas for patents” but “has essentially no assets of meaningful value.” In an earlier filing, Holmes’ legal team said she “has incurred substantial debt from which she is unlikely to recover.”
In her response to the prosecution’s proposed restitution amount, Holmes said her crimes did not cause the collapse of Theranos and she should not be ordered to pay restitution. In court Friday, prosecutor Robert Leach argued that even though Holmes was not found guilty of defrauding some investors, the jury convicted her of conspiring to defraud investors, so she should have to make all investors whole. “Investors got nothing back,” Leach said. “You need to put them in the position where they were before the investment.”
Holmes’ lawyer Patrick Looby argued that prosecutors had failed to establish that the investors Holmes was not convicted of defrauding were victims of her fraud. Looby also argued that the prosecution did not produce an accurate calculation of the actual fraud-related loss — in part because Theranos retained some value after Holmes’ crimes — so Holmes should not be ordered to pay restitution. Looby admitted that the retained value “slowly, over time” disappeared.