May 20, 2024

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Super Technology

Theranos’s Sunny Balwani sentenced to nearly 13 years in prison

Theranos’s Sunny Balwani sentenced to nearly 13 years in prison

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Ramesh “Sunny” Balwani, the one time second-in-command to disgraced Theranos founder Elizabeth Holmes, was sentenced to nearly 13 years in prison Wednesday as the saga of the blood-testing start-up draws to a close.

Balwani, the company’s former president and chief operating officer, was convicted earlier this year on 12 counts of wire fraud and conspiracy to commit wire fraud. Federal District Judge Edward J. Davila sentenced him in San Jose Wednesday, according to the Associated Press.

Balwani received a slightly harsher sentence than his former partner. Holmes, the once highflying CEO of Theranos, was sentenced to more than 11 years in prison last month after being found guilty on four counts of misleading investors about the company’s technology and business.

Elizabeth Holmes sentenced to more than 11 years in prison

“It clearly sends a signal to Silicon Valley that puffery and fraud and misrepresentation will be prosecuted, there will be consequences and the end result is potentially decades in prison,” said Michael Weinstein, chairman of the white collar criminal defense group at law firm Cole Schotz, who has been following the case.

Theranos was once valued at $9 billion, with an ambitious goal to make health care more affordable and accessible to the masses. It made a small device to process blood samples, purporting to be able to run hundreds of tests from just a few drops of patient’s blood.

But during Holmes’s lengthy trial, testimony showed that the technology could only run about a dozen blood tests, and its results were erratic. Theranos often relied on traditional testing machines made by outside companies. A Wall Street Journal investigation in 2015 and regulatory investigations exposed the misleading claims, leading to a stunning reputational fall for Holmes, Balwani and the company.

Theranos shuttered in 2018, after Holmes and Balwani left the start-up.

Juries in the trials of Holmes and Balwani concluded that both of them misled investors. Theranos had attracted prominent businesspeople and statesmen as investors or board directors, including George Shultz, Henry Kissinger, Rupert Murdoch and Larry Ellison.

Balwani was also convicted of defrauding patients who used the technology, which was available for a short period of time at some drugstores.

Former Theranos executive Sunny Balwani convicted on 12 fraud counts

“We are disappointed with the outcome,” Balwani’s attorney Jeffrey Coopersmith said in a statement after the sentence was handed down. “We respectfully disagree and plan to appeal.”

After their fall from grace, Theranos, Holmes and Balwani became the subjects of high-profile media portrayals of Silicon Valley greed and fraud, including a Hulu series, an HBO documentary, a best-selling book and multiple podcasts.

Holmes was the founder and CEO of the company, while Balwani served as a second-in-command for years, but the judge did not determine that either Holmes or Balwani was the definitive leader in the conspiracy.

Legal experts say Balwani’s sentence is on the higher-end for white-collar criminals. It’s also somewhat unusual for a person “lower down in the corporate hierarchy in a criminal conspiracy” to receive a harsher sentence, said former federal prosecutor Jason Linder, who is now a partner at corporate law firm Mayer Brown and has been following the case.

Balwani’s lawyers requested probation or home confinement for him, arguing that he did not profit from Theranos and believed in the company he was helping to build. They also suggested Holmes was the central figure at Theranos, not Balwani.

“To begin, Mr. Balwani did not start Theranos,” lawyers wrote in his sentencing filing. “He was never Theranos’ most significant shareholder. He did not conceive the blood-testing technology that drove the company’s promise. And he did not have the final say on Theranos’ strategy.”

Balwani and Holmes were originally charged together, but their cases were severed after Holmes accused Balwani of abusing her while they were in a romantic relationship. He has denied the allegations.

Balwani had significant responsibilities within Theranos, including managing the biotech’s ultimately doomed relationship with Walgreens, supervising the company’s labs and overseeing some of its finances and relationships with investors, the trial revealed.

He was already an experienced software entrepreneur when he first met Holmes on a trip in China during the summer before she started college. The pair later struck up a romantic relationship and continued dating while he was working at the start-up.

Holmes appealed her verdict earlier this month. Her legal team wrote in a filing that the “record is teeming with issues for appeal.”

Holmes cited several possible reasons for appeal, filings show, including the judge’s decision to exclude certain testimony from Balwani and to allow information about the start-up voiding test results in 2016, after many events of the case had occurred. Her appeal probably will face an “uphill battle” in court, Linder said.

Her lawyers also asked the court to allow Holmes to remain out of prison while the issue of the appeal is settled, arguing that she is not a flight risk or a danger to anyone’s safety. The judge has not yet ruled on the request.