No. 2 A Top Executive at Theranos Gets Almost 13 Years in Prison for Fraud
In July, Ramesh Balwani, the COO of the doomed blood testing startup, was found guilty on 12 charges of fraud.
Former Theranos COO Ramesh Balwani was sentenced to nearly 13 years in jail on Wednesday for fraud involving the company’s operations and technology.
The 58-year-old Mr. Balwani and the 38-year-old convicted co-conspirator, Elizabeth Holmes, creator of Theranos, claimed that their company’s machines and tests could diagnose various diseases with only a few drops of blood, so revolutionizing the health care industry. However, the company’s promises turned out to be bogus, and Theranos became a symbol of the excesses of Silicon Valley ambition and marketing.
Known by his alias “Sunny,” Mr. Balwani was found guilty on 10 charges of wire fraud and 2 counts of conspiracy to commit wire fraud in July.
Mr. Balwani was sentenced to 155 months in prison by U.S. District Court for the Northern District of California Judge Edward J. Davila, which is equivalent to 12 years and 11 months in prison. On March 15, Mr. Balwani must report for arrest.
Compared to Ms. Holmes, who was found guilty on four charges of fraud in January and sentenced to almost 11 years in prison last month, his sentence was significantly more severe. M. Balwani will be filing an appeal. His legal team has requested that he be sent to a satellite camp in Lompoc, California, that has a lower level of security.
While the maximum punishment for wire fraud is 20 years in prison, prosecutors requested that Mr. Balwani be sentenced to 15 years and made to pay more than $800 million in restitution to investors. His legal team requested only probation for him.
As they did in Ms. Holmes’s case, prosecutors urged Judge Davila that a long sentence would discourage Silicon Valley entrepreneurs and start-up founders from stretching the facts. A lengthy sentence would “rebuild the trust investors must have when backing innovators,” they claimed in court documents.
Prosecutor Jeffrey Schenk, an assistant U.S. attorney, argued in court on Wednesday that Mr. Balwani should serve a longer term than Ms. Holmes because he controlled the Theranos lab, which put patients at risk.
Mr. Balwani was given a lot of leeway in how the lab was managed. “He made choices that had an effect on the information that was sent to patients,” Mr. Schenk said. He continued by saying that “some of the greatest harm” came from the laboratory.
Attorney for Mr. Balwani Jeffrey Coopersmith put the blame on Ms. Holmes, who was found not guilty of patient fraud. “She was the C.E.O. He referred to her as “the public face of Theranos.”
Mr. Balwani did not read a statement to the Court during his court appearance with his family. The victims kept quiet.
Former federal prosecutor and current head of white-collar litigation at Cole Schotz Michael Weinstein claims that Mr. Balwani’s difficulties stem from the fact that he lacks “some of the same sympathies Ms. Holmes possesses.” Mr. Balwani, he said, “is a little bit older and wiser,” so “the court would expect more from him as an executive.”
Mr. Balwani had previously worked at software firms and led an e-commerce start-up, from which he reportedly profited $40 million at the height of the dot-com boom. Shortly after Ms. Holmes founded Theranos in 2003, he and Ms. Holmes met; at the time, he was 37 and she was 18. Mr. Balwani joined the company and invested $4.6 million in it in 2009.
After The Wall Street Journal reported that Theranos’s tests did not work as stated in 2015, Mr. Balwani departed the company in 2016 and split with Ms. Holmes. In 2018, Theranos went bankrupt.
That year, federal authorities charged Mr. Balwani and Ms. Holmes with fraud. After their cases were initially consolidated, they were eventually split up, and Mr. Balwani’s trial began this year.
At trial, prosecutors claimed he was aware that Theranos’ technology did not deliver as promised because of his extensive involvement in the company. He did a lot of work for the company beyond just running the lab, including creating financial predictions and meeting with investors.
Attorneys for Mr. Balwani claimed that he was a firm believer in Theranos’s goals. People said that Ms. Holmes, not Mr. Balwani, had been in command.
Every defendant was addressed at some point during every other defendant’s trial, although no one testified against anyone else. Ms. Holmes presented allegations of emotional and sexual abuse against Mr. Balwani during her trial; these allegations were not admissible against Mr. Balwani.
A jury decided that Mr. Balwani was guilty of fraud against Theranos’s investors and customers. After the conviction, he sought for and was refused a new trial.
Ms. Holmes, who must surrender to authorities in April, has given notice of an impending appeal by filing paperwork this week. She referred to the prosecution’s conflicting accounts of her relationship with Mr. Balwani there. In court, she and her accuser were treated as equals. However, “the government took the opposite position and stressed Mr. Balwani’s age, expertise, and influence over Ms. Holmes,” as her attorneys put it, during the trial of Mr. Balwani.
Before handing down Mr. Balwani’s sentence, Judge Davila considered the executive’s background in education and business, concluding that Mr. Balwani’s “tragic” behavior at Theranos was all the more shocking in light of his accomplishments.
We ran a profitable enterprise. Judge Davila praised Theranos for having a “solid idea.” But when issues emerged at work, Mr. Balwani “chose to go forward with deceit,” he added.