Ramesh Balwani, Theranos’ No. 2 executive, is sentenced for fraud
Ramesh Balwani, the former chief operating officer of failed blood-testing startup Theranos, was sentenced to nearly 13 years in prison on Wednesday for defrauding investors and patients about the company’s business and technology. company.
Mr Balwani, 58, and his convicted co-conspirator Elizabeth Holmes, 38, the founder of Theranos, had promised that the start-up would revolutionize healthcare with machines and tests capable of detecting certain diseases using only a few drops of blood. . But those claims were false, and Theranos became a tale of Silicon Valley ambition and hype.
Mr. Balwani, also known as Sunny, was convicted in July of 10 counts of wire fraud and two counts of conspiracy to commit wire fraud.
Judge Edward J. Davila of the U.S. District Court for the Northern District of California sentenced Mr. Balwani to 155 months, or 12 years and 11 months, as well as three years of probation. Mr. Balwani is due in police custody on March 15.
His sentence was longer than that of Ms Holmes, who was found guilty of four counts of fraud in January and sentenced last month to more than 11 years in prison. Mr. Balwani plans to appeal. His attorneys requested that he be assigned to a minimum-security satellite camp in Lompoc, California.
While wire fraud carries a maximum sentence of 20 years in prison, prosecutors had asked that Mr. Balwani be sentenced to 15 years and ordered to pay more than $800 million in restitution to investors. His lawyers had asked for fair probation.
As they did in Ms. Holmes’ case, prosecutors told Judge Davila that a long sentence would discourage Silicon Valley entrepreneurs and start-up founders from misrepresenting the truth. In court filings, they also wrote that a long sentence would “rebuild the confidence investors need to have when funding innovators.”
The Epic Rise and Fall of Elizabeth Holmes
The story of the Theranos founder, from a $9 billion valuation to a conviction for fraud, has become a symbol of the pitfalls of Silicon Valley culture.
Jeffrey Schenk, assistant U.S. attorney and lead prosecutor, said in court on Wednesday that Mr. Balwani should receive a longer sentence than Ms. Holmes because he oversaw the Theranos lab, which put patients at risk.
“Mr. Balwani had a great deal of autonomy in the management of the laboratory. He made decisions that had a direct impact on the information communicated to patients,” said Mr. Schenk. The laboratory, he added, was the source of “some of the greatest damage”.
Jeffrey Coopersmith, a lawyer for Mr Balwani, blamed Ms Holmes, who was not found guilty of defrauding patients. “She was the CEO. She was the face of Theranos,” he said.
Mr Balwani, who appeared in court with his family members, did not read a statement to the judge. None of the victims spoke.
Michael Weinstein, a former federal prosecutor who leads white-collar litigation at the Cole Schotz law firm, said Mr. Balwani faced hurdles because he didn’t have “some of the same sympathies as Ms. Holmes”. He added that Mr Balwani “being a bit older and wiser” meant “the court would expect more of him as an executive”.
Prior to Theranos, Mr. Balwani worked at software companies and helped run an e-commerce start-up, where he won a $40 million payout during the height of the dot-com boom. He and Ms. Holmes met when he was 37 and she was 18, and they started dating in secret shortly after Ms. Holmes launched Theranos in 2003. Mr. Balwani joined the company and there invested $4.6 million in 2009.
After The Wall Street Journal revealed Theranos’ tests were not working as advertised in 2015, Mr Balwani left the company in 2016 and parted ways with Ms Holmes. Theranos closed in 2018.
That year, federal prosecutors charged Mr. Balwani and Ms. Holmes with fraud. Their cases were later separated and Mr. Balwani was tried this year.
Prosecutors argued at trial that he knew Theranos’ technology didn’t work as promised because he was involved in nearly every aspect of the business. In addition to running the company’s lab, he created its financial projections and participated in numerous meetings with investors.
Lawyers for Mr. Balwani argued that he had been a genuine supporter of Theranos and its mission. They said it was Ms. Holmes, not Mr. Balwani, who was responsible.
Each defendant was frequently mentioned in the other’s trial, but they did not testify against each other. During her trial, Ms. Holmes accused Mr. Balwani of emotional and sexual abuse, which Mr. Balwani denied and was not allowed as evidence in her trial.
Ultimately, a jury found Mr. Balwani guilty of defrauding Theranos investors and patients. After his conviction, he requested and was denied a new trial.
Ms Holmes, who is due in jail in April, announced plans to appeal her case in a filing this week. In this document, she cited the various presentations of the prosecutors on her relationship with Mr. Balwani. The pair were presented as equals in his lawsuit. But during Mr Balwani’s trial, his lawyers wrote, ‘the government took the opposite position and pointed to Mr Balwani’s age, experience and influence over Ms Holmes’.
Before imposing Mr Balwani’s sentence, Judge Davila reflected on Mr Balwani’s educational and business history, saying the executive’s previous successes had made his actions at Theranos “tragic”.
“It was a successful business. The idea was strong,” Judge Davila said, referring to Theranos. But when problems within the company arose, he said, Mr Balwani “chose to go ahead with deception”.
Erin Griffith contributed report.