Ramesh Balwani, the former chief operating officer of failed blood-testing startup Theranos, was sentenced Wednesday to nearly 13 years in prison for defrauding investors and patients about the company’s business and technology.
Mr Balwani, 58, and his convicted accomplice, Theranos founder Elizabeth Holmes, 38, had promised the start-up would revolutionize health care with machines and tests that would require only a few drops of blood. Can detect certain diseases. But those claims were false, and Theranos became a story 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.
US District Judge Edward J. Davila of the Northern District of California sentenced Mr. Balwani to 155 months in prison, or 12 years and 11 months, plus three years of supervised release. Mr Balwani must surrender on March 15.
his sentence was longer Ms Holmes was found guilty of four counts of fraud in January and sentenced to more than 11 years in prison last month. Mr Balwani plans to appeal. His lawyers requested that he be assigned to a minimum security satellite camp in Lompoc, California.
While wire fraud carries a maximum penalty of 20 years in prison, prosecutors sought a 15-year prison sentence for Mr. Balwani and ordered more than $800 million in restitution to be paid to investors. His lawyers are only asking for probation.
As they did in Ms. Holmes’ case, prosecutors told Judge Davila that a long sentence would deter Silicon Valley entrepreneurs and start-up founders from exaggerating the truth. In court papers, they also wrote that the long sentence would “rebuild the trust investors must have when they fund innovators.”
The Epic Rise and Fall of Elizabeth Holmes
The Theranos founder’s story, from a $9 billion valuation to a fraud conviction, has become emblematic of Silicon Valley’s cultural pitfalls.
Assistant U.S. Attorney and Attorney General Jeffrey Schenk said in court on Wednesday that Mr. Balwani deserved a longer sentence than Ms. Holmes because he oversaw Theranos’ lab, which Threatening the life safety of the patient.
“Mr. Balwani has a great deal of autonomy in running the lab. The decisions he makes directly impact the message communicated to patients,” Mr. Schenk said. He added that laboratories were the source of “some of the greatest harm”.
Mr. Balwani’s attorney, Jeffrey Coopersmith, pinned the blame on Ms. Holmes, who was not found guilty of defrauding patients. “She’s the CEO and she’s the face of Theranos,” he said.
Mr Balwani, who appeared with his family, did not read a statement to the judge. None of the victims spoke.
Mr. Balwani faced obstacles because he didn’t have “some of the empathy that Ms. Holmes has,” said Michael Weinstein, a former federal prosecutor who led white-collar litigation at the law firm of Cole Schotz. He added that Mr Balwani was “a little older and a little wiser” meaning “the court expected more from him as an executive”.
Before joining Theranos, Mr. Balwani worked at software companies and helped lead an e-commerce startup, for which he was reportedly paid $40 million at the height of the dot-com boom. He and Ms. Holmes, who were 37 and 18 when he met, began secretly dating shortly after Ms. Holmes founded Theranos in 2003. Mr. Balwani joined the company and invested $4.6 million in the company in 2009.
Mr. Balwani left the company and split with Ms. Holmes in 2016 after the Wall Street Journal revealed that Theranos’ tests hadn’t worked as advertised in 2015. Theranos shut down in 2018.
That year, federal prosecutors charged Mr. Balwani and Ms. Holmes with fraud. Their cases were later separated and Mr Balwani went to trial this year.
Prosecutors argued at trial that he knew Theranos technology wasn’t working as promised because he was involved in nearly every part of the business. In addition to leading the company’s labs, he developed financial forecasts and participated in numerous meetings with investors.
Mr. Balwani’s lawyers argue that he has always been a big believer in Theranos and its mission. They said Ms Holmes was responsible, not Mr Balwani.
Each defendant was mentioned frequently in the other’s trial, but they did not testify against each other. At trial, Ms Holmes accused Mr Balwani of emotional and sexual abuse, which Mr Balwani denied and was not allowed to testify at trial.
Ultimately, the jury found Mr. Balwani defrauding Theranos investors and patients. After his conviction, he asked for a new trial, which was refused.
Ms Holmes, who is due to report to prison in April, said in a filing this week that she plans to appeal her case. In it, she cites different statements by prosecutors about her relationship with Mr Balwani. The two were treated equally at her trial. But at Mr Balwani’s trial, her lawyers wrote, “the government took the opposite position, emphasizing Mr Balwani’s age, experience and influence over Ms Holmes.”
Before sentencing Mr. Balwani, Judge Davila reviewed Mr. Balwani’s educational and business history, saying the executive’s previous success made his conduct at Theranos “tragic.”
“It’s a successful business. The idea is strong,” said Judge Davila, referring to Theranos. But he said Mr Balwani had “chosen to cheat” when things went wrong at the company.
Erin Griffiths Contribution report.