In January, Elizabeth Holmes became the rare Silicon Valley founder convicted of fraud stemming from her tenure as CEO of her failed blood testing startup, Theranos. On Thursday, her ex-boyfriend and former second in command, Ramesh “Sunny” Balwani, was also found guilty of fraud by a separate jury.
Their back-to-back trials spanned nearly a year and mark the final chapter of a startup that rose to prominence, and a $9 billion valuation, with the promise of revolutionizing blood testing to become a cautionary tale for founders and technology companies.
Now anticipation turns to their sentencing hearings, which are set to take place weeks apart, with Holmes scheduled for late September and Balwani’s for mid-November.
The former couple were first charged four years ago with the same 12 criminal charges relating to defrauding investors and patients of Theranos’ abilities and business dealings in order to obtain money.
Their lawsuits broke down after Holmes indicated she intended to accuse Balwani of sexually, emotionally and psychologically abusing her throughout their decade-long relationship, which coincided with his time at the head of the company. Balwani, through his lawyers, has strongly denied the allegations.
The jury largely discounted Holmes’ emotional testimony about the alleged abuse, finding it irrelevant to the charges she faced, but the issue may be factored into their sentencing.
Holmes and Balwani each face up to 20 years in prison as well as a $250,000 fine plus restitution per count. But legal experts say it’s incredibly rare for anyone to receive the full amount. Any jail time associated with the charges is also likely to be served concurrently.
“The prosecution defines the maximum the person can get, but no one ever gets the maximum,” said Nancy Gertner, a former U.S. federal judge and senior lecturer at Harvard Law School. She also noted that sometimes judges decide to weigh restitution more heavily on jail time. “It hasn’t happened as often in recent years because it can seem like someone is buying their way out of prison – but it can happen.”
Judge Edward Davila, who presided over Holmes and Balwani’s trial, will ultimately decide their fate as he sees fit, using the sentencing guidelines as a benchmark. Judge Davila will consider a variety of factors, including the amount of money intended to be defrauded. Wire fraud charges related to individual investors totaled more than $154 million, for example.
Between their convictions and their scheduled sentencing dates, the probation office conducts an investigation of each of the former executives to provide a holistic look at their history – from their family to their finances, as well as their crimes – that will help the judge determine a phrasing. It may also include factors such as their psychological background or any trauma, where Holmes’ claims about the nature of his relationship with Balwani, who is nearly 20 years his senior, may play a role. Holmes and Balwani will also each be allowed to submit sentencing memoranda that argue in favor of leniency in sentencing.
“The crime itself is only one factor in the conviction,” Rachel Maimin, a partner at Lowenstein Sandler LLP, which specializes in white-collar defense, told CNN Business. “It’s a very important factor, but certainly not the only factor. … They are each going to be judged by their own actions and their own life story.
Separate juries ultimately found Holmes and Balwani guilty, but returned different verdicts.
Holmes, who left Stanford in 2004 at age 19 to work at Theranos, was convicted on four counts of defrauding investors. But she was acquitted of the patient-related charges and jurors could not reach a unanimous decision on three charges relating to the fraud of specific investors. (A patient charge was dropped due to prosecutorial error.)
Balwani, who assumed an official role at Theranos in 2009 and oversaw key aspects of the business, including its lab that handled patient testing, was found guilty on all 12 counts, including 10 counts of wire fraud federal government and two counts of conspiracy to commit wire fraud.
Both are currently bond free – Holmes on a $500,000 bond secured by property and Balwani on a $750,000 bond secured by cash or property.
A hearing on Holmes’ motion for acquittal is scheduled for later this month.
Meanwhile, Balwani’s attorney, Jeffrey Coopersmith of Orrick, Herrington & Sutcliffe, said in a statement Thursday that the defense was exploring ways to possibly challenge the verdict.
“We are obviously disappointed with the verdicts,” he said. “We plan to investigate and consider all of Mr. Balwani’s options, including an appeal.”