Elizabeth Holmes Possible Sentence: No Slap On The Wrist

The sentencing of Elizabeth Holmes, the former CEO of Theranos, a blood-testing company in Silicon Valley, is set for Sep 26 2022 at 130 pm, Judge Davila, San Jose California Federal Court.

On January 3, 2022, Holmes was convicted of one count of conspiracy to defraud investors, and 3 counts of wire fraud, Each count carries up to 20 years in prison, a $250,000 fine, 3 years supervised release by probation, and likely victim (investor) restitution in the amount of $144 million dollars.

Why the sentencing “delay”? Here are 2 reasons….

Post-trial motions: Defendants, typically, file motions after the trial to challenge the verdict and to preserve issues for appeal. The judge has set a motions hearing for June 16, 2022 at 9 am regarding 3 potential motions raised by the Defense: Rule 29 motion for judgment of acquittal (substantial evidence of guilt or not), Rule 33 motion for a new trial (interest of justice requires vacate verdict) and Rule 34 motion to arrest of judgment (substantial defect in indictment i.e. indictment does not include all elements or court lacks jurisdiction, etc. this motion is seldom used and rarely granted). We will have a better idea of the defenses’ basis/arguments and the prosecutions response when their briefs are filed/due March 4 and April 29th, respectively, with Defenses reply brief due May 27.

Balwani’s Trial upcoming, reportedly, mid-March? (judge’s calendar indicates Feb 15th start for trial)
There may be evidence presented in Balwanis case that may impact Holmes sentencing as they are alleged co-conspirators in a scheme to defraud investors, patients and commit wire fraud.  

What’s the potential sentence for Holmes?

Federal sentencing is based upon sentencing guidelines established in the United States Sentencing Commission Guidelines Manual (aka “sentencing guidelines”). The guidelines establish sentencing ranges for crimes as an attempt to establish uniformity/consistency of sentencing across the federal courts. As of 2005, the guidelines are advisory not mandatory, and the sentence is up to the trial judge. 

So, assuming I did the math correctly, Holmes sentencing range is 108 months (offense level 31) to 210 months (offense level 35), that’s potentially 9 to 17.5 years in prison. Fraud is base offense level 7 plus 24-28 levels depending on aggravating/mitigating factors like the amount of loss, abuse of position of trust, aggravating/leadership role, cooperating with government, etc. Here’s the link to the guidelines USSC Guidelines. 

Sentencing time will be increased incrementally due to conviction on multiple counts rather than consecutive sentences. 

Although sentencing is up to Judge Davila, the sentence also rests in the hands of Holmes. Right now, she can take actions to reduce/mitigate her prison time. Specifically, here are 3 ways…

1. Flip on Balwani and cooperate with the government to help them with their case against Balwani,
2. Waive her appeal upon an agreement with the prosecution to recommend a shorter sentence,  
3. Accept responsibility for crimes 

Btw, her new mom status or even a pregnancy is not technically a mitigating factor. Holmes is also not technically eligible for probation or a mix of home detention and prison time due to her high offense level.

Fyi, based on 3 similar fraud cases at or near Holmes offense level, Judge Davila sentenced the fraudsters to 97, 108, and 140 months. Holmes will likely face a longer sentence as the amount of loss in her case, approximately 144M far exceeds the 7 million, 9.9 million and 48 million, respectively, defrauded by other defendants. However, based upon a review of 8 recent fraud cases sentenced by Judge Davila, the sentences were 30% less on average, than the sentencing range in the sentencing guidelines. In short, assuming Holmes loses her appeal, she could face a prison sentence of 76 months (108 x 30% reduction) to 147 months (210 x 30% reduction) or 6.3 to 12.25 years in prison. Keep in mind, this is just a sentencing estimate as there are many moving parts in sentencing including the sentencing recommendations by the probation department, the government and information yet unknown to be discovered in the pre-sentence report, at the sentencing hearing in September and in Balwani’s trial.

Contrary to some public sentiment, Holmes sentence will not be a slap on the wrist. Additionally, as she faces a longer sentence, she will also likely await the outcome of her appeal in prison rather than out on bond. Her defense team will undoubtedly pursue all possible avenues to minimize her sentence.

And….lastly, since Holmes has been convicted, she will be required to forfeit any assets traceable to the fraud proceeeds including any commingled assets. Curious, what property will secure her 500k bond? 

Simply, my opinion, what say you?

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