Elizabeth Holmes should be sentenced to 15 years in prison for fraud, according to the United States

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Former Theranos Inc. CEO Elizabeth Holmes is set to spend 15 years in prison for committing one of the most serious white-collar crimes in Silicon Valley history, prosecutors tell the judge who will sentence her .

In a motion filed Friday night by the U.S. Attorney’s Office in San Francisco, prosecutors introduced a new element to the closely watched case: a recommendation that Holmes, 38, be ordered to pay off his investors, including Walgreens, in full. Boots Alliance Inc. and Safeway Inc. — sums totaling more than $800 million.

Misleading both novice and sophisticated investors, Holmes was “blinded by ambition,” prosecutors said in a court filing. The founder of the blood-testing startup that reached a peak valuation of $9 billion before collapsing into ruins in 2018 operated in a “reality distortion field,” in which her quest for fame, adoration and billions of dollars of wealth justified tampering and deception that put patient safety at risk, the government said.

“Holmes often seized on investors’ desire to make the world a better place in order to trick them into believing his lies,” prosecutors said. “She stands in court without remorse. She declines all responsibility. On the contrary, she insists that she is the victim.

The government’s sentencing memo sets the stage for a final showdown Nov. 18 in federal court in San Jose, Calif., before U.S. District Judge Edward Davila.

Holmes’ own lawyers say she should be spared jail time and sentenced to house arrest and community service so she can continue her pro bono work advising victims of sexual assault that she has started in recent months. His lawyers have argued that if Davila believes incarceration is necessary, an 18-month sentence is sufficient, followed by supervised release.

The government memo echoes many of the more sensational revelations from Holmes’ trial, including her admission that she added the logos of pharmaceutical giants without permission on reports to potential investors. They also pointed to instances where she falsely boasted that Theranos devices were being used by the US military in combat.

Statements from investors and victim patients are intertwined throughout the memo. Holmes’ lies about Theranos’ contracts with the Department of Defense were designed to “attack investor respect for our servicemen and servicewomen in the armed forces,” said investor Craig Hall. “Put simply, Holmes’ actions were disgusting and un-American.”

Holmes’ scheme to defraud patients should also weigh against her, even though she was acquitted of those charges, prosecutors said. Citing a sentencing recommendation from the U.S. probation office, the government said Holmes should serve more prison time because of his role as a leader in “extensive criminal activity that has occurred in connection with the company she founded.

Prosecutors included a list of investors, with a particular focus on Walgreens, Safeway and the late George Shultz, the former US secretary of state who served on the Theranos board and whose grandson worked in the company. business and was a whistleblower. Shultz’s family submitted a victim impact statement, prosecutors said. Holmes should compensate investors who suffered a total loss of $803,840,309, according to the filing.

Holmes has “modest assets” offset by $450,000 in loans for his civil settlement with securities regulators and more than $30 million in debt for legal fees, prosecutors said. The US Probation Office reported that Holmes’ family “appears to have substantial assets” and that the former CEO “is managing his affairs to avoid having their assets subject to judgment in this case.”

Davila should consider whether this “reflects a genuine desire to make his investors whole,” prosecutors said.

The case is USA v Holmes, 18-cr-00258, US District Court, Northern District of California (San Jose).

Photo: Elizabeth Holmes, founder of Theranos Inc., left, leaves federal court with her husband Billy Evans in San Jose, Calif., October 17, 2022./Bloomberg

Copyright 2022 Bloomberg.

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Fraud in the United States

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