Former Theranos COO Ramesh “Sunny” Balwani was sentenced to 12 years and 11 months in federal prison and three years’ probation on Wednesday over a July conviction on 12 counts of fraud.
Restitution will be decided at a later date.
“Ramesh Balwani, in a desire to become a Silicon Valley titan, valued business success and personal wealth far more than patient safety. He chose deceit over candor with patients in need of medical care, and he treated his investors no better,” said US Attorney Stephanie Hinds in a canned statement.
“Today’s sentence should serve as a lesson to anyone considering fraud in their own push for success,” added Hinds.
Balwani’s sentence is 20 months more than the 11 years and three months given to his former partner in both crime and life, Elizabeth Holmes.
Holmes, who was CEO of the biotech startup, was found guilty of four counts of fraud and acquitted of another four. A further four counts were dropped: three because the jury could not decide, and one during Holmes’ trial.
The disgraced COO received a longer sentence than his counterpart, Holmes, as he was convicted of more charges. Those charges equate to 12 counts related to investors and include 10 charges for wire fraud and two for conspiracy to commit wire fraud.
Judge Ed Davila, who presided over Balwani’s case, calculated total investor loss at $120 million – thus putting sentencing in the range of 135-168 months (11.25-14 years.) Davila reportedly said he wouldn’t give Balwani a tougher sentence for leading the conspiracy, but that Balwani had recklessly put patients at risk while leading the Theranos lab.
Balwani will be in prison before Holmes as he is required to report to the Bureau of Prisons on March 15, six weeks prior to Holmes’ April 27, 2023 required surrender date.
As a recap, Holmes founded Theranos in 2003, later becoming a well known Silicon Valley character as she adopted a Steve-Jobs like wardrobe and deep voice.
Balwani came onboard in 2009 and ran the company’s day-to-day operations, holding roles such as board member, chief operating officer and president during his almost seven-year stint at Theranos.
Holmes raised over $700 million from investors including Oracle’s Larry Ellison, former US Education Secretary Betsy DeVos, Rupert Murdoch, and the Walton family on false claims the company developed technology that could complete more than 200 medical tests with just a few drops of blood.
The Department of Justice asserted Balwani approved descriptions that were false and misleading and that the duo were aware of their technology’s many shortcomings as they courted investors and partnerships.
The company didn’t just hurt investors, but also patients and consumers of the fraudulent tech who relied on inaccurate blood test results to make life-saving decisions.
The entire house of cards came crashing down thanks to regulatory investigations and a series on the company run by the Wall Street Journal written by John Carreyrou. Carreyrou’s interest was piqued by biochemist Eleftherios Phedias Diamandis’ examination and damning publication on the tech.
On Wednesday Carreyrou celebrated Balwani’s sentencing.
The long-running Theranos saga is finally over!
— John Carreyrou (@JohnCarreyrou) December 7, 2022
According to multiple reporters in the court room, Balwani’s attorneys urged for probation over incarceration. His legal team argued that he had lost nearly $5 million he personally invested in Theranos and therefore should not be on the hook for other investor losses. They also said that he left the company in May 2016 before investor money was lost and therefore was not responsible.
The defendant’s counsel also cited his other charitable givings, and argued he was not a harm to society as no one would dare hire him at this point. Furthermore, unlike Holmes, he never courted the media.
The prosecution pushed for 15 years, due to Balwani’s role in preparing financial projections, his role in deals with Walgreens and investor communications, and autonomy within the Theranos’ lab.
Balwani’s counsel and the prosecution also differed on whether Balwani or Holmes were really leading the conspiracy. Prosecutor Robert Leach called the relationship between the two “complicated” and said their texts showed that at times Holmes led and other times it was Balwani.
The defendant’s legal team argued Elizabeth Holmes was the leader, which contradicts claims Holmes previously made during her trial that Balwani was psychologically and sexually abusive during their relationship.
The Register reached out to Balwani’s counsel and will report back if anything substantial arises.
“We are disappointed with the outcome,” the defendant’s attorney Jeffrey Coopersmith reportedly said in a statement. “We respectfully disagree and plan to appeal.”
“There is an unfortunate phrase in Silicon Valley: ‘Fake it ’til you make it.’ Elizabeth Holmes and Sunny Balwani stretched this idea to a place much further than the law allows,” said US attorney Stephanie Hinds. ®