The former tech company founder has admitted making mistakes but denied any criminal activity.
One year after Theranos founder and CEO Elizabeth Holmes entered prison, a panel of federal judges listened as her lawyers asked for a new trial in the Silicon Valley fraud case that dethroned her stardom.
The hearing held in the Ninth Circuit Court of Appeals in San Francisco on June 11 came 2 ½ years after a jury found Ms. Holmes guilty of crafting a blood-testing scheme that defrauded investors and patients by purposely lying about the viability of the business.
Ms. Holmes, 40, launched the startup in Palo Alto, California, shortly after dropping out of Stanford University in 2003 at the age of 19, with claims that her medical diagnostic company would revolutionize the health care industry.
Ms. Holmes did not attend the hearing. She is currently serving her 11-year sentence in a Bryan, Texas prison.
However, her parents and boyfriend Billy Evans, with whom she has two young children, attended as oral arguments were delivered for more than two hours.
The three federal prosecutors who presented the U.S. Justice Department’s case during the original four-month trial that began in August 2021 sat in the courtroom audience, including two attorneys—Jeffrey Schenk and John Bostic—who have since gone to work for private law firms.
Ms. Holmes had admitted to making mistakes but adamantly denied any criminal activity in her trial testimony on the witness stand.
“Substantial evidence showed that Holmes and Theranos’ scientists believed in good faith that Theranos had developed technology that could accurately run virtually any blood test,” her lawyers wrote in their 55-page
appeal.
Justices Jacqueline Nguyen, Ryan Nelson, and Mary Schroeder offered few clues as to their leanings in upholding or overturning Ms. Holmes’ conviction. However, they made clear it would take compelling evidence to throw out the jury’s decision.
The panel did not provide a timeline for their ruling, with Justice Nguyen saying that it would be issued in “due course.” Appeals for criminal convictions can take weeks to more than a year.
Ms. Holmes will await the decision from prison. Due to good behavior, she is scheduled to be released in August 2032, earlier than her full, 135-month sentence.
Justice Nelson appeared to show some sympathy when Ms. Holmes’ attorney, Amy Saharia, argued that her client’s case deserved close scrutiny because the jury had acquitted her on four additional counts of fraud and conspiracy and was unable to reach a verdict on three more counts.
Ten years ago, Theranos had become a valued commodity, raising nearly $1 billion from investors. Then-Vice President Joe Biden praised the company for its ingenuity.
The company put together a high-profile board of directors, including former presidential cabinet members George Schultz, James Mattis, and Henry Kissinger.
Ms. Holmes became a Silicon Valley media sensation with a fortune valued at $4.5 billion in 2014.
She claimed that Theranos-designed devices could scan a few drops of human blood for hundreds of potential diseases. However, the test results were unreliable, and both Ms. Holmes and her former business partner and lover at the time, Ramesh “Sunny” Balwani, attempted to hide the information from investors.
Eventually, the technology’s flaws were exposed, and Theranos collapsed in a scandal that dominated headlines and led to criminal charges against Ms. Homes and Mr. Balwani.
Prosecutors hoped to break a “fake-it-till-you-make-it'' mentality often adopted by Silicon Valley entrepreneurs hoping to strike it rich with still-buggy products.
On June 11, the panel of appeals judges also heard arguments from Mr. Balwani’s lawyers, who are trying to overturn the 13-year prison sentence he received after his July 2022 conviction for fraud and conspiracy. He was tried separately from Ms. Holmes.
Mr. Balwani claims that federal prosecutors distorted evidence to bias the jury against him while spinning a different narrative from the story they presented during Ms. Holmes’ trial, which ended just months before his trial began in March 2022.
Mr. Balwani was found guilty on all 12 counts of fraud conspiracy, which contributed to his longer sentence at a federal prison in Southern California.
He is currently scheduled for release in November 2033.
