Elizabeth Holmes Should Have Faced a Life Sentence

On Jan. 3, 2022, the disgraced Theranos founder Elizabeth Holmes was found guilty on four of the 11 counts against her. Those four counts carry a maximum potential penalty of 80 years imprisonment. As set forth below, the Federal Sentencing Guidelines produce a recommended sentence of “life.”

Judge Edward Davila on Nov. 18, 2022, sentenced Holmes to 11-and-one-quarter years in prison, after which she would serve three years of supervised release.

That’s less than the Department of Justice sought, which was a sentence of 15 years (180 months), even though the Probation Office recommended a sentence of nine years (108 months). And Holmes’ attorneys were looking for a sentence of just “18 months or less followed by supervised release.”

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How did we get to a place where “80 years” or “life” became at most a recommendation for 15 years, which would allow Holmes to return to a life of luxury? The simple answer, as my friend Ken White has often said, is that judges tend to show leniency to white men who commit their crimes wearing blue suits (or, in this case, a white woman who committed her crimes wearing black turtlenecks).

The Sentencing Guidelines Were Supposed To Prevent Favoritism For White-Collar Criminals

The Federal Sentencing Guidelines were first adopted in 1984 with the idea that disparity in sentencing based upon type of crime, region of the country or the predispositions of the sentencing judge should be eliminated in favor of a grid that would produce a sentencing range for every crime. The factors taken into consideration under the Sentencing Guidelines include the amount of loss, the defendant’s role in the offense, whether sophisticated means were used or position of trust was abused. The ranges produced by the Sentencing Guidelines were based on the average sentences imposed in similar cases in the past.

The four counts on which Elizabeth Holmes was found guilty were:

1. Count 1 - Conspiracy To Commit Wire Fraud - Section 371;
2. Count 6 - Wire Fraud in the amount of $38.3 million - Section 1343;
3. Count 7 - Wire Fraud in the amount of $100 million - Section 1343; and
4. Count 8 - Wire Fraud in the amount of $6 million - Section 1343.

Simply adding the statutory maximum sentence for each conviction generates a maximum sentence of 80 years. Ordinarily, the statutory maximum does not tell the sentence that the defendant is likely to get in federal court, because sentencing is conducted by reference to the United States Sentencing Guidelines—which usually call for a sentence far below the stacked statutory maximums. Here, as I set forth below, the Sentencing Guidelines call for “life,” which means that the 80-year statutory maximum sets the maximum sentence that can be imposed.

The relevant Guideline to start determining Elizabeth Holmes’ sentence is Section 2B1.1, which covers fraud-based crimes. Under Section 2B1.1(a), the Base Offense Level is 7, because the offense of conviction carries “a statutory maximum term of imprisonment of 20 years or more”.

• upward adjustment of 30 levels under Section 2B1.1(b), because the amount of the loss is “More than $550,000,000.”
• an upward adjustment of 2 levels under Section 2B1.1(b)(2)(A), because the offense “involved 10 or more victims.”
• an upward adjustment of 2 levels under Section 2B1.1(b)(16), because the offense involved “the conscious or reckless risk of death or serious bodily injury.” That brings the running total to Level 41.

To the Level 41 for the fraud, there is an upward adjustment of 4 levels under Section 3B1.1(a), because Elizabeth Holmes was “an organizer or leader of a criminal activity that involved five or more participants or was otherwise extensive.” That brings the running total to Level 45.

The Sentencing Guidelines matrix tops out at Level 43, and calls for “life” even if the defendant has no prior convictions.

The Probation Office’s Recommended That The Judge Depart From Guidelines And Impose a Far More Lenient Sentence

The Probation Office generates a Pre-Sentence Report (“PSR”) in every case, which provides the office’s assessment of the proper application of the Sentencing Guidelines, and then recommends a sentence. The PSR is not disclosed to the public.

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Here, the DOJ’s sentencing brief revealed that the PSR generated an offense level of 45, which would lead to a recommendation of 80 years (since “life” is not a possible sentence under the convictions).

The DOJ’s brief also states that—notwithstanding that the Sentencing Guidelines call for 80 years—the PSR recommended a sentence of only 108 months. The public record does not reflect why the PSR recommended a sentence so far below the 960 months (80 years) called for by the Sentencing Guidelines.

The Department of Justice Sought 15 Years

The DOJ’s brief has two conflicting strands.

First, it lays out the horrors of Holmes’ crimes, which included putting the lives of patients at risk by using unproven Theranos tests and losing more than $550 million to Theranos fraud. Most of the first 30 pages of the DOJ’s brief lays out how Holmes was the “organizer or leader” of “extensive fraud.”

But, when the DOJ makes it sentencing recommendation, it arrives at 15 years, citing the following mitigating circumstances:

“Through this variance request, the government also acknowledges that the Holmes’ crimes were not motivated by a short-term desire for financial gain. Second, this recommended sentence satisfies the ‘sufficient but not greater than necessary’ standard found in 18 U.S.C. § 3553(a). Finally, the Court will achieve the important sentencing goal of providing adequate deterrence to criminal conduct through a 15-year custodial sentence.”

In over 25 years as an attorney, as a federal prosecutor and a defense attorney, I have never seen anyone other than a “white-collar” criminal get this sort of break from the Sentencing Guidelines.

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The real explanation for the DOJ’s request is that the courts have been lenient towards white-collar criminals for decades, as the DOJ admits in a chart in its brief. For example, Charles McColl, who presided over an $8.6 billion fraud at McKesson, was sentenced to only 120 months (10 years). Walter Forbes, who ran a $1 billion fraud at Cendent, was sentenced to only 151 months (12 and a half years). The DOJ could not come up with good arguments for why Holmes should be given a significantly more harsh sentence than the billion-dollar fraudsters who preceded her.

Holmes Sought At Most, 18 Months—And Was Indignant That The DOJ Wanted More

Holmes’ sentencing memorandum reads more like a nomination for a Nobel Prize than a mea culpa: “Despite her mistakes, Ms. Holmes’ personal characteristics—including her deeply held desire to make the world a better place, her self-reflection, her determination and work ethic, and her visionary and creative mind—leave her with capacity and potential to positively contribute to the world.” She requested that the Court either impose no jail time, or “at most 18 months incarceration” followed by supervised release.

Her reply memorandum attacks the DOJ for even seeking the 15 year sentence and contends that “Ms. Holmes was not driven by greed, as the government apparently cannot help but persist in suggesting despite the overwhelming evidence to the contrary.”

The Judge Had the Last Word

Judge Davila saw Holmes testify, and knows her testimony was necessarily rejected as false by the jury in finding her guilty on four counts. The federal judges for whom I worked uniformly have been harsh to those who commit trial perjury.

In receiving a little more than 11 years in prison for her crimes—from where I sit, Elizabeth Holmes just received undeserved leniency.