Ramesh “Sunny” Balwani, the former business partner of Elizabeth Holmes, has been sentenced to almost 13 years in prison for his part in perpetuating the fraud at the failed blood-testing start-up Theranos.
Balwani, 57, had been the company’s chief operating officer, and Holmes’s ex-boyfriend. District judge Edward Davila handed down the 155-month sentence in a San Jose, California, court on Wednesday afternoon. The amount Balwani will be forced to pay in restitution costs would be decided at a later date, the judge said. Balwani has been told to report to prison on March 15th.
Holmes was last month sentenced to 11 years and three months in prison.
Last week, Holmes filed notice to appeal against her sentence, which she is due to start serving in April at a low-security facility in Texas. On Monday she requested to be permitted to stay out of prison during the appeal, citing “strong ties to her partner and family, including her son and soon-to-be-born child”.
Balwani was convicted in July on all 12 counts of fraud, including some charges of defrauding patients on which Holmes had been acquitted.
Prosecutors described Balwani as an “equal participant” in helping Theranos defraud investors of more than $900mn in funding — which gave the company a valuation of $9 billion (€8.6 billion) — on the promise its technology could carry out a range of tests on a single drop of blood.
Instead, the machines failed to perform as promised, as later revealed by whistleblowers, and the company entered a death spiral that has become symbolic of Silicon Valley’s risk-taking culture.
“There is an unfortunate phrase in Silicon Valley: ‘fake it ‘til you make it’,” US attorney Stephanie Hinds said after the sentencing. “Elizabeth Holmes and Sunny Balwani stretched this idea to a place much further than the law allows.”
During the trial, jurors were told that Balwani, as chief operating officer, had been responsible for securing and managing the relationship with companies such as Walgreens, who had agreed to deploy Theranos testing in some of its stores.
“I am responsible for everything at Theranos,” Balwani once wrote in a text message to Holmes, according to court filings from the prosecution. Holmes later claimed during her trial that she had been emotionally and sexually abused by Balwani — claims he has denied.
In a sentencing memo, prosecutors had called for Balwani to be sentenced to at least 15 years in prison.
“Balwani had a front-row seat to numerous problems that put him on notice that Theranos tests were not suitable for clinical use,” prosecutors wrote.
Balwani’s attorneys had called for him to be spared jail, asking the judge for probation or “barring that, a non-custodial sentence conditioned on home-confinement is proper”.
The defence argued that Balwani had invested considerable amounts of his own money into Theranos — “close to $5mn” — and had believed Theranos’ technology to be real, even recommending family members use it.
“Mr Balwani is not the same as Elizabeth Holmes,” the defence said. “He did not put his own financial interests first; he did not misuse investor funds; he was a major investor himself; he did not seek fame or media attention; he worked tirelessly to build a business.” – Copyright The Financial Times Limited 2022