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Ex-Theranos president Balwani gets 13-year prison term in fraud case

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Former Theranos President and Chief Operating Officer Ramesh “Sunny” Balwani was sentenced to 13 years in prison for defrauding investors and patients of Theranos Inc., the blood-testing startup he ran alongside its founder and chief executive officer Elizabeth Holmes.

The sentence imposed Wednesday by US District Judge Edward Davila in San Jose, California, is far closer to the 15-year term prosecutors asked for than what Balwani’s lawyers sought — home detention or supervised release on probation. Davila last month ordered Holmes to serve 11 1/4 years in prison.

As he did with Holmes, the judge said he’ll decide later how much restitution Balwani must pay. The government has asked for both to be ordered to pay about $800 million.

Balwani, 57, chose to remain silent rather than make a statement to the judge before he was sentenced. He sat still showing no emotion as his prison term was announced. Family members sitting behind him in court didn’t react either.

“We are disappointed with the outcome,” his attorney, Jeffrey Coopersmith, said in a statement. “We respectfully disagree and plan to appeal.”

Ramesh “Sunny” Balwani

Balwani and Holmes, who had a romantic relationship while they worked together, were tried and convicted separately of lying about the accuracy and capabilities of Theranos’s blood-testing machines. The pair promised to revolutionize the medical industry by using a few drops of blood to complete a wide array of health tests.

As problems came to light, the company once valued at $9 billion fell apart amid regulatory crackdowns and shareholder lawsuits. The collapse of the startup and the indictment of Holmes, a Stanford University dropout who became a celebrity Silicon Valley entrepreneur, spawned books, a documentary and a television series. Holmes was convicted of defrauding investors in January, while a jury found Balwani guilty in July.

“The defendants chose to go forward and continue with deception, misleading information, active misleading, and continued to perpetuate the fraud” even after they knew Theranos machines were a failure, the judge said before he issued Balwani’s sentence.

The sentence imposed by Davila reflects, in part, how he viewed Balwani’s role in the fraud. While Holmes was acquitted of charges she defrauded patients, Balwani was convicted on those counts.

Prosecutors argued Balwani’s conviction on the patient counts merits a higher sentence because he knowingly provided patients with inaccurate and unreliable blood tests.

Balwani had “significant autonomy in running the lab” at Theranos, prosecutor Jeffrey Schenk told the judge at Wednesday’s hearing. He was in charge of hiring for the lab and its data management, he added. “It is in the lab that some of the greatest harm occurred.”

Balwani’s lawyers aimed to distinguish him from Holmes in their plea for leniency. Balwani never sought fame or recognition, and has a long history of giving to charity, Coopersmith argued.

In his late fifties, Balwani won’t get “another crack at a company like Theranos,” Coopersmith said. “He’s unfortunately radioactive as a result of this whole affair.”

Davila said he’ll support Coopersmith’s suggestion that Balwani serve his time at the minimum-security prison in Lompoc, California. The US Bureau of Prisons makes final decisions on inmate assignments.

“Ramesh Balwani, in a desire to become a Silicon Valley titan, valued business success and personal wealth far more than patient safety,” Stephanie Hinds, the US Attorney in San Francisco, said in a statement. “He chose deceit over candor with patients in need of medical care, and he treated his investors no better.”

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

© 2022 Bloomberg

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