Elizabeth Holmes is going to prison – with a $500m bill

'Liz' learns you don't screw over rich people

Disgraced Theranos founder Elizabeth Holmes' final bid to keep herself out of prison has failed. That leaves her with a ticket to Club Fed to begin an 11-year sentence after being convicted last year of defrauding billionaires who invested in her imploded blood-testing startup.

Holmes' most recent attempt to delay the start of her stretch behind bars saw her begging the Ninth Circuit Court of Appeals to reverse Judge Edward Davila's denial of her previous attempt to let her remain free on bail while appealing her conviction. The Ninth Circuit was brief in its dismissal of her claims, and came to a conclusion similar to Davila's denial of Holmes' request for freedom in April.  

The failed bio-biz founder "has not shown that the appeal raises a 'substantial question' of law or fact that is 'fairly debatable,'" the three-judge panel said [PDF], meaning it was unlikely the outcome of any appeal against her conviction would reverse the verdict, result in a new trial, or otherwise modify her sentence. 

It's the Ninth Circuit telling her she's at a dead end. So much for that soft profile piece by the New York Times on "Liz" the other week.

Holmes' lawyers had argued that Judge Davila made an error in denying her bail request, and that the guilty verdict resulted from "prejudicial errors" that warranted a new trial. Under Ninth Circuit Court rules, a defendant on bail who files an appeal with the court remains on bail until a ruling is issued in the motion. Thus, they felt she should remain free while waiting to overturn her conviction, a point the courts have dismissed.

Holmes' co-defendant and former Theranos lieutenant Ramesh 'Sunny' Balwani made a similar appeal to the Ninth Circuit, and his request was denied on similar grounds of not raising a substantial question of law or fact likely to result in a reversal of his conviction. Balwani, who received a 13-year sentence, reported to prison on April 20, a week before Holmes was originally scheduled to begin her sentence. 

According to a preliminary order [PDF], Holmes' latest prison report date is May 30, giving her just shy of two weeks to get her affairs in order before turning herself in at the Big House. 

Judge puts a price on Theranos' fraud

Along with ordering Holmes to prison this week, Judge Davila also published a restitution order [PDF] in the Holmes/Balwani case, finding the pair jointly responsible for repaying $452,047,268 (£361,533,844) to Theranos investors defrauded by the pair. 

Investors include News Corp supremo Rupert Murdoch, who is due just shy of $125 million; pharmacy chain Walgreens and grocery chain Safeway, who are owed $40m and $14.5m, respectively; the DeVos family's RDV Corporation, which Davila ordered be repaid nearly $100m; and eight other individuals and investment funds. The court said there was insufficient evidence to order restitution for lower class investments.

According to the restitution order, Holmes and Balwani tried to wiggle their way out of repaying investors using the "complexity exception," which allows a court to waive mandatory restitution in cases that are complex enough to delay the sentencing process. Judge Davila didn't agree with Holmes and Balwani's attorneys, saying that "the Court does not find that the calculation here involved such unwieldy issues of fact to preclude restitution." 

And while Holmes may have been acquitted on some counts, Davila said she's still liable for repayments since she was a key part of Theranos.

"To the extent Defendant Holmes may object that restitution is improper as to her on the individual investor fraud counts for which she was not convicted, restitution may nonetheless be ordered 'based on related but uncharged conduct that is part of a fraud scheme,'" Davila said. 

It's not clear if, when or how Holmes and Balwani will repay the $452m. According to the US Department of Justice, restitution payments are legally enforceable for 20 years following a judgment, but "the chance of full recovery is very low." ®