Elizabeth Holmes Found Guilty On 4 (out of 11) Counts
Sentencing Guidelines Likely To Call For 65 Year Sentence
Today, Elizabeth Holmes was found guilty on four out of the eleven counts against her. As I will set forth below, she is likely to face a presumptive sentence of 65 years imprisonment under the United States Sentencing Guidelines. Judge Edward Davila will have the authority to depart from that presumptive sentence, but I would be surprised if Judge Davila significantly departed from that sentence because Elizabeth Holmes committed trial perjury.
The Counts Of Conviction Provide For A 65 Year Maximum Sentence
The four counts on which Elizabeth Holmes was found guilty were:
Count 1 - Conspiracy To Commit Wire Fraud - Section 371 - Five year maximum;
Count 6 - Wire Fraud in the amount of $38.3 million - Section 1343 - Twenty year maximum;
Count 7 - Wire Fraud in the amount of $100 million - Section 1343 - Twenty year maximum; and
Count 8 - Wire Fraud in the amount of $6 million - Section 1343 - Twenty year maximum.
Simply adding 5 + 20 + 20 + 20 = 65 years statutory maximum. 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. The Sentencing Guidelines 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 65 year statutory maximum sets the maximum sentence that can be imposed.
The Sentencing Guidelines Call For “Life”
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”.
To that Base Offense Level of 7, there is an upward adjustment of 24 levels under Section 2B1.1(b)(1)(M), because the amount of the loss ($144 million) is “More than $65,000,000” but less than $150 million. That brings the running total to Level 31.
To that Level 31, there is an upward adjustment of 2 levels under Section 2B1.1(b)(2)(A), because the offense “involved 10 or more victims”. That brings the running total to Level 33.
To that Level 33, there is an upward adjustment of 2 levels under Section 2B1.1(b)(10), because the offense “involved sophisticated means”. That brings the running total to Level 35.
Next, there are adjustments under Section 3 for factors beyond the offense.
To the Level 35 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 39.
To that Level 39, there is an upward adjustment of 2 levels under Section 3B1.3 because Elizabeth Holmes “abused a position of public or private trust” — specifically her role as CEO of Theranos. That brings the running total to Level 41.
To that Level 41, there is an upward adjustment of 2 levels under Section 3C1.1 because Elizabeth Holmes “willfully obstructed or impeded . . . the administration of justice with respect to the investigation, prosecution or sentencing of the instant offense of conviction.” Specifically, Elizabeth Holmes’ trial testimony denying that she acted with fraudulent intent was necessarily found to be false by the jury in reaching their verdicts. Note 4 to Section 3C1.1 specifically states that trial perjury is a basis for this upward adjustment:
Examples of Covered Conduct.—The following is a non-exhaustive list of examples of the types of conduct to which this adjustment applies:
. . .
(B) committing, suborning, or attempting to suborn perjury, including during the course of a civil proceeding if such perjury pertains to conduct that forms the basis of the offense of conviction;
This brings the running total to Level 43. Level 43 is the “magic number”, because under Section 5 of the Sentencing Guidelines, the sentencing range for Level 43, Criminal History Category I is “Life”. Since the 65 year maximum is below “Life”, the Sentencing Guidelines will call for a sentence of 65 years.
I expect that many of the factors that I set forth above will be hotly contested at sentencing. I also would not be surprised if the Government sought to impose some additional upward adjustments (such as the 4 point upward adjustment for securities fraud by an officer or director of a public company). I have made my best estimate of where the case is likely to come out.
[Clarifying Edit: Section 5G1.2 of the Sentencing Guidelines requires that the sentences run CONSECUTIVELY in order to reach the sentence called for by the Guidelines calculation. I understand that some media outlets are erroneously reporting that Holmes’ twenty year sentences on the three counts of wire fraud will be served concurrently. That is plainly wrong, unless Judge Dávila exercises his discretion to depart from the Sentencing Guidelines.]
Judge Davila Likely Will Sentence On The Basis That Elizabeth Holmes Committed Practiced Perjury At Trial
Will Judge Davila actually impose the 65 years called for by the Guidelines calculation above? I do not know. The trend in recent white collar criminal cases is for the defendant to be sentenced to below the Guidelines range.
However, Elizabeth Holmes stands in stark contrast to most recent white collar criminal convicts because she took the witness stand and gave tear jerking, practiced testimony that she did not know that Theranos was providing false information to investors and that the real malefactor was her former boyfriend and COO, Sunny Bulwani. That testimony was false. It was perjury.
I do not know whether Judge Davila will blink away that perjury, but most federal judges that I have known over the last 27 years of my career have saved special ire for defendants who take the stand and lie. When I was just out of law school, I clerked for Judge Herbert N. Maletz in the United States District Court for the District of Maryland. During my one-year clerkship, there were 20 cases tried before Judge Maletz and countless more guilty pleas and sentences. He would never cut the defendant a break if His Honor believed that the defendant had lied on the stand. The other District Court judges in Maryland had similar unwritten policies. Similarly, when I was an Assistant United States Attorney in the District of New Jersey from 2001-04, the judges invariably would withhold mercy from defendants who took the stand and lied. I have seen that pattern throughout my career in private practice. My law school classmates and colleagues from major law firms all have shared the conclusion that trial perjury is the quickest way to get on the wrong side of a federal judge.
What will Judge Davila do? We’ll See.