NEW YORK, Dec 8 (PTI): Ramesh “Sunny” Balwani, the Indian-origin former chief operating officer of a failed blood-testing start-up, has been sentenced to nearly 13 years in prison for fraud in which prosecutors said he risked patient health and defrauded the company’s investors of millions of dollars in a bid to become a “Silicon Valley titan”.
In July, a jury found Balwani, 57, guilty on all 12 felony counts of defrauding Theranos investors and the patients that used the company’s unreliable blood tests.
Balwani, who is from Fremont, was sentenced on Wednesday in California to 12 years and 11 months in federal prison for fraud that risked patient health by misrepresenting the accuracy of Theranos blood analysis technology and that defrauded the company’s investors of millions of dollars, US Attorney Stephanie Hinds said.
In addition to the 155 months prison term, US District Judge Edward Davila sentenced Balwani to three years of supervision following release from prison. A hearing to determine the amount of restitution to be paid by Balwani is to be scheduled in the future. Balwani was ordered to surrender on March 15, 2023, to begin serving his prison sentence.
Balwani was employed from September 2009 through July 2016 at the Palo Alto-based blood-testing company founded in 2003 by his former girlfriend Elizabeth Holmes, once touted as Silicon Valley’s rising star.
Last month, District Judge Davila sentenced Holmes to 11 years and 3 months in federal prison and ordered her to surrender to begin serving her sentence on April 27, 2023. Balwani was 37 when he met then 18-year-old Holmes.
“There is an unfortunate saying in Silicon Valley – fake it till you make it,” Attorney Hinds said in a video statement.
Holmes and Balwani “stretched this idea to a place much farther than the law allows and in so doing, put vast amounts of investor dollars at risk,” Hinds said adding that with Balwani’s sentencing, the court also made clear that his decision to deceive doctors and patients also put the health of patients at risk.
Hinds said that while patient health is the highest priority of the US healthcare system, and Silicon Valley has long been home to healthcare start-ups that enhance the care of patients through technological developments, Balwani, in a desire to become a “Silicon Valley titan”, valued business success and personal wealth far more than patient safety.”
“He chose deceit over candour with patients in need of medical care, and he treated his investors no better,” Hinds said in a statement.
Trial evidence showed that the fraud brought “spectacular personal wealth” to Balwani, who owned nearly 30 million shares of Theranos – over 6 per cent of the company – which were worth hundreds of millions of dollars at the peak of the fraud.
Balwani was born in Pakistan but his family is said to have moved to India. He moved to the US from India during the 1980s and studied at the University of Texas.
Jeffrey Coopersmith, Balwani’s attorney, said in a statement: “We are disappointed with the outcome. We respectfully disagree and plan to appeal.”
FBI Special Agent in Charge Robert Tripp said Balwani not only deliberately concealed defects in Theranos’ blood-testing technology to mislead investors; he knowingly put patients’ health at risk.
During his employment at the now-defunct Theranos, Balwani held the positions of a board member, chief operating officer and president.
Balwani and Holmes, who was chairperson and CEO, claimed Theranos developed a “revolutionary blood analyser” that could run any blood test run by conventional labs using only a small blood sample drawn via a fingerstick, rather than the traditional draw from a vein.
Balwani and Holmes asserted that the Theranos proprietary analyser produced results that were cheaper, more reliable and less variable than existing methods, and obtained results at a speed faster than ever before possible.
However, evidence at trial demonstrated that both Balwani and Holmes knew that the analyser performed only a few basic tests and was slower than existing devices. They repeatedly resorted to using conventional machines to obtain the blood test results that the Theranos analyser was supposed to perform, the statement said.
However, they led investors and the public to believe that Theranos was conducting essentially all of its tests using only its Theranos analyser, it said.
Evidence demonstrated that Balwani and Holmes were aware that the Theranos analyser’s limited capabilities meant it could not compete in the market, but they nevertheless trumpeted false claims and representations about the analyser’s capabilities and conspired to convince patients and investors that the claims were true, the statement said.
Evidence at trial and examples in a sentencing memorandum filed by the government demonstrate the “dark reality” these misrepresentations created for patients. In order to portray Theranos as a legitimate enterprise, Theranos eventually offered the blood analyser to the public to perform a “full range” of tests, despite internal protests from Theranos employees and even resignations by staff. Prosecutors said because of this, numerous misdiagnoses followed.
