How Many Years Could Elizabeth Holmes Face in Prison? Decades, in Theory

In practice, government data shows judges have for years been handing down more-lenient sentences than the guidelines manual suggests for economic crimes such as fraud, larceny and insider trading.

In 2021, 41% of defendants sentenced under guidelines for economic crimes received prison time within or above the recommended range, U.S. Sentencing Commission records show. That’s down from 56% a decade earlier, the records show.

Ms. Holmes is likely to appeal her conviction on four counts of conspiracy and fraud charges involving investors. She will remain out of prison until at least her sentencing. No sentencing date has been set. Lawyers for Ms. Holmes and a spokesman for the U.S. attorney’s office for the Northern District of California didn’t respond to requests for comment.

The government hasn’t said whether it will retry Ms. Holmes on three other counts relating to investors on which the jury deadlocked. She was acquitted on four counts of defrauding patients.

Fraud Sentences

Sentencing guidelines suggest life in prison for fraud convictions on the scale of the one a jury handed up in the Elizabeth Holmes criminal trial. Federal judges generally have been more lenient.

Similar convictions to Elizabeth Holmes
102 cases total

Median sentence: 16 years

Longest sentences:

Life equivalent

13 cases

number of CASES

sentence in years

Median sentence: 16 years

Longest

sentences:

Life equivalent

13 cases

number of CASES

sentence in years

Median sentence: 16 years

Longest

sentences:

Life equivalent

13 cases

number of CASES

sentence in years

Sentencing guidelines give judges a playbook for matching up recommended prison terms to offenders based on the characteristics of their crimes. The guidelines were once mandatory, but a 2005 Supreme Court ruling changed that. Now judges must consider them, but can use their own discretion.

An analysis prepared for The Wall Street Journal by sentencing consultant Empirical Justice LLC found the median prison term for defendants whose cases have similar characteristics to Ms. Holmes’s was 16 years.

Empirical Justice’s founder, Michael Yaeger, a partner at law firm Carlton Fields PA, identified 102 comparable first-time offenders convicted of similarly severe economic crimes in U.S. Sentencing Commission data. It excludes convicts who cooperated or entered guilty pleas.

Mr. Yaeger estimated Ms. Holmes’s offense level—a measure of a crime’s severity—at 43 for the analysis, based largely on the large amounts of money involved.

She was convicted of wire fraud involving nearly $150 million in investments, but lawyers not involved in the Holmes case said her conspiracy conviction could easily be interpreted to include the hundreds of millions of dollars she raised during the period of the fraud scheme, 2010 to 2015.

U.S. sentencing guidelines recommend life-equivalent prison terms for offenders at level 43 or higher. But Empirical Justice’s analysis shows just how much discretion judges now wield: About 13% of the 102 comparable felons received lifetime-equivalent prison terms as the guidelines suggest, but an even larger share—nearly 15%—got five years or less in prison, including two who were sentenced to a single year.

Ms. Holmes’s case presents a dilemma of sorts for U.S. District Judge Edward Davila, who has overseen the case. If he follows the guidelines, he could hand Ms. Holmes a severe sentence out of step with some other defendants convicted of similar crimes. If he follows the pattern of his peers in similar cases, he could be criticized for appearing to give Ms. Holmes a break.

Ms. Holmes, 37 years old, held a controlling stake in Theranos that was valued at $4.5 billion before she was accused of civil and criminal fraud. Theranos dissolved in 2018.

Sentencing guidelines for white-collar offenders hinge largely on the amount of money alleged to have been lost in a fraud scheme, meaning criminals operating on a corporate scale can easily reach offense levels comparable to those attained by mafia kingpins.

The rules also allow judges to consider “relevant conduct,” including similar transactions that aren’t part of a fraud indictment—and even charges for which an offender has been acquitted—to be included in the loss amount for some crimes, such as Ms. Holmes’s conspiracy conviction.

Fraud charges such as Ms. Holmes’s begin with a base offense level of seven. During the period of the conspiracy to defraud investors for which she was convicted, she raised more than $900 million, trial records show.

If the federal probation officer who calculates her offense level concludes all those funds—less some amounts she repaid investors in separate civil settlements—are proceeds of her scheme, that would amount to an additional 30 points. If the probation officer goes with a more modest monetary figure, for instance any amount between $250 million and $550 million, that still would amount to an added 28 points.

Other considerations in the sentencing guidelines include two points added for crimes with 10 or more victims, two points for ones that use “sophisticated means,” and as many as four points if a defendant was the leader of the scheme.

Lawyers for the government and for Ms. Holmes will likely fight over every point.

In a widely cited 2006 ruling in a case involving an accounting fraud, U.S. District Judge Jed Rakoff in New York complained of overly harsh sentences, warning of the “utter travesty of justice that sometimes results from the guidelines’ fetish with abstract arithmetic.”

Judge Rakoff, who has had no involvement in the Holmes case, declined to comment other than to say his opinions remain unchanged today.

Recent sentences imposed on a string of high-profile white-collar defendants show judges consider the guidelines, as they are required to do, but often appear to ultimately ignore them.

Martin Shkreli, who gained notoriety for boosting drug prices at his pharmaceutical company before a conviction for unrelated securities fraud, had an offense level of 41. The guidelines recommend at least 27 years. In 2018, he was sentenced to seven years in prison.

Mr. Shkreli’s lawyer, Benjamin Brafman, said in an interview that he believed his client could have gotten as little as two years if he’d behaved himself between his conviction and sentencing hearing. Instead, Mr. Shkreli threatened Hillary Clinton on social media, “to the extent the Secret Service told the court they had to increase her security detail,” Mr. Brafman said.

Mathew Martoma, the former hedge-fund trader convicted in 2014 of insider trading, had an offense level of 36 and a recommended sentence of at least 15 years and eight months. He received a prison term of nine years and was released in July after seven. He couldn’t be reached for comment.

One exception to that pattern is Bernie Madoff, the Ponzi-scheme architect who was convicted of a massive fraud in 2009. His offense level was 52, and he ultimately received a 150-year sentence, the maximum penalty provided for by law for his conviction. Mr. Madoff died in April, after serving nearly 12 years of his sentence.

In addition to the sentencing guidelines, judges consider other factors when imposing sentences. For instance, Ms. Holmes’s lawyers might also revive her trial testimony that her former romantic and business partner, Ramesh “Sunny” Balwani, sexually and emotionally abused her, some experts said.

Her lawyers never attempted to tie the allegations—which Mr. Balwani has denied—back to the charges. A lawyer for Mr. Balwani declined to comment.

But “this kind of evidence is much more likely to be presented at sentencing, to create sympathy for her, without having to characterize it as a formal defense,” said Christopher Slobogin, a Vanderbilt University law professor and expert on mental health and law.

Ms. Holmes could also point to her infant child, born in July on the eve of her trial, in making the case for a more lenient sentence. And Monday’s verdict could work in her favor, too. The fact that Ms. Holmes was acquitted of some charges, including all charges regarding a scheme to defraud patients, will arm her lawyers with strong arguments for leniency, said Mr. Yaeger.

“When it comes down to it, the guidelines are still only a baseline for the judge to go by and he’s going to consider all types of other things,” said Tess Lopez, a former federal probation officer and sentencing consultant.

Write to Christopher Weaver at christopher.weaver@wsj.com

Corrections & Amplifications
Ponzi scheme architect Bernie Madoff died in April 2021. An earlier version of this article incorrectly said he died in 2014. (Corrected on Jan. 5)