Former Theranos COO denied request to stay free during appeal

A federal district court judge in California has denied the request of Ramesh “Sunny” Balwani, former president and chief operating officer of the defunct blood testing company, Theranos, to suspend his incarceration while an appeal of his convictions plays out in a higher court.

Balwani indicated in court documents in December that he would appeal any decision denying his request.

At sentencing, Balwani was ordered to report to federal custody at 2:00 p.m. on March 15. In a related order, Balwani was directed to self-surrender to federal prison on March 16, 2023, no later than 2:00 p.m.

REFILE - ADDING COUNTRY Former Theranos President and COO Ramesh
Former Theranos President and COO Ramesh "Sunny" Balwani leaves after a hearing at a federal court in San Jose, California, U.S., July 17, 2019. (REUTERS/Stephen Lam)

In July, a jury convicted Balwani on 12 counts of fraud for his role in aiding Theranos founder and CEO Elizabeth Holmes in fraudulently promoting the Silicon Valley company to investors and patients. U.S. District Court Judge Edward Davila, who presided over separate trials for Balwani and Holmes, sentenced Balwani to 155 months behind bars.

Holmes was convicted months earlier in January 2022 by a jury who returned guilty verdicts on four of 11 nearly identical counts of criminal fraud.

"They misled investors, they misled patients," U.S. District Court Judge Edward Davila said during Balwani's sentencing hearing in San Jose, California, according to NBC News.

In making his determination Judge Davila said he found that Balwani provided clear and convincing evidence that he is neither a flight risk nor a danger to the community. However, he ruled that Balwani had not raised sufficient enough questions concerning the handling of his trial that if resolved in his favor would likely lead to a reversal of the jury's verdict or a new trial.

In his request to remain free while his appeal is pending, Balwani argued that the district court improperly permitted differences between the government's allegations in its indictment and the evidence presented at trial. He also argued that the court improperly permitted expert-type testimony from former Theranos employees Erika Cheung, Mark Pandori, and Adam Rosendorff, despite that they testified as lay witnesses, and that it wrongly excluded testimony concerning Theranos' former laboratory director Dr. Adam Rosendorff’s post-Theranos employment, which would have revealed bias.

Balwani also argued that the jury would have acquitted him on all counts had the court granted his motion to suppress evidence of customer complaints, testing results, and regulatory reports and evidence of misrepresentations in materials Theranos provided to the military.

"Mr. Balwani’s convictions for investor fraud involved many different misrepresentations made to investors, regarding Theranos’s testing capabilities, validation by pharmaceutical companies, Theranos’s relationship with Walgreens and the Department of Defense, and the company’s financial projections," Davila wrote in his decision. "The representations regarding the Department of Defense, therefore, constitute only one facet of the larger body of misrepresentations made to investors."

Davila based Balwani's sentence on a calculation that he defrauded 12 Theranos investors out of a collective $120 million, Law360 reported. Balwani's lawyers argued that his sentence should be more lenient than Holmes' because his role at Theranos was subordinate to the chief executive. Davila, however, challenged that contention, saying that Balwani was, at times, also a leader in the company.

Government prosecutors asked Davila to impose a 15-year sentence, while Balwani's probation officer recommended a sentence of nine years.

Balwani, who started dating Holmes soon after she dropped out of Stanford University at the age of 19, made millions as an executive during the dot-com boom. He lost millions of dollars in his own investments in Theranos. During sentencing, his lawyers argued that Balwani's sentence should not be enhanced for investor losses because he left the company before investors officially lost their money.

Alexis Keenan is a legal reporter for Yahoo Finance. Follow Alexis on Twitter @alexiskweed.

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