Ramesh “Sunny” Balwani, a former executive of US health technology company Theranos, has been sentenced to 12 years and 11 months in federal prison for fraud, announced United States Attorney Stephanie Hinds on Wednesday. In a statement, the U.S. Attorney’s Office said Balwani risked patient health by misrepresenting the accuracy of Theranos blood analysis technology and that defrauded Theranos investors of millions of dollars.
“Patient health is the highest priority of our healthcare system, and Silicon Valley has long been home to healthcare start-ups that enhance the care of patients through technological developments,” said U.S. Attorney Stephanie Hinds. “Ramesh 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 candor with patients in need of medical care, and he treated his investors no better,” Hinds added.
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. “Today’s sentence reflects years of dedication by the FBI and our partners to investigate fraud within Theranos and bring the company’s leadership to justice,” Tripp added.
Balwani, 57, of Fremont, Calif., was employed from September 2009 through July 2016 at Theranos, Inc. Over time he held the positions of board member, chief operating officer and president. Theranos, now defunct, was a blood testing company based in Palo Alto and Newark, Calif., that was founded in 2003 by Balwani’s former romantic partner Elizabeth Holmes, 38, of Woodside, Calif.
Trial evidence showed that Balwani and Holmes, who was chairperson and CEO, claimed Theranos developed a revolutionary blood analyzer, variously referred to as the Theranos Sample Processing Unit (TSPU), the Edison, and the minilab. They described the Theranos blood analyzer device as a single device 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 analyzer produced results that were cheaper, more reliable and less variable than existing methods, and obtained results at a speed faster than ever before possible. Balwani and Holmes asserted to investors that the Theranos technology had been comprehensively validated by multiple major pharmaceutical companies and was being used by the Department of Defence to treat wounded soldiers where, it was represented, it “actually saved lives in the battlefield.”
In truth, pharmaceutical companies did little work with Theranos and did not validate its technology, and the Department of Defence never used Theranos’ analyzer to clinically treat soldiers. False representations were also made that Theranos would dramatically increase its number of Wellness Centers within stores operated by its partner Walgreens from a few dozen to 900, despite Balwani and Holmes knowing at the time that the relationship with Walgreens was stagnating.
Trial evidence demonstrated that Balwani and Holmes continued to tout Theranos’ analyzer as a revolution in healthcare while misrepresenting the dire financial status of Theranos.