Additionally, the panel affirmed the admissibility of a damning 2016 report from the U.S. Centers for Medicare & Medicaid Services (CMS), which highlighted glaring deficiencies in Theranos’ lab operations. The court reasoned that the report was relevant in establishing Holmes’ awareness of the lab’s unreliability—even if it was released after the alleged fraud period.
Restitution and Investor Losses: A Final Nail in the Coffin
The court rebuffed Holmes and Balwani’s argument that the sentencing judge should have applied a lower legal standard in calculating investor losses. The Ninth Circuit upheld the existing standard, citing a 2023 precedent in United States v. Lucas, which reaffirmed the requirement for clear and convincing evidence in sentencing enhancements.
However, in a minor concession, the appellate panel acknowledged a miscalculation in the $452 million restitution order, as investors technically retained their Theranos shares even after the company’s collapse. Nonetheless, the court deemed this error “harmless,” emphasizing that the shares had become effectively worthless.
What’s Next for Holmes and Balwani?
This decision leaves Holmes and Balwani with dwindling legal options. They could seek an en banc review from the full Ninth Circuit or petition the U.S. Supreme Court—though the likelihood of either court intervening remains slim.
