As frauds go, Theranos was a doozy, for which Elizabeth Holmes was properly convicted.and sentenced to 135 months (11 years, three months for base 12 impaired). Few people shed tears over the length of her sentence. Many condemned the sentence as far too lenient, given the magnitude of her fraud and the nature of harm Theranos’ false claims could have caused. As for Holmes, she went from high tech waif to the embodiment of “fake it till you make it,” a sadly admired state for many in the tech industry.
There was a time, however, when the public wasn’t addicted to astronomical sentences, when a sentence over ten years was reserved for the most heinous of crimes, murders and rapes. There was also a time when a distinction of moral culpability was made between the person who would commit a violent crime from financial crime, so-called “white collar” crime. Should there be?
How did we get to a place where “80 years” or “life” became at most a recommendation for 15 years, which would allow Holmes to return to a life of luxury? The simple answer, as my friend Ken White has often said, is that judges tend to show leniency to white men who commit their crimes wearing blue suits (or, in this case, a white woman who committed her crimes wearing black turtlenecks).
This isn’t so much simple as insufferably simplistic. While both terrorism and financial fraud are crimes, are they comparable? Does the same quality of culpability apply to someone who defrauds sophisticated investors by promising a technology that doesn’t exist as pulling the trigger and murdering school children?
The Federal Sentencing Guidelines were first adopted in 1984 with the idea that disparity in sentencing based upon type of crime, region of the country or the predispositions of the sentencing judge should be eliminated in favor of a grid that would produce a sentencing range for every crime. The factors taken into consideration under the Sentencing Guidelines include the amount of loss, the defendant’s role in the offense, whether sophisticated means were used or position of trust was abused.
While the sentencing commission was formed by law in 1984, the guidelines didn’t exist until 1987, but more to the point, the goal of eliminating the inconsistencies of sentences by reducing them to a grid basically required the United States Sentencing Commission to perpetrate a lie on the public, that there was some actual basis for the numbers, from the drug quantity tables to the fraud loss tables to the sentencing ranges based on adding and subtracting “levels” without regard to what any of it had to do with the crime itself. And the biggest lie was that there was some actual basis for these sentencing ranges, as opposed to their being pulled out of thin air.
The ranges produced by the Sentencing Guidelines were based on the average sentences imposed in similar cases in the past.
As Judge John Gleeson exposed, there was nothing empirical about the sentencing guidelines. They weren’t based on “average sentences,” but just numbers pulled out of the air for what the commission decided sentenced ought to be. Judge Gleeson noted this with drug sentences, and Judge Jed Rakoff noted the same with white collar sentences.
In his effort to rationalize why the Holmes sentence was too lenient, because sentences for drug dealers and killers were harsher, Mitchell Epner gives a rundown on the applicable guidelines, noting that the 20-year max sentence for the four counts on which she was convicted doesn’t provide much insight.
The relevant Guideline to start determining Elizabeth Holmes’ sentence is Section 2B1.1, which covers fraud-based crimes. Under Section 2B1.1(a), the Base Offense Level is 7, because the offense of conviction carries “a statutory maximum term of imprisonment of 20 years or more”.
- upward adjustment of 30 levels under Section 2B1.1(b), because the amount of the loss is “More than $550,000,000.”
- an upward adjustment of 2 levels under Section 2B1.1(b)(2)(A), because the offense “involved 10 or more victims.”
- an upward adjustment of 2 levels under Section 2B1.1(b)(16), because the offense involved “the conscious or reckless risk of death or serious bodily injury.” That brings the running total to Level 41.
To the Level 41 for the fraud, there is an upward adjustment of 4 levels under Section 3B1.1(a), because Elizabeth Holmes was “an organizer or leader of a criminal activity that involved five or more participants or was otherwise extensive.” That brings the running total to Level 45.
The Sentencing Guidelines matrix tops out at Level 43, and calls for “life” even if the defendant has no prior convictions.
The offense of wire fraud, standing alone, starts at level 7, which has a guidelines sentence of 0 to 6 months (effectively probation), and then ratchets up to life when it maxes out at level 43 based on factors which may or may not be relevant to what actually happened, most notably the dollar amount involved. For comparison, the sentencing guidelines do the same for drug dealing, by increasing the sentencing levels by the amount of drugs involved, whether real or imaginary. Notably, the drug tables were ratcheted to the sky after the death of Len Bias, which brought about public outcry, as were the fraud loss tables after Enron, which similarly brought about public outcry. None of it had anything to do with average sentences.
Here, Holmes sought 18 months of home detention while the government sought a sentence of 15 years, a request that Epner finds woefully inadequate.
The real explanation for the DOJ’s request is that the courts have been lenient towards white-collar criminals for decades, as the DOJ admits in a chart in its brief. For example, Charles McColl, who presided over an $8.6 billion fraud at McKesson, was sentenced to only 120 months (10 years). Walter Forbes, who ran a $1 billion fraud at Cendent, was sentenced to only 151 months (12 and a half years). The DOJ could not come up with good arguments for why Holmes should be given a significantly more harsh sentence than the billion-dollar fraudsters who preceded her.
On the contrary, the “real explanation” is that white collar offenses aren’t the same as looking into the eyes of a second-grader and deciding to pull the trigger and end her life. The “real explanation” is that we’ve ratcheted up sentences from a decade in prison, an astoundingly long time reservef for only the worst criminals, to life plus cancer for any crime that outrages people. The “real explanation” is that we have mass incarceration because too many insipid people have come to believe that outrageously long sentences are needed for anyone, no less someone like Holmes.
There was nothing lenient about this sentence. There are far too many sentences for other crimes that go far beyond “the ‘sufficient but not greater than necessary’ standard found in 18 U.S.C. § 3553(a),” and arguing that yet another defendant should die in prison is exactly the destructive mindset that should rejected, not promoted at The Daily Beast.