According to a complaint, Elizabeth Holmes has not paid over $25 million to creditors of her former Theranos company while attempting to postpone her 11-year prison sentence.
In a complaint filed in the Superior Court of California in Santa Clara County, Theranos ABC, a business formed on behalf of its creditors, claims that “Holmes has not made any payments on account of any of the Promissory Notes.”
The action was filed in December 2022, but it wasn’t made public until Holmes appeared in court on Friday.
According to the breach of contract action, when she was CEO of the bankrupt blood-testing company, Holmes signed three promissory notes. According to the lawsuit, the promissory notes were as follows:
The total was $9,159,333.65 in August 2011.
In the month of December 2011, the total was $7,578,575.52.
In the month of December 2013, the total was $9,129,991.10.
“Theranos ABC has demanded payment of Promissory Note #1 and Promissory Note #2 from Holmes, but Holmes has failed to pay any amounts on account of Promissory Note,” according to the complaint.
Theranos ABC’s attorneys did not immediately reply to a request for comment.
The first two promissory note payments were due in 2016, with the third due in 2018. Theranos’ board of directors, which comprised Holmes, former Secretary of Defense James Mattis, attorney David Boies, former Bechtel Group CEO Riley Bechtel, and former Wells Fargo CEO Richard Kovacevich at the time, amended the conditions to extend the notes by five years in July 2016. The first two notes are past due, and the third is due in December, according to the suit.
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On Friday, Holmes appeared in federal court in San Jose, California, to request a postponement of her report date to jail next month as she appeals her sentence. Inside the courtroom, a guy holding the lawsuit approached Holmes at her attorneys’ table. Marshals removed the man, who was becoming increasingly irate. It was unclear whether he was a process server attempting to serve the suit on Holmes.
A jury found Holmes guilty on four charges of wire fraud and conspiracy in January 2022. Holmes was ordered to surrender on April 27, 2023, to begin her sentence. Her counsel has indicated that they intend to file an appeal with the Ninth Circuit Court of Appeals in Holmes’ case.
Following her conviction, Holmes became pregnant and gave birth to a second child.
A lawyer for Holmes stated various reasons why she is not a flight risk, including her young children and the fact that she has been out on bond for more than a year without fleeing.
The government, on the other hand, pointed to a one-way ticket booked by Holmes and her partner, Billy Evans, to Puerto Vallarta, Mexico, just days after her conviction.
Holmes is also battling prosecutors over the amount of restitution she should pay. Prosecutors want her to pay over $900 million in damages, but Holmes claims the government failed to demonstrate that investors relied on her assertions.
Judge Edward Davila of the United States District Court for the District of Columbia expects to rule on both motions in early April.
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After dropping out of Stanford, Holmes launched Theranos in 2003 with the goal of transforming the healthcare business. Following a series of failed regulatory inspections and articles by then-Wall Street Journal reporter John Carreyrou, the firm shut down in 2016.
