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Ex-Theranos COO delays incarceration on day of surrender deadline

In the final hours before a deadline to surrender to federal prison, former Theranos executive Ramesh “Sunny” Balwani has delayed his incarceration on multiple fraud convictions.

The delay was triggered on Thursday — the same day Balwani was ordered to report to custody — when the former blood-testing company chief operating officer filed a notice in a California district court asserting his right to remain free pending an appeal of his convictions, filed on Wednesday.

“Please take notice that defendant Sunny “Ramesh” Balwani’s Bureau of Prisons reporting date of March 16, 2023, has been automatically stayed by the United States Court of Appeals for the Ninth Circuit by operation of the Ninth Circuit Rules,” a court document filed in San Jose federal district court states.

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

U.S. federal district court Judge Edward Davila, who presided over Balwani’s trial as well as an earlier trial against his co-defendant, Theranos founder and CEO, Elizabeth Holmes, previously denied Balwani’s request to remain out of custody while his case plays out on appeal. Davila had ordered Balwani to self-surrender to federal prison on March 16, 2023, no later than 2:00 p.m. PT.

In July, a federal jury convicted Balwani on twelve counts of fraud and conspiracy against Theranos investors and customers. Davila handed down the former COO’s sentence of nearly 13 years in prison in December. On March 9, Davila denied Balwani’s district court request to remain out of custody pending appeal.

In his appeal to the Ninth Circuit, Balwani argues that his jury trial was unfair for multiple reasons.

For one, he says, Judge Davila should not have admitted evidence showing that federal health care regulators cited Theranos’ laboratory for violations concerning traditional blood-testing technology, given that he was indicted on charges alleging fraud related to Theranos’ proprietary technology.

“The district court’s admission of evidence distinct from the charges in the indictment presents a substantial question,” Balwani’s appeal states. The substantial question about the scope of the indictment, he argues, is likely to result in a new trial on all charges.

Balwani also argues that Davila should have prevented certain testimony offered by former Theranos employees Erika Cheung, Mark Pandori, and Adam Rosendorff. The witnesses, he said, were permitted to offer expert-type testimony, even thought they were qualified only to testify as lay witnesses.

Balwani also states that Davila wrongly excluded testimony concerning the post-Theranos employment of Theranos' former laboratory director, Dr. Adam Rosendorff, which would have revealed Rosendorff’s bias.

In additional rationale, the former executive argues that Davilia improperly denied his motion to suppress evidence showing Theranos customer complaints, test results, and regulatory reports, and improperly failed to correct the testimony of investors who mischaracterized Holmes’ statements about military use of Theranos’ blood-testing technology. Holmes’ pitch to investors about Theranos’ use of its technology in medivac helicopters used “aspirational language,” Balwani states, though investors characterized her words as if the technology had already been deployed.

Holmes was convicted by a federal jury in a separate trial that concluded before Balwani's, in January 2022. Her jury returned guilty verdicts on four of 11 counts of 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.

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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