Three former executives of Chicago-based medical technology startup Outcome Health (Outcome) have been convicted of participating in a fraud scheme that targeted the company’s customers, lenders and investors to obtain roughly $1 billion in illegal funding. The startup’s investors included Goldman Sachs Group Inc., Google parent Alphabet Inc. and Illinois Governor JB Pritzker’s venture capital firm.
* Outcome co-founder and former CEO Rishi Shah, 38, was sentenced to seven years and six months in prison on June 26. * Outcome co-founder and former president Shraddha Agarwal, 38, was sentenced yesterday to three years in a rehabilitation facility. * Outcome’s former chief operating officer and chief financial officer Brad Purdy, 35, was also sentenced yesterday to two years and three months in prison.
“Outcome’s former executives deceived customers, auditors, lenders and investors for years,” said Principal Deputy Attorney General Nicole M. Argentieri, Chief of the Justice Department’s Criminal Division. “Their sentences are a reminder that ‘fake it till you make it’ is unacceptable behavior for any business, whether it’s a tech startup or an established company. Misrepresenting revenue in order to obtain customers and capital is fraud, plain and simple. The Criminal Division is committed to holding companies and their executives accountable for their wrongdoings.”
“The defendants’ massive scheme deceived customers, investors and lenders who supported their business,” said Morris Pascual, Acting U.S. Attorney for the Northern District of Illinois. “They attempted to cover up their fraud by silencing whistleblowers and misleading auditors, but the jury rightly held the defendants responsible for their massive fraud scheme. Our office will continue to work tirelessly with our law enforcement partners to bring justice to the victims of this complex fraud scheme.”
According to court documents and evidence presented at trial, Outcome, founded in 2006 and known as Context Media prior to January 2017, installed television screens and tablets in doctor’s offices across the United States and sold advertising space on those devices to clients, mostly pharmaceutical companies. Shah, Agarwal and Purdy sold advertising inventory that the company did not own to Outcome’s clients and subsequently delivered underperforming advertising campaigns. Despite these underperforming performance, the company still invoiced clients as if it had delivered in full. Shah, Agarwal and Purdy lied, or had others lie, to conceal the underperforming performance from clients and to make it appear that the company delivered advertising content in accordance with the number of screens in the client’s contracts. Purdy and other Outcome employees inflated metrics that purported to show how often patients engaged with Outcome’s tablets installed in doctor’s offices. According to trial evidence, the scheme to target Outcome customers began in 2011 and continued through 2017, resulting in at least $45 million in overcharges for advertising services.
“This was an elaborate multi-billion-dollar fraud scheme carried out by three supposed company leaders,” said Timothy Langan, Assistant Director in Charge of the FBI’s Criminal, Cyber, Response and Services Division, “but the former executives instead sought to illegally enrich themselves. This type of fraud and misconduct drains vital resources from our health care system, and the FBI will always work with our law enforcement partners to investigate and prosecute those who seek to defraud the American people.”
Shah, Agarwal and Purdy also misled Outcome’s lenders and investors. Outcome’s revenues for 2015 and 2016 were significantly overstated due to Outcome’s underperformance of its advertising clients. The company’s independent auditors approved the 2015 and 2016 revenue figures because Purdy had others falsify data to hide the underperformance from the auditors. Shah, Agarwal and Purdy then used the inflated revenue figures in Outcome’s 2015 and 2016 audited financial statements to raise $110 million in debt financing in April 2016, $375 million in debt financing in December 2016, and $487.5 million in equity financing in early 2017. The $110 million debt financing provided dividends of $30.2 million to Shah and $7.5 million to Agarwal, while the $487.5 million equity financing provided dividends of $225 million benefiting Shah and Agarwal.
“The defendants in this case have been brought to justice for their actions in misleading Outcome Health’s customers and fraudulently obtaining nearly $1 billion from the company’s lenders and investors,” said Simon R. Richmond, Deputy Inspector General for Investigations for the Federal Deposit Insurance Corporation’s Office of Inspector General (FDIC-OIG). “The FDIC-OIG will continue to work with our law enforcement partners to hold accountable individuals whose fraudulent conduct harmed lenders, investors, and customers.”
A federal jury convicted Shah, Agarwal and Purdy in April 2023. Shah was convicted of five counts of mail fraud, 10 counts of wire fraud, two counts of bank fraud and two counts of money laundering. Agarwal was convicted of five counts of mail fraud, eight counts of wire fraud and two counts of bank fraud. Purdy was convicted of five counts of mail fraud, five counts of wire fraud, two counts of bank fraud and one count of making a false statement to a financial institution.
Three former Outcome employees also pleaded guilty before trial. Former chief growth officer Ashik Desai pleaded guilty to one count of wire fraud. Former senior analyst Katherine Choi and former analyst Oliver Han pleaded guilty to one count of wire fraud conspiracy. Desai will be sentenced on Sept. 20. Choi and Han will be sentenced on Oct. 4 and Oct. 11, respectively.
The FBI and FDIC-OIG investigated this case. The Securities and Exchange Commission assisted in this case.
Deputy Chief of the Criminal Division’s Fraud Section Kyle C. Hankey and Assistant U.S. Attorneys for the Northern District of Illinois Jason Yonan, Corey Rubenstein and William Hogan prosecuted the case. Former Deputy Chief of the Criminal Division’s Fraud Section William E. Johnston and former Assistant U.S. Attorneys for the Northern District of Illinois Matthew F. Madden and Saurish Appleby Bhattacharjee also prosecuted the case at trial.
* Outcome co-founder and former CEO Rishi Shah, 38, was sentenced to seven years and six months in prison on June 26. * Outcome co-founder and former president Shraddha Agarwal, 38, was sentenced yesterday to three years in a rehabilitation facility. * Outcome’s former chief operating officer and chief financial officer Brad Purdy, 35, was also sentenced yesterday to two years and three months in prison.
“Outcome’s former executives deceived customers, auditors, lenders and investors for years,” said Principal Deputy Attorney General Nicole M. Argentieri, Chief of the Justice Department’s Criminal Division. “Their sentences are a reminder that ‘fake it till you make it’ is unacceptable behavior for any business, whether it’s a tech startup or an established company. Misrepresenting revenue in order to obtain customers and capital is fraud, plain and simple. The Criminal Division is committed to holding companies and their executives accountable for their wrongdoings.”
“The defendants’ massive scheme deceived customers, investors and lenders who supported their business,” said Morris Pascual, Acting U.S. Attorney for the Northern District of Illinois. “They attempted to cover up their fraud by silencing whistleblowers and misleading auditors, but the jury rightly held the defendants responsible for their massive fraud scheme. Our office will continue to work tirelessly with our law enforcement partners to bring justice to the victims of this complex fraud scheme.”
According to court documents and evidence presented at trial, Outcome, founded in 2006 and known as Context Media prior to January 2017, installed television screens and tablets in doctor’s offices across the United States and sold advertising space on those devices to clients, mostly pharmaceutical companies. Shah, Agarwal and Purdy sold advertising inventory that the company did not own to Outcome’s clients and subsequently delivered underperforming advertising campaigns. Despite these underperforming performance, the company still invoiced clients as if it had delivered in full. Shah, Agarwal and Purdy lied, or had others lie, to conceal the underperforming performance from clients and to make it appear that the company delivered advertising content in accordance with the number of screens in the client’s contracts. Purdy and other Outcome employees inflated metrics that purported to show how often patients engaged with Outcome’s tablets installed in doctor’s offices. According to trial evidence, the scheme to target Outcome customers began in 2011 and continued through 2017, resulting in at least $45 million in overcharges for advertising services.
“This was an elaborate multi-billion-dollar fraud scheme carried out by three supposed company leaders,” said Timothy Langan, Assistant Director in Charge of the FBI’s Criminal, Cyber, Response and Services Division, “but the former executives instead sought to illegally enrich themselves. This type of fraud and misconduct drains vital resources from our health care system, and the FBI will always work with our law enforcement partners to investigate and prosecute those who seek to defraud the American people.”
Shah, Agarwal and Purdy also misled Outcome’s lenders and investors. Outcome’s revenues for 2015 and 2016 were significantly overstated due to Outcome’s underperformance of its advertising clients. The company’s independent auditors approved the 2015 and 2016 revenue figures because Purdy had others falsify data to hide the underperformance from the auditors. Shah, Agarwal and Purdy then used the inflated revenue figures in Outcome’s 2015 and 2016 audited financial statements to raise $110 million in debt financing in April 2016, $375 million in debt financing in December 2016, and $487.5 million in equity financing in early 2017. The $110 million debt financing provided dividends of $30.2 million to Shah and $7.5 million to Agarwal, while the $487.5 million equity financing provided dividends of $225 million benefiting Shah and Agarwal.
“The defendants in this case have been brought to justice for their actions in misleading Outcome Health’s customers and fraudulently obtaining nearly $1 billion from the company’s lenders and investors,” said Simon R. Richmond, Deputy Inspector General for Investigations for the Federal Deposit Insurance Corporation’s Office of Inspector General (FDIC-OIG). “The FDIC-OIG will continue to work with our law enforcement partners to hold accountable individuals whose fraudulent conduct harmed lenders, investors, and customers.”
A federal jury convicted Shah, Agarwal and Purdy in April 2023. Shah was convicted of five counts of mail fraud, 10 counts of wire fraud, two counts of bank fraud and two counts of money laundering. Agarwal was convicted of five counts of mail fraud, eight counts of wire fraud and two counts of bank fraud. Purdy was convicted of five counts of mail fraud, five counts of wire fraud, two counts of bank fraud and one count of making a false statement to a financial institution.
Three former Outcome employees also pleaded guilty before trial. Former chief growth officer Ashik Desai pleaded guilty to one count of wire fraud. Former senior analyst Katherine Choi and former analyst Oliver Han pleaded guilty to one count of wire fraud conspiracy. Desai will be sentenced on Sept. 20. Choi and Han will be sentenced on Oct. 4 and Oct. 11, respectively.
The FBI and FDIC-OIG investigated this case. The Securities and Exchange Commission assisted in this case.
Deputy Chief of the Criminal Division’s Fraud Section Kyle C. Hankey and Assistant U.S. Attorneys for the Northern District of Illinois Jason Yonan, Corey Rubenstein and William Hogan prosecuted the case. Former Deputy Chief of the Criminal Division’s Fraud Section William E. Johnston and former Assistant U.S. Attorneys for the Northern District of Illinois Matthew F. Madden and Saurish Appleby Bhattacharjee also prosecuted the case at trial.
