Three former executives from Outcome Health, a health technology startup company based in Chicago, have been convicted by a jury in a fraud scheme amounting to approximately $1 billion.
Rishi Shah, 37, the co-founder and former CEO of Outcome Health; Shradha Agarwal, 37, the former president and a co-founder; and Brad Purdy, 33, the former chief operating officer and chief financial officer; were all convicted. Outcome Health, which was founded in 2006 and was known as Context Health prior to January 2017, installed television screens and tablets in doctors’ offices in the United States and sold advertising space, mostly to pharmaceutical companies, on those devices.
According to the Department of Justice (DOJ), the three executives oversold advertising inventory they did not have and under-delivered on advertising campaigns. However, Outcome Health still invoiced these clients even when they under-delivered on campaigns, charging as though they had delivered in full. In addition, Shah, Agarwal and Purdy lied or caused others to lie to conceal the advertising campaign fraud. They and others also inflated metrics to show how often patients engaged with Outcome’s tablets within doctors’ offices.
The DOJ alleged the scheme began in 2011 and lasted until 2017, resulting in $45 million in overbilled advertising services.
In addition, the three leaders of the company were convicted for defrauding the company's investors and lenders by overstating Outcome Health’s revenue after lying to its clients over under-delivered advertising campaigns for 2015 and 2016. Purdy fabricated data to conceal under-deliveries, resulting in an outside auditor signing off on the company’s revenues.
They then used the inflated revenue numbers to raise huge sums for the company––$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 DOJ said. Further, the three paid themselves huge dividends––The $110 million debt financing resulted in a $30.2 million dividend to Shah and a $7.5 million dividend to Agarwal; the $487.5 million in equity financing resulted in a $225 million dividend to Shah and Agarwal.
Three other former employees also pleaded guilty for their roles in the scheme, including:
- Ashik Desai, the former chief growth officer pleaded guilty to one count of wire fraud;
- Kathryn Choi, a former senior analyst, and Oliver Han, a former analyst, both pleaded guilty to conspiracy to commit wire fraud
“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,” the DOJ stated. “Agarwal was convicted of five counts of mail fraud, eight counts of wire fraud, and two counts of bank fraud. Purdy was convicted on five counts of mail fraud, five counts of wire fraud, two counts of bank fraud and one count of false statements to a financial institution.”
The three company leaders face a maximum penalty of 30 years in prison for each count of bank fraud and 20 years in prison for each count of wire fraud and mail fraud. Purdy could face up to a maximum of 30 years for false statements to a financial institution, and Shah faces up to 10 years in prison for each count of money laundering.
Amy joined TriMed Media as a Senior Writer for HealthExec after covering home care for three years. When not writing about all things healthcare, she fulfills her lifelong dream of becoming a pirate by sailing in regattas and enjoying rum. Fun fact: she sailed 333 miles across Lake Michigan in the Chicago Yacht Club "Race to Mackinac."