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Defendants’ Greed Led to $1 Billion Scam
Outcome Health, a Chicago-based health technology start-up company, imploded after a $1 billion corporate fraud scheme was uncovered, leading to the convictions of three former executives. The scheme, which began in 2011 and lasted until 2017, involved approximately $1 billion in fraudulently obtained funds.
The individuals convicted by jury verdict today were Rishi Shah, 37, the co-founder and former CEO of Outcome Health; Shradha Agarwal, 37, the former president of Outcome; and Brad Purdy, 33, the former chief operating officer and chief financial officer.
The scheme targeted the company’s clients, lenders, and investors. Outcome installed television screens and tablets in doctors’ offices around the United States and then sold advertising space on those devices to clients, most of whom were pharmaceutical companies. Shah, Agarwal, and Purdy sold advertising inventory the company did not have to Outcome’s clients, then under-delivered on its advertising campaigns.
Despite these under-deliveries, the company still invoiced its clients as if it had delivered in full. Shah, Agarwal, and Purdy lied or caused others to lie to conceal the under-deliveries from clients and make it appear as if the company was delivering advertising content to the number of screens in the clients’ contracts. Purdy and others at Outcome also inflated metrics that purported to show how frequently patients engaged with Outcome’s tablets installed in doctors’ offices.
The scheme targeting Outcome’s clients resulted in at least $45 million of overbilled advertising services. Shah, Agarwal, and Purdy were also convicted of defrauding Outcome’s lenders and investors. The under-delivery to Outcome’s advertising clients resulted in a material overstatement of Outcome’s revenue for the years 2015 and 2016.
The company’s outside auditor signed off on the 2015 and 2016 revenue numbers because Purdy caused others to fabricate data to conceal the under-deliveries from the auditor. 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.
Shah, Agarwal, and Purdy lied to investors and lenders to conceal their ongoing under-delivery of advertising campaigns for clients. Shah and Purdy also misrepresented to investors the efficacy of Outcome’s advertising campaigns by concealing the fact that it had failed to meet return-on-investment commitments to clients.
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 of Outcome pleaded guilty prior to trial. Ashik Desai, the former chief growth officer pleaded guilty to one count of wire fraud; and 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. 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 defendants 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 faces a maximum penalty of 30 years in prison for the count of false statements to a financial institution.
The scheme has left a trail of devastation in its wake, with many questioning how such a massive scam could have gone undetected for so long. As the defendants face the consequences of their actions, one thing is clear: their greed has led to a $1 billion corporate fraud scheme that will go down in history as one of the largest of its kind.
Key Facts
- State: Federal
- Category: White Collar Crime
- Source: DOJ Press Release â†â€â€
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