A federal jury found three former leaders of health tech startup Outcome Health guilty of multiple counts of fraud on Tuesday.
A federal jury convicted Rishi Shah, the co-founder and former CEO of Outcome Health, Shradha Agarwal, the former president of Outcome, and Brad Purdy, the former COO and CFO, for their roles in a fraud scheme that targeted the company’s clients, lenders and investors and involved approximately $1 billion in fraudulently obtained funds, according to the Department of Justice (DOJ).
The verdict followed a 10-week federal trial that tracked Outcome Health's rise and dramatic fall after allegations that the officials had lied to customers and investors while taking in millions, according to reporting from U.S. News and World Report.
Shah was convicted on 19 criminal counts of wire, mail and bank fraud, while Agarwal was convicted on 15 counts and Purdy was found guilty on 13 counts of similar charges along with making a false statement to a financial institution.
The defendants could face years in prison as a result of the convictions. It is likely that they will appeal the verdict.
Outcome, formerly called ContextMedia, was one of Chicago’s high-flying startups, pulling in $500 million during its first round of funding in May 2017 and attracting high-profile investors like Goldman Sachs and Google’s parent company, Alphabet. The company was valued at $5.5 billion at the time.
The company installs TVs and tablets in physicians' offices and sells targeted ads to pharmaceutical companies.
Outcome's troubles started in 2017 when The Wall Street Journal reported that the company inflated data to pharmaceutical companies to boost ad sales. Things continued to unravel when the company was sued by investors who wanted to get their nearly $500 million investment back, claiming the company provided investors with fraudulent data and financial reports.
In 2019, Outcome agreed to pay $70 million as part of a 2019 deal to resolve federal fraud charges.
As part of its settlement with the DOJ, Outcome admitted that from 2012 to 2017 former executives and employees of the company fraudulently sold ads to clients. Federal investigators said Outcome overbilled clients by more than $6 million in 2015 and by more than $25 million in 2016, according to the non-prosecution agreement.
According to evidence presented at trial, 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, according to a DOJ press release.
Prosecutors alleged the executives defrauded customers including major pharmaceutical companies such as Novo Nordisk A/S as well as investors including Goldman Sachs Group Inc., the WSJ reported.
“Today’s verdict deeply saddens Mr. Shah, and he will exhaust every avenue to overturn this result,” a spokesman for Shah said in a statement to the WSJ. “He would like to thank his family and those who have supported him throughout this challenging time.”
Defense attorneys for the three former executives argued that the blame should fall on another official who previously pleaded guilty to one count of wire fraud and testified against them, as reported by U.S. News and World Report.
Separately, the Securities and Exchange Commission has charged the three former executives and another former employee with fraud, and that case is still pending.