A federal jury has convicted three former executives of Outcome Health, a Chicago-based health technology start-up company, for their roles in a fraud scheme that targeted the company’s clients, creditors and investors and involved nearly $1 billion in fraudulently obtained funds.
The people convicted in the jury’s verdict today are:
- Rishi Shah, 37, co-founder and former CEO of Outcome Health (Outcome), which was founded in 2006 and was known as Context Media before January 2017;
- Shraddha Aggarwal, 37, former president of Outcome, who was described as a co-founder; And
- Brad Purdy, 33, former chief operating officer and chief financial officer.
The result was installing television screens and tablets in doctors’ offices around the United States and then selling advertising space on those devices to clients, most of whom were pharmaceutical companies. According to evidence presented at trial, Shah, Aggarwal, and Purdy sold advertising inventory to the company’s Outcomes clients, then under-delivered on its advertising campaigns. Despite this under-delivery, the company still invoiced its clients as if it had delivered in full. Shah, Aggarwal, and Purdy lied to conceal under-delivery from clients or lied to others and made it appear as if the company was delivering advertising materials to clients in contracted numbers. Purdy and others at Outcome have also developed metrics that show how often patients interact with Outcome’s tablets in doctors’ offices. According to trial testimony, the scheme targeting Outcome’s clients began in 2011, lasted through 2017, and resulted in at least $45 million in overbilled advertising services.
Shah, Aggarwal and Purdy were also found guilty of defrauding Outcome’s creditors and investors. Under-delivery to Outcome’s advertising clients resulted in a material overstatement of Outcome’s revenue for 2015 and 2016. The company’s outside auditors signed off on 2015 and 2016 revenue numbers because Purdy committed fraud by concealing information from under-delivering to others. Auditors Shah, Aggarwal, and Purdy then used the inflated revenue figures in Outcome’s 2015 and 2016 audited financial statements to include $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, Aggarwal, and Purdy lied to investors and lenders to conceal their ongoing under-delivery advertising campaigns for clients. Shah and Purdy misrepresented the effectiveness of Outcome’s advertising campaign to investors, suggesting that it failed to deliver on its investment-on-investment promises to clients.
A $110 million loan financing resulted in $30.2 million in dividends to Shah and $7.5 million to Agarwal; A $487.5 million equity financing resulted in $225 million in dividends to Shah and Agarwal.
Three other former Outcome employees pleaded guilty before trial. Ashiq Desai, former chief growth officer pleaded guilty to one count of wire fraud; And Catherine Choi, a former senior analyst, and Oliver Han, a former analyst, both pleaded guilty to conspiracy to commit wire fraud. Desai, Choi and Han will be sentenced at a date to be determined.
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 false statements to a financial institution. The defendants face a maximum sentence of 30 years in prison for each count of bank fraud and 20 years for each count of wire fraud and mail fraud. Purdy faces a maximum sentence of 30 years in prison for making false statements to a financial institution. Shah faces a maximum sentence of 10 years in prison for each count of money laundering. A sentencing hearing date will be scheduled. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.
Assistant Attorney General Kenneth A. Polite, Jr. of the Justice Department’s Criminal Division, U.S. Attorney Maurice Pasquale for the Northern District of Illinois, and Shimon Richmond, Assistant Inspector General for the investigation of the Federal Deposit Insurance Corporation-Office of Inspector General (FDIC-Office). OIG) has announced.
The FBI and FDIC-OIG investigated the case.
Assistant Chief of the Criminal Division’s Fraud Section, William E. Johnston and Kyle C. Hankey and Assistant US Attorney for the Northern District of Illinois Matthew F. Madden and Sourish are prosecuting the Appleby-Bhattacharya case