Three former executives of Outcome Health, a Chicago-based health technology start-up, have been sentenced for their involvement in a fraud scheme that deceived the company’s clients, lenders, and investors, resulting in approximately $1 billion in fraudulently obtained funds.
Rishi Shah, 38, co-founder and former CEO of Outcome Health, was sentenced on June 26 to seven years and six months in prison. Shradha Agarwal, 38, co-founder and former president of Outcome Health, received a sentence of three years in a halfway house. Brad Purdy, 35, the former chief operating officer and chief financial officer of Outcome Health, was sentenced to two years and three months in prison.
“Outcome’s former executives deceived their clients, their auditor, their lenders, and their investors for years,” said Principal Deputy Assistant Attorney General Nicole M. Argentieri. “Their sentences should serve as yet another reminder that ‘faking it until you make it’ is not an acceptable practice for any business... Lying about your revenue to obtain customers or financing is fraud... The Criminal Division is committed to holding companies and their executives accountable for their misconduct.”
“The defendants’ vast scheme defrauded the clients, investors, and lenders who supported their business,” stated Acting U.S. Attorney Morris Pasqual for the Northern District of Illinois. “Although they sought to hide the fraud by silencing whistleblowers and duping auditors... Our office will continue to work tirelessly with our law enforcement partners to deliver justice for the victims of complex fraud schemes.”
Court documents revealed that Outcome Health installed television screens and tablets in doctors' offices across the United States and sold advertising space on those devices primarily to pharmaceutical companies. Shah, Agarwal, and Purdy sold advertising inventory they did not possess to Outcome's clients and under-delivered on its advertising campaigns while still invoicing clients as if they had delivered in full. They concealed these under-deliveries from clients by lying or causing others to lie about them.
“This was an elaborate billion-dollar fraud scheme by three people who were supposed to be leaders of the company,” said Executive Assistant Director Timothy Langan of the FBI’s Criminal Division. “Instead... these now-former executives attempted to illegally line their own pockets.”
Shah, Agarwal, and Purdy also defrauded Outcome's lenders and investors by overstating revenue figures for 2015 and 2016 due to fabricated data used to conceal under-deliveries from auditors. These inflated figures helped raise significant debt financing: $110 million in April 2016; $375 million in December 2016; and $487.5 million in equity financing in early 2017.
“The defendants... have been brought to justice for their actions in deceiving Outcome Health’s clients...” said Assistant Inspector General Shimon R. Richmond of FDIC-OIG.
A federal jury convicted Shah on multiple counts including mail fraud (five counts), wire fraud (10 counts), bank fraud (two counts), and money laundering (two counts). Agarwal was convicted on charges including mail fraud (five counts) and wire fraud (eight counts). Purdy faced convictions including mail fraud (five counts) and wire fraud (five counts).
Three other former employees pleaded guilty before trial: Ashik Desai pleaded guilty to one count of wire fraud; Kathryn Choi and Oliver Han both pleaded guilty to conspiracy to commit wire fraud.
The FBI and FDIC-OIG investigated this case with assistance from the U.S. Securities and Exchange Commission.
Assistant Chief Kyle C. Hankey along with Assistant U.S. Attorneys Jason Yonan, Corey Rubenstein, William Hogan prosecuted this case.