Three former executives of Outcome Health, a Chicago-based health technology startup, were sentenced for their roles in a $1 billion fraud scheme targeting the company’s clients, lenders, and investors.
- Rishi Shah, 38, a co-founder and former CEO of Outcome, was sentenced on June 26 to seven years and six months in prison.
- Shradha Agarwal, 38, a co-founder and former president of Outcome, was sentenced yesterday to three years in a halfway house.
- Brad Purdy, 35, the former chief operating officer and chief financial officer of Outcome, was also sentenced yesterday 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, head of the Justice Department’s Criminal Division. “Their sentences should serve as yet another reminder that ‘faking it until you make it’ is not an acceptable practice for any business, whether that company is a technology start-up or a well-established corporation. Lying about your revenue to obtain customers or financing is fraud, plain and simple. The Criminal Division is committing to holding companies and their executives accountable for their misconduct.”
Outcome Health, founded in 2006 and previously known as Context Media, installed TV screens and tablets in doctors’ offices across the U.S., selling ad space mainly to pharmaceutical companies.
Executives Shah, Agarwal, and Purdy sold ads they didn’t have, under-delivered on campaigns, but still billed clients as if they had delivered fully. They concealed this by lying to clients, making it seem they met their contracts.
Purdy and others also inflated patient engagement metrics with the tablets. This fraud started in 2011 and lasted until 2017, leading to $45 million in overbilled services.
They also defrauded lenders and investors by overstating revenue for 2015 and 2016. Purdy had others fabricate data to hide the under-deliveries from auditors.
Using these inflated figures, they secured $110 million in debt financing in April 2016, $375 million in December 2016, and $487.5 million in equity financing in early 2017. These financings resulted in millions in dividends to Shah and Agarwal.
A federal jury convicted Shah, Agarwal, and Purdy in April 2023:
- 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 false statements to a financial institution.
Three other former Outcome employees pleaded guilty prior to trial.
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. Desai will be sentenced on Sept. 20. Choi and Han will be sentenced on Oct. 4 and Oct. 11, respectively.
The FBI and FDIC-OIG investigated the case.
Assistant Chief Kyle C. Hankey of the Criminal Division’s Fraud Section and Assistant U.S. Attorneys Jason Yonan, Corey Rubenstein, and William Hogan for the Northern District of Illinois prosecuted the case.
Former Assistant Chief William E. Johnston of the Criminal Division’s Fraud Section and former Assistant U.S. Attorneys Matthew F. Madden and Saurish Appleby-Bhattacharjee for the Northern District of Illinois also prosecuted the case through trial.