Rishi Shah and Shradha Agarwal, two Indian-American executives of a Chicago-based health technology startup, have been convicted for their roles in a $1 billion fraud scheme that targeted the company's clients, lenders, and investors. Brad Purdy, the former chief operating officer, was also convicted. 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. Shah faces a maximum penalty of 10 years in prison for each count of money laundering.
According to the Department of Justice, Outcome Health installed television screens and tablets in doctors' offices around the US and then sold advertising space on those devices to clients, most of whom were pharmaceutical companies. The trio sold advertising inventory the company did not have to Outcome's clients, then under-delivered on its advertising campaigns. The company still invoiced its clients as if it had delivered in full despite these under-deliveries. They 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 the company's tablets installed in doctors' offices. The scheme targeting Outcome's clients began in 2011, lasted until 2017, and resulted in at least $45 million of overbilled advertising services. The under-delivery to Outcome's advertising clients resulted in a material overstatement of Outcome's revenue for the years 2015 and 2016. The trio 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.
