Former Executives Sentenced for $1B Corporate Fraud Scheme
Last week, three former executives of Outcome Health, a Chicago-based health technology start-up, were sentenced for a massive fraud scheme in which they deceived clients, lenders, and investors, resulting in approximately $1 billion in fraudulently obtained funds.
Rishi Shah, 38, co-founder and former CEO of Outcome Health, received a sentence of seven years and six months in prison. Shradha Agarwal, 38, co-founder and former president, was sentenced to three years in a halfway house, while Brad Purdy, 35, former COO and CFO, received two years and three months in prison.
Outcome Health, originally founded as Context Media in 2006, installed TV screens and tablets in doctors’ offices across the United States, selling advertising space primarily to pharmaceutical companies. From 2011 to 2017, Shah, Agarwal, and Purdy allegedly engaged in deceptive practices by selling more advertising inventory than the company possessed and under-delivering on those campaigns. Despite this, they still allegedly invoiced their clients as if they had fulfilled their contracts in full, inflating the company’s revenue figures.
To conceal these under-deliveries, the executives falsified data, making it appear that the advertising content was reaching the contracted number of screens. Specifically, Purdy allegedly manipulated metrics to show higher patient engagement with Outcome Health’s devices.
The fraudulent activities extended beyond clients and included lenders and investors. By overstating revenues in 2015 and 2016, the executives secured significant financing: $110 million in April 2016, $375 million in December 2016, and $487.5 million in early 2017. These falsely inflated revenues facilitated substantial dividends to Shah and Agarwal, amounting to tens of millions of dollars.
The operational schemes are distressing for investors and the implications of such fraud can have serious consequences. These types of schemes should be reported if seen. If you have information about potential financial fraud or want to learn more about Whistleblower protection laws, you can speak to an experienced Constantine Cannon whistleblower lawyer team member. Please do not hesitate to contact us for a free and confidential consultation.
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