They Played Ads in Doctors' Offices, Are Guilty of Fraud

As far as health-tech startup concepts go, Outcome Health's was fairly basic: It put TV screens and tablets in doctor's offices and waiting rooms and ran big-name pharmaceutical companies' ads on them, reaching a valuation of $5.5 billion in May 2017. But the Wall Street Journal pulled back the veil five months later, alleging the 11-year-old Chicago-based company was fudging its numbers. A federal jury has now agreed, on Tuesday convicting the former CEO, president, and COO/CFO "for their roles in a fraud scheme that targeted the company’s clients, lenders, and investors and involved approximately $1 billion in fraudulently obtained funds."

• The convictions by the numbers: Former CEO/co-founder Rishi Shah was convicted on 19 of 22 criminal counts of wire, mail, and bank fraud; former president/co-founder Shradha Agarwal was convicted on 15 of 17 counts, and former COO/CFO Brad Purdy was convicted on 13 of 15 counts. Each count carries maximum penalties of between 10 and 30 years.
• The fraud by the numbers: Quartz reports the company is said to have overbilled advertisers by $45 million between 2011 and 2017, but it also raised hundreds of millions in debt and equity financing using its inflated revenue figures. The Journal notes the $487.5 million they secured in equity financing from the likes of Goldman Sachs, Alphabet, Pritzker Group Venture Capital, and the investment firm of Laurene Powell Jobs had an unusual element to it: $225 million was earmarked as a dividend for Shah and Agarwal.
• The allegations: The DOJ accused the company of selling ad inventory it didn't have and not fulfilling the campaigns it secured but charging as if all purchased impressions were run.
• Their defense: The execs pointed a finger at former chief growth officer Ashik Desai, who pleaded guilty to one count of wire fraud and inked a deal with the government for a reduced sentence. He was the prosecution's star witness, and the execs say he was to blame.
• Since 2017. Investors sued after the Journal report, and the case was settled, with Shah and Agarwal resigning and agreeing to return $159 million in dividends they had earned. Outcome admitted to fraud in October 2019; the DOJ charged the execs the next month, and the SEC sued (that case has not concluded). Outcome merged with rival PatientPoint in early 2021.

(More fraud stories.)