The billion-dollar fraud of Outcome Health
To bring on investors, Outcome created fake contracts to blow up its revenue.
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The backstory: Outcome Health (which used to be called ContextMedia) was formed in 2006. The startup was focused on health tech. The whole idea was to enable pharma companies to run their ads on TVs and other screens in medical offices and waiting rooms. The company was estimated to be worth more than US$5 billion by 2017.
More recently: In 2017, the Wall Street Journal uncovered fraud within the company involving execs selling “advertising inventory” that didn’t exist. Major investors in the company included Goldman Sachs, Alphabet (Google’s parent company) and even the governor of Illinois.
To bring on investors, Outcome created fake contracts to blow up its revenue. It brought on pharma clients and promised advertising that just wasn’t there, under-delivering on broadcasting promises. Executives and other employees apparently hid all this by faking engagement metrics and changing third-party reports. In 2019, the US justice department charged the firm’s former execs with fraud.
The development: Now, three of them have been found guilty of fraud of over a billion dollars. On Tuesday, a jury in Chicago convicted the company’s two co-founders, Rishi Shah and Shradha Agarwal, and former COO and CFO Brad Purdy after a 10-week trial. Three other execs pled guilty and didn’t go to trial.
The defense attorneys for this trial argued that another official – Ashik Desai – was to blame, and he’d already pleaded guilty to one count of wire fraud and testified against them. But prosecutors showed communications between the three defendants and Desai, arguing that these were proof that they knew about all the shady stuff going on. The sentencing date isn’t set yet.
Key comments:
“Today’s verdict deeply saddens Mr. Shah, and he will exhaust every avenue to overturn this result,” a spokesperson, Mark Emerson, said in an email.
“[The evidence] showed that certain critical information was intentionally withheld from Brad Purdy,” said Purdy’s attorney, Theodore Poulos. “But, regretfully, throughout his tenure at Outcome Health, he trusted and believed in his colleagues and failed to ask the questions that a more seasoned executive might have asked.”
“It was a company built on a lie,” said prosecutor William Johnston during the government’s closing arguments, as quoted by The Wall Street Journal.
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