Former Outcome Health execs found guilty on most fraud counts

Five years after the once high-flying Chicago tech company Outcome Health began to unravel, a jury has found all three of its former leaders guilty of multiple counts of fraud, while acquitting them of other counts.

The jury deliberated for about two days before reaching its verdict Tuesday morning. The verdict followed a 10-week-long trial.

Jury members found Outcome co-founder and former CEO Rishi Shah guilty on 19 of 22 counts. They found co-founder and former President Shradha Agarwal guilty on 15 of 17 counts.

The jury also found Brad Purdy, the company’s former chief operating officer and chief financial officer, guilty on 13 of 15 counts.

Any prison terms will be decided during sentencing.

The verdict represented a dramatic fall for the three, who were once stars of Chicago’s tech scene. And it may have implications for others in the tech community, with parts of the case focusing on the line between start-ups’ typical growing pains and fraud.

Outcome sold advertising to pharmaceutical companies, with the ads running on TVs and tablets that Outcome installed in doctors’ offices and waiting rooms. During the trial, prosecutors alleged that Shah, Agarwal and Purdy lied about how many doctors’ offices had screens and tablets running their content. Prosecutors said they then used those false numbers to overcharge drug companies for advertising, and inflated revenue figures used to get loans and raise money from investors.

Outcome grew from a 16-employee operation in 2011 to a company with more than 500 employees and a reported valuation of more than $5 billion by 2017.

That breakneck growth earned Outcome’s founders Shah and Agarwal respect and riches. Shah, who owned 80% of Outcome, was named to the Forbes 400 ranking of richest Americans in 2017, with a net worth of $3.6 billion at the age of 31. Agarwal owned 20% of the company.

Their success, however, began to crumble when a 2017 Wall Street Journal article revealed the alleged problems at Outcome. The company lost business, investors sued, and Shah and Agarwal stepped down. In 2019, Outcome, as a company, agreed to pay $70 million to pharmaceutical companies to resolve a federal fraud investigation. The fraud trial that just concluded focused on Outcome’s three top executives as individuals.

Throughout the case, defense attorneys placed the blame entirely on a fourth former Outcome employee, Ashik Desai. Desai had already pleaded guilty to one count of wire fraud before the trial, and he testified that he falsified screen shots and return-on-investment reports without his bosses’ knowledge.

Defense attorneys argued that the defendants trusted Desai, and Desai repeatedly reassured them that everything was above board whenever questions arose.

Government prosecutors tried to poke holes in that theory partly by showing communications between the defendants, and, in some cases, Desai, in an attempt to demonstrate that they were aware of underdeliveries to clients and wanted to fire workers who raised concerns.

Ultimately, the government had to prove the three committed fraud beyond a reasonable doubt, and that they did so knowingly and with intent to defraud.

It was a complex case that featured about 1,500 exhibits, many in the forms of emails, text and voice messages.

More to come.

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