Former Executives of Outcome Health Sentenced for $45 Million Overbilling Scheme

Three former executives of Chicago-based healthcare technology company Outcome Health (OH) have been sentenced for deceiving an auditor, clients, lenders, and investors in a scheme involving $45 million in overbilled advertisements.

Rishi Shah, OH’s former chief executive, and Brad Purdy, its former chief financial officer, were sentenced to seven and a half years and two years and three months in prison, respectively, according to a Department of Justice (DOJ) press release on Monday. Shradha Agarwal, OH’s former president, will serve three years in a halfway house.

The DOJ detailed that starting in 2006, Context Media, which later rebranded as Outcome Health, installed televisions and tablets in doctor’s offices nationwide, selling advertising on these screens to drug companies and other businesses.

However, OH sold more advertising than it could accommodate, resulting in clients paying for ads that never appeared. The company overbilled clients by $45 million from 2011 to 2017, the DOJ reported.

Additionally, the trio misled lenders and investors who had provided $1 billion to the company. OH overstated its revenue for 2015 and 2016, with an external auditor only approving the figures because Purdy had caused others to fabricate data to hide the under-deliveries, the DOJ said.

Using the inflated revenue figures and audited financial statements, the executives secured debt financing of $110 million in April 2016 and $375 million in December 2016, along with $487.5 million in equity financing in early 2017, according to the DOJ.

In April 2023, the former executives were convicted on multiple charges, including mail fraud, wire fraud, bank fraud, making false statements to a financial institution, and money laundering.

Several other former employees have pleaded guilty and are awaiting sentencing following investigations by the Federal Bureau of Investigation and the Federal Deposit Insurance Corporation, with assistance from the Securities and Exchange Commission.

“Outcome’s former executives deceived their clients, their auditor, their lenders, and their investors for years,” said Nicole Argentieri, head of the DOJ’s Criminal Division, in the press release. “Their sentences should serve as yet another reminder that ‘faking it until you make it’ is not an acceptable practice for any business, whether that company is a technology start-up or a well-established corporation.”

Outcome Health could not be immediately reached for comment.

By fLEXI tEAM