Two Indian-origin people, Rishi Shah and Shradha Agarwal, who are former executives of Chicago-based health technology start-up company Outcome Health, were sentenced on charges of being involved in a fraud scheme allegedly targeting the company's clients, lenders and investors.
In a statement, the US department of justice (DoJ) says Mr Shah, a co-founder and former chief executive officer (CEO) of Outcome, is sentenced to seven years and six months in prison. Ms Agarwal, also a co-founder and former president of Outcome, was sentenced to three years in a halfway house.
Brad Purdy, the former chief operating officer (COO) and chief financial officer (CFO) of Outcome was also sentenced to two years and three months in prison.
"Outcome's former executives deceived their clients, their auditor, their lenders, and their investors for years," said principal deputy assistant attorney general Nicole M Argentieri, who is also head of the DoJ's criminal division. "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. Lying about your revenue to obtain customers or financing is a fraud, plain and simple. The criminal division is committing to holding companies and their executives accountable for their misconduct."
"The defendants' vast scheme defrauded the clients, investors, and lenders who supported their business," says Morris Pasqual, the acting US attorney for the northern district of Illinois. "Although they sought to hide the fraud by silencing whistle-blowers and duping auditors, a jury rightly held the defendants accountable for their extensive fraud scheme. Our office will continue to work tirelessly with our law enforcement partners to deliver justice for the victims of complex fraud schemes."
According to court documents and evidence presented at trial, Outcome Health, which was founded in 2006 and known as Context Media before January 2017, installed television screens and tablets in doctors' offices across the US and then sold advertising space on those devices to clients, most of which were pharmaceutical companies.
Mr Shah, Ms Agarwal, and Mr Purdy sold advertising inventory Outcome Health did not have to its clients and then under-delivered on its advertising campaigns. Despite these under-deliveries, the company still invoiced its clients as if it had delivered in full.
"All three lied or caused others to lie to conceal the under-deliveries from clients and make it appear as if the company was delivering advertising content to the number of screens in the clients' contracts. Mr Purdy and others at Outcome also inflated metrics that purported to show how frequently patients engaged with Outcome's tablets installed in doctors' offices. According to the trial evidence, the scheme targeting Outcome's clients began in 2011 and lasted until 2017 and resulted in at least US$45mn (million) of overbilled advertising services, DoJ says.
"This was an elaborate, billion-dollar fraud scheme by three people who were supposed to be leaders of the company," says Timothy Langan, executive assistant director of the FBI's criminal, cyber, response, and services branch. "Instead, these now former executives attempted to illegally line their own pockets. This type of fraud and abuse takes critical resources out of our health care system, and the FBI will always work with our law enforcement partners to investigate and prosecute anyone who intends to defraud the American public."
Mr Shah, Ms Agarwal, and Mr Purdy also defrauded Outcome's lenders and investors, the DoJ says. "The under-delivery to Outcome's advertising clients resulted in a material overstatement of Outcome's revenue for 2015 and 2016. The company's outside auditor signed off on the 2015 and 2016 revenue numbers because Mr Purdy caused others to fabricate data to conceal the under-deliveries from the auditor. Mr Shah, Ms Agarwal, and Mr Purdy then used the inflated revenue figures in Outcome's 2015 and 2016 audited financial statements to raise US$110mn in debt financing in April 2016, US$375mn in debt financing in December 2016, and US$487.5mn in equity financing in early 2017. The US$110mn debt financing resulted in a US$30.2mn dividend to Mr Shah and a US$7.5mn dividend to Ms Agarwal, and the US$487.5mn in equity financing resulted in a US$225mn dividend that benefited Mr Shah and Ms Agarwal."
Shimon R Richmond, assistant inspector general for investigations of the Federal Deposit Insurance Corporation Office of Inspector General (FDIC-OIG) says, "The defendants in this case have been brought to justice for their actions in deceiving Outcome Health's clients and fraudulently obtaining approximately US$1bn from its lenders and investors."
In April 2023, Mr Shah was convicted of five counts of mail fraud, 10 counts of wire fraud, two counts of bank fraud, and two counts of money laundering. Ms Agarwal was convicted of five counts of mail fraud, eight counts of wire fraud, and two counts of bank fraud, while Mr Purdy was convicted of five counts of mail fraud, five counts of wire fraud, two counts of bank fraud and one count of false statements to a financial institution.
Wish our INDIAN Financial Fraudsters & Looters are also caught, investigated & prosecuted & put in JAIL without BAIL in TIME BOUND MANNER