First Theranos, now Outcome Health — it doesn’t seem like the digital health sector is the best place to “fake it ’til you make it.”
On Tuesday, a federal jury found three former Outcome Health executives guilty of multiple counts of fraud. The convictions come after a 10-week trial that investigated the former leaders’ role in a billion-dollar scheme that defrauded customers and investors.
Rishi Shah, Outcome’s co-founder and former CEO, was found guilty on 19 of 22 counts; Shradha Agarwal, the company’s co-founder and former president, was found guilty on 15 of 17 counts; and Brad Purdy, the company’s former COO and CFO, was found guilty on 13 of 15 counts.
Chicago-based Outcome installed screens to run educational content and advertisements in physicians’ offices and sold advertising space on those devices to customers, most of which were pharmaceutical companies. The company grew fast — from 16 employees in 2011 to more than 500 in 2017.
In 2017, Outcome was valued at more than $5 billion — its investors included Goldman Sachs, Alphabet and Pritzker Group Venture Capital. Despite its high valuation, this was the year the company ran into trouble, which began when The Wall Street Journal reported that Outcome had lied to its customers about how many physicians’ offices their advertisements would appear in.
The report alleged that the lies told by Outcome executives allowed the company to overcharge its customers, as well as use falsely inflated revenue data to obtain investments and loans. After the report surfaced, investors sued the company to get nearly $500 million back, claiming that they received false data and financial reports from Outcome.
In 2019, Outcome agreed to pay $70 million to resolve a federal fraud investigation and said it would cooperate with the Justice Department as it looked into fraud committed by individual executives. The company admitted that from 2012 to 2017, its former executives operated a fraud scheme in which clients were sold advertising space that the Outcome did not actually have. Less than a month later, the Justice Department criminally charged Shah, Agarwal and Purdy, along with former chief growth officer Ashik Desai.
Desai pleaded guilty to conspiracy to commit wire fraud and struck a deal with the government for reduced sentence in exchange for testimony against his former bosses. Two other former employees who reported to Desai also pleaded guilty to conspiracy to commit wire fraud.
The defense team representing Shah, Agarwal and Purdy argued that Desai was responsible for Outcome’s fraud scheme.
Shah, Agarwal and Purdy did not testify during their trial. They have not been sentenced yet, but they could face years in prison. The former executives are likely to appeal the verdict.
In 2021, Outcome merged with rival PatientPoint. Shah, Agarwal and Purdy were not involved with the merger, nor are they involved in the new company.
Photo: Feodora Chiosea, Getty Images
