Goldman Sachs and Google among the defrauded investors
Former Chicago billionaire Rishi Shah has been sentenced to seven and a half years in prison for his role in a $1 billion fraud scheme at Outcome Health. Shah, along with other executives, including Shradha Agarwal, were convicted of defrauding investors, such as Goldman Sachs, Alphabet, and the Pritzker Group venture fund.
Rishi Shah, 38, co-founded Outcome Health, a startup that provided advertisements on televisions and in doctors’ offices. Alongside him, Shradha Agarwal and Brad Purdy were also found guilty of multiple counts of fraud and money laundering by a federal jury. The sentencing was handed down by Chicago US District Judge Thomas Durkin, following a statement from the United States Attorney’s Office on July 1.
The convicted executives included Shah, who served as the co-founder and former CEO, Agarwal, who was the co-founder and former President, and Purdy, the former Chief Operating Officer and Chief Financial Officer. They were accused of deceiving pharmaceutical companies, accepting payments for ads that were never placed, and falsifying the company’s financial health to investors.
Outcome Health, initially known as Context Media Health, was founded by Shah in 2006 while he was a student at Northwestern University. The company quickly rose to prominence and attracted significant investments, including from Illinois Governor JB Pritzker’s venture capital firm. However, the fraud was uncovered in 2017 by the Wall Street Journal.
In court, Shah expressed remorse, stating he was “ashamed and embarrassed” by his mismanagement and acknowledging that his aggressive push for growth led to significant mistakes, including the creation of false data in response to client inquiries
Prosecutors portrayed Shah as the mastermind behind a series of lies to clients, lenders, investors, and auditors. They had recommended a 15-year sentence for Shah, but Judge Durkin ultimately sentenced him to 7.5 years. Agarwal and Purdy received lighter sentences, with Agarwal serving three years in a halfway house and Purdy serving two years and three months in prison.
The company had falsely claimed the capability to deliver more ads than it could actually broadcast and misled clients about the size of its TV network in doctors’ offices across the US. This fraudulent activity generated hundreds of millions of dollars in ad sales, funding Shah’s extravagant lifestyle, including luxury travel and a $10 million home. In 2016, Shah’s net worth was reported to be over $4 billion, based on fabricated financial statements.
Nicole M. Argentieri, Principal Deputy Assistant Attorney General, emphasized that the sentences should serve as a warning that deceptive practices in business are unacceptable. She highlighted the extensive deceit carried out by Outcome Health’s former executives.
In court, Shah expressed remorse, stating he was “ashamed and embarrassed” by his mismanagement and acknowledging that his aggressive push for growth led to significant mistakes, including the creation of false data in response to client inquiries. Investors, including Alphabet, Goldman Sachs, and Pritzker, sued Outcome in 2017, alleging fraud related to a $487.5 million fundraising that year, which resulted in a $225 million dividend for Shah and Agarwal. The US Securities and Exchange Commission (SEC) also filed a lawsuit against Shah, Agarwal, Purdy, and former Chief Growth Officer Ashik Desai for using false financial statements to raise funds.
Desai, along with two other Outcome employees, pleaded guilty to charges prior to the criminal trial of the company’s top executives.
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