Ad-scam, lavish lies, and a billion-dollar fraud: How Rishi Shah’s Outcome Health duped high-profile investors – Healthcare News

Rishi Shah, a 38-year-old Indian-American entrepreneur who co-founded Outcome Health, was sentenced to seven and a half years in prison by a US court last Wednesday for his involvement in a billion-dollar fraud scheme. Shah, the co-founder of Outcome Health, was found guilty of deceiving investors and clients through fraudulent practices related to visual advertisements in doctors’ offices. This high-profile case, reported by the Wall Street Journal, has drawn significant attention due to the massive financial losses and the prominent figures involved. The fraud shook major investors including Google parent Alphabet, Illinois Governor JB Pritzker’s venture capital firm, and Goldman Sachs. This is by far one of the biggest frauds in recent times.

The Rise of Outcome Health

Founded in 2006, Outcome Health’s goal was to revolutionize medical advertising by installing televisions in doctors’ offices to show health ads to patients. Shah partnered with Shradha Agarwal, and the company’s valuation skyrocketed as it sought to bridge the communication gap between patients and healthcare providers with innovative ad placements.

By the mid-2010s, the company had become a significant player in the tech and healthcare investment sectors. Its promise of integrating advanced technology into healthcare marketing attracted high-profile investors. During its rapid rise, Outcome Health secured massive funds and clientele, making Shah a rising star in Chicago’s corporate circles.

The billion-dollar fraud

Behind the scenes, the company was built on lies. Prosecutors revealed that Shah, along with Agarwal and CFO Brad Purdy, misrepresented the company’s operational and financial health to investors, clients, and lenders, where they sold more advertising inventory than they could deliver. They fabricated the data to cover up their shortfall.

Outcome Health deceived clients like pharmaceutical giant Novo Nordisk A/S about its network size and ad reach. False information and fraudulent data created an illusion of rapid revenue growth, attracting more investment and financial backing.

Shah enjoyed a lavish lifestyle funded by inflated ad sales and investor money, with reports detailing exotic trips, private jets, yachts, and a $10 million home. By 2016, Shah’s net worth was over $4 billion, a figure inflated by deceptive accounting practices.

The Downfall

The facade began to crumble in 2017 when a Wall Street Journal expose revealed the fraudulent activities. Soon after, investors, including Goldman Sachs, Alphabet, and Governor Pritzker’s firm, filed lawsuits against Outcome Health, accusing the company of fraud in its $487.5 million fundraising earlier that year. This fundraiser had given Shah and Agarwal a $225 million dividend but left investors with a grossly overvalued stake in a collapsing company.

Legal Consequences

Shah was indicted on multiple counts of fraud and money laundering and was convicted in April 2023, along with Agarwal and Purdy. Prosecutors sought 15 years for Shah and 10 years for his co-conspirators. However, Judge Durkin sentenced Shah to seven and a half years, Agarwal to three years in a halfway house, and Purdy to two years and three months in prison. The US Securities and Exchange Commission also filed a civil action against Shah, Agarwal, Purdy, and former chief growth officer Ashik Desai, who, along with other Outcome employees, had already pleaded guilty.

Public Apology

In his sentencing, Shah, who is in ill health, expressed remorse and accepted responsibility. He admitted his failure to manage Outcome Health’s aggressive expansion and acknowledged creating a corporate culture that permitted deceptive practices. “The culture I created allowed people on my team to think it was okay to create false data in response to a client question,” he confessed, adding that he was “ashamed and embarrassed” by the misconduct that led to the company’s downfall.