2 Indian-origin former executives of US startup convicted on fraud charges

Washington [US], April 13 (ANI): Three, including two Indian-origin former executives of Outcome Health, a Chicago-based health technology start-up company, have been convicted by a federal jury for their roles in a fraud scheme that targetted the company’s clients, leaders, and investors and involved approximately USD 1 billion in fraudulently obtained funds, the US Department of Justice said in a statement.

The trio ran a billion-dollar scheme that defrauded customers, including major pharmaceutical firms like Novo Nordisk A/S and investors including Goldman Sachs Group Inc, The Wall Street Journal reported.
As per the news report, Rishi Shah, Outcome’s former chief executive and co-founder, has been convicted on fraud charges on 19 of 22 criminal counts of wire, mail and bank fraud, former President Shradha Agrawal was convicted on 15 of 17 counts. Furthermore, former Chief Financial Officer Brad Purdy was convicted on 13 of 15 counts.

Shah, Agarwal and Purdy did not testify during the weekslong trial. As per the news report, the defendants could face years in prison due to their convictions. It is likely that the defendants will appeal the verdict.

A spokesperson for Rishi Shah said, “Today’s verdict deeply saddens Mr. Shah, and he will exhaust every avenue to overturn this result,” according to The Wall Street Journal report. A representative for Shradha Agarwal said her defence is analysing the verdict of the jury and Purdy’s lawyer said he is disappointed by the verdict of the jury.

The defence team of the defendants said that a former executive who pleaded guilty to fraud, and who was the government’s star witness at trial, was responsible for the criminal conduct at the firm. As per the news report, two other employees who reported to that executive, Ashik Desai, pleaded guilty to conspiracy to commit wire fraud. Desai and the government agreed to a deal for a reduced sentence in exchange for testifying against his former bosses.

Separately, the Securities and Exchange Commission has charged the three former executives and Ashik Desai with fraud. The SEC has obtained a partial consent judgement against Desai in that case, which is pending. Outcome acknowledged that its former executives and employees defrauded clients and agreed to pay them USD 70 million as part of a 2019 deal to resolve federal fraud charges.

Outcome Health, which merged with rival PatientPoint in 2021, operated a business installing video screens in doctors’ offices and charging pharmaceutical firms to run drug ads on the devices, which were targeted at patients sitting in the waiting room, as per The Wall Street Journal report.

The advertising was not a new business. However, Outcome made around USD 500 million equity investment in May 2017 at a USD 5.5 billion valuation from investors including Goldman, Google parent Alphabet Inc., Pritzker Group Venture Capital and the investment firm of Laurene Powell Jobs. Unlike most startup investments, the large amount was earmarked as dividends for Rishi Shah and Shradha Agrawal, as per the news report.

Investors filed cases against the company after the fraud was revealed. The case was settled after Shah and Agarwal agreed to leave their executive roles and give back USD 159 million of the money they received from the investment. The firm also raised around USD 500 million in loans. Of which, USD 38 million was given to Shah and Agarwal, The Wall Street Journal reported citing a pretrial filing from prosecutors.

The government alleged that Rishi Shah, Shradha Agrawal and Brad Purdy participated in a joint criminal venture to charge clients of a pharmaceutical firm for running ads on more screens than Outcome had installed in medical offices and to conceal from clients, auditors, lenders and investors, as per The Wall Street Journal report.

In addition, the government said that the company manipulated third-party reports to inflate the impact of its advertising. The Outcome Health trial was an example of the government taking on what prosecutors in the trial called the technology world’s “fake-it-till-you-make-it” culture. The government made the case to the jury that fraud at Outcome predated Ashik Desai’s joining the company, The Wall Street Journal reported.