NRI PULSE STAFF REPORT
Chicago, IL, July 3, 2024: Rishi Shah, the Indian American co-founder of Outcome Health, has been sentenced to 7.5 years in prison for orchestrating a massive fraud scheme that defrauded investors and clients of nearly $1 billion. His co-founders, Shradha Agarwal and Brad Purdy, were also sentenced for their roles in the scheme. Agarwal received three years in a halfway house, and Purdy received two years and three months in prison.
Outcome Health, founded in 2006 and known as Context Media prior to 2017, installed television screens and tablets in doctors’ offices across the U.S. to display pharmaceutical advertisements. Shah, Agarwal, and Purdy inflated the company’s financial performance and advertising reach by selling more advertising inventory than they had and under-delivering on advertising campaigns. They invoiced clients as if they had delivered in full and falsified data to secure loans and investments.
Major investors defrauded by the scheme included Goldman Sachs, Google’s parent company Alphabet (through its investment arm CapitalG), and the Pritzker Group. These investors were part of a $500 million funding round in 2017, valuing Outcome Health at $5.5 billion at the time.
The fraud resulted in a significant overstatement of Outcome’s revenue for 2015 and 2016, enabling Shah and his team to raise $110 million in debt financing in April 2016, $375 million in December 2016, and $487.5 million in equity financing in early 2017. The $110 million debt financing resulted in a $30.2 million dividend to Shah and a $7.5 million dividend to Agarwal, while the $487.5 million equity financing yielded a $225 million dividend benefiting both Shah and Agarwal.
Shah was convicted of multiple counts, including mail fraud, wire fraud, bank fraud, and money laundering. Agarwal and Purdy were also convicted on multiple counts of fraud. The scheme resulted in at least $45 million in overbilled advertising services.
“This was an elaborate, billion-dollar fraud scheme by three people who were supposed to be leaders of the company,” said FBI Executive Assistant Director Timothy Langan. The FBI and FDIC-OIG, along with the U.S. Securities and Exchange Commission, investigated the case.
Shah plans to appeal the verdict.
