U.S. prosecutors announced criminal charges accusing the founders of Outcome Health of overseeing a scheme to overbill clients and fraudulently obtain nearly $1 billion of funds, including from major investors.
Former Chief Executive Rishi Shah, former President Shradha Agarwal, and two other former executives of the pharmaceutical advertising company were charged with fraud in a 26-count indictment in Chicago made public on Monday.
The U.S. Department of Justice announced the charges four weeks after Outcome agreed to pay $70 million and enter a non-prosecution agreement to end a related criminal probe.
Outcome streams pharmaceutical ads on televisions and computer tablets it installs in doctors’ offices.
Prosecutors said the defendants maintained a facade of “extraordinary revenue growth” through a scheme from 2011 to 2017 in which Outcome overstated its industry connections, billed clients for ads that never ran and inflated revenue.
They said this enabled Chicago-based Outcome to raise $487.5 million of equity financing and borrow $485 million, with investors that included affiliates of Goldman Sachs Group Inc, Google parent Alphabet Inc and Pritzker Group.
Outcome said in 2017 it was worth $5 billion, and Forbes magazine estimated Shah’s net worth at $3.6 billion.
Prosecutors charged Shah, 33, Agarwal, 34, and former Chief Financial Officer Brad Purdy, 30, with various counts of bank fraud, mail fraud and wire fraud. Ashik Desai, 26, a former executive vice president, was charged with one wire fraud count.
The U.S. Securities and Exchange Commission filed related civil charges against the four defendants. Two former Outcome analysts face separate criminal charges.
William Burck, a lawyer for Shah, said his client was being “scapegoated” for the wrongdoing of others who cut deals with prosecutors. “Mr. Shah will plead not guilty to these charges because he is, in fact, not guilty,” Burck said in a statement.
Christina Egan, a lawyer for Agarwal, said in response to the SEC lawsuit that her client denied the agency’s allegations and would defend herself in court. “Shradha never committed fraud and never participated in any conspiracy,” Egan said.
Purdy’s lawyer had no immediate comment. A lawyer for Desai did not respond to requests for comment.
Shah and Agarwal co-founded Outcome in 2006 while attending Northwestern University. Prosecutors said Shah owned an 80% stake, while Agarwal owned 20%.
Most of Outcome’s $70 million settlement has been paid. The company said in May it sold a majority stake to private equity firm Littlejohn & Co as part of a recapitalization.