An American court has convicted Indian-American businessman Rishi Shah to seven and a half years in prison for his role in a billion-dollar fraud scheme revolving around visual advertisements in doctors’ offices.
“ Thirty-eight-year-old Outcome’s former executives deceived their clients, their auditor, their lenders, and their investors for years,” Principal Deputy Assistant Attorney General Nicole M. Argentieri, head of the United States Justice Department’s Criminal Division stated.
“Their sentences should serve as yet another reminder that ‘faking it until you make it’ is not an acceptable practice for any business, whether that company is a technology start-up or a well-established corporation. Lying about your revenue to obtain customers or financing is fraud, plain and simple. The Criminal Division is committing to holding companies and their executives accountable for their misconduct,” Argentieri said.
Rishi Shah is the founder of Outcome Health, a Chicago-based health technology start-up, which provided advertorials on televisions in the offices of doctors across United States, and also sold spaces for advertisements on their devices to clients, mostly pharmaceutical companies.
A Forbes 2017 article on Shah states that he grew up in Oak Brook, a suburb in Chicago. He’s the son of a doctor who emigrated from India, the report adds.
According to his LinkedIn profile, Shah is also the chairman and Managing Director of JumpStart Ventures. He studied at Harvard and Northwestern universities. It is at Northwestern University where he met Shradha Agarwal, who is the president and co-founder of Outcome Health, according to the Forbes report. They together started a company called ‘ContextMedia’ in 2006, which later became Outcome Health in 2016 after they reportedly purchased AccentHealth.
According to a report in the Bloomberg, prosecutors were seeking a 15-year sentence for Shah, alleging him to be the “driving force behind a dizzying array of lies to clients, lenders, investors and an audit firm.”
The US Department of Justice, describing the fraud, stated that Shah sold “advertising inventory the company did not have to Outcome’s clients and then under-delivered on its advertising campaigns. Despite these under-deliveries, the company still invoiced its clients as if it had delivered in full.”
Besides Shah, Agarwal and former chief operating officer and chief financial officer Brad Purdy have also been sentenced for their roles in the fraud scheme.
All three former executives of the company, according to the Justice Department, “lied or caused others to lie to conceal the under-deliveries from clients and make it appear as if the company was delivering advertising content to the number of screens in the clients’ contracts.”
“According to the trial evidence, the scheme targeting Outcome’s clients began in 2011 and lasted until 2017, and resulted in at least $45 million of overbilled advertising services,” the Department shared in its release.
The fraud scheme included investors such as Goldman Sachs Group Inc., Google parent Alphabet Inc. and Illinois Governor JB Pritzker’s venture capital firm, according to the Bloomberg report.
The case was investigated by the Federal Bureau of Investigation (FBI) and the Federal Deposit Insurance Corporation-Office of Inspector General (FDIC-OIG). The United States Securities and Exchange Commission provided assistance in the case.
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